Dow Chemical, Freeport LNG agree on Gulf Coast LNG terminal

By OGJ editors

HOUSTON, June 20 -- Dow Chemical Co. and Freeport LNG Development LP (Freeport LNG) have reached an agreement whereby Dow will have the right to use Freeport LNG's proposed LNG receiving terminal for 20 years.

Freeport LNG plans to build the terminal on its Quintana Island site southeast of Freeport in Brazoria County, Tex. It would be one of the first LNG receiving terminals to be approved and built in the continental US in more than 20 years.

Under the agreement, Dow will have processing rights for 500 MMcfd (3.6 million tonnes/yea) of non-US sourced LNG beginning in 2007. The LNG would be used partially to fuel Dow's Gulf Coast petrochemical facilities, which consume nearly 700 MMcfd of natural gas. The remaining gas will be marketed to other industrial consumers and to key Gulf Coast natural gas hubs in Texas.

Freeport LNG plans to permit, design, and construct the LNG terminal with a storage capacity of 6.9 bcf and a vaporization send-out rate of 1.5 bcfd. The natural gas would be transported through a 9.4-mile pipeline to Stratton Ridge, Tex., which is a major point of interconnection for a number of Texas intrastate systems.

"The Quintana Island terminal is well located to serve Dow's Freeport operations, which is essentially adjacent to the terminal," said B.J. "Jody" Sumrall, Dow's business manager for LNG & Texas Gas. "The US Gulf Coast region is very important to us. For Dow to continue to grow here, we must have access to a globally competitive supply of natural gas and natural gas liquids that we use to make our products."

The agreement marks an important milestone toward the realization of the receiving terminal initiative, said Freeport LNG Chief Executive Michael S. Smith. "Freeport LNG has completed all major state and federal governmental filings necessary to secure environmental and technical approval for this project, and the initial Federal Energy Regulatory Committee public scoping meeting was well received by the Brazosport-area business and community groups."

The next key milestones, he said, is for Freeport LNG to obtain the necessary governmental approvals and enter into an engineering, procurement, and construction agreement for the terminal, and for Dow and Freeport LNG to complete a final terminal use agreement.

Freeport LNG is a Delaware limited partnership whose sole general partner and 60% limited partner are owned and controlled by Michael S. Smith. The partnership's other limited partners are Cheniere LNG Inc.30%, and Contango Oil & Gas Co.10%.

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