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FERC OKs GOM System Abandonment Over Shipper Objections

Shippers challenging the 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 (GOM) by Avocet LNG LLC were turned back by FERC in an order issued Thursday.

"We will not require TC Offshore to maintain and operate, at a financial loss...an offshore pipeline system with a design capacity of 748,170 Dth/d to ensure continuity of the remaining 6,800 Dth/d, on average, of service currently flowing on an interruptible basis," the Federal Energy Regulatory Commission said [CP16-78].

The abandonment of Grand Chenier by TC Offshore -- which is now known as Kinetica Deepwater Express LLC -- to Avocet will 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 (see Daily GPIMarch 31).

The Grand Chenier System is composed of four pipeline segments totaling 39.74 miles and extending from West Cameron (WC) Block 167 to the onshore Grand Chenier liquids handling facility.

The Commission said protesting shippers could have ponied up for more costly firm service rather than opting for interruptible, but they chose not to do so. "TC Offshore's conclusion that the underutilization of its capacity is indicative of that capacity not being highly valued by the market is supported by the lack of customer interest in securing firm capacity on the system under existing available rates," the Commission said.

"With respect to the protesters' claims that demand for the Grand Chenier System facilities could increase in the future, we find that general estimates of gas reserves and maximum production life are insufficient justification to support denying abandonment."

TC Offshore described transportation alternatives for the four receipt points through which gas currently flows into the Grand Chenier System.

About 85% of gas currently transported on the Grand Chenier System (averaging 36,499 Dth/d) enters the system from High Island Offshore System LLC (HIOS) facilities at a HIOS-owned platform (the WC-167 Platform) in WC Block 167. At that platform, HIOS delivers into both Grand Chenier and the facilities of Kinetica Energy Express LLC, a Commission-jurisdictional pipeline, which then provide transportation downstream from that location, the pipeline told FERC. TC Offshore said that although the protesters point out that HIOS has proposed to abandon and repurpose this platform and other facilities, the HIOS abandonment proposal includes modifications to the WC-167 Platform to enable a continued interconnection with Kinetica Energy Express LLC.

Fieldwood Energy LLC delivers about 4,300 Dth/d into Grand Chenier at WC Block 100. The construction of five miles of four-inch diameter pipeline to Transcontinental Gas Pipe Line Corp.'s (Transco) 16-inch-diameter pipeline in WC Block 98 would enable these volumes to be delivered into Transco's offshore system for transportation to onshore, the pipeline told FERC.

Fieldwood also delivers about 2,100 Dth/d into Grand Chenier at WC Block 165. TC Offshore told FERC that following the abandonment, the construction of about six miles of two-inch-diameter pipeline would enable the volumes to be delivered to Kinetica Energy Express at the WC-167 Platform for subsequent transportation.

M21K Offshore Inc. delivers about 200 Dth/d into Grand Chenier from WC Block 149 at the WC-167 Platform. TC Offshore said construction of a few hundred feet of pipeline would enable M21K Offshore to connect its eight-inch diameter tie-in to Kinetica Energy Express.

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 (HIOS). This also is being challenged in a separate docket at FERC [CP16-20] (see Daily GPI, Dec. 23, 2015; Dec. 2, 2015; July 1, 2015).

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