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Why Natural Gas Prices Collapsed

Natural gas prices have collapsed…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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DOE Dashes Freeport LNG Export Hopes

Texas’ Freeport LNG terminal was given the conditional green light in May, but a new bid to ship more liquefied natural gas from the terminal has fallen short of expectations and the company is now facing excess capacity and expansion complications.

The US Department of Energy (DOE) late last week approved an additional 400,000 Mcf/d in LNG exports from the planned Freeport terminal, but the figure falls far short of the 1 Bcf/d the company had asked for based on capacity and future expansion plans.  

"We're quite disappointed in the order itself," Houston-based Freeport CEO Michael Smith told reporters on Monday.

Related article: Russia Opens LNG Floodgates

In May, the DOE gave the green light for Freeport LNG Terminal on Quintana Island, Texas. The terminal was granted conditional approval to export up to 1.4 billion cubic feet per day of natural gas for 20 years to countries without a free-trade agreement (FTA) with the US.

With export deals already signed with Japan’s Osaka Gas and Chubu Electric Power, and with BP Plc, the reduction to 400,000 Mcf/d from the conditionally approved 1.4 Bcf/d is a major blow to Freeport.

"They're basically making the rules up as they go along," Platts quoted Smith as saying. "We're spending $4 billion per train, if you can get an extra five or ten or 15% out of the train you should be able to sell it after making that kind of capital commitment."

Smith also expressed frustration at the DOE’s failure to disclose the reasons for its decision.

Freeport LNG Expansion, L.P. is a wholly owned subsidiary of Freeport LNG Development, L.P. It has four limited partners: Freeport LNG Investments, LLLP, an entity owned by Michael S. Smith; ZHA FLNG Purchaser, LLC, a wholly owned subsidiary of Zachry American Infrastructure, LLC; Texas LNG Holdings, LLC, a wholly owned subsidiary of The Dow Chemical Company; and Turbo LNG, LLC, a wholly owned subsidiary of Osaka Gas Co., Ltd.   

Related article: British Gas Agree £4.4 Billion LNG Deal with Qatar

Freeport was only the second export project to win approval from the DOE. The first was over 2 years ago when the DOE approved natural gas exports with non-FTA countries from the Cheniere Energy-owned Sabine Pass LNG Terminal in Cameron Parish, Louisiana. A total of four non-FTA LNG export projects have been approved so far.

There are at least 22 more LNG export projects awaiting DOE approval and only one—if any-are likely to get that approval before the end of this year.

By. Charles Kennedy of Oilprice.com




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