Delfin Close to Landing Supply Deal for Delayed U.S. Offshore LNG Export Terminal
BY JAMISON COCKLIN
July 3, 2021
Delfin Midstream has filed another request with FERC for more time to build onshore metering, compression and pipeline facilities in Cameron Parish, LA, for its planned floating liquefied natural gas (FLNG) export project offshore.
Delfin wants until Sept. 28, 2022 to complete the onshore facilities. It is the company’s third extension request. If built, it would be the first FLNG export terminal in the United States. A final investment decision (FID) on the entire project has also been pushed back to later this year or next, said CEO Dudley Poston. Under that timeline, LNG production could start in 2025 or 2026, he said.
With the global economy recovering from the pandemic, Delfin said in its Federal Energy Regulatory Commission filing that it has entered “detailed negotiations” with potential buyers and expects to sign a long-term offtake contract in the coming year.
Delfin first requested more time for the onshore facilities in 2019 as it worked through the regulatory process. The project has also been impacted by a global natural gas supply glut that plagued the market over the last three years. Things were made worse by the Covid-19 pandemic, complicating Delfin’s ability to sign offtake agreements to secure financing for the project’s first vessel.
“The market has definitely come back, and it’s not the same market it was in 2018,” Poston told NGI. “Terms are shorter, people are looking for more comfort, more flexibility. There’s more discussion about alternative indices.”
The global gas market shifted late last year as demand increased. Since then, the world went from an abundance of natural gas to a shortfall. Consumption is expected to outstrip supply by the middle of this decade. At the same time, more buyers and sellers have entered the market, expanding spot deals and increasing the liquidity of benchmarks across the globe.
Poston said Delfin has discussed a wide variety of commercial models for the Delfin project, including supply deals linked to Henry Hub, plus liquefaction fees, tolling structures or agreements linked to European and Asian benchmarks that would be netted back to the Gulf Coast to exclude shipping costs.
“The pure netback deals are easy to sign, but hard to finance. The Henry Hub deals are hard to sign but easy to finance,” Poston said. “What we’re trying to do is find that midpoint. What’s in the middle there?”
Delfin completed the front-end engineering design for its FLNG vessels late last year. The 3.5 million metric tons/year ships can be developed independently with their own commercial and financial structure. FIDs can be made on a vessel-by-vessel basis.
Poston said the company could begin construction on a vessel within three to six months of landing an offtake agreement. The project consists of onshore facilities and an offshore pipeline that connects them to move gas to up to four FLNG vessels off the Louisiana coast. The company is also in the planning stages for the similar Avocet project nearby.
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