Houston-based Annova LNG, LLC, has filed an application with the US Department of Energy (DOE) to receive authorization to export domestic LNG to free trade agreement (FTA) countries.
While the Office of the United States Trade Representative lists free trade agreements in force with 20 countries, the US only exports LNG to Canada and Mexico by pipeline.
As exportation to FTA countries is seen by the DOE to be in the national interest, the approval process is usually expedited. This is a direct contrast to the four companies approved this year by the DOE to export LNG to non-free trade countries following the Obama administration’s approval to widen LNG export: Sabine Pass Liquefaction, LLC (Cheniere Energy Inc.); Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC; Lake Charles Exports, LLC; and Dominion Cove Point.
Located in the Port of Brownsville, Annova’s facility is in its initial stages and expected to be in-service by mid-2018. Its output is expected to reach 2 mtpa (1 mtpa per train). The facility was designed to be small enough to sell 100% of its volume in long-term tolling agreements to buyers in FTA countries, with the scalability in place to expand to 6 mtpa.
All proposed LNG facilities are limited to a small number of counterparties per train to maximize profitability. Annova’s train sizes are 1 mtpa; therefore, its facility was designed to attract buyers within a scheme of 0.5 mtpa or 1 mtpa. With the majority of facilities marketing to counterparties buying 2 mtpa or 4 mtpa, Annova sees a clear market advantage.
"There are not that many counterparties around the world that can buy that volume," said David Chung, Annova President and CEO. "We are marketing to a completely different set of counterparties than the larger facilities."
The facility’s size grants it another advantage: scaled-back licensing requirements. At 2.0 mpta, Annova can sell 100% of its volume to FTA countries, whereas the other larger facilities must sell at least some volume to non-free trade countries (NFTA). Annova therefore only needs an FTA license to get built.
Annova has two clear milestones for early 2014: to enter into front-end engineering and design (FEED) and to initiate the Federal Energy Regulatory Commission’s (FERC) National Environmental Policy Act (NEPA) pre-filing process.
According to a September report prepared for members of the US Congress by the Federation of American Scientists, the US is expected to go from a net importer of natural gas to a net exporter by 2020.
“With our proximity to the Eagle Ford shale and multiple interstate and intrastate pipelines, we are poised to be the ideal provider to those customers looking to buy in the range of 0.5 mtpa to 1.0 mtpa. We are excited to have initiated the DOE application process and eagerly look forward to getting down to business,” Chung said.
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