When Cheniere Energy exported its first shipment of liquefied natural gas (LNG) from its Louisiana Sabine Pass terminal in 2016, it became the first company to deliver the resource to other countries from within the lower 48 states in more than 50 years. At a time when LNG was in high demand from international markets but had operated under limitations that made its shipment and delivery expensive, it set a major precedent. “We’ve really been a disrupter in the whole LNG industry, both in price and from a shipping model,” says Ed Lehotsky, Cheniere’s senior vice president of engineering and construction.
Lehotsky had worked in the LNG industry for 25 years—primarily as an engineer and project manager with KBR, where he’d worked on projects all over the world—when he first joined Cheniere in 2003. He was initially charged with building regasification terminals where, to combat natural gas shortages in the US, the intent was to import LNG, regasify it, and send it out via pipeline. Cheniere’s Sabine Pass location in Louisiana was chosen as a regas terminal for its deep water channel, its remote location, and its proximity to pipelines, and construction was completed in 2008.
But, with the development and use of hydraulic-fracturing technology immediately afterward, domestic natural gas supplies boomed, and LNG import projects became obsolete. Cheniere’s Sabine Pass location sat largely dormant, funded only by a few customers that had already signed take-or-pay contracts. Cheniere had also begun development of a regas terminal near Corpus Christi, Texas, but work on that terminal was suspended.
In the midst of this seemingly dire situation, the team at Cheniere had a realization: because of the glut of natural gas in the US, the Sabine Pass site could be transformed to liquefy natural gas and export it to other countries, using the tanks, docks, pipelines, and other infrastructure already completed. Lehotsky immediately brought in Bechtel, the engineering and construction company he’d previously worked with. Bechtel also had significant experience building LNG plants using the ConocoPhillips Optimized Cascade process Cheniere selected to liquefy the gas.
At that time, almost all other LNG export sites operated under destination clauses that limited them to the specific companies that they were servicing, which drove up prices. “What we did was charge for the service of liquefying the gas; they load it onto their ships and take it away,” Lehotsky says. “That was new and very innovative, and we had no trouble signing up customers.” Cheniere also introduced an innovative pricing structure that proved attractive to importing countries around the world. Its success continued, and it soon began construction on a second liquefaction terminal near Corpus Christi.
One of Cheniere’s early decisions, Lehotsky says, was to control changes, creating a model for an LNG train and duplicating its specs in each successive train as much as possible. Another key factor was finding highly skilled contractors and employees. “We had a fairly small group of about 140 owner’s representatives to oversee more than $19 billion worth of construction on both projects combined, so it was important to have people who knew what we were doing,” Lehotsky explains. In addition to Bechtel, Cheniere partnered with GE, Linde, Hudson, and SVT GmbH. “SVT supplied the LNG marine-loading arms for the Sabine Pass terminal and has worked closely with Cheniere and EPC Bechtel during the project’s engineering and execution,” SVT’s Uta Hummel says. “This resulted in the successful installation of the eight loading arms in 2008.”
As the design of the terminals has progressed, Lehotsky’s team has focused on finding ways to mitigate environmental factors that might affect production, including the high summer temperatures in Louisiana and Texas. To adjust for this at Sabine Pass, Cheniere elected to inject water into the combustion chamber to give the system extra power while also reducing nitrogen oxide (NOx) pollutants. At the Corpus Christi site, which does not have a convenient source of fresh water but does have access to electrical power, a set of coolers will air-condition the air going into gas turbines.
Cheniere got the projects permitted by working with the Federal Energy Regulatory Commission and other regulatory bodies. Throughout the process, Lehotsky and the Cheniere team regularly communicated with regulators, who until then had not worked with any companies exporting LNG. “We spent a lot of time educating the regulators and convincing them that we knew what we were doing,” Lehotsky says. And it’s clear that Lehotsky does know what he’s doing, according to the KBR Cheniere Project Team. “Ed’s vision and leadership are second to none. We look forward to continuing to work with him on the future growth of Cheniere,” they say.
Since the Sabine Pass site opened, Cheniere has exported more than 160 cargo shipments of LNG with the three trains it has had up and running ahead of schedule and on budget. A fourth train is in commissioning, a fifth train is scheduled for completion in early 2019, and a sixth will come soon after that. Two trains will be completed at Corpus Christi in 2019, and a third has been permitted there.
In total, the costs of developing, financing, and building these projects add up to more than $20 billion. But Lehotsky is confident that Cheniere will have no problems monetizing future trains. It has already exported to 24 different countries, with heavy interest in Japan, South Korea, China, and South America, and its largest current contract is with Shell. “Now that there’s a big amount of LNG about to be leaving the US, we’re going to be one of the biggest exporters, behind Qatar and Australia,” Lehotsky says, adding that Cheniere has other projects on the horizon, too. He’s currently working on an alternative design called midscale, customized for customers who want smaller quantities than Cheniere’s current customers.
“Our success has come from looking at opportunities, being a first mover, and knowing what we want and what the customer needs,” Lehotsky says. “And that has completely upset the LNG apple cart.”
Photos: Barrett Walker, Jason Carroll
The KBR team looks forward to continuing to work under Ed’s exceptional vision and leadership in the development of the future growth of Cheniere.
