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McMoRan Deepwater LNG Port Gets Final Green Light

McMoRan Exploration Co. said Thursday that it received final approval for its proposed liquefied natural gas (LNG) deepwater project -- the Main Pass Energy Hub (MPEH) -- to be located offshore Louisiana.

The U.S. Maritime Administration (MARAD) and the U.S. Coast Guard gave the go-ahead for the $1 billion MPEH deepwater port, which will include offshore platforms, regasification facilities, pipelines and on-site storage caverns.

The MPEH terminal would be capable of regasifying LNG at a peak rate of 1.6 Bcf/d, storing 28 Bcf of natural gas in salt caverns and delivering 3.1 Bcf/d, including gas from storage, to the U.S. market.

This is a "very unique project because...no other [offshore LNG] facility has salt cavern storage for natural gas," said David Landry, vice president of Freeport McMoRan Energy LLC. The LNG facility will sit atop a two-mile salt dome, he noted.

The MPEH project, which will be located 16 miles offshore Louisiana, calls for the construction of a $500 million regasification facility and $500 million in storage and pipeline facilities. McMoRan plans to build a 90-mile, FERC-approved pipeline from offshore Louisiana to onshore Alabama, where it would interconnect with eight interstate pipelines. MPEH also would interconnect with offshore pipelines that would ship regasified LNG ashore to Louisiana.

Landry could not say when construction would begin, but he noted that it would take about 3-3 1/2 years for the LNG project to be built.

In its record of decision, MARAD concluded that construction and operation of the MPEH deepwater port would be in the national interest and consistent with national security and other national policy goals and objectives, including energy efficiency and environmental quality, said New Orleans, LA-based McMoRan Exploration, an independent producer.

McMoRan co-Chairmen James R. Moffett and Richard C. Adkerson called the MARAD decision a "significant development" in the company's efforts to establish a "new LNG gateway and natural gas delivery system for the U.S. with substantial onsite natural gas storage."

Last June, the company was forced to amend its application for the offshore Louisiana project to include the use of the more expensive closed-loop technology rather than the open rack vaporization (ORV) technology (see Daily GPI, June 16, 2006). McMoRan took this action after Louisiana Gov. Kathleen Blanco denied the company's application for the deepwater LNG port, citing concerns about the ORV technology (see Daily GPI, May 9, 2006).

Blanco believed that ORV technology, which uses seawater to warm the chilled LNG, could cause serious future environmental damage to her state's fisheries. Landry estimated that the closed-loop system, which uses imported gas to warm the LNG, will cost McMoRan an additional $20-$30 million annually.

McMoRan said it is continuing discussions with potential LNG suppliers as well as gas marketers and consumers in the United States to develop commercial arrangements for the facilities. Landry said the company "was not ready" to identify the potential suppliers. Prior to beginning construction, it said it expects to enter into commercial arrangements that would enable McMoRan to finance the $1 billion construction cost of the project on favorable terms.

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