Kinder Morgan Wins Federal Permit for LNG Exports

Elba Island LNG Terminal (image courtesy ISI)

By MarEx 2016-06-02 21:14:52

Energy firm Kinder Morgan announced Thursday that it has received approval from the Federal Energy Regulatory Commission for its proposed Elba Island LNG export plant near Savannah, Georgia. 

The permit is for the expansion of the existing Elba Island LNG Terminal (an import facility) through the addition of $2 billion in liquefaction equipment. Ten Shell-designed "Moveable Modular Liquefaction System" (MMLS) units are planned, all to come online in 2018. Kinder Morgan plans for a combined 2.5 mtpa of export capacity  – all contracted for sale to Shell under a 20-year agreement. Kinder Morgan says that the plant will create 100 permanent jobs and $10 million a year in extra tax revenue. 

The firm also announced FERC certificates for $300 million in pipeline expansion work to boost gas supply to the site and to other industrial consumers; that work should be completed towards the end of this year. 

Kinder Morgan said that it was interested in selling a stake in Elba Island LNG in January, reversing its course: it bought out Shell's 49 percent stake last year to become full owner of the project. CFO Kim Dang said that the firm was in talks with potential investors; she did not specify the equity percentage or the firms in question, but she noted that Kinder Morgan has an extensive project backlog and saw a need to raise funds. The firm is the largest energy infrastructure operator in the United States. 

When they began planning for the project, Kinder Morgan and Shell expected to begin operation quickly under a dual strategy of minimizing regulatory hurdles – exporting at first to Free Trade Agreement (FTA) countries, a simpler bar to clear than exports to non-FTA countries, for which the facility's permit is still pending – and deploying small, modular liquefaction units. Each of Shell's MMLS units puts out 0.25 mtpa, a much smaller volume than Cheniere's liquefaction trains at Sabine Pass and Corpus Christi, and the firms believe these micro-plants will to be simpler to deploy. Initial operations of a first phase were expected in late 2015, but regulatory delays have since pushed back the timeline.