U.S. Approves First Offshore LNG Export Application

lng

By MarEx 2017-06-01 18:58:30

The U.S. Department of Energy has approved the nation's first long-term application to export gas from a floating LNG terminal.

Delfin LNG will be able to export 1.8 billion cubic feet of gas per day (Bcf/d) from its proposed Louisiana floating offshore LNG terminal in the Gulf of Mexico. The facility, jointly owned by the India and Singapore-based Fairwood Group and the U.S.-based Peninsula group, is expected to be operational in 2020.

The news comes as President Donald Trump announced that the U.S. will withdraw from the Paris accord involving 200 countries working together to fight against climate change. U.S. Secretary of Energy Rick Perry said: “Today the President announced that the United States will no longer be bound by an agreement unilaterally entered into by the Obama Administration. This was neither submitted to nor ratified by the U.S. Senate, and is not in the best long term economic interest of the United States. President Trump’s decision will prove to be the right course of action and one I fully support.

“Instead of preaching about clean energy, this Administration will act on it. Our work and deeds are more important than empty words. I know you can drive economic growth and protect the environment at the same time, because that is exactly what I did as Governor of Texas.”

Perry says that using gas has enabled the U.S. to achieve the largest drop in carbon emissions of all countries in 2016. He is eager to bring the benefits of gas to international trading partners and will take this message to Japan, and then to China for the Clean Energy and Mission Innovation ministerials, where he plans to strengthen the U.S.-China LNG export partnership.

China’s Opportunity

However, Frank Yu, Principal Consultant APAC Power & Renewables, Wood Mackenzie, says the U.S. withdrawal of the Paris accord will offer an unprecedented opportunity for China, the biggest carbon emitter and the biggest renewable energy supplier, to ascend in leading global climate affairs.

“We are going to see closer cooperation between China and the European Union in accelerating the energy transition into a  low-carbon economy. China would accelerate kicking off its national carbon trading market by learning from the Emission Trading System, and lend more support to help climatically vulnerable countries.

“Many U.S. companies who are climatically accountable would likely relocate their renewable technology R&D centers to Asia. By leveraging the strong manufacturing value chain in China and other Asian countries, cost of renewables could fall even faster and penetrate more rapidly to displace dirty fossil fuel such as coal in key Asian markets.”

Net Exporter

With the rapid increase in domestic natural gas production, the U.S. is transitioning to become a net exporter of natural gas. The Department of Energy has now authorized a total of 21 Bcf/d of natural gas exports to non-free trade agreement (non-FTA) countries from planned facilities in Texas, Louisiana, Florida, Georgia, Maryland, and now, with Delfin, from the Gulf of Mexico. 

The Delfin project would further position the U.S. to become the predominant LNG supplier to the rest of the world, says Perry.

The increase in U.S. natural gas production is expected to continue, with the U.S. Energy Information Administration’s Short Term Energy Outlook projecting an average dry natural gas production rate of 74.1 Bcf/d in 2017, the second highest on record.

The Delfin Project

Federal law requires approval of natural gas exports to countries that have an FTA with the U.S. Due to its offshore location, the environmental review of Delfin was led by the Maritime Administration (MARAD) and the U.S. Coast Guard. 

According to the company's website, the Delfin LNG Deepwater Port project has four main parts:

 * Newly built onshore gas compression on an existing site
 * The use of existing 42-inch pipelines to transport natural gas nearly 50 miles offshore
 * An offshore port complex comprised of four moorings
 * Four floating LNG vessels with total export capacity of 13 million metric tons per year and the ability to liquefy and store the gas

Delfin initiated the purchase of the UTOS Pipeline (now Delfin Offshore Pipeline) from Enbridge Inc in 2012 and closed the transaction in 2014. The pipeline was originally built to transport gas from offshore wells in the Gulf of Mexico into the U.S. natural gas market. However, Delfin LNG will build an onshore compression facility to reverse the flow of the pipeline to deliver processed gas from onshore sources to the Delfin LNG Deepwater Port. The LNG will be transferred from storage tanks on the floating LNG vessels to an LNG carrier where it will be delivered to customers around the world.

Delfin says it is convinced that floating liquefaction will be the future of LNG production. Floating liquefaction is environmentally friendly, cost competitive, economical with limited scale, moveable in the event of a hurricane and has a shorter and more efficient schedule relative to an onshore plant. Further, in the event that global energy markets drastically change in the coming decades, a floating liquefaction plant provides greater flexibility for decommissioning and re-deployment. 

The offshore location of the Delfin LNG Deepwater Port, nearly 50 miles off the coast of Louisiana, will significantly reduce coastal LNG carrier traffic while minimizing near shore environmental impacts, says the company.