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Calpine Accelerates LNG Strategy, Looks at Oregon Site

Calpine Accelerates LNG Strategy, Looks at Oregon Site

Looking to help bring down wholesale natural gas prices with an infusion of new Pacific Rim supplies into the West, Calpine Corp. has made the import of liquefied natural gas (LNG) a integral part of its fuel strategy and begun very preliminary analysis of a possible receiving terminal in the far northwest corner of Oregon at the mouth of the Columbia River.

Calpine signed a lease for public land earlier this month with the Port of Astoria to get access for site feasibility work, a company spokesperson told NGI during an interview last Monday. This is a third possible LNG receiving terminal site in Oregon.

One along the Pacific Coast near Coos Bay and another farther east along the Columbia River on the Oregon side are further along in their preliminary development, said the Calpine spokesperson. "We haven't even done a soils analysis yet, for example, so you can see we're very early on in assessing this site. We are very, very preliminary on this project."

Projected operation of a terminal at the Oregon site is 2011 at the earliest, the spokesperson said. In conjunction with the LNG terminal, Calpine envisions building a large-diameter natural gas pipeline across the Columbia River in an easterly direction to connect with The Williams Co.'s Northwest Pipeline system at Longview, WA, one of two major regional interstate pipelines serving the Pacific Northwest.

Calpine's proposed site is on a peninsula west of Astoria, OR, in the town of Warrenton. It is currently vacant as are adjacent parcels, although some of the area was once the site of marine-related businesses on the river-side of the peninsula. There is no specific source of LNG targeted for a potential Oregon facility, the spokesperson said, noting that various sources around the Pacific Rim, including Alaska, hold potential.

"Although there is no excess export capacity in Alaska presently where all of the supplies are dedicated to Japan, it has some obvious synergies," said the spokesperson, who stressed that the Pacific Northwest holds strong demand for new natural gas supplies. Wind and more gas are the two future sources of new power supplies in the Northwest. "When gas is clearing the market at $8-per-unit and we can bring it in as LNG between $3.50 and $4.50 (per million Btus), there is a market need.

"The entire goal behind LNG, and it is not unique to Calpine, is to lower the commodity price of natural gas. So being a large consumer of natural gas (for a power plant fleet approaching 30,000 MW), we're looking to cut costs. With new power plants coming on line and being planned here, the Northwest is a market we have always been interested in."

Earlier this year, Port Westward LNG LLC proposed building a $400 million receiving terminal near St. Helens, along the Columbia River, with a 700 MMcf/d average capacity and a peak capacity exceeding 1 Bcf. Last August another proposal was targeted near Coos Bay at Jordan Cove to build a relatively small $150 million, 150 MMcf/d terminal and 20 MW cogeneration plant at the site. Like Calpine, neither of these projects have applied for permits so far.

"We're one of the largest customers of natural gas out there," said the Calpine spokesperson. "So we view it in our own best interest and the interest of all gas consumers to be active proponents for LNG. If we can get our own project moving or help someone else's project move forward, then we certainly intend to do so. Somebody should be doing something because natural gas should not be costing $8-per-unit."

Once LNG becomes more established in the United States, Calpine expects 25% of its power plant fleet fuel needs to be met by the imported supplies, the spokesperson said. Calpine's strategy is to get a quarter of its supplies from its own reserve and production holdings, another quarter from long-term contracts, a third quarter from short-term purchases, and the rest from LNG, the spokesperson said.

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