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FEATURE: Update on Install of Initial Liquefaction Units on Elba Island Consortium

Category: Manufacturing

By Lou Phelps, Savannah Business Journal

August 1, 2018 – Based on the Kinder Morgan announced construction schedule, the SBJ decided to reach out to get an update on the construction progress on Elba Island by Elba Liquefaction Company, L.L.C. (ELC) and Southern LNG Company, L.L.C. (SLNG) that are constructing a two-phased project called the Elba Liquefaction Project, which will add liquefaction and export capability to SLNG’s existing liquefied natural gas (LNG) terminal located at Elba Island. The 840-acre island is considered to be in the Unincorporated area of Chatham County, outside of the city limits of Savannah.  The first LNG terminal began to operate on the island more than 40 years ago.

After a series of design approvals and environmental reviews by the Federal Energy Regulation Commission (FERC), construction began on Nov. 1, 2016 on the approximately $2 billion project, that when completed will significantly increase the county’s property taxes collected by the companies.

ELC is a Delaware limited liability company formed by Southern Liquefaction Company, LLC, a Delaware limited liability company, and a unit of Kinder Morgan.

On June 1, 2016, the FERC granted the project authorizations under Sections 3 and 7 of the Natural Gas Act, and Kinder Morgan announced that the initial liquefaction units were expected to be placed in service in mid-2018, with final units coming on line by early 2019.  But in the company’s call with industry investors on July 16, the company stated that the six initial units were on site, but that operations will not get underway until the 4th Qtr. this year, “one quarter behind,” they stated.

On Feb. 28, 2017, Kinder Morgan, Inc. announced that investment funds managed by EIG Global Energy Partners (EIG) have become a 49 percent joint venture participant in Elba Liquefaction Company, L.L.C. (ELC) which will own 10 liquefaction units and other ancillary equipment to be constructed as part of the Elba Liquefaction Project at Kinder Morgan’s existing Southern LNG Company, L.L.C. Elba Island LNG facility. 

The project has been years in the making.  In 2012, the project received authorization from the Department of Energy to export to Free Trade Agreement (FTA) countries. An application to export to non-FTA countries was approved on Dec. 16, 2016. Under full development, the Elba Liquefaction Project is expected to have a total capacity of approximately 2.5 million tons per year of LNG for export, which is equivalent to approximately 350,000 Mcf per day of natural gas.

The project was first announced in Jan. 2013 by Southern Liquefaction Company, LLC, a unit of Kinder Morgan, and Shell to add liquefaction and export capability to Southern LNG Company, L.L.C.’s existing liquefied natural gas regasification terminal at Elba Island in Chatham County, Georgia. On July 15, 2015, Kinder Morgan and Shell announced that they reached an agreement for Kinder Morgan to purchase 100 percent of Shell’s equity interest in Elba Liquefaction Company, LLC (ELC). Prior to the announcement, Kinder Morgan owned 51 percent of the ELC joint venture and Shell owned the remaining 49 percent (see press releases).

Shell continues to subscribe to purchasing 100 percent of the liquefaction capacity.

One of the innovations by the consortium of companies is us of a flexible small-scale liquefaction plant, that cools natural gas to the point that it becomes a liquid-commonly known as liquefied natural gas or LNG. Stringent safety standards and assurance processes are being used, approved by FERC.

Latest Stock Information

On July 18, Kinder Morgan, Inc. (NYSE: KMI) announced that its board of directors approved a cash dividend of $0.20 per share for the second quarter ($0.80 annualized) payable on August 15, 2018, to common stockholders of record as of the close of business on July 31, 2018. This is a 60 percent increase from last year’s fourth quarter dividend, and is consistent with the plan KMI announced during the summer of 2017.

The Importance of Liquified Natural Gas to the U.S.’s Energy Policies

According to Kinder Morgan in their recent press release on 2nd Qtr. results, “Natural gas is critical to the American economy and to meeting the world’s evolving energy needs. Objective analysts project U.S. natural gas demand, including net exports of liquefied natural gas (LNG) and net exports to Mexico, will increase by 39 percent to nearly 112 billion cubic feet per day (Bcf/d) by 2027. Of the natural gas consumed in the U.S., about 40 percent moves on KMI pipelines. While a substantial majority of natural gas is consumed in industrial, commercial and residential heating uses, KMI expects future natural gas infrastructure opportunities over the next decade will also be driven by greater demand for gas-fired power generation across the country (expected to increase by 27 percent), LNG exports (up almost seven-fold), exports to Mexico (forecast to rise by 51 percent), and continued industrial development, particularly in the petrochemical industry.”

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