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El Paso to Expand Georgia LNG Terminal, Build Pipe; Shell, BG Commit to Capacity

El Paso Corp. last Wednesday announced plans to expand its Elba Island liquefied natural gas (LNG) import terminal in Georgia and build a new pipeline at a total cost of $850 million to meet the growing gas demand in the Southeast. The two projects are expected to be operational in mid-2010.

The Phase III expansion of the terminal near Savannah, GA, will add 8.4 Bcf of LNG storage, more than doubling Elba Island's storage capacity to 15.7 Bcf, and will increase sendout capacity by 0.9 Bcf/d to 2.1 Bcf/d. In addition, the unloading docks at the terminal will be modified to accommodate larger LNG tankers, according to El Paso. This latest project is in addition to the ongoing Phase II expansion, which will double existing storage at the Elba Island terminal to 7.3 Bcf when it goes into operation in February 2006.

The expansions will make Elba Island "one of the largest, if not the largest," LNG import terminal in the United States, said El Paso spokesman Bill Baerg.

Shell NA LNG LLC, a subsidiary of Royal Dutch Shell, and BG LNG Services LLC, a subsidiary of BG Group plc, have signed long-term agreements with El Paso's Southern LNG Inc. to acquire the incremental storage and sendout capacity to be created by the Phase III expansion and for transportation on the proposed Elba Express pipeline, El Paso said. The agreements are subject to Federal Energy Regulatory Commission (FERC) approval of the proposed facilities. El Paso said it will submit project applications to FERC the in the third quarter of 2006.

Shell plans to use its capacity primarily to import LNG from Qatar through its Qatargas IV project, which it announced last Wednesday. The project, a joint venture between Qatar Petroleum and Shell, includes 7.8 tons per year of liquefaction plant capacity and related LNG shipping capability. Qatar IV is Shell's seventh global LNG supply project. Most of the LNG will be delivered to the growing North American gas market. LNG shipments are expected to begin around the end of the decade.

BG, the sole importer of LNG at Elba Island now, will continue to ship LNG supplies from the Atlantic Basin, including Trinidad, Egypt and Equatorial Guinea, El Paso noted. The expansion of Elba Island will more than double BG's storage capacity to 8.2 Bcf, and will boost the company's vaporization capacity to 1.17 Bcf/d from 675 MMcf/d.

As for the pipeline project, El Paso said it will be 191 miles in length and will have a total capacity of 1.1 Bcf/d. The so-called Elba Express pipeline would increase gas transportation capacity from the Elba Island terminal to markets in Georgia and, through interconnections with other pipelines, to southeastern and eastern U.S. markets. About 105 miles of the proposed line would be 42-inch diameter and 86 miles would be 36-inch diameter.

"By doubling the size of our Elba Island terminal and expanding our delivery capability from the terminal, we are significantly improving the natural gas supply picture in the southeastern United States, and [are] doing so together with Shell and BG Group, two of the largest players in the worldwide LNG business," said El Paso CEO Doug Foshee.

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