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Freeport LNG Pursuing NGL Extraction Capability

August 17, 2009
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Freeport LNG has applied at FERC to construct and operate a natural gas liquids (NGL) extraction system at the Quintana Island liquefied natural gas (LNG) regasification terminal in Texas. Adding the capability to extract NGLs would broaden the terminal's options among global LNG supplies and improve the pipeline-readiness of regasified LNG, Freeport LNG said.

"The NGL extraction project will provide Freeport LNG and its customers access to more diverse and competitively priced supplies of LNG, as well as provide a new source of NGL feedstock to the petrochemical markets in the U.S.," the company said in the filing. "Many of the existing LNG exporters around the world (with certain limited exceptions) produce LNG with a gross heating value that exceeds many U.S. pipeline gas specifications. In this regard, the ability to remove NGLs from the gas stream will allow Freeport LNG to accept cargoes that might otherwise fail to meet the gas interchangeability standards of downstream pipelines, thus ensuring that competitively priced LNG sources are not restricted from delivery to the Quintana Island terminal."

The extraction system would enable Freeport LNG to extract and recover NGLs (primarily ethane, propane and butane) from the terminal's LNG throughput. The system would include two 400 MMcf/d NGL extraction trains, collectively providing 0.80 Bcf/d of extraction capability; a 60,000 b/d depropanizer; associated non-modular equipment; two colocated NGL plant pipelines (eight- and 12-inch diameter); and an NGL delivery pipeline and associated metering, pigging and valve facilities.

Freeport LNG said on-site processing for NGLs is more economical than off-site processing because it can accommodate LNG at cryogenic temperatures, "eliminating the need to cool the gas for condensing NGLs and simplifying the process of compressing regasified LNG to pipeline pressures."

Onsite NGL extraction is more attractive than blending inert gases into the gas stream as well because the costs of inert gas injection vary depending on the technology used. Also, some pipeline tariffs limit the amount of inert gas that is injected into the gas streams they carry, the company said.

Earlier this year the Federal Energy Regulatory Commission upheld a 2006 order approving a policy statement that takes a pipeline-by-pipeline approach to natural gas quality and interchangeability issues (see NGI, March 16).

The proposed extraction system would be constructed within the authorized operational area of the Quintana terminal. Freeport LNG proposes a service date of June 2011 for the facilities.

"...[O]nce global market conditions support a continuing supply of foreign-sourced LNG at the terminal, NGL extraction will offer economic returns to the extent NGL market prices exceed the value of natural gas on a Btu basis," the company said. "Freeport LNG has prime access to transportation infrastructure and markets that can absorb large quantities of NGLs extracted from the NGL stream."

According to the most recent analysis by Tudor, Pickering, Holt & Co. Securities Inc., sendout from U.S. LNG regasification facilities has been tracking at levels equal to a year ago during July and August at about 1.1 Bcf/d and 0.9 Bcf/d, respectively. However, sendout during the second quarter was 1.3 Bcf/d, up from 0.9 Bcf/d in the year-ago quarter, and during the first quarter sendout was 1 Bcf/d, up from 0.8 Bcf/d in the first quarter of 2008.

In May FERC approved a request by Freeport LNG Development to build minor facilities to export LNG from the Quintana terminal on a short-term basis (see NGI, May 11). The Commission gave Freeport LNG permission to begin operations at the terminal last summer (see NGI, July 7, 2008).

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