ConocoPhillips signs up for LNG receiving terminal

Plans to start construction of new receiving terminal on Texas coast in 2004

Larry Persily

Petroleum News Juneau Correspondent

ConocoPhillips expects to start unloading liquefied natural gas at a new receiving terminal on the Texas coast in mid-2007, with the volume eventually to reach an average 1 billion cubic feet per day.

The LNG terminal at Freeport, Texas, population 13,000, about 40 miles down the Gulf of Mexico coast from Galveston, Texas, would be a major expansion into the natural gas business for Houston-based ConocoPhillips and its first U.S. LNG receiving terminal. The company produces about 1.3 bcf per day from its own wells in the United States.

ConocoPhillips announced the deal Dec. 21, reporting it had signed an agreement with Houston-based Cheniere Energy and Freeport LNG Development. As part of the deal, ConocoPhillips will take a 50 percent interest in the general partner Freeport LNG and will be responsible for construction management and operation of the facility. It also will get 1 bcf per day of the facility’s 1.5 bcf per day send-out capacity and will provide an estimated $400-450 million in construction funding.

The terminal will include 6.9 bcf of storage. The gas will move less than 10 miles through a new pipeline to connect with the interstate gas distribution grid at Stratton Ridge, Texas.

The balance of the capacity not taken by ConocoPhillips — 500 million cubic feet per day — will go to Dow Chemical.

“Between ConocoPhillips and Dow Chemical, the entire capacity of Freeport is now spoken for,” said Charif Souki, Cheniere’s chairman and CEO.

Cheniere is also working to develop two additional LNG receiving terminals along the Gulf of Mexico coastline — at Corpus Christi, Texas, and Sabine Pass, La.

“Between ConocoPhillips and Dow Chemical, the entire capacity of Freeport is now spoken for,” said Charif Souki, Cheniere’s chairman.

Work could start next year

ConocoPhillips has not locked in firm supply contracts, but is looking at bringing in LNG from any of three potential sources, said Houston spokeswoman Linsi Crain: Venezuela, 2,500 miles away; Nigeria, 7,000 miles away; or Qatar, almost 13,000 miles away.

In July the company signed an agreement to develop Qatargas 3 at Qatar’s North Field, a 1 bcf per day LNG facility jointly owned with Qatar Petroleum. Under the agreement ConocoPhillips is responsible for regasification and marketing in the United States, with start-up planned for 2008 or 2009.

Then in October ConocoPhillips announced an agreement with the Nigerian National Petroleum Corp. to conduct front-end engineering and design to develop a new LNG project in the West African coastal nation. The target date for operations in 2008, at almost 1.3 bcf per day. ChevronTexaco and Eni are partners in the project.

And ConocoPhillips, working with ChevronTexaco, also is studying potential LNG supply from Venezuela, Crain said, adding that the company is focusing on development of its LNG portfolio.

“This significant step in our LNG import and regasification development effort provides a near-term opportunity to serve the growing U.S. natural gas market,” said Jim McColgin, ConocoPhillips vice president of exploration and business development.

Company also plans Maine LNG site

The companies, however, are encountering some community opposition to the project, with residents questioning whether the undersea pipeline connecting the terminal to a major interstate line inland would harm fishing grounds.

Harpswell residents will vote Jan. 27 whether to approve the $350 million terminal.