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Bahamas LNG Stalemate Prompts Suez to Plan Offshore Florida LNG Port

With no action for months from the Bahamas government on its application for a liquefied natural gas (LNG) import terminal in Freeport, Suez Energy North America has adopted a new plan for construction of an LNG port offshore Florida. Company officials said last week they intend to file an application for the offshore terminal in the next 30-60 days.

CEO William P. Utt said the new project would be a carbon copy of Suez's Neptune LNG facility planned for offshore Massachusetts. Suez currently operates the Everett, MA, LNG terminal near Boston, but inadequate expansion space has forced it to look offshore. Utt said the same type of project could work off Florida's coast.

"We have not heard anything from the Bahamas in about a year," Utt said during a briefing with reporters in Boston on Wednesday. "We are continuing to try to engage in a dialogue. We have very good relations with the Grand Bahama Port Authority around Freeport; it has been a very good sponsor for us. But the government, for reasons I will leave to the government, has not elected to move forward on issuing any permits for any of the sites in the Bahamas."

There originally were three LNG import projects proposed for the Bahamas: Ocean Cay, sponsored by AES Corp.; Suez's Calypso project in Freeport; and a third project proposed by El Paso and FPL Group. FPL, El Paso and Suez later agreed that they would combine their projects and utilize the more attractive of the two locations on Grand Bahama Island. AES had planned to develop its terminal on its own man-made island. Both AES and Suez already have FERC certificated pipeline projects that would deliver the regasified LNG to the Florida peninsula from the Bahamas (see NGI, June 13, 2005).

"The government before was very pro business, and things got done," said Utt. "This government that exists today appears less able to evaluate and feel comfortable making commitments for industrial development. They are very focused on tourism. Some of our programs had been to improve the tourism in the Bahamas. I think a lot of folks are frustrated.

"I had dinner last night with a gentleman from AES and we were kind of joking about our mutual stalemate that we have in the Bahamas. Neither one of us is sure what will happen."

In the meantime, Utt said Suez is moving forward quickly with its plans for an offshore Florida LNG terminal, much like the one it has proposed offshore Gloucester, MA. He said having two offshore terminals in the Atlantic with similar designs that would incorporate ships with onboard regasification actually would improve the economics of both projects.

"The pipeline [offshore Florida] already is approved so we will just truncate it offshore," said Utt. "It will be far enough offshore so that the visual impact and the safety impact should be very remote to any Floridian." He said the offshore LNG project would have a sendout capacity of about 800,000 Dth/d.

"We are actively putting together our applications for [the offshore Florida terminal]," he added.

Utt also said that although FPL Group dropped out of the LNG project and its affiliate Florida Power & Light (FP&L) later shelved plans for a long-term agreement to buy LNG, Suez still expects Florida's largest electric utility company to be an anchor LNG customer (see NGI, June 6, 2005).

"We think they have always been interested in LNG. The RFP they announced a couple years ago and then terminated last year was terminated more as a result of a their urgency to get a rate case through [with hurricane cost recovery]...," he said. "They had not had a rate case in 20 years so they were sensitive to getting it done cleanly. It was a very complicated LNG contract and if we could have completed it in time it probably would have been part of that rate case.

"We continue to have an ongoing dialogue with them and we're optimistic," said Utt. "They continue to show an interest in LNG and we think the economics of LNG are very favorable given that Florida is a peninsula with a very high basis to the Henry Hub."

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