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Chevron Files at FERC for Casotte Landing, MS LNG Project; Puts Port Pelican on Hold

Chevron Corp. said last Thursday it has the support of the Mississippi governor for a new LNG import terminal it plans to locate in Jackson County, MS, alongside its Pascagoula refinery on the Gulf Coast. The announcement followed the revelation earlier in the week it had put its more ambitious Port Pelican offshore terminal on hold.

"I welcome and support Chevron's plans to invest in vital natural gas infrastructure that will help meet the future energy needs of Mississippi and the Southeast. This good news will be very important in helping the Mississippi Gulf Coast recover from the destruction of Hurricane Katrina," Mississippi Gov. Haley Barbour said. "Adding LNG to the energy mix strengthens Mississippi's position as a key player in providing critical energy infrastructure."

Chevron proposed its Casotte Landing LNG terminal, to be located adjacent to the Chevron-owned Pascagoula refinery, just two days after it was revealed the company's Port Pelican project had gone into limbo.

The fate of Port Pelican surfaced in a Federal Register notice by the U.S. Coast Guard saying it has stopped processing an environmental assessment of Chevron's onshore work associated with its Port Pelican liquefied natural gas (LNG) import terminal offshore southwest Louisiana. Chevron had planned to conduct fabrication activities for the gravity-based structure onshore at Port Aransas in Nueces County, TX, but the company has decided not to renew a lease on the site because it has not lined up LNG supply for the project.

"Port Pelican LLC has now informed the Coast Guard and [Maritime Administration] that it will not pursue its plans for the Port Aransas site at this time, and therefore, the Coast Guard and MARAD are canceling their plans for the supplemental [environmental assessment]," the agency said in its notice.

In November 2003, Port Pelican became the first offshore LNG import terminal to receive a deepwater port license from MARAD (see NGI, Nov. 24, 2003). The proposed $800 million terminal would be capable of handling 1.6 Bcf/d of gas deliveries. ChevronTexaco originally expected to have the terminal in service in 2007, but service now is expected to commence in 2009 or later mainly because of the timing of upstream liquefaction capacity (see NGI, Oct. 25, 2004).

"We decided it wouldn't be prudent to continue payment on the lease [at Port Aransas] while we are waiting to get alignment with our upstream supplies for Port Pelican," said Chevron spokesman Nicole Hodgson. "We don't actually have a date [for commercial service at Port Pelican]. At this point we have not identified upstream supply... The project is on hold." Hodgson said Chevron is looking at bringing LNG to the terminal from Angola, Nigeria or potentially Venezuela.

However, she said Chevron's other LNG import project in Baja California Norte, Mexico, is not on hold. Terminal GNL Mar Adentro offshore Tijuana near South Coronado Island has received all of its major permits for construction. Chevron plans to bring LNG to that terminal from the Gorgon Field offshore western Australia.

The regulatory process for offshore Gulf of Mexico terminals also is evolving. For example, it was pretty late in the game when MARAD and the Coast Guard realized the significant environmental impacts of onshore fabrication of the massive gravity-based LNG structures required for these projects. MARAD had to go back to Chevron after issuing a permit for Port Pelican and require supplemental information on the onshore construction process.

The onshore structures for the offshore LNG terminals are very large. Basically, they include a giant hole in the ground 1,000 feet long by several hundred feet wide and 60 feet deep, in which concrete is poured. The hole must be dug near a waterway so that it can be filled with water and the structure can then be floated out to sea. There are many environmental concerns related to such an endeavor, not least of which is what to do with all that dirt. Another major impact would be on the local community and its roads, schools and stores where the facilities are built. MARAD officials are just beginning to address the many environmental issues associated with the onshore construction portion of these terminals.

Meanwhile, a design characteristic of many of the offshore LNG terminals, including Port Pelican, has basically stalled the regulatory process. Officials from the Gulf Coast states have expressed concern about the use of the open rack vaporization (ORV) process, in which LNG containers are warmed with seawater, which is then returned to the ocean. Analysis has indicated that the process would be harmful to fish populations and other sea life because of the way that hundreds of millions of gallons of water per day would be taken from the sea and discharged and because of the cooler temperature of the water once it's returned to the Gulf. It is unclear what impact the outcome of this debate will have on Port Pelican and the other proposed offshore LNG terminals.

The new Chevron project, Casotte Landing, filed at the Federal Energy Regulatory Commission by subsidiary Bayou Casotte Energy LLC, will have a regasification capacity of 1.3 Bcf/d.

Chevron Global Gas President John Gass said, "This project can help meet the projected increase in demand for energy in the United States. Recent events have underscored the critical need for reliable and diverse supplies of natural gas and the important role increased LNG imports can play in the energy future of this country."

Chevron already has an LNG import project underway in Baja California Norte, Mexico. Terminal GNL Mar Adentro offshore Tijuana near South Coronado Island has received all of its major permits for construction. Chevron plans to bring LNG to that terminal from the Gorgon Field offshore western Australia.

Chevron also has an agreement for the use of 700 MMcf/d of LNG regasification capacity at Cheniere Energy's Sabine Pass LNG receiving terminal being developed in Cameron Parish, LA.

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