North America aboard LNG bandwagon

Rush to embrace imports as answer to supply deficit results in bundle of projects for U.S., with emphasis on the GOM and East Coast sites, Canada, Mexico

Gary Park

Petroleum News Calgary Correspondent

In the scramble to make liquefied natural gas a vital part of U.S. gas supply, and avert a possible shortfall of 8 trillion cubic feet by 2010, the floodgates have opened this year.

With U.S. Federal Reserve Board chairman Alan Greenspan as cheerleader, a wide array of majors and independents has unveiled a bundle of new and expanded projects for the United States, with emphasis on the Gulf of Mexico and East Coast sites, Canada and Mexico.

But people such as Hal Kvisle, chief executive officer of TransCanada, which is actively exploring a role in LNG projects, caution that many of the proposals now on the table will never make it to completion.

However, this year’s list is long and seemingly growing longer by the week.

ExxonMobil already producing 20 percent of LNG

In August it signed a purchase option for a site at Corpus Christi, Texas, and said it is pondering a similar option for an LNG facility at Mobile Bay, Ala., although a spokesman declined to say whether ExxonMobil is simply weighing the two or likely to build at both sites.

Also being evaluated by ExxonMobil are possible terminal sites at Beaumont, Texas, and Sabine Pass, La., in addition to other Texas projects that are on the drawing boards for Freeport and Brownsville.

Already producing about 20 percent of the world’s LNG, ExxonMobil, along with other stakeholders, plans to increase output from Qatar’s North Field, which has reserves estimated at 900 tcf.

Two LNG processing trains are under construction at Qatar and plans are in the works for two more, with a combined capacity of 15 billion cubic feet per day.

ChevronTexaco and Shell

Shell proposes to build the plant which would have capacity of about 1 bcf per day online in 2007 to serve utilities, industrial users and power plants in southern California and northwest Mexico.

The two companies say they have signed letters of intent covering 20-year contracts from Gorgon, which has proven reserves of 12.9 tcf and expects to spend $7.2 billion on development between now and about 2025.

• ChevronTexaco is also waiting regulatory approvals for a 1.5 bcf per day import terminal 60 miles southeast of Lake Charles, La., using the Henry Hub and Gulf Coast pipelines to reach markets in the U.S. northwest and west.

The Port Pelican project is scheduled to come on stream in 2006, likely taking supplies from ChevronTexaco’s export facilities in West Africa or Venezuela’s Delta Platform, with total reserves estimated at 40 tcf.

The plans include a joint venture with 40 percent partner ConocoPhillips to invest $2.1 billion developing the Delta block and building an LNG train. Venezuela’s state-owned PDVSA has the right to acquire up to 35 percent of the project when it turns commercial.

Canada Maritime region receiving terminals

Both projects would likely deliver gas to New England through the existing Maritimes & Northeast Pipeline system from Nova Scotia’s Sable offshore gas field.

Irving, despite the loss of ChevronTexaco as a potential partner, said it plans to build a C$500 million terminal at its Canaport deepwater port, 60 miles north of the U.S. border, for start-up in 2006.

Access Northeast is eyeing a terminal site on the Cape Breton Island shore of the deepwater Canso Strait, with initial capacity of 750 million cubic feet per day, growing to 2.125 bcf per day.

The company is in discussions with upstream sources and customers to ensure it has adequate supply and takeaway capacity and before it announces a construction timetable.

U.S. plans include GOM, East Coast

It holds a 30 percent limited partnership interest in Freeport LNG Development which is seeking Federal Energy Regulatory Commission approval for a 1.5 bcf per day regasification facility on Quintana Island in Freeport; has signed a deal with and BPU LNG, an affiliate of Sherwin Alumina, for a 1.5 bcf per day terminal at Corpus Christi; and is 100 percent owner of the Sabine Pass project, which is designed with capacity of 2 bcf per day.

• Weaver’s Cove Energy has filed an application with regulators to use a mothballed oil terminal at Fall River, Mass., aiming for peak deliveries of 800 million cubic feet per day or 15 percent of New England’s base gas consumption.

• McMoRan Exploration plans to convert an old sulfur mining operation near Venice, La., to move as much as 1 bcf per day and establish gas storage of 28 bcf. Operations are targeted for mid-2006.

• Somerset LNG plans to build and operate a terminal in Massachusetts that will include a 3.5 bcf import/storage tank and handle 430 million cubic feet per day, at a cost of up to $300 million.

• El Paso, which owns terminals at Elba Island, Ga., and Cove Point, Md., is examining sites in the Gulf of Mexico and East Coast for a new system that regasifies LNG onboard a tanker and discharges 400 million cubic feet per day through a subsea pipeline that sidesteps the need for a land-based terminal.

• CMS Energy, owner of the Lake Charles, La., terminal, plans to double capacity to 1.2 bcf per day by 2005 and is considering a new offshore terminal in the Gulf of Mexico.

West Coast plans

• Sempra Energy has received key approvals for two terminals which are scheduled for completion in 2007 — a 1.5 bcf per day project at Hackberry, La., costing $700 million and its Energia Costa Azul project on Mexico’s Baja coast, planned to handle 1 bcf per day and cost $600 million.