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LNGC Maran Gas Lindos docks at Elba Island LNG

Arrival of Shell-controlled LNGC suggests conversion of Elba Island LNG will see its first commercial export in the coming weeks

Our LNGJ Market Tracker shows the 159,800m3 LNGC Maran Gas Lindos – currently on charter with Shell following the BG Group takeover – has docked at Kinder Morgan’s Elba Island LNG plant. Shell’s offtake agreement with the terminal covers 100% of its capacity for the next 20 years.

Initial capacity will likely require weeks to complete cargo loading

Given the plant’s commissioned gas liquefaction capacity of 0.5 million tonnes per annum (mtpa) to date, we estimate it will take up to five weeks to load a full cargo onto the Maran Gas Lindos, depending on the amount of LNG the plant already has in its storage tanks. Notably, the terminal will also be discontinuing its truck-loading business.

Elba LNG is one of the oldest US LNG sites

The facility is a $2bln brownfield development based on an import terminal that had been mothballed in the 1980s and recommissioned in 2001, only to change direction again from import to export when shale gas made US LNG exports commercially viable.

Conversion into export plant marks tail end of initial US LNG development boom

With its first export cargo in the process of loading, Elba Island represents the last of the initial US LNG export facilities quick off the starting blocks after the US shale gas production boom. As such, we only expect to see expansions of existing projects (e.g. Cameron Train 2) to be commissioned over the next two years.  Whilst there are three more large-scale standalone projects under development – Calcasieu Pass, Golden Pass and Driftwood LNG – they are not due for commissioning before 4Q 2022.

US still has several more large-scale projects, but their future is less certain

Yet others – Port Arthur LNG, Gulf LNG Liquefaction, Eagle LNG Partners and Venture Global LNG – have FERC approval but lack final investment decisions. It remains to be seen whether any of these will be constructed as planned since a massive expansion in Qatar will add downward pressure on global LNG prices by around 2024.

Two Elba liquefaction units certified for full commercial operations

Elba Island’s revamp as a liquefaction project is divided into two phases – Phase I (1.5mtpa) with Moveable Modular Liquefaction System (MMLS) Units 1-6 and Phase II (1mtpa) with MMLS Units 7-10. The United States Federal Energy Regulatory Commission (FERC) granted Kinder Morgan the request to commence liquefaction and export activities from MMLS Unit 1 of the 10-Unit plant in October. The facility’s MMLS Unit 3 received its FERC permit to start commercial operations in late November.

Unit 2 slightly delayed, Units 4, 5 and 6 likely to start 1Q 2020

Meanwhile, Units 2, 4, 5 and 6 are undergoing their commissioning processes, FERC filings showed on 10 December. However, based on the previous commissioning timeline of Units 1 and 3, it seems unlikely that 4, 5 and 6 will be put into commercial service this year. However, as Unit 2 started commissioning before Unit 3 in August, we expect its in-service date to be in mid-December 2019, when the next FERC inspection is due. The commissioning of Unit 2 was put on hold in November due to required vibration analysis by Shell.

An LNG terminal in the United States is considered in service as soon as it receives an ‘Authorization to Commence Service’ by FERC, which is issued once commissioning activities have been completed and the facility passed subsequent inspections. Elba Island’s original in-service date was delayed in early September due to the approach of Hurricane Dorian. Fortunately, a subsequent inspection found the facility had remained undamaged by the passing hurricane.

The renewed facility is owned and operated by Elba Liquefaction Company, a joint venture between Kinder Morgan (51%) and EIG Global Energy Partners (49%).