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West LNG Projects Tread Water; GHG Reviewed

It's not easy being green for liquefied natural gas (LNG) project developers along Southern California's shores as the first West Coast LNG facility prepares to open next quarter in North Baja California, Mexico, and proposals move along in Oregon. Three California offshore proposals have been diverted to examine their individual global climate change impacts, and a fourth onshore site in Long Beach awaits a critical state court hearing March 17 to try to force local officials to restart a final environmental review process that was abruptly stopped a year ago.

San Diego-based Sempra Energy sits in the power position as the only entity with long-term gas contracts and its Energia Costa Azul LNG terminal in Mexico set to begin pre-commercial test cargo operations. Meanwhile, some rather large financial interests are in various stages of trying to get competing projects under way in the next two to four years -- Australian-based Woodside Natural Gas and its Ocean Way offshore project; NorthernStar's Clearwater Port; Tidelands Oil & Gas Corp.'s Esperanza offshore LNG project; and Mitsubishi Corp's Sound Energy Solutions (SES) terminal proposed for Long Beach harbor.

Each proposal will tout its unique advantages, but NorthernStar is the only one hoping to leverage two western LNG projects -- Clearwater and its more advanced Bradwood Landing LNG proposal for a site along the Columbia River in Oregon. NorthernStar's Billy Owens told NGI in an interview last week that the two proposals can help one another in a commercial sense, seeking near-term and long-term LNG cargoes.

"Our plan all along has been to do both terminals, and Bradwood is farther along in the permitting process," said Owens, who heads NorthernStar's California development. "Where it has its greatest benefit for us is that if it's successful, it will facilitate discussions with parties that want to use the port in Southern California as well."

None of the offshore proposals, all of which fall under U.S. Coast Guard and state approvals, will go forward without California Gov. Arnold Schwarzenegger's approval. That's when they will know they have a realistic chance of building a terminal off California, Owens said. "When the governor says he is for it."

Meanwhile, work on a draft environmental review of Woodside's project has been suspended by the Coast Guard, pending the completion of a global lifecycle assessment of the greenhouse gas (GHG) impact of the proposed ship-to-ship transfer and regasification process 28 miles offshore.

Also applying to the Clearwater Port and Esperanza projects, the latest diversion is the first of this scope in the LNG siting process, looking at the projects' GHG footprint all the way from the extraction of the gas through the shipping to Southern California and the offloading and undersea pipelines to the burnertip onshore. Also in the final report resulting from this analysis will be comparisons with lifecycles for similar amounts of energy from other sources domestically -- U.S. pipeline supplies, coal and maybe even renewables, according to Woodside.

Late summer or early fall is now the target for when the draft environmental documents will be released and the public hearing process begins for Woodside, according to the company's Santa Monica, CA-based spokesperson. Woodside originally filed with the Coast Guard for a deepwater port permit last August, and last September federal and Los Angeles city authorities officially launched a full environmental impact review process, which was halted last December, according to the spokesperson.

The Coast Guard put out a small public notice on the change, but Woodside considered the move "a small procedural change," according to the spokesperson. The company and Coast Guard have issued requests for proposals from independent consultants that can do the work, and the agency and company are determining the scope of the work, which will be done for the Coast Guard and paid for by Woodside. An outside panel of experts will review the methodology and scope of the project before it is actually done.

"Hopefully this can turn into a model for how other companies do this in the future," said Woodside's spokesperson, adding that California GHG rules under its 2006 Global Warming Solutions Act (AB 32) have not been established yet. He said Sydney, Australia-based energy industry consultant WorleyParsons has been selected to head the work as an extension of earlier GHG assessment work it was doing for Woodside's Australian gas production operations.

A holder of large portions of Australian North Shelf gas supplies, Woodside has proposed an offshore LNG ship-based docking facility and undersea pipeline 28 miles from an onshore connection point near Los Angeles International Airport. The Coast Guard and city jointly deemed as "complete" the application for Woodside's OceanWay project, triggering the environmental work last fall.

There is no new timeline for developing the draft environmental impact assessment. Woodside's spokesperson estimated it would take "a few more months" to compile all of the GHG lifecycle data and study methodology. "Then the work will actually be incorporated into the other draft environment impact report/statement. It is something we anticipated, so it has been incorporated into our timetable. We're not changing our timetable yet, and I don't think that we will."

Backers of the newest of three proposals for an offshore LNG terminal along the Southern California coast, Port Esperanza off of the Huntington Beach-Long Beach area, also have been asked by the Coast Guard to complete a lifecycle GHG impact assessment from the gas source to the burnertip.

Announced a year ago and incorporated by its parent company, San Antonio, TX-based Tidelands Oil & Gas, Esperanza has yet to file its formal applications to the Coast Guard and California State Lands Commission, but its lead consultant, former California Energy Commission gas expert David Maul told NGI the project has been actively dealing with "key social, community and environmental issues that are not obvious from the normal 10,000-foot review.

"We have to address GHG emissions issues, and we have already done a preliminary analysis of that," said Maul, noting his project has the lowest GHG emissions footprint of any LNG proposal on the West Coast, including Sempra Energy's Energia Costa Azul, the only project to be built so far. "So, we're already going forward with that kind of review and analysis."

Pre-application work has gone forward, but Tidelands is still lining up financing for the project, Maul said. The application will be ready to go when the financing is secured. "Hopefully, we will have that lined up real soon and we'll go forward. There is room for a couple of LNG projects on the West Coast, and we think we can be one of them," he said.

Maul said that currently many long-term cargoes have been locked up globally, but there are still sufficient short-term ones for the first years of the terminal's operation -- sometime after 2012 -- and he thinks Esperanza can sign up enough initial supplies to make a go of the project. "For the first years we'll have some short-term bridge contracts, but then we'll get some longer-term stuff. We are currently working on some supply areas that are very intriguing. We're not too worried about the supply side."

As outlined a year ago with much fanfare, Esperanza's project intends to link to an onshore gas-fired electric generation plant, of which there are several located in the Long Beach-Huntington Beach area, with a horizontally drilled tunnel buried 100 feet under the beach that would provide a conduit for water, communications and electrical lines to serve the offshore terminal while also providing an artery in which to run an undersea natural gas pipeline for bringing regasified LNG to shore and delivery to the Southern California Gas Co. transmission system.

Esperanza has maintained that its project would have no significant air quality or marine impacts; no petroleum fuels will be stored at the site; and whenever possible the emissions from the LNG ships will be minimized by using natural gas for the ship engines while undergoing the offloading of the shipments.

On a different track early in March, the Federal Energy Regulatory Commission (FERC) notified the backers of the proposed onshore terminal in the Port of Long Beach, CA, that it was suspending its application, based on the proponents' lack of a lease for the proposed site in the port, which combined with adjacent Los Angeles Harbor comprises the busiest port in the United States.

The project has been dormant for more than a year since the port unilaterally stopped processing the joint environmental review and Sound Energy Solutions (SES) subsequently filed a lawsuit against the city and port that has yet to be heard. After three past delays, the lawsuit is scheduled to be heard March 17 before California Superior Court Judge James C. Chalfant in downtown Los Angeles. SES CEO Thomas Giles told NGI that this is the "big event" for the four-year effort by Mitsubishi Corp. to build and operate a 1 Bcf/d facility in the harbor on part of what was once a U.S. naval base.

In saying that he wasn't surprised by the action by the FERC and SES did not ask for the action, Giles said the company is taking the notice "matter-of-factly" at this point. "We're keeping FERC informed all the time, and will do so regarding the court hearing later this month."

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