Southern Union, BG apply for LNG export license

Houston-based Southern Union Co. and British gas giant BG Group have applied for a federal license to export liquefied natural gas from their Lake Charles, La., LNG import terminal.

In its earnings announcement Monday, Southern Union said they have formed a joint venture for the export application, which will require modifying the import terminal  by adding equipment to turn natural gas into a liquid. The application asks for the right to ship more than 2 billion cubic feet per day of natural gas over a 25-year period.

Southern Union said early cost estimates for the project are $2 to $3 billion.

The U.S. has largely been an LNG importer, with the exception of an export terminal in Nikiski, Alaska, that has supplied LNG to Japan for several decades. That facility is expected to close in the next year.

The natural gas production boom that has come with the expanded development of shale formations in the U.S. has led to an oversupply of the fuel, making export projects more attractive.

The Southern/BG proposal is one of nine North American LNG export projects awaiting approval from regulators as U.S. natural gas producers are looking for ways to move their low-cost gas overseas.

Freeport LNG just south of Houston and Cheniere Energy’s Sabine Pass LNG Terminal have both received permits to re-export LNG shipments that are in storage at the sites, and have both applied for licenses to super-chill natural gas into a liquid to export.

At the Offshore Technology Conference in Houston last week David Thames, president of Cheniere’s marketing arm, said his company isn’t planning to actually sell LNG but rather the capacity to convert gas into LNG using equipment that will be built on the site of the existing import terminal. That reduces the risk of the project and makes it more competitive with other LNG projects around the globe.

The project is being built in small stages, using LNG liquefaction equipment licensed by ConocoPhillips that can be turned on and off based on market demands (most of the major LNG projects in countries like Qatar have to run at near capacity year ’round).

Both the Freeport and Sabine Pass projects are expected to be online by 2015 if permitting is approved.