Energy Transfer, Shell seek Lake Charles LNG permit extension

Energy Transfer and Shell have filed a request with the Federal Energy Regulatory Commission to extend its deadline for the completion of the Lake Charles LNG export project. 

In its filing, Lake Charles LNG noted it is requesting the permit for the project to be constructed and placed into service be extended to December 2025. Currently, the deadline sits at December 16, 2020.

Energy transfer and Shell have been progressing the project and incurred substantial costs since obtaining authorization, the filing reads. The project received all required federal, state and local authorizations and permits.

Due to a material development regarding BG LNG Services, the project encountered an unforeseen delay in the originally projected construction schedule. As set out in the order, it was expected that BG LNG Services would subscribe for 100 percent of the capacity of the LNG export terminal and BG Energy Merchants, would subscribe for 100 percent of the capacity of the pipeline facilities.

It was also expected that Lake Charles LNG Export Company would own 100 percent of the LNG export terminal facility and be responsible for the construction of the pipeline facilities and LNG export terminal facility.

Following FERC authorization, BG Group was acquired by Shell in an international merger.

“The resulting merger and integration process required a reevaluation of the project by Shell and the negotiation of new project agreements. This process resulted in the execution of a project framework agreement, dated March 25, 2019, between subsidiaries of ET and Shell,” the filing reads.

Under the new project framework agreement, ET and Shell have established a detailed process for the development of the project which includes milestones that are expected to result in reaching FID as early as the end of 2020, subject to specified conditions precedent.

Pursuant to the project framework agreement, following FID, each of the units of ET and Shell would own 50 percent of the equity of Lake Charles LNG Export Company and would subscribe for 50 percent of the capacity of the LNG export terminal facility.

Since the execution of the new project framework agreement, the parties have taken further material steps in progressing the project. On April 30, 2019, the parties issued an invitation to tender to prospective LNG EPC bidders to construct the LNG export terminal facilities.

In the second quarter of 2019, the parties executed contracts with LNG engineering, procurement and contracting (EPC) companies to verify existing front-end engineering design.

The project sponsors have incurred in excess of $300 million to date in development costs and the project sponsors have approved additional expenditures of approximately $150 million in development costs to be incurred prior to FID.

The project remains an active, fully-supported project with no changes proposed to the scope or design that the commission reviewed and approved in the order.

An extension of the deadlines for the completion of the construction of the pipeline facilities and the LNG export terminal facilities to December 2025 is necessary to bring the project to completion. Five years is the commission’s standard construction deadline for LNG export terminal projects, the filing reads.

In addition, per the project framework agreement, the project sponsors anticipate that FID could occur as early as the end of 2020, and a precondition of FID is that all FERC authorizations remain in full force and effect.

Due to the large scale of the LNG export terminal facilities, it is anticipated that the construction of these facilities will take 52-56 months to complete, with construction commencing immediately following FID.

As such, completion of construction of the LNG export terminal facility is expected to occur as early as the second half of 2025.