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Vol. 12, No. 14 Week of April 08, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Shell drops LNG plans in Louisiana

Offshore facility in Gulf faced opposition over environmental issues, but import capacity seems adequate for available supplies

By Allen Baker

For Petroleum News

Royal Dutch Shell has dropped plans for a liquefied natural gas import facility 38 miles south of Louisiana’s Cameron Parish, citing the substantial capacity already available for importing liquefied natural gas into the U.S. market, particularly along the Gulf Coast.

The Shell decision came on the heels of a March 13 cancellation by Chevron Corp. of a proposed West Coast import terminal in Mexico, near the California border.

Environmental groups claimed victories in both cases, but an ample supply of import capacity is the more likely factor.

Plenty of capacity

“The terminals that have already been committed will provide sufficient (LNG) capacity,” Greg Koehler, Shell’s project director for the Gulf Landing proposal, told the Associated Press on March 28.

Projects that already have federal approval, plus those currently operating, could theoretically import half of the 61 billion cubic feet of gas currently consumed daily in the United States, though there is nowhere near enough LNG available in the world market to provide that kind of supply.

U.S. import terminals in the Atlantic Basin already can bring in the equivalent of 1.7 trillion cubic feet annually, or more than 4 bcf daily. LNG imports last year amounted to 580 million cubic feet, or about 1.6 bcf daily.

Offshore plans hit reef

Offshore LNG terminals originally were seen as a way to avoid NIMBY complaints from residents near the sites of onshore facilities. But they quickly drew fire for plans to use millions of gallons of seawater to heat the LNG and regasify it in what are called “open-loop” systems. The National Marine Fisheries Service found that open-loop terminals would be harmful, because the chilling of the seawater in the shallow Gulf was found to kill marine creatures and eggs.

A ConocoPhillips plan for an LNG terminal off Alabama was abandoned last summer as political pressure mounted on governors in Gulf Coast states to veto the projects.

Similar projects have been making progress in New England, however, as Neptune LNG LLC received a deepwater port license on March 26 from the U.S. Maritime Administration for an offshore port in Massachusetts Bay.

Neptune, a subsidiary of Europe’s Suez Energy, already operates an onshore LNG import terminal at Everett, Mass. The new system could import and regasify up to 750 million cubic feet of gas daily using an onboard regasification system. The project cost is about $1 billion, including the ships, and the port is expected to start operating in 2009.

Excelerate Energy, based in The Woodlands, Texas, has proposed a similar terminal nearby called the Northeast Gateway Energy Bridge 13 miles southeast off Gloucester. The Maritime Administration has said it will issue an operating license for that port also. Excelerate built a similar offshore terminal in the Gulf of Mexico but it has been largely inactive.

West Coast proposals

Offshore terminals also are under consideration on the West Coast, where Australian energy firms BHP Billiton and Woodside Petroleum have proposed LNG import facilities. Those have faced substantial opposition from local residents despite their locations more than a dozen miles from shore, and important decisions on those projects are expected this spring.

ConocoPhillips recently dropped plans for an LNG port at Long Beach after the city’s harbor commission voted against the idea. But a Sempra Energy facility is currently under construction near Ensenada, Mexico, to serve the California market as well as Mexican utilities.

The Sempra terminal has an initial capacity of 1 bcf 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.

The Energia Costa Azul project is near the proposed site of the abandoned Chevron terminal, which would have had an initial capacity of 1.4 bcf daily.

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