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A US regulatory agency has approved plans by Cheniere Energy to proceed with building a liquefied natural gas (LNG) terminal in Corpus Christi, Texas, on the coast of the Gulf of Mexico. Construction of the terminal will begin early this year if the project wins final approval from the Energy Department.
The Federal Energy Regulatory Commission (FERC) announced the approval on Dec. 30, saying it was convinced that Cheniere, based in Houston, will operate the facility responsibly. The terminal is approved for both imports and exports and is expected to be big enough to liquefy and ship up to 15 million tons of LNG each year.
“We conclude that, with the conditions required herein, Corpus Christi liquefaction’s project results in minimal environmental impacts and can be constructed and operated safely,” the FERC said.
In an effort to win approval, Cheniere said it had approached several banks and other financial institutions to ensure it had the $11.5 billion it estimates it will need to complete the project. It also said it already had found some customers for its LNG.
One customer it named is EDF, the largest gas company in Portugal, which committed itself to buy about 8.4 million tons of gas per year from the terminal.
Now that Cheniere has the FERC approval, the US Department of Energy (DOE) must decide whether the terminal should be allowed to ship LNG to countries that don’t have free trade agreements with the United States.
That decision will probably come soon because of the dozens of LNG companies that have sought similar shipping approval, but only Cheniere already has the FERC blessing, according to Chris McDougall, an industry analyst at Westlake Securities in Austin, Texas.
“They have already secured financing commitments, and [the FERC blessing] is the major regulatory approval from a difficulty standpoint,” McDougall told Bloomberg News. “It’s going to be relatively easy for the DOE to approve these projects.”
Cheniere is also building a terminal at the Sabine Pass, an outlet of Sabine Lake to the Gulf of Mexico on the Texas-Louisiana border. Cheniere CEO Charif Souki says it is expected to begin operating as early as October. He said that would make his company the first to export gas extracted during the American boom in shale gas.
This new source of gas should be able to meet up to 80 percent of the expected increase in worldwide demand for American LNG, according to the US Energy Information Administration. Yet it cautioned that the “effects on overall economic growth [from the emerging LNG market] were positive but modest.”
There also is some controversy over the approval of the Corpus Christi terminal. Environmental groups, including the Sierra Club, say increased exports would only lead to increased hydraulic fracturing, a shale-extraction technique that many believe poisons groundwater.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com