US LNG Exports -- RBN Energy -- February 23, 2016

Active rigs:

	2/23/2016	02/23/2015	02/23/2014	02/23/2013	02/23/2012
Active Rigs	39	126	187	181	204

RNB Energy: Natural Gas Flowing to Sabine Pass LNG Export Plant.

The first U.S. liquefied natural gas (LNG) export cargo from the Lower 48 is now likely within just a week or two of shipping from the Cheniere Sabine Pass, LA terminal. In the meantime, physical flow data is already giving us a first glance at how the terminal will be supplied from U.S. natural gas production. In today’s blog, we begin a look at flows to the terminal, how the gas is getting there and where it’s coming from.

In recent months, there has been a flurry of completion and commissioning activity around Sabine Pass. Filings with the Federal Energy Regulatory Commission (FERC) indicate the terminal has been furiously readying its first two liquefaction trains over the past few months in preparation for loading its first export cargo. As we detailed previously in our blog series Begin the Sabine, Cheniere Energy’s Sabine Pass LNG (SPL) export terminal in Cameron Parish, LA along the Texas-Louisiana border, is one of four such brownfield projects targeting gas exports from the US, and the first to begin operations.

The terminal will ultimately include six liquefaction “trains,” each with the capacity to supercool up to 650 MMcf/d of natural gas into LNG (at -260 ^oF) for a total capacity to produce 3.8 Bcf/d for loading and shipment overseas. The facility also has 17 Bcf of LNG storage capacity on site. Construction of the first train was completed and commissioning activity began last fall. And just last Friday (February 19, 2016), SPL filed a request for authorization to introduce fuel gas to train 2 “at the earliest date possible, but no later than March 4, 2016” in order to begin commissioning activities for the second train. Additionally, pipeline flow data from our friends at Genscape indicates that more than 3 Bcf of gas has physically flowed to the terminal in just the past two weeks, suggesting the liquefaction process is underway. Reuters is reporting that two LNG tankers in the Gulf of Mexico are at the ready to take the cargo, one having docked at the terminal just this past Sunday (February 21).

The terminal’s activity and the imminent first cargo of physical gas exports from the lower 48 U.S. are historic events in their own right, with long-term implications for both the global and U.S. natural gas supply/demand balances. But on a more granular level within the U.S., the exports also will have more localized impacts on regional flows and pricing based on where the supply is sourced and how that gas will get there. Cheniere has lined up commitments for the vast majority of each train’s liquefaction capacity through Sales and Purchase Agreements, or SPAs, with various counterparties. To fulfill these commitments, Cheniere secured upstream supply and transportation capacity to serve the trains. In a January 2016 company presentation, Cheniere restated that it has entered into 1-7 year term gas supply contracts with producers for an aggregate of approximately 2 Tcf for an average price of Henry Hub minus $0.10/MMBtu. The supply contracts cover ~50% of the required daily load for Trains 1-4. To ensure transportation capacity to bring supply to the terminal, Cheniere also has commitments on existing and planned expansion pipeline capacity.

Thus, flows around the terminal will continue to evolve based on expected pipeline expansions and related supply contracts kicking in over the next year. Additionally, some of these flows could be seasonal. By looking at initial flows to the terminal, as seen in the daily pipeline flow data, we can provide an early glimpse of this picture. We’ll start today with a quick review of the available pipeline capacity serving the terminal and deliveries to date. Next time we’ll take a detailed look at where the supply is coming from.

The other day there was an article about the Chinese looking to build three methanol refineries along the Columbia River in Washington state and Oregon. LOL. When will these folks ever learn. When it comes to fossil fuel, one cannot do business in Washington, Oregon, Minnesota, Nebraska, Iowa, Maine, New Hampshire, or Vermont, or as I call them, "The Gang Of Eight." New York State has applied for membership.  FuelFix is reporting:

The Pacific Northwest could become a major hub for methanol production if three proposed refineries are built along the Columbia River and Puget Sound.

A China-backed consortium, Northwest Innovation Works, has proposed two plants in Washington and a third in Oregon to convert natural gas to methanol, which would be shipped to China to make plastics and other consumer goods.

But those plans are running into opposition. On Friday, the company temporarily put its project in Tacoma on hold, saying it has been “surprised by the tone and substance of vocal opposition.”

I wasn't going to link that article; some things are beyond the pale, as they say. But when I saw the LNG export story from RBN Energy, it reminded me of the FuelFix article. The Chinese simply have to build these plants in Texas, Louisiana, or Mississippi. The Panama Canal has been widened. What are we talking? Three extra days shipping time from the Gulf Coast to China? Or the Chinese can fight Washington and Oregon for a decade and still probably have nothing to show for it.

How naive can these folks be? The company temporarily put its project in Tacoma on hold, saying it has been “surprised by the tone and substance of vocal opposition.” Surprised? Naive, I would say.

Update, just a couple of hours later, 5:23 p.m. Central Time: bizjournals is reporting that one of the proposed Columbia River refinery projects is "already dead in the water" --

The Port of Longview has rejected a proposal for an oil refinery and propane export terminal.

Waterside Energy, the proponent, wanted to build the first-ever oil refinery on the Columbia River, and would have been the first constructed on the West Coast in 25 years.

The port's commissioners voted unanimously to deny the $1.25 billion proposal.

Project opponents point to Houston-based Waterside Energy's record as proof the refinery project was wrongheaded. In 2014, the investors behind Waterside Energy abandoned a biodiesel facility in Odessa, Wash., firing its employees and leaving $1.6 million in bills unpaid, according to information from Columbia Riverkeeper.

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GITMO

I've lost the bubble why we still need GITMO. It is a political issue in which closing GITMO will simply be another pin in the George W. Bush voodoo doll. Folks want GITMO to be closed only to point out that Bush was wrong. Whatever.

Once I start reading about the money being spent keeping GITMO open tells me no one is serious about this issue. It's simply political theater, and a theme that can be used in political speeches to raise money. No matter how much GITMO costs or doesn't cost, it's but a footnote in a national budget that has a $20 trillion debt.

I would suggest that the Bush family get out in front of this -- now that Jeb is out of the race -- and fight to have GITMO closed. The grand compromise would be this: close GITMO, move the prisoners to federal prisons, and put pork back on the menu.

I don't think this is all that difficult. Based on early reports, it does not sound like the president is averse to putting them into non-military federal prisons. I would prefer not to have them in military prisons, but that's a minor debating point.

The best thing that would come out of this would be the detainees would be separated from each other.

By the way, President Obama was to lay out his "Get Out of GITMO" speech this morning. At least we know what he was doing this past weekend during the Scalia funeral: working on a speech. I still haven't seen the golfing photographs from this past weekend.