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Gas Demand Growth Attracts Another LNG Project in Maine

Less than a week after the Passamaquoddy Native American tribe in Maine received approval from the Bureau of Indian Affairs to lease land to Quoddy Bay LLC for construction of a $200 million LNG terminal at Split Rock (see NGI, May 23), a new competing Maine LNG project was announced for construction about 10 miles away in the Washington County town of Robbinston.

The new project would be built on an 80-acre site on the south side of Mill Cove, where the St. Croix River meets Passamaquoddy Bay. The $400 million Downeast LNG project's financial backers are Kestrel Energy Partners LLC, an oil and gas private equity investment firm based in New York, and Dean Girdis, who is president and founder of Downeast LNG.

Girdis, a former consultant with Washington, DC-based PFC Energy, funded preliminary project development over the last year with his own money. He said the site was selected for the terminal after examining 25 different locations in New England and Maine.

"I think Quoddy Bay, our project and all the others need to go through the permitting process" before the winners are declared, Girdis said in an interview with NGI. "We looked at 15 sites in Maine, and based on socioeconomic, community issues and land issues -- both environmental and technical -- the site we chose in Robbinston was the highest ranked site out of 40 or so criteria that we ranked. We believe that it has the highest chance of receiving a permit. Any project is going to succeed on its own merits."

The project sponsors cited gas demand growth in Maine as one of the primary reasons for moving forward with the terminal at this location. In a statement, they noted that gas demand in the state has risen from 121 MMcf/d in 2000 to about 225 MMcf/d in 2004, with about 90% of gas used for the production of electricity. Maine has five gas-fired power plants located in Veazie, Bucksport, Jay, Rumford and Westbrook. During the coldest winter days, as much as 40% of New England's gas supply may come from LNG, they said.

Girdis said the company did a demand analysis and determined that there will be a 1.5-1.8 Bcf/d gas supply deficit in New England and the Maritimes provinces in Canada by 2020 if no LNG terminals are built. Gas demand is on the rise while production offshore Nova Scotia has shown signs of weakness rather than growth.

However Downeast LNG may face pretty stiff competition not only from Quoddy Bay, but also from Anadarko's Bear Head LNG terminal in Point Tupper, NS, and from Irving Oil and Repsol's Canaport LNG terminal in St. John, NB. Operators of both of those LNG terminals, which are beginning construction, signed precedent agreements last week for a substantial amount of proposed expansion capacity on the Maritimes & Northeast pipeline system (see related story).

The site of the proposed Downeast LNG terminal in Robbinston is 22 miles from the Maritimes mainline, which brings gas south from offshore Nova Scotia to markets in the northeastern United States.

Girdis said that based on preliminary discussions with town officials and area residents, Downeast LNG believes that the people of Robbinston will be supportive of the project because of its benefits to the town and the economic opportunities it will create. However, none of the many proposed East Coast LNG import terminals have passed through the regulatory process without some opposition based on environmental or safety concerns.

Girdis said that the site has excellent technical characteristics so that any impact on the environment will be minimized. He said the project will meet or exceed every government safety and security requirement.

He sent a letter to all property owners in Robbinston over the weekend (July 9-10) informing them of the project and inviting them to one of two residents-only informational meetings during the week in Calais. Additional public meetings will be held in Calais and Eastport later this month. Girdis said that Downeast LNG is committed to a free and open exchange of information with area residents about the project.

The Downeast LNG project will consist of a single LNG storage tank (160,000 cubic meters), processing equipment (500 MMcf/d of peak sendout), a new pier and several small support buildings. Site acreage is adequate for the installation of a second storage tank if the demand for gas outpaces current projections.

Once built, the facility would receive one ship a week on average, carrying about 125,000 to 138,000 cubic meters of LNG, or about 2.6-2.8 Bcf of gas. Ship transit from Head Harbor Passage to the pier is expected to take less than two hours and offloading about 12-14 hours.

"We're going to do this right," said Robert Wyatt, an environmental consultant who serves as vice president of environmental affairs for the project sponsor. "We do not expect the project to have any significant impact on the natural environment or the marine and tourism-related industries that are so important to eastern Washington County."

The company also announced that once the facility is fully operational, Downeast LNG will provide up to $500,000 annually to communities of eastern Washington County to support economic development activity. The permitting process is expected to take about two years.

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