Live Oak LNG is the latest North American LNG export project to be announced. It joins 40 some other projects that have been announced since the increase in shale gas production. Live Oak estimates that their five million mtpa project will be in service by the end of 2019. However, Live Oak’s timeline is likely optimistic. Live Oak has not received any approvals and is currently in the planning stages.
In order to start exporting, Live Oak must receive Federal Energy Regulatory Commission (FERC) environmental, FERC construction, and Department of Energy (DOE) export approvals. While there can be some overlap within the regulatory process, new DOE guidelines state that they will no longer be giving conditional export approval to projects that have not yet received FERC environmental approval. The shortest amount of time it has taken for a project to receive both FERC approvals has been about two years. However, with more projects applying for approvals, some are having to wait upwards of three years.
Department of Energy licenses are separated into two parts, Free trade agreement (FTA) and non-FTA. Free trade agreement licenses are given out almost immediately, but the non-FTA license process is lengthier and has to determine whether or not the exportation of LNG to non-FTA countries is in line with public interest. Eight projects have received non-FTA export approval each taking about two years. However, there dozens of projects that have applied for non-FTA export approval and Live Oak would then be at the bottom of the order of precedence for review. After the approvals are met, construction can then begin. Construction on larger facilities can take three to four years for one train.
Assuming that Live Oak, being a medium sized project, can complete construction in two years, the total timeline, even with assuming a two year regulatory overlap, is six years. This puts the project in service during 2021. Even if Live Oak LNG is able to stick to their estimated start date of late 2019 that puts the project behind some 15 other U.S. exporting projects with a total of ~140 mtpa of LNG capacity.
Additionally, forecasted global supply of LNG is outpacing demand. Unless demand from Asian buyers increases significantly beyond forecasts in the coming years, there is more LNG output planned than will be needed. Simply put, not all LNG export projects will see the light of day.
U.S. LNG export projects have already come under pressure. With supply forecasted to outpace demand and energy prices sinking, Excelerate Energy has cancelled their LNG export project. Excelerate, did not have any of their planned LNG production contracted to buyers. In fact, most LNG export projects do not have contracted buyers. Even projects with contracted off-take are not sure things. BG’s final investment decision on their Lake Charles LNG export project was recently delayed. The company cited a delay in the FERC process as the reason for delaying the FID. LNG is not the only natural gas monetization option that companies have in front of them. ADI Analytics has researched the natural gas value chain in depth and evaluated several other monetization options.
-Tyler Wilson and Uday Turaga
