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    ExxonMobil, Qatar Take FID on Texas LNG Project: UPDATE

Summary

Updates with Wood Mackenzie observations, award of EPCC contract.

by: Dale Lunan

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ExxonMobil, Qatar Take FID on Texas LNG Project: UPDATE

ExxonMobil and its partner Qatar Petroleum have made a final investment decision (FID) to proceed with their $10bn Golden Pass LNG export project at Sabine Pass, Texas, they said February 5.

Construction of the 16mn metric tons/year facility – a conversion of an existing LNG import terminal – will begin this quarter with completion and start-up expected in 2024. Later, joint venture partners McDermott International, Chiyoda International and Zachry Group were awarded the engineering, procurement, construction and commissioning contract for the three-train facility.

“Golden Pass will provide an increased, reliable, long-term supply of liquefied natural gas to global gas markets, stimulate local growth and create thousands of jobs,” ExxonMobil CEO Darren Woods said. “The extensive experience of ExxonMobil and Qatar Petroleum provides the expertise, resources and financial strength needed to construct and operate an integrated liquefaction and export facility in the US.”

The announcement from ExxonMobil came following meetings earlier on February 5 between US energy secretary Rick Perry and Qatar Petroleum CEO Saad Al-Kaabi.

The Golden Pass project is expected to create 9,000 jobs over the five-year construction period and more than 200 permanent jobs during operation. Independent estimates suggest the project could generate up to $31bn in US economic gains and more than $6.4bn in direct federal, state and local tax revenues over the life of the project.

Qatar Petroleum has a 70% working interest in the Golden Pass export project, while ExxonMobil, by acquiring ConocoPhillips’ 12.4% stake in the project, will hold the remaining 30% interest.

The two partners had planned to import LNG to Golden Pass as a long-term strategy, before the US shale gas boom made the US self-sufficient in cheap gas. Cheniere Energy's already operational Sabine Pass LNG export terminal was another such conversion.

And as a brownfield development - similar to Sabine Pass - Golden Pass is a logical next investment for both ExxonMobil and Qatar Petroleum, according to Alex Munton, principal analyst, Americas LNG for Wood Mackenzie.

“The $10 billion liquefaction project...is one of the few remaining brownfield LNG development opportunities in the US Gulf Coast,” he said in a research note. “The repurposing of the existing facility has commercial logic. The Golden Pass regas terminal, with its five storage tanks, two shiploading berths and header pipeline, already includes much of the infrastructure needed for an export project. Even if costs come in at slightly above the $10bn mark, on a dollars-per-tonne basis, it's still one of the lowest-cost opportunities for new large-scale liquefaction capacity anywhere in the world.

Proceeding with construction now, Munton said, will allow ExxonMobil and Qatar Petroleum to lock in costs and minimise exposure to inflationary pressures ahead of the expected next cycle of global LNG investments.

By moving ahead now, the partners ensure that Golden Pass will be at the forefront of the second wave of US LNG.”