GLNG: US LNG players see more interest in SPAs, higher greenfield costs

US-based sempra Energy warned in its second-quarter conference call that construction costs were rising for greenfield liquefaction projects. Meanwhile, fellow US LNG exporter Cheniere Energy highlighted the return of long-term LNG contracts in support of the construction of new liquefaction capacity.
This illustrates the challenges and opportunities for US LNG players as they consider whether to issue final investment decisions (FIDs) on a second wave of liquefaction capacity, centred on the Gulf Coast; and brownfield projects may find themselves at more of an advantage as these companies decide what to build next.
“It does go back to this issue … that greenfield projects, which tend to have a little bit of a higher per-unit cost than brownfield projects; this will continue to put pressure on that dichotomy,” Sempra’s chairman and CEO, Jeffrey Martin, said in response to an analyst question about the economics of new North American LNG projects compared with the rest of the world. “But keep in mind that all the other projects in the world are subject to those same cost pressures,” he added.
Indeed, Sempra recently pushed plans for its greenfield Port Arthur LNG project in Texas onto the back burner, opting to prioritise a fourth train at the existing Cameron LNG terminal in Louisiana instead.
Martin noted that at the same time as the cost pressures around construction were being seen, LNG spot prices were also rising. And this is a trend he expects the US to benefit from as demand for the fuel continues to grow.
Cheniere executives, meanwhile, said they were close to considering an FID on the Stage III expansion at Corpus Christi LNG, as the company’s 45mn tonne portfolio is around 90% contracted. However, Cheniere’s president and CEO, Jack Fusco, said the company was “staying extremely financially disciplined” on its next expansion project.