Analysts downplay overall effect of Algerian LNG plant blast

Sam Fletcher
Senior Writer

HOUSTON, Jan. 20 -- Even as energy prices surged Tuesday, analysts downplayed the danger of any immediate fuel shortages following an explosion early that day that destroyed 3 of 6 trains at the Skikda, Algeria, LNG complex, some 500 km east of Algiers.

Reuters News Service reported oil futures prices hit new 10-month highs during early trading Tuesday after a huge blast at the LNG plant closed Algeria's largest refinery and main oil export terminal. The shutdown fueled concerns about global supplies with US fuel inventories already at extremely low levels.

Officials at Sonatrach, Algeria's state-owned oil and gas company, blamed a faulty boiler for the explosion that left 23 dead and 74 injured. Of the injured, 42 were able to go home after being treated, Sonatrach said. Other sources put the death toll at 27, however.

NIMBY reflex
Some speculated that the mishap could trigger a "not in my backyard" (NIMBY) reaction to several plans to build LNG unloading facilities in the US and Mexico to bring in foreign supplies for the growing US natural market.

Although the exact cause of the accident was still under investigation, the fact that the explosion occurred at a LNG facility is sure to cause uneasiness among members of the public and some politicians.

"It's the largest explosion connected with LNG that I know of," one international energy consultant at Purvin & Gertz Inc., Houston, told OGJ. "I'm sure it will affect the NIMBY syndrome. Having been involved in this industry all my life, I'm comfortable with [such facilities]."

Ironically, he said, the mishap may strengthen existing proposals to build marine LNG unloading and gasification terminals off the US coast.

However, the analyst said, "No matter what happens, LNG is here to stay in North America. The question is how do we make it safe."

With US demand for natural gas growing rapidly, while US and Canadian gas production is declining, "not building LNG plants would not be logical," said Eric Smith, a New Orleans-based energy consultant currently working on a report on LNG imports into Louisiana. Still, he acknowledged, "Logic never has much to do with disasters like this."

Explosion aftermath
Sonatrach officials said the 3 LNG trains unaffected by the explosion will be inspected and reactivated. The company plans to "minimize the impacts on LNG deliveries to its buyers," officials said. "One must not forget that Sonatrach has a flexibility unique in the world, which makes it able to use its export pipeline capacities."

The explosion's shockwave reportedly triggered a circuit breaker at the Sonelgaz thermal power station adjacent to the LNG complex, but officials said there was no major damage and that the station would be reactivated following inspection.

The Skikda facility employs some 12,000 people at several units, including the LNG plant, a refinery, an industrial gas plant, an oil and gas transport center, and what was described by one source as "a detergent enterprise." Two other units in the plants' petrochemical area were reported to have been damaged.

The complex exports about 15 million tonnes/year of LNG, crude, and refined products, primarily to European markets, officials said.

The Skikda LNG plant provided 8% of Gaz de France's LNG imports, which amounted to 25% of the plant's natural gas supply. The Bethioua liquefaction plant in Algeria accounts for 12% of GDF's LNG imports. But Gaz de France officials claimed the company's natural gas imports are diversified, and its storage capacity is equal to a quarter of the natural gas consumed in France.

Contact Sam Fletcher at Samf@ogjonline.com.

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