March 8, 2024 [LNG Prime]- Delfin Midstream, the US developer of a floating LNG export project in the Gulf of Mexico, is seeking a five-year extension for its LNG export authorizations from the US Department of Energy. The firm is also in talks with South Korea’s Samsung Heavy to reserve a shipbuilding slot for the first FLNG unit.
In October last year, Delfin LNG, a unit of Delfin Midstream, won more time from the US FERC to put into service the project’s onshore facilities in Louisiana.
Delfin now has time until September 28, 2027, to construct and make available for service the onshore facilities.
The company plans to install up to four self-propelled FLNG vessels that could produce up to 13.3 mtpa of LNG or 1.7 billion cubic feet per day of natural gas as part of its Delfin LNG project.
Besides this project, it also aims to install two FLNG units under the Avocet LNG project.
Only FLNG project with non-FTA authorization
According to a filling with the DOE dated March 1, Delfin now requests for a conditional extension of its existing long-term, multi-contract authority, as well as related short-term authority, to export LNG from its project.
LNG will be exported to any country which has, or in the future develops, the capacity to import LNG via ocean-going carriers and with which the US either has a free trade agreement or does not have such a FTA but with which trade is not prohibited by US law or policy.
Delfin said it is “uniquely situated” as the only FLNG project that has received non-FTA export authorization from DOE and the only LNG export project with conditional approval and a favorable record of decision from the Maritime Administration (MARAD).
The firm submitted the request 90 days prior to the existing commencement deadline in its non-FTA order, which is June 1, 2024.
“Delfin does not propose any change in the nature of its project, nor in its existing export authorizations except to modify the timing condition so as to allow it to commence export operations from the Delfin Deepwater Port by no later than June 1, 2029,” it said.
The Biden administration said in January it will “temporary pause” pending decisions for LNG export terminals.
The US paused pending decisions on exports of LNG to non-FTA countries until the DOE can update the underlying analyses for authorizations.
However, the DOE said that this will not affect projects which already have non-FTA approvals.
Delfin “nearly ready” to make FID
US shale gas producer Chesapeake Energy recently entered into an offtake deal with Delfin to supply 0.5 mtpa of LNG to Geneva-based trader Gunvor.
These volumes will add to the SPA Gunvor signed with Delfin in November last year for up to 1 mtpa.
Delfin also sealed a supply deal in July last year with UK-based Centrica worth about $8 billion.
The firm told the US DOE in the filling that it has “diligently and continuously worked to advance its project as expeditious as it could and has spent well over $100 million in doing so.”
“Through those efforts, it has successfully advanced the project such that it is now nearly ready to make the final investment decision,” it said.
Delfin has a modular project consisting of four separate FLNGs, each of which may move forward individually independent of the others, with the result that long-term LNG offtake contracts for only 2.5 to 3 mtpa are needed to support FID for the first FLNG, and the Delfin Deepwater Port, which will be constructed at an estimated cost of over $2.5 billion, it said.
The firm said it has “ample commercial contracts for that purpose, having secured long-term contracts with five LNG offtakers for a total of 3.3 mtpa (some of which may not be sourced from Delfin’s first FLNG).”
Delfin said it is in “advanced” commercial negotiations for additional volumes that will result in financial underpinnings for the second FLNG as well.
The executed contracts represent a long-term revenue stream of almost $19 billion that will underpin the Delfin Deepwater Port and the first FLNG, it said.
According to the firm, it has the needed financial support to reach FID and proceed with its first FLNG, as well as contracted customers counting on its LNG supply.
Delfin in talks with SHI on FLNG slot reservation deal
Delfin said its project has been delayed by a “series of extenuating circumstances” outside its control.
These include the continuing evolution of FLNG technology requiring a series of refinements of the project, complications related to trade with China, the impacts of the Covid-19 epidemic, the related slowdown in market demand for LNG, and “significant” challenges with the MARAD licensing process.
Much of the infrastructure for Delfin’s project has already been constructed and is in existence, namely the large offshore natural gas pipelines that will transport feed gas to the FLNGs.
Unlike the land-based LNG export projects holding all other non-FTA authorizations, Delfin’s project does not require significant onshore construction in the US.
Instead, the key part of the Delfin project, the FLNGs, will be constructed in existing shipyards overseas.
Delfin said it has negotiated and agreed upon major terms of a “near-ready-for-execution” EPCI deal with South Korea’s Samsung Heavy Industries, supported by Black & Veatch of Kansas for the topside liquefaction technology, for a newbuild FLNG.
The firm also said it is negotiating a slot reservation agreement with SHI in order to ensure that construction activities on the first FLNG can start soon, and which will give Delfin an exclusive right to the shipyard slot needed for the construction and delivery of the vessel in 2028.
In the coming months, Delfin expects to execute the slot reservation agreement, and to issue a limited notice to proceed to SHI to begin work on the FLNGV, and then to execute the EPCI agreement.
MARAD approval
Before Delfin may absolutely commit to unconditional construction under the EPCI agreement, finalize its financing arrangements, and reach FID on its first FLNGV, however, it needs to solidify the status of its long-standing regulatory approvals, it said.
Delfin has acquired and maintained the regulatory authorizations needed for its project, but two key final steps remain.
First, Delfin needs MARAD to issue its final license under the DWPA.
Delfin said it has been working with MARAD to that end for over two years and expected to receive the license in 2023.
The firm still expects to receive the final DWPA license soon and will notify DOE/FECM of the issuance when it occurs.
Second, Delfin needs DOE/FECM to grant the conditional extension of time for the start of LNG exports.
To ensure the consistency of its requested extension of time with the commencement extension policy, Delfin proposes that DOE/FECM grant only a conditional extension, it said.
The conditional approval will require Delfin to certify by no later than nine months after DOE/FECM’s order that it has obtained the final DWPA license, secured necessary financing arrangements to construct its first FLNG, made its positive FID decision with respect to first FLNG, and issued an unconditional, full NTP for first FLNG to the EPCI contractor.
“While Delfin is confident in its ability to satisfy those conditions within the requested time period, should it fail to do so then the export authorizations would expire at the end of that period,” it said.
“Thus, imposition by DOE/FECM of these conditions on the extension of time will eliminate soon any uncertainty about the status of Delfin’s project, providing assurance to DOE (and all other stakeholders and interested observers) that Delfin will actually commence LNG exports by the extended deadline,” Delfin said.
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