US-listed New Fortress Energy expects to produce the first cargo from its floating LNG production unit off Mexico in June, almost one year after originally planned.
Speaking on its first-quarter results call, New Fortress chairman and chief executive Wes Edens said the liquefaction unit — which the company dubs “Fast LNG” — is mechanically complete and is in the final stages of commissioning.
“We expect gas in a matter of the next several days, not months, and a first cargo in June,” Edens said, adding that the unit represents an incredibly valuable asset for the company.
New Fortress originally set out a fast-track schedule for its first venture in offshore LNG production with an initial cargo scheduled for June 2023.
Going into detail on the project, New Fortress chief financial officer Chris Guinta said the company is currently working on the final unit to be commissioned — the mixed refrigerant compressor.
Guinta spoke about the recent incident that occurred on NFE Pioneer II, one of three converted jack-up rigs that house the liquefaction kit. Photographs appeared on social media in April showing the rig covered in a white substance.
He described the incident as a “pipe fracture” inside the unit’s cold box which occurred on 26 April.
Guinta said it was “extremely unfortunate” given that the company was expecting to produce its first LNG 72 hours later.
He said the pipe incident caused the perlite insulation material inside the cold box to be emitted all over the rigs but no “significant injuries were sustained or other adjacent equipment were damaged”.
“While the incident looked like it was much more extensive than it actually was on account of the perlite dusting, the damage was isolated to one pipe and manifold within the box and is expected to be repaired by next weekend,” he said.
Guinta said New Fortress estimates that the value of its FLNG unit exceeds $3bn.
He said this is based on a combination of the cost to replicate it and the time value of having production in today’s “still elevated” market for global LNG.
Guinta said the company has talked to various engineering, procurement and construction contractors on what it would cost for an LNG project of similar size and has been given a price in the region of $1,300 to $1,500 per tonne including storage, but minus other costs like permitting and interest.
He said the floating LNG unit will produce about 90 cargoes over the next four years. He said the value of this LNG sold into the market is worth more than $1bn.
He said the unit gives New Fortress surety of supply, allows it to manage supply-demand imbalances at its terminals and offers increased uptime compared to US terminals which have weather and congestion issues to contend with.
Edens talked up New Fortress’ business in Brazil, where the company has brought on stream two floating storage and regasification units, is building power plant capacity and eyeing growth through participation in local power auctions.
He said the company is looking at bringing in an equity partner and expects to spin off its Brazilian business with an initial public offering in July or August.
First-quarter net income crumbled to $56.7m from $151.6m in the same three months of 2023.
Revenue climbed to $690.3m from $579.1m in the first quarter of last year.
Edens, who also spoke about expansion plans for New Fortress’ business in Puerto Rico, described the results as “solid” and “as expected”. He said it had been an “incredible quarter” for the company.
