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The LNG revival in the US: Freeport LNG terminal gets OK and already looks to expand

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Author(s): Freeport LNG Development, L.P., Texas, USA

As construction gets under way on a major liquefied natural gas (LNG) receiving terminal and regasification facility at Port Freeport, efforts already are afoot to as much as double the size of the project.

Freeport LNG Development, L.P. (FLNG), is constructing and will own and operate one of the first LNG terminals in the US after more than a 20-year hiatus in LNG terminal development. The storage and regasification facility is located on Quintana Island, about 70 miles south of Houston, Texas. The site is located approximately six miles from open water off a ship channel that is maintained at a depth of 45 feet. This six-mile approach is one of the shortest LNG terminals currently operating or under construction in North America. The channel as well as the berth is sufficient to accommodate all existing LNG carriers, as well as the largest currently planned for construction.

Responding to growing US demand for natural gas, FLNG quickly followed the January 11 authorisation from the Federal Energy Regulatory Commission (FERC) for construction of a facility with a throughput of 1.5 b cubic feet per day (BCF) – all of which is already committed to ConocoPhillips and The Dow Chemical Co. – with the execution of a long-term agreement to sell additional volumes to a subsidiary of Mitsubishi Corp.

The FERC approval, coupled with permitting through the US Army Corps of Engineers, set in motion a three-year construction process for the first phase of the Freeport LNG project, which has exceeded US$500 m. Specific design and construction aspects will continue to come before the Brazos River Harbor Navigation District, while plans for the additional phase must gain approvals from the FERC and the Corps of Engineers.

Phase I

The first phase of this world-class regasification terminal will have a send-out capacity of 1.75 Bcf per day (including peaking) beginning in early 2008. Construction crews broke ground for the first phase of the project on January 17, 2005, which is scheduled to be completed within 37 months (February 2008). A consortium made up of Technip, Zachry and Saipem is providing for the construction services under a lump-sum turn-key engineering, procurement and construction (EPC) contract.

After September 30, 2009, Phase I capacity is fully contracted under two separate long-term take-or-pay terminal use agreements (TUAs) with ConocoPhillips Company (1 Bcf per day) and The Dow Chemical Company (0.5 Bcf per day). However, as part of its arrangements with ConocoPhillips, Freeport has retained 0.5 Bcf/d of capacity from commercial start-up to September 30, 2009. This capacity is being marketed either as short-term capacity or as part of the planned expansion of the facility.

The expansion phase (Phase II) is currently in the permitting process and will add another 1.15 Bcf per day of marketable capacity plus additional peaking capacity. FLNG held informal meetings with the FERC to begin the pre-NEPA process in January, 2005. After several rounds of interagency meetings with state and federal regulators, FLNG officially submitted its pre-NEPA notice to the FERC on April 8. However, in May, the FERC reversed its decision after determining that the pre-NEPA process was not necessary. FERC ordered a third-party Environmental Assessment (EA) and allowed FLNG to file its full application, which was submitted on May 26, 2005. The EA is expected to be completed in the third quarter of 2005, and full FERC approval is expected in late 2005 or early 2006, as the expansion does not represent any substantial additional environmental impact.

 

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