American Oil and Gas Reporter - January 2015 - 76

TABLE 1
LNG Export Terminals with Non-FTA Permits
Terminal

Location

Volume
authorized

First shipment date

Carib Energy

Martin County, Fl.

0.04 Bcf/d

2014

Sabine Pass

Cameron Parish, La.

2.2 Bcf/d

Late 2015/early 2016

Dominion Cove Point

Calvert County, Md.

0.77 Bcf/d

Late 2017

Cameron LNG

Cameron Parish, La.

1.7 Bcf/d

2018

Freeport

Freeport, Tx.

1.8 Bcf/d

Third-quarter 2018

Jordan Cove
Energy Project

Coos Bay, Or.

0.8 Bcf/d

Late 2018/early 2019

Oregon LNG

Warrenton, Or.

1.25 Bcf/d

Early 2019

Lake Charles

Lake Charles, La.

2.0 Bcf/d

2019

TOTAL

construction itself is not a concern as long
as it is well executed. However, before construction can begin, terminals need to secure long-term contracts with credit-worthy buyers, obtain financing, and get regulatory approvals.
All three of these tasks take time.
Most of the potential buyers for LNG are
utilities or oil and natural gas traders. Understandably, they need to be confident an
export terminal will become a reality before they commit to 20- or 25-year off-take
agreements. To give potential buyers that
confidence, the LNG developer needs to
form strong relationships with key decision makers and convey how much thought
has gone into the facility's design and construction.
Even in the best situations, securing
contracts can take time because the buyers often are large organizations that must
involve several people from different departments in major decisions. But with patience, it is possible. The many terminals
that already have signed agreements attest
to that.
Once a developer has long-term agreements in place with several customers, it
is possible to obtain financing. Together
with demand, banks' tolerance for LNGrelated risk is likely to be the limiting factor on terminal construction. A year ago,
an analyst estimated that banks would
commit as much as $60 billion to domestic export terminals before feeling overweighted. That number will change with
the long-term outlook for shipping costs,
oil prices and natural gas prices, because
those ultimately determine how much
countries save by buying U.S. LNG.
Regulations present the final hurdle. To
build an LNG terminal on or near shore,
the developer needs approval from the Federal Energy Regulatory Commission,
76 THE AMERICAN OIL & GAS REPORTER

10.56 Bcf/d

which must conduct an environmental review while evaluating a project. Unfortunately, FERC does not have the staff to
complete the reviews as quickly as it
should, especially given the many other
countries that are building export terminals
to supply LNG to key buyers in Asia.
I hope the newly elected Congress will
give FERC the staff it needs to work more
quickly so potential U.S. LNG shippers
can complete terminals more rapidly to
compete with foreign LNG suppliers and
secure a bigger share of the global LNG
market.
LNG terminals also need approval
from DOE to export natural gas. This approval takes two forms: permits to export
to countries with which the United States
has a free trade agreement, which DOE is
required to grant, and permits to export to
countries with which the United States
does not have a free trade agreement,
which DOE can deny only if project opponents demonstrate that the exports
would be inconsistent with the public interest.
Because the burden of proof is on opponents to a project, getting non-FTA approval is a matter of providing the necessary information, responding to public
comments, and being patient. In the past,
concerns that exports would harm the U.S.
economy made the applications' ultimate
fate uncertain. To address those concerns,
DOE commissioned a study on the economic impact of U.S. gas exports. Since
the study found that exports have a positive effect on the economy as a whole,
DOE has approved applications more
quickly and consistently.
Project Location
When I decided to develop LNG export
terminals, I thought floating terminals

would be easier to permit, finance, and
construct. In reality, they are harder to finance because the requisite technology is
unproven in comparison with traditional
land-based terminals.
If financing is available, floating terminals still would be difficult to permit because they need to be cooled. That cooling can take one of two forms: air cooling,
which is prohibitively expensive, and
water cooling, which is affordable but turns
the water surrounding the terminal into a
Jacuzzi. This heating effect can make floating terminals difficult to permit.
So, instead of building a terminal offshore, Barca and Eos will be constructing
facilities onshore. Both will be located in
Brownsville, Tx. We chose that location
because it has the 45-foot draft to accommodate LNG tankers, provides easy access
to natural gas from the Eagle Ford Shale,
and is a few days closer to the Panama
Canal than the other areas we considered
along the Gulf Coast. We expect the terminals will take two years to permit and
another four years to build.
At this point, both projects are in the
early stages. I do not know whether we will
secure the off-take agreements and financing necessary to make them a reality. What
I do know is that I am far from the only
American entrepreneur who is trying to export LNG, not only because it makes good
business sense, but because it will create
well-paying jobs and boost the United
States' influence in key regions. Even if
only a fraction of these entrepreneurs succeed, we will have a noticeable impact on
natural gas demand, drilling activity, and
U.S. prosperity.
Ì

ANDREW
KUNIAN

Andrew Kunian is the chief executive officer of Eos LNG and Barca
LNG, which are developing liquefied
natural gas export terminals in
Brownsville, Tx. Kunian has been a
global macro-portfolio manager trading equities, bonds, commodities, futures and options for 20 years. He graduated from Tulane University with a
B.A. in political science and from New
York University's Stern School of Business with a concentration in finance
and marketing.

American Oil and Gas Reporter - January 2015

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