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Mitsubishi Plans to Bring LNG to Freeport Terminal from Oman

January 24, 2005
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Mitsubishi Plans to Bring LNG to Freeport Terminal from Oman

Freeport LNG Development LP, which has a FERC permit to build a 1.5 Bcf/d LNG receiving terminal in Quintana, TX, on Tuesday announced plans for a future expansion project and said that it signed a new 17-year terminal use agreement with a Mitsubishi Corp. subsidiary, MC Global Gas Corp., for a portion of the terminal's capacity starting in 2009.

The agreement is for 150 MMcf/d of sendout capacity at the terminal (1 million tons of LNG per year), starting Jan. 1, 2009. It also includes an option for another 100 MMcf/d. Freeport spokesman Charles Reimer said that although the terminal's initial capacity is almost completely subscribed by ConocoPhillips and Dow Chemical, some of the capacity will become available in 2009 and a second phase expansion will ensure that all customers are served.

Mitsubishi, one of Japan's largest industrial and manufacturing companies, said it is expanding its business activities across the entire LNG value chain, and the terminal agreement enables it to begin natural gas marketing in the United States where it sees growing natural gas demand. It already has its own LNG import terminal project on file at FERC. The Long Beach, CA, LNG terminal is being proposed by Mitsubishi subsidiary Sound Energy Solutions and ConocoPhillips. The Long Beach terminal is expected to be operational in 2008 if it survives local challenges and a state's rights battle with California (see related story).

Mitsubishi said it plans to import some of the LNG for the Freeport terminal from Oman. Last July, it signed a supply deal with that country's Qalhat LNG.

"As a customer of the terminal, MC Global Gas Corp. will further diversify the gas supply available to Texas and the broader U.S. natural gas markets," said Michael S. Smith, CEO of Freeport LNG. "Mitsubishi is one of the largest LNG suppliers in the world, and we are proud to have them as a participant in this project."

On Jan. 11, Freeport received authorization from FERC to begin construction, which was started last Monday by contractors Technip USA, Zachry Construction of San Antonio, and Saipem SpA of Italy.

The capacity of the first phase has been sold on a long-term basis to ConocoPhillips (1 Bcf/d) and Dow Chemical (0.5 Bcf/d). However, Freeport announced that it is planning to file plans with FERC this quarter for an expansion, which would nearly double the vaporization capacity of the terminal to 2.5 Bcf/d and also add additional storage space and a second shipping berth. Service from the second phase is expected in 2011.

"Along with ConocoPhillips' options for up to 500 MMcf/d of additional capacity, the long-term contract with MC Global Gas Corp. moves us closer to selling out of the second phase of our project," said Smith.

"Long-term natural gas demand in Texas and the U.S. continues to outpace our supply prospects. We are pursuing this expansion in response to continued demand for capacity in the Freeport LNG terminal as end-users and suppliers alike see LNG imports as key to bringing balance to the U.S. gas market."

Freeport LNG Development LP is a Delaware limited partnership whose general partner Freeport LNG-GP Inc. is owned by Michael S. Smith (50%) and ConocoPhillips (50%). The partnership's limited partners are Freeport LNG Investments LLP (45%); Cheniere Energy (30%); Texas LNG Holdings LLC, a subsidiary of Dow Chemical (15%) and Contango Oil & Gas (10%).

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