Jordan Cove rejection underscores weak LNG market


Another US pipeline project delay took centre stage this week as the Federal Energy Regulatory Commission rejected  construction of the Jordan Cove LNG terminal and a proposed pipeline to supply it. The decision serves as a reminder of weak LNG demand and a rise in midstream exposure as upstream operators face increasing legal scrutiny and financial strain.

On March 11, the Federal Energy Regulatory Commission (FERC) rejected Veresen Inc.'s proposed Jordan Cove LNG export terminal at Coos Bay, Oregon, and the Pacific Connector pipeline to feed it. Veresen's $3 billion plan would source gas from the West Canadian Sedimentary Basin and US Rockies, which compete for market with Northeast and Gulf Coast gas.

Veresen's Jordan Cove and Pacific Connector

Although the commission cited 'adverse effects on landowners' and 'no benefit to the public to counterbalance,' Veresen plans to refile by April as it works to secure the necessary customer support.

Meanwhile, Japanese support for Jordan Cove remains strong due to its West Coast location, which offers basin diversity, shorter shipping times and lower costs without the hurricane risk of the Gulf Coast. However, as a single-phase project, its strategic benefits to Japan, however, are viewed in competition with multi-phased development in East Africa LNG.

This latest delay for a US pipeline project, along with a recent increase in LNG projects in the Gulf Coast and Australia, highlights the weakness of global LNG demand — a trend we expect to continue over the near term. Our recent Insight report, 'Midstream March Madness', is a case study examining midstream risk exposure at the play level.

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Source: Wood Mackenzie

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