LNG Export Facility Construction Underway on Gulf Coast

Construction has begun on a liquified natural gas (LNG) plant, export terminal, and associated pipeline on the U.S. Gulf Coast south of Lake Charles, Louisiana.

Tellurian Inc., a Houston-based natural gas company, received a permit for the $16 billion Driftwood LNG project from the Federal Energy Regulatory Commission (FERC) in 2019, but delayed construction due to low prices and regulatory uncertainty under the Biden administration.

Rising natural gas prices and the war in the Ukraine have caused the Biden administration to push U.S. natural gas exports to Europe to replace Russian gas.

Enhances Energy Security

The LNG plant will benefit the world, said Tellurian president and CEO Octávio Simões, in a March press release.

“Energy security is a leading concern in many countries today and the United States must do its part to supply LNG to the global market as quickly as possible,” said Simões. “Beginning construction now allows Tellurian to deliver upon our robust schedule for first LNG in 2026 while we complete the project financing.”

The Driftwood LNG project will be able to export nearly 27.6 million tons of LNG annually.

It is expected to cost between $13 billion and $16 billion to build, employing 6,400 temporary workers to construct the plant and providing about 400 permanent jobs after operations begin.

Started Under President Trump

President Biden is lucky President Trump had the foresight to approve several new LNG facilities during his administration, says Merrill Matthews, Ph.D., a resident scholar with the Institute for Policy Innovation.

“With U.S. consumers angry over high energy prices and our EU allies struggling to obtain non-Russian natural gas supplies, the Biden administration is eager to tout progress in the development of new LNG facilities—facilities that were started under President Trump,” said Matthews.

The Trump administration also approved the infrastructure projects that will supply gas to the LNG plant, says Matthews.

“Fortunately for Biden, recently completed natural gas pipelines—the type of pipelines Biden has either canceled or urged more regulatory control over—that were begun under Trump, for instance Texas’s Whistler pipeline and Permian Highway pipeline, will help supply the much-need natural gas to the Gulf Coast LNG facilities,” said Matthews.

‘Higher Demand Means Higher Prices’

One key question is how the Driftwood LNG project and others like it will impact the long-term price of natural gas, says Gary Stone, executive vice president of engineering at Five States Energy Company.

“Historically, natural gas in the United States has been a more-or-less captive ‘local’ market, priced by seasonal supply and demand and unaffected by world and, in the case of crude, OPEC politics, but with growing exports of LNG, this will change,” said Stone. “This spring alone we’ve seen a large run-up in the price of natural gas in the normally low-priced spring months. Many think this was brought on by tensions from the war in Ukraine and the need for gas in Europe.”

Many nations are increasing their use of natural gas and bidding for LNG exports from the United States, says Stone.

“Long term, prices in a world market will undoubtedly favor producers and adversely impact domestic consumers, in part because many parts of the world do not hold the same negative view of natural gas that the Biden administration does, and higher demand will mean higher prices,” said Stone.

Kenneth Artz (KApublishing@gmx.com) writes from Dallas, Texas.