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Tractebel Enters Offshore Massachusetts LNG 'Marathon'

Tractebel LNG said last week there may be enough gas demand in New England to support its new Neptune liquefied natural gas (LNG) project offshore Gloucester, MA, as well as Excelerate Energy LLC's Northeast Gateway terminal, planned nearby, but it may be impractical to have two similar LNG projects located in the same general area.

Embracing the notion that offshore LNG terminals have a better chance of gaining public support and being approved than onshore facilities, Tractebel LNG, owner of the onshore Distrigas terminal in Everett, MA, last Monday entered the competition to build a terminal off the coast of Massachusetts. Tractebel's $900 million Neptune deepwater port would be located not far from Excelerate Energy's offshore LNG project, which was announced last June. Excelerate Energy's $200 million Northeast Gateway terminal would be located 10 miles offshore Gloucester and could be operational sometime in 2007 (see NGI, June 14, 2004).

Neptune would be designed to provide an average of 400 MMcf/d of natural gas to the New England market -- enough to heat about 1.5 million homes. The deepwater port would be located 10 miles south of Gloucester and 22 miles northeast of Boston. Excelerate Energy's project is also expected to have an average of 400 MMcf/d of sendout capacity.

Tractebel picked the location because it does not require any precious coastal land, and also limits aesthetic impacts. In addition, the site specifically avoids the Stellwagen Bank National Marine Sanctuary and essential shipping lanes into Boston Harbor.

The Neptune LNG deepwater port -- much like the Excelerate Energy plan -- would be capable of mooring specially designed LNG ships equipped to store, transport, and vaporize LNG into natural gas that can be sent to customers using the existing HubLine subsea pipeline. The LNG carriers would moor at the proposed port by means of a submerged unloading buoy system. The Neptune LNG project cost includes specially built LNG ships, a buoy system and a connection to HubLine.

Despite what would appear to be a remote location, LNG facility siting in the United States has met with staunch opposition over security concerns in the past. The fact that both proposals are offshore could help with their approvals. Neptune LNG anticipates that the project's development phase, including regulatory and public consultation and evaluation, and a formal project application review, could take 15-18 months. Following that period, construction would take an additional three years.

"We filed the application [last] Tuesday morning with the Coast Guard," said Tractebel spokesman Doug Bailey. "This is going to be a long process. During the regulatory approval process, we hope to educate people and inform them of what the project is all about. Hopefully we can assuage some of the opposition."

Bailey said he thinks there is sufficient demand growth in New England for both projects. "There is probably enough demand to warrant that amount of LNG being imported," he said. "The question is whether or not it makes sense to put similar projects in the same place, which is a question that will be left up to the regulators and other people. This is a marathon, not a sprint."

The Woodlands, TX-based Excelerate Energy said its project is moving forward and that opposition to their plan has been sparse. "We are looking at filing our 'complete' application in May of this year, with an in-service date in the first half of 2007," said Rob Bryngelson, vice president of development and downstream services for Excelerate Energy. Commenting on the Neptune LNG project, Bryngelson said, "You know what they say, 'imitation is the highest form of flattery.'

"I am sure both projects can go forward and it would be great for consumers because there would be an abundance of supply," he added. "Whether or not both of them will be built, I think, is another question that has to be determined."

He said that while the Excelerate project has stirred up concerns from the fishing industry, the company is working to find the best solution. "For about eight or nine months, we have been working with the regulators, just bringing them up to speed and educating them on the process of what we are doing," he said. "One of the things we tried to do from the get-go is to have a lot of public outreach and agency outreach to get all of their input so that we can have the best application possible when we submit."

Excelerate has already completed a similar LNG buoy terminal located in the Gulf of Mexico (see NGI, April 5, 2004). The first-of-its kind offshore Louisiana Energy Bridge was constructed after the rights were purchased from El Paso in 2003. "Construction is complete and our first cargo is on the water and is due to be delivered on March 17," said Bryngelson. "We have a working system in place here in a relatively short period of time."

Neptune Draws Political Support

The Neptune LNG announcement was applauded by Massachusetts state Sen. Jarrett Barrios (D-Cambridge), chairman of the Joint Committee on Public Safety and Homeland Security. Barrios, an advocate of offshore LNG, said the proposal could avoid the public opposition that might come from any proposal to expand operations at the Everett terminal.

"I am delighted they are looking at locating offshore where an inherently dangerous facility of this sort belongs in the first place,'' said Barrios. "I'm most pleased because until now this company has argued it was economically infeasible to operate offshore."

Tractebel LNG North America LLC CEO Rick Grant, said, "We're pursuing this project because New England's demand for natural gas has been growing rapidly and is expected to continue increasing at the rate of 1-2% per year for at least the next 20 years. Without new means of supplying natural gas to the region, New England could face a supply gap approaching 500 MMcf/d before the end of the decade. We need all of the existing natural gas facilities we have, plus new ones -- and they're needed soon."

Neptune LNG said an LNG ship would typically moor at the deepwater port for four to eight days, depending on ship size, vaporizer throughput and market demand. By mooring ships to two separate buoys, Neptune said, natural gas can be delivered in a continuous flow by having a brief overlap between arriving and departing LNG carriers.

"After much analysis, we believe operating both the Everett terminal and this deepwater port simultaneously will help meet the increase in demand for natural gas while continuing to satisfy the New England energy market's need for highly reliable service," Grant added. "Neptune LNG is ready to make a significant investment, not only to help make sure our region has enough natural gas supply to meet rising demand, but also to ensure that the facilities are well designed, safely constructed, and expertly operated -- adhering to the exceptionally high standards that have made the Everett facility and the Port of Boston models for others to follow."

The Everett terminal commenced operations in 1971 and currently serves most of the gas utilities in New England and key power producers. Tractebel LNG North America is the primary supplier of LNG to Puerto Rico. Another subsidiary makes regular LNG deliveries to the LNG receiving terminal in Cove Point, MD, as well as spot deliveries to the LNG facility in Lake Charles, LA.

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