Project aims to liquefy U.S. natural gas
Texas could again be an exporter of energy if Freeport gains capacity
Copyright 2010 Houston Chronicle
Nov. 22, 2010, 10:54PM
http://www.chron.com/disp/story.mpl/business/energy/7307449.htmlTexas could return to the old days of being a global energy exporter if the owners of a
Freeport liquefied natural gas terminal get their way. Freeport LNG is
partnering with Australian bank Macquarie to build the capacity to turn
U.S. natural gas into a liquid for shipment overseas.
The Freeport terminal, which opened on the Texas coast in 2008 to import liquefied
natural gas from other countries, has already added the capacity to ship
some of that LNG back overseas because of overproduction of the fuel in
the U.S.
But adding the capacity to liquefy U.S.-produced natural gas for export shows just how
deep the country's natural gas glut has become, thanks to the widespread
success of prolific shale formations from Texas to New York.
"The shale story just kept building and building over the past few years until, finally, we
did the engineering and it just made sense," said Michael Smith,
Freeport LNG's chairman and CEO.
The plans include building up to four units that can turn natural gas into a super-chilled
liquid that can be shipped by tanker. The $2 billion project should be
able to export up to 1.4 billion cubic feet per day of gas by 2015, the
companies said.
Half of the project's capacity will be offered to Freeport's existing import
customers — Dow Chemical and ConocoPhillips - while Macquarie and
Freeport will jointly market the other half.
Asia seems a likely market for U.S. LNG, given current market dynamics and the fact that the
Panama Canal is opening soon to LNG tankers, said Nicholas O'Kane,
global head of Macquarie Group's energy markets division in Houston.
"But we'll be marketing in Europe in the next few weeks as well," O'Kane said.
If Freeport and Macquarie are able to sign up customers committed to buying the LNG for
up to 20 years, they will use those com- mitments to fund the project
through U.S. debt markets.
One source of the natural gas for the Freeport export project will likely be the Eagle Ford shale formation in South Texas.
While drilling in other shale formations has slowed in the past year because of low
natural gas prices, the Eagle Ford has continued to ramp up because it
is also heavy with natural gas liquids and other fuels that are still
fetching higher prices.
"The gas production in the Eagle Ford is expected to exceed the takeaway capacity unless there's some other market for it," Smith said.
Smith said the LNG pro-ject could employ up to 1,000 workers over the three to four years
it takes to build, and it could export $4 billion to $6 billion in
natural gas per year.
"That could reduce our trade deficit by up to 1 percent per year," Smith said. "That's a lot for one project."
The U.S. surge in natural gas production, combined with the startup of a number of large
LNG terminals in Middle Eastern countries, has the International Energy
Agency predicting the world will be swimming in natural gas through
2020.
Natural gas demand will rise, but it will take until 2020 to absorb the surplus, the agency said.
Earlier this month, Cheniere said it also plans to build gas liquefaction capacity to export LNG from its facility in Sabine Pass.
Views: 58
Replies to This Discussion
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Permalink Reply by Stevew on
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People were planning to build several LNG import terminals in the Pac NW. Now, they are being canceled, mostly due to the economics.
My question is: could a terminal built to import LNG easily switch to exporting LNG? It would make sense if they could do both.
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Permalink Reply by Jack Blake on -
Not only is it cost prohibitive (LNG terminals) but the coastal states balk at the environmental impact. About 7 years ago a major oil co was going to build one in Louisiana but could not obtain the permits. The facility would have taken gulf water and when the water would go back in the gulf it would be much hotter and would screw up the ecosystem...................
WENEEDTOBURNTHEHSGASINNORTHAMERICANEEDSTODOSOMETHINGTOHELPUSBEINDEPENDENTANDBECOMEAMOREPOWERFULNATIONCRIEDJACKBLAKE
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Permalink Reply by Robert Duke on
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Yes, I like your "rant" line Jack. I understand the value of export markets, but why in the heck would we want to export an energy source for cheap, and continue to import expensive energy sources? I know I am just ranting too, but surely somebody in the government could see a role for government in promoting things that are good for the national economy, defense, people. Too much to ask?
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Permalink Reply by Les Bamburg on -
Robert, you have to hire someone to lock up the coal lobby in Washington DC.
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Permalink Reply by Robert Duke on
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Yeah, too much to hope that national interest could compete with lobbying interests, I suppose. I would think that the O&G companies could create great confusion by going into overdrive on producing shale gas in the Marcellus Shale under W Virginia though; it seems to be under ALL of W Virginia, though trending deeper than in Pennsylvania. At least then the W Virginia congressional delegation would be internally conflicted. Sorry, couldn't resist ;-)
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Permalink Reply by Jack Blake on
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Robert, Jack Blake stood up and shouted AMEN!
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Permalink Reply by Les Bamburg on
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Jack, the project you are referencing was an offshore LNG import terminal with open rack vaporizers. Several LNG import terminals are in operation on the Gulf Coast but use closed circulation vaporization systems.
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Permalink Reply by Les Bamburg on
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Logger, it is not easy or cheap - but it can be done. That is what is being considered for both the Sabine Pass and Freeport LNG import terminals on the Gulf Coast. Basically you utilize the same LNG storage tanks and ship berths but must add gas treatment, liquefaction and additional power generation.
Plans for the Kitimat LNG terminal in Western Canada were changed before the import terminal was constructed.
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Permalink Reply by essay on
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i was gonna say, this is the third such project i have seen floated recently
personally i think these export terminals are a necessity because they can be brought online faster than we will find alternative uses for natural gas in this country. companies heavily leveraged into shale assets (chk comes to mind) need access to foreign markets ASAP and do not have time to wait on the political process necessary for widespread adoption of NG as a domestic transport fuel.
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Permalink Reply by Les Bamburg on
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Essay, it is not quick as it takes 4 years to build. A much quicker solution is to increase the run rate of existing gas fired power generation in the US. Increasing the natural gas share of power generation from 23% to 35% would add 8 Bcfd of additional natural gas demand.
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Permalink Reply by essay on
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i just think export will happen the fastest because it is the path of least resistance. i'd love to see some of the dirtier coal plants shut down though.
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