Energy Transfer seeks equity partners for Lake Charles facility

Energy Transfer will not move ahead with a final investment decision (FID) for its Lake Charles LNG facility until at least 80% of the project has been sold to equity partners, the US pipeline operator stated in a post-earnings call Reuters reported on November 5.

The Louisiana-based facility will possess a production capacity of 16.5mn tonnes per year (tpy). Moreover, the export terminal has secured long-term offtake deals for most of its supply.

But amid rising project costs, the US midstream company is seeking further financial assurances before the greenlight can be given for the plant to be built in Cameron Parish.

“Our projects need to meet certain risk-return criteria, and we're not there yet on LNG,” co-CEO Tom Long told reporters. 

“We are hoping that these equity partners will step up by the end of the year and get us to where we want this kind of risk profile, in the space we want this project,” Long added.  

Energy Transfer has secured MidOcean Energy, which is backed by investment firm EIG, as an equity partner. A non-binding contract was signed in April with MidOcean committing to cover 30% of the construction costs in return for 5mn tonnes per year (tpy) of LNG supply.

Chevron has also signed an offtake deal, agreeing to purchase 2mn tpy, while Kyushu Electric Power has also committed to purchase 1mn tpy.

Energy Transfer has been targeting to take FID by the end of the year, but with a lack of equity partners this timeline may need to be pushed back.

Hesitancy by Energy Transfer over a lack of equity partners comes at a time when construction costs have been soaring for LNG facilities in North America.

Inflationary pressures, particularly the rising wages of skilled labour in the Gulf Coast region have led to massive cost overruns for a number of LNG facilities, including ExxonMobil and QatarEnergy’s Golden Pass LNG, as well as Venture Global’s Plaquemines facility.

Rising construction costs for LNG export terminals are not limited to the Gulf Coast. Woodfibre LNG, located in the western Canadian province of British Columbia has also grappled with soaring construction costs at the halfway mark of building.