Kinder Morgan Elba Island LNG Exports Delayed

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Two weeks ago the Federal Energy Regulatory Commission (FERC) granted a request to Kinder Morgan to “introduce feed gas, back-up fuel, and BOG fuel” to the first of what will be 10 production units at its Elba Island, Georgia LNG export facility (see One Step Closer: FERC OKs Feed Gas to Elba Island LNG). We told you in February that Kinder said it will launch the first of its 10 LNG export mini-trains by the end of March this year (see Kinder Morgan Takes Another Baby Step with Elba Island LNG). Scrap that.

Yesterday Kinder announced it is pushing back the startup of the first mini-train to April, “because of construction delays,” and very disappointingly, all 10 mini-trains will now likely not be online until “early 2020.” Previously the full facility was supposed to be up and running by the end of this year.

Frankly, Kinder keeps violating expectations. This isn’t the first time. The first train was originally supposed to be online by the end of third quarter 2018, then by the end of fourth quarter 2018 (see Elba Island, Ga. LNG Export Startup Delayed (Again) – Now 1Q19). We’re now entering the “Boy Who Cried Wolf” territory. Best not to say anything at all if you can’t deliver.

Kinder Morgan said Wednesday it was pushing back startup of its Elba LNG export terminal in Georgia to April because of construction delays, and in an updated timeline suggested completion of all 10 liquefaction trains may not occur until early 2020.
The Georgia terminal is among three US liquefaction facilities that are expected to begin service this year, aiding the country’s efforts to be a major supplier of LNG to global destinations.
The startup of Elba, Freeport LNG and Sempra Energy’s Cameron LNG would double the number of major US LNG export terminals in operation. All three have faced construction or weather-related delays. In Kinder Morgan’s case, the operator had most recently said it expected in-service of the first train by the end of March, with the remaining trains online by the end of 2019. Startup had previously been expected by the end of 2018.
“Kinder Morgan has revised its initial in-service date expectations for the Elba Liquefaction Project as a result of delays during construction,” spokeswoman Lexey Long said in an e-mail responding to questions. “The first unit of the project is now expected to be in commercial service in late April.”
She said the first export cargo will likely go out when sufficient LNG is accumulated in storage tanks after the first unit is in service, though the exact timing would be up to Shell, which is supporting the facility with a 20-year contract to buy LNG produced there.
The in-service date of the remaining nine units is expected to follow sequentially, with one each month after the other, Long said. Based on that timing, if the first train came online in late April, it could be January 2020 before all the trains are online. The in-service date of the final unit will depend on the duration of the commissioning activities for the successive units, Long said.
LNG netbacks to Transco Zone 4, the most liquid market for Elba Island LNG feedgas supplies, have been trending downward since earlier in the year, as global demand has failed to keep pace with supply growth from the US, Russia and Australia.
The netback to the UK’s National Balancing Point is currently pricing at a roughly 70 cents/MMBtu premium to the Platts JKM spot price – the benchmark price for spot LNG in Northeast Asia — and was estimated at just over $1/MMBtu on Wednesday, S&P Global Platts Analytics data show. This premium suggests that initial exports from the Elba Island facility may target European markets, which have taken roughly 40% of total US LNG production so far this month.
MODULAR TECHNOLOGY
While the Elba Island facility near Savannah remains the smallest of the US LNG export projects, its completion will be a major milestone for Shell, marking the first application of its Movable Modular Liquefaction System design for LNG exports. Shell eventually plans to have these small-scale MMLS units deployed across North America, liquefying stranded or otherwise flared gas for use as vehicle and marine fuel.
The units at the Elba facility will be commissioned on site and will not require a commissioning cargo before commercial service begins, Kinder Morgan’s Long said. Investment funds managed by EIG Global Energy Partners own a 49% stake in the joint venture that holds the terminal. Kinder Morgan expects that 70% of the revenue associated with the project will be recognized when the first liquefaction unit is in service.
Meanwhile, Sempra has said most recently that it expects the first train at its Cameron LNG export terminal in Louisiana to begin production in the second quarter. Freeport LNG CEO Michael Smith told Platts last week he expects the Texas facility to be ready to ship its first export cargo in July. (1)

Coincidentally, RBN Energy ran an interesting article yesterday (third in a series) about LNG export plants. Elba Island was one of the plants they discussed:

Elba Island LNG
Commissioning for the first of 10 “mini-trains” (totaling a capacity of 2.5 MMtpa, or ~350 MMcf/d) is also under way at the brownfield Elba Island LNG terminal in Chatham County, GA. The green call-out boxes in Figure 3 show the timeline of progress to date. Like Cameron, the commissioning activity at Elba, which appears to have kicked off in late January, thus far has been focused around the facility’s ancillary systems, including the LNG tanks, flare system, and the back-up fuel and boil-off components. In early March, the project was also approved to introduce feedgas, and last week (on March 15), it also got approval to begin commissioning the hot oil system, indicating that testing of the pretreatment unit is now under way — a precursor to starting up the liquefaction process.
Figure 3. Elba Liquefaction Ramp-Up. Source: RBN, FERC Filings (Click to Enlarge)
As for gas flows to the terminal, it’s not entirely clear how fuel and feedgas deliveries will be reported by EEC during the commissioning process. As a legacy pipeline, EEC already moves some gas volumes to non-LNG delivery interconnects (mainly serving power demand). In September 2018, the pipeline added a delivery interconnect with Elba Liquefaction Co. (ELC) in Chatham County, but the point has yet to report any flows (except for a lone, 74-MMcf/d delivery on February 12). As of its mid-January earnings call, Kinder Morgan suggested that the first of the 10 trains would be online by the end of the first quarter. However, assuming that the EEC-ELC interconnect represents gas deliveries to the export terminal, it looks like the facility has yet to begin taking feedgas and an in-service delay seems likely. In the case of Cheniere’s trains, it took an average of 30 days after the hot oil system was first ramped up before feedgas flows appeared. If Elba follows a similar pattern, it could be mid-April before feedgas flows begin in earnest, putting the window for first LNG production in the late-April/May time frame. (The remaining nine trains are due online by the end of the year.) (2)