El Paso: LNG terminal land site preferable; off shore possible

By the OGJ Online Staff

HOUSTON, Mar. 8�El Paso Corp. hopes to announce "within months" a proposed site for a new LNG terminal on the US West Coast, said Kathleen Eisbrenner, senior managing director, Global LNG, an El Paso unit.

El Paso Thursday said it tentatively agreed to begin purchasing LNG in 2005 from an export terminal Phillips Petroleum Co. will build near Darwin, Australia, with plans to ship it to California or Mexico.

By midyear, the companies said they expect to have negotiated and executed a definitive agreement, including permits for the Australian terminal, under which El Paso would buy 4.8 million tonnes/year of LNG. The LNG would be shipped to North America, where it would be regasified and sold as 680 MMcfd of natural gas.

Eisbrenner said in a interview the search has been narrowed to "viable sites" in California and Mexico, but the company is declining to be more specific in anticipation of environmental protests, while it readies applications that will have to be submitted to state and federal authorities.

The company is reviewing land-based sites but also has a contingency plan for an offshore facility, she said. Eisbrenner said California officials are aware of the proposal, and "I haven't heard any negative responses." She pointed out LNG facilities have an "excellent" safety and environmental record.

Customer response has been positive, Eisbrenner said, noting California faces potential gas shortages, in addition to its electricity problems. Recently, gas traded at $30/Mcf at the southern California border, after a pipeline serving the state was shut down 1 day for scheduled maintenance. She said the LNG facility would help boost the in-state gas infrastructure which is widely considered inadequate to serve rising demand.

Prices linked to US prices
In addition, Eisbrenner said this will be the first Asian LNG to be priced off North American gas prices. "We think we can create a pricing policy our producers and customers will find attractive," she said.

Phillips and El Paso are looking at using a combination of new and existing tankers to transport the LNG. She said they range in size from 138,000-145,000 cu m, and some shipyards have proposed tankers capable of hauling 160,000 cu m.

Cost of the project, including the LNG plant, ships, and a West Coast receiving terminal, is estimated at between $3 billion and $3.5 billion, depending upon the size of the LNG plant, Phillips spokeswoman Kristi DesJarlais said.

The Darwin LNG facility, using Phillips' LNG technology, will be supplied from the Greater Sunrise fields, which had reserves of 9 tcf.

The project is part of El Paso's announced goal of becoming a leading LNG merchant, its statement noted. The company holds long-term terminal capacity at the Elba Island, Ga., and Cove Point, Md., LNG terminals, which are being reactivated, and is importing LNG at the Lake Charles, La., terminal.

Earlier this year in meetings with financial analysts, El Paso executives touted the company�s LNG strategy in response to higher gas prices. They said El Paso expected to spend about $1.5 billion during the next 5 years building LNG terminals for the US and Mexico markets. El Paso reported it was considering six projects, including three in the US, two in Mexico, and another in the Bahamas.

"Our appetite hasn't stopped," Eisbrenner said. The company still in interested in at least two more US sites, plus the ones in Mexico and the Bahamas, although she cautioned "some of those may prove not to work out."

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