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Sempra Affiliates Seek FERC OK to Build Port Arthur LNG Terminal, Pipe

Sempra Energy's Port Arthur LNG LP filed an application with FERC on Friday to build and operate a liquefied natural gas (LNG) terminal and associated facilities in Port Arthur, TX, to import up to 1.5 Bcf/d of natural gas, to be expandable later to 3 Bcf/d.

Affiliate Port Arthur Pipeline LP also is seeking approval to build and operate a 70-mile, 36-inch diameter pipeline leg, which would interconnect with Transcontinental Gas Pipe Line, and a three-mile pipeline leg to provide takeaway capacity for regasified LNG on an open-access basis [CP05-83, CP05-84]. The three-mile, 36-inch diameter pipeline leg would interconnect with Natural Gas Pipeline Company of America in Jefferson County, TX.

Port Arthur LNG proposes to build the terminal in two phases. Phase I would permit the terminal to send out 1.5 Bcf/d of regasified LNG on a firm basis by the winter heating season of 2008-2009, the company said. Phase II would allow the terminal to send out an additional 1.5 Bcf/d of regasified LNG on a firm basis as early as 2010, but no later than 2015, it noted.

The company called on the Federal Energy Regulatory Commission to issue a final order within nine months of filing the application to permit it to meet its targeted deadlines for the project.

The Port Arthur terminal would be sited on roughly 198 acres within an approximately 540-acre parcel of land in Port Arthur, which lies at the eastern edge of Jefferson County. The land, which is owned by Sempra Energy, runs along the Port Arthur Ship Channel.

The terminal project initially would contain three LNG storage tanks with an approximate capacity of 160,000 cubic meters each, expanding to a total of six LNG storage tanks in the second phase. Two berths would be constructed in Phase I, each capable of accommodating the concurrent unloading of two LNG tankers ranging in capacity from 125,000 cubic meets to 250,000 cubic meters.

In addition to the Port Arthur filing last week, Sempra also signed a preliminary 20-year agreement with Italy's E&P company, Eni SpA, for throughput capacity at Sempra's Cameron LNG terminal, which is being prepared for construction near Lake Charles, LA.

Sempra said it expects to finalize a "definitive" terminal services agreement by mid-year. Under the proposed agreement, Sempra LNG will provide Eni with between 400 MMcf/d and 600 MMcf/d (4.1 Bcm/year and 6.2 Bcm/year) of capacity at the Cameron receiving terminal, which is slated for completion in 2008. At that time, the Cameron terminal will have an initial capacity of 1.5 Bcf/d (15.5 Bcm/year) of regasified LNG supplies.

Sempra LNG President Darcel Hulse called the preliminary pact "another significant step" in his company's aggressive LNG strategy, and he anticipated signing the definitive deal "in the near future." Hulse praised the "new relationship" with Eni, which is a massive international company involved in not only oil and gas E&P, but also electricity generation, petrochemicals, engineering/construction, and various oil field services.

Earlier this year, Sempra LNG announced a similar nonbinding preliminary deal with Tractebel LNG North America LLC for between 325 MMcf/d and 500 MMcf/d of capacity at Cameron. That deal also is for 20 years and is expected to be finalized by June 30.

Located along the Calcasieu Ship Channel, about 15 miles south of Lake Charles, Cameron LNG has all the approvals needed to begin construction later this year. Sempra has committed to only beginning major LNG projects after securing long-term contracts for their throughput, or their own long-term contracts for supplies of LNG.

Earlier this winter Sempra began construction of another LNG receiving terminal -- the first one on the West Coast of North America -- at Energia Costa Azul, along the Pacific Coast of North Baja, about 12 miles north of Ensenada. That terminal has all of its 1 Bcf/d capacity under contract through a combination of a 20-year capacity agreement for up to 500 MMcf/d with Shell International Gas Limited and a separate contract for 500 MMcf/d of Indonesian supplies that Sempra has purchased in a 20-year deal.

Sempra Energy COO Don Felsinger said last Tuesday in New York City that the Costa Azul LNG terminal alone pencils out to provide $100 million in net income annually once it is operational in 2008.

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