Banks to lend $7.5 to the beleaguered U.S. Cameron LNG project

LNG tanker
Source: DollarPhotoClub

About 30 banks, including Japan’s three biggest lenders, are set to sign a $7.5 billion loan early next month for the Hackberry, Louisiana-based Cameron liquefied natural gas development – Bloomberg reported yesterday.

The U.S. plant could give Japan access to much-needed LNG after the country decided to phase out its nuclear power stations, following the Fukushima disaster.

“It’s worthwhile for Japanese banks to participate in these projects at a time when there’s fierce competition” in domestic lending, Hironari Nozaki, an analyst at the Tokyo Citigroup Inc. told Bloomberg. The lenders’ “capital is ample,” he added.

The lenders include: Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, HSBC Holdings Plc, Societe Generale, and ING Groep NV. Nippon Export and Investment Insurance will guarantee $2 billion of the private-sector bank loans, the Bloomberg sources said.

The $10 billion Cameron project, owned by Sempra Energy, GDF Suez, Mitsui & Co., and a joint venture between Mitsubishi Corp. and Nippon Yusen KK, is slated to produce 12 million tons of LNG a year starting 2018.

However, the project, which includes a three-train liquefaction facility and a 21-mile, 42-inch-diameter pipeline to feed gas to the facility, is not without problems. Environmental groups campaign to revoke the approval the US Federal Energy Regulatory Commission (FERC) gave the Cameron LNG export project, on the grounds that FERC made errors in its order granting authorization of the Cameron project.

Among other concerns, the petition noted that LNG exports will put considerably more demand on gas. Meeting that demand will require either an increase in supply through more production or a reduction in consumption, which would come primarily from switching more power generation to coal from gas, the groups said, referring to an EIA study.

In the EIS issued in April, FERC found the environmental impacts from the construction and operation of the facility would be manageable. The commission adopted staff’s environmental recommendations, and the project will have to “adhere to more than 75 conditions that would mitigate any potential adverse environmental impacts,” FERC said last month.

What is more, the two LNG export facilities are planned in a zone of increased flooding risks. Sen. Mary Landrieu, D-La, who chaired a Senate meeting on FERC, pointed out that the area’s high flood risk won’t permit construction of even a gas station or restaurant, although such facilities are needed for the jobs being produced by the projects.

The first liquefaction train at the Cameron project is expected to be placed in service in 2017, with the other two scheduled to follow in 2018.

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