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FERC Approves Export Facilities for Freeport LNG

FERC has approved a request of Freeport LNG Development LP to build minor facilities to export liquefied natural gas (LNG) from its terminal on Quintana Island in Texas on a short-term basis.

Freeport LNG proposes to construct and operate a boil-off gas liquefaction system and an LNG truck delivery system to accommodate the exportation of up to 24 Bcf/d of previously imported LNG for a two-year period on its own behalf or as an agent for others. In seeking Federal Energy Regulatory Commission (FERC) approval, the company said worldwide demand and relatively low prices in the United States have slowed deliveries of LNG to its Texas terminal.

Freeport LNG still is awaiting a response from the Department of Energy's Office of Fossil Energy on its request for an export license, which it submitted in August 2008 (see NGI, Aug. 18, 2008). Freeport is seeking to export LNG to the United Kingdom, Belgium, Spain, Japan, South Korea, India, China, Taiwan, France and Italy. Freeport did not request authorization to export domestically produced natural gas or LNG.

If granted an export permit, Freeport would become only the second LNG export facility in North America. It would differ from an export terminal that has been liquefying gas and exporting LNG from the Alaska coast for nearly 40 years in that Freeport currently has no major liquefaction facilities and would only be able to serve as an LNG storage and transit station.

Prompted by FERC's approval of Freeport LNG's export facilities, Sabine Pass LNG LP Friday renewed its request, made in October 2008, to operate export facilities at its terminal in Cameron Parish, LA. Sabine Pass, a subsidiary of Cheniere LNG Inc., "has had several significant commercial LNG opportunites that it has had to forego due to the delay in issuance of the order authorizing it to perform export services," the company said [CP04-47, CP05-396].

The FERC order gives Freeport LNG the go-ahead to install facilities that would enable it to liquefy approximately 5 MMcf/d of boil-off gas and return it to the LNG storage tanks in order to keep the tanks in the necessary cryogenic state. In addition, the company plans to make minor facility modifications in order to undertake LNG truck unloading activities in the event that the boil-off gas liquefaction facilities are not available. It anticipates that it would receive truck deliveries of 66,000 gallons of LNG each day that delivery of LNG by truck is required.

"The ability to export foreign-sourced LNG will provide Freeport LNG with greater latitude to acquire LNG for maintenance and operation of its facilities during those periods when LNG deliveries for ultimate domestic use may not otherwise be adequate to maintain the terminal in a state of readiness to serve U.S. markets," the agency order said [CP03-75].

Last July the Commission gave Freeport the green light to begin service at its LNG terminal, located about 70 miles south of Houston (see NGI, July 7, 2008). The terminal came on-line about four years after FERC approved the project.

The Phase 1 facilities at Freeport have a sendout capacity of up to 1.5 Bcf/d of regasified LNG, with the ability to meet 1.75 Bcf/d of peak demand. Phase 1 also includes two 160,000 cubic meter LNG storage tanks and one piled dock capable of handling LNG tankers in excess of 200,000 cubic meters. The marine terminal has the capability of unloading 200 ships per year.

The Freeport terminal is located near two large gas trading hubs (Katy and the Houston Ship Channel) and is adjacent to large industrial gas consumers. The terminal's capacity is fully contracted under three separate long-term use agreements with ConocoPhillips (0.9 Bcf/d), Dow Chemical Co. (0.5 Bcf/d) and Mitsubishi Global Gas Corp. (0.15 Bcf/d).

In September 2006 FERC approved Freeport LNG's request to raise the sendout capacity of the terminal to 4 Bcf/d. The expansion of the facility will include an additional LNG vessel berth, LNG tank storage and vaporization capacity. Freeport LNG also is planning to construct a 7.5 Bcf underground storage cavern at Stratton Ridge that will be integrated into the operations of the terminal.

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