Conoco/Mitsubishi LNG project halted

Allen Baker

For Petroleum News

A plan for a liquefied natural gas terminal at the Long Beach port has been shelved by the city’s harbor commission, and it isn’t likely to be revived. The commissioners decided unanimously Jan. 21 that the environmental impact report wasn’t adequate for the terminal backed by ConocoPhillips and Mitsubishi.

The project fell to concerns about risk to the port and nearby residents even though Sound Energy Solutions, the Conoco/Mitsubishi joint venture, offered to pay $500 million to the city-owned port over 40 years, including $100 million up-front. The joint venture hasn’t said whether it will continue to press for the terminal.

That leaves three offshore projects in the running to provide LNG to Southern California, along with two in Mexico’s Baja California.

One of those, the Energia Costa Azul project of Sempra Energy, is already under construction 50 miles south of San Diego. The other is a Chevron project nearby that has received Mexican government approval but hasn’t begun construction.

The Sempra terminal has an initial capacity of a billion cubic feet daily, with an expansion being sought to boost that to 2.5 bcf per day, more than a third of the amount California now consumes. Chevron’s project would bring in 1.4 bcf per day.

In an effort to avoid the issues Long Beach terminal faced, Australian suppliers Woodside Energy Ltd. and BHP Billiton are seeking permission to ship LNG to terminals far out to sea and pipe the gas to shore.

Woodside would use tankers that would regasify the cargo onboard and then pipe it 22 miles to Malibu. That system could supply up to 1.4 bcf daily, roughly 22 percent of California’s current usage.

The BHP Billiton proposal, for a similar capacity, is off Ventura County. Crystal Energy also has a proposal to convert an old oil platform off Oxnard into a terminal.

Farther north, Jordan Cove Energy has proposed a 1 bcf/day project at Coos Bay, Ore., and there are three proposals for terminals on the Oregon side of the lower Columbia River. None has governmental approvals yet.

Two projects near Prince Rupert, British Columbia, are in process. The Kitimat LNG port has Canadian approval for importing a billion cubic feet daily, while a Prince Rupert terminal is proposing to bring in 300 million cubic feet each day.

Meanwhile, the South Coast Air Quality Management District filed a lawsuit Jan. 23 against the California Public Utilities Commission over its decision to permit utilities to burn high-Btu gas from LNG. The lawsuit argues that burning the undiluted gas would create more pollution.

Most potential suppliers have already said they will limit the Btu values of their gas. That can be done by mixing in nitrogen or stripping out the natural gas liquids that are generally more valuable anyway. But the air quality agency said other suppliers might show up in the market and the current suppliers might change their minds.