Daily GPI / Regulatory / Infrastructure / NGI All News Access / Liquefied Natural Gas (LNG)

Shippers Balk at Repurposing of Offshore System For LNG

Shippers are protesting the proposed abandonment by sale of TC Offshore LLC's Grand Chenier System for reversal to serve a liquefied natural gas (LNG) export terminal proposed for the Gulf of Mexico by Avocet LNG LLC.

The facilities in question were previously abandoned by sale from ANR Pipeline Co. to affiliate TC Offshore [CP11-543] (see Daily GPIJuly 22, 2012); however, at that time their jurisdictional function didn't change. The recently proposed abandonment of Grand Cheniere by TC Offshore to Avocet would see the facilities taken out of their current service and reversed to feed Avocet's proposed offshore LNG terminal, making them non-jurisdictional to FERC.

Avocet is a unit of Fairwood Peninsula Energy Corp., as is Delfin LNG, which has its own offshore LNG project that would rely on the abandonment and repurposing of different existing pipeline infrastructure (the High Island Offshore System). This also is being challenged in a separate docket at the Federal Energy Regulatory Commission [CP16-20] (see Daily GPIDec. 23, 2015Dec. 2, 2015July 1, 2015).

In the TC Offshore case, Indicated Shippers are Apache Corp., ExxonMobil Gas & Power Marketing Co., and Fieldwood Energy LLC. Also intervening in separate filings are Chevron U.S.A. Inc., Anadarko Energy Services Co., Kinetica Partners LLC, and the Sierra Club, which is representing, again, its broad opposition to LNG exports. (Chevron U.S.A., Apache, ExxonMobil Gas & Power Marketing, and Fieldwood also filed to intervene in the High Island Offshore proceeding related to Delfin's project. The ExxonMobil unit and Fieldwood also are protesting Indicated Shippers in this docket.)

In their TC Offshore protest [CP16-78], Indicated Shippers cite the precedent of the ultimate denial of Northern Natural Gas Co.'s proposal to abandon its Matagorda Offshore Pipeline System (MOPS) because it was "underutilized and uneconomic" and shippers were only using interruptible service [CP10-82] (see Daily GPIJuly 6, 2013). "The Commission properly denied that application, finding that abandonment was not in the public interest because Northern failed to demonstrate that there were cost-effective alternatives for all of the shippers using MOPS," Indicated Shippers said. "The considerations in this case are identical."

Indicated Shippers argue that TC Offshore failed to make its case by not addressing impacts on customers whose services would be terminated. They said that while TC Offshore argued that last year only 20 shippers only took interruptible service and it has no obligation to provide continuity of service to such shippers, this is not relevant.

"This is because the Grand Chenier System, like many offshore pipelines, has excess capacity, such that shippers need not contract for firm service in order to keep their gas flowing or meet their transportation requirements," Indicated Shippers said. "The Commission has recognized that the economic choice for shippers, in such circumstances, is to take interruptible service. However, TC Offshore erred in assuming that this fact, alone, justifies its application under Section 7(b) of the [Natural Gas Act]."

Further, TC Offshore acknowledged that shippers, such as Fieldwood, have production that is not connected to any pipeline alternative, making them captive to Grand Chenier, Indicated Shippers said. "...[I]n today's low commodity price environment, it is not likely to be economically feasible for a captive shipper to construct new facilities to connect to an alternative, and then to pay additional transportation and/or processing fees to use that alternative to move its production to onshore markets."

According to TC Offshore's abandonment filing, "natural gas enters the Grand Chenier System from the West Cameron [WC] Area at four receipt points, located at WC Block 100, WC Block 149, WC Block 165, and WC Block 167. In total, 20 different producer shippers utilized the Grand Cheniere System in 2015, all under interruptible transportation service agreements."

All of the interruptible service agreements have month-to-month contract terms, TC Offshore said. "Gas flows from the West Cameron Area through the Grand Chenier System have declined from an average of 86,000 Dth/d in 2013 to an average of less than 48,000 Dth/d in 2015, which represents less than 7% of the Grand Chenier System design capacity of 748,170 Dth/d. For the past three years, capacity utilization has averaged less than 10%."

Recent Articles by Joe Fisher

Comments powered by Disqus