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BG, Trunkline Plan Pipeline, Phase II Expansion for Lake Charles LNG Terminal

BG, Trunkline Plan Pipeline, Phase II Expansion for Lake Charles LNG Terminal

An agreement between Trunkline LNG parent Southern Union and BG Group, which holds all of the capacity at Trunkline's Lake Charles LNG terminal in Louisiana, and has paved the way for the terminal to be expanded to a peak sendout capacity of 2.1 Bcf/d by 2006. The deal also eliminates BG's plan to build its own 1.2 Bcf/d Lake Charles Express pipeline system.

BG said it has withdrawn an application for the Lake Charles Express pipeline at the Federal Energy Regulatory Commission. The pipeline would have been a partial bypass of Trunkline LNG's existing pipeline from the terminal to the pipeline grid.

According to a new agreement, Trunkline will build a new pipeline, a 23-mile, 30-inch diameter system that will run parallel to its existing system. Trunkline also has agreed to a Phase II expansion of the LNG import terminal. The Phase I expansion was approved by FERC last year and will bring peak sendout capacity to 1.3 Bcf/d in 2005.

"With this agreement, we will have effectively tripled the size of Trunkline LNG by 2006," said Thomas F. Karam, COO of Southern Union. "These projects will ensure that Southern Union, together with BG LNG, continues to provide America with a significant source of natural gas -- now and long into the future."

Trunkline is currently building a Phase I expansion of the Lake Charles LNG terminal, which will increase sendout capacity to 1.2 Bcf/d from its current 630 MMcf/d and increase terminal storage capacity to 9 Bcf from its current 6.3 Bcf. Phase I, which was approved by FERC last year, is expected to be completed and in service by Dec. 31, 2005.

The Phase II project is expected to be completed and in service by early to mid-2006. The $125 million Phase II expansion and pipeline, will increase average sendout capacity from the LNG terminal by an incremental 50% to 1.8 Bcf/d, with a peak of 2.1 Bcf/d. The additional capacity will be fully contracted to BG LNG under an agreement expiring in 2023. Construction includes additional pumps and vaporizers along with unloading facilities added to a second dock.

The second pipeline will transport additional capacity created by the expansion, increasing pipeline capacity from the terminal to 2.1 Bcf/d from 1.3 Bcf/d. BG LNG and Trunkline Gas have signed a 19-year transportation agreement for the capacity on the new pipeline that also expires in 2023.

Trunkline LNG and Trunkline Gas plan to file pipeline construction and LNG expansion plans with the FERC later this month. Construction will begin after approval from the FERC is received. Much of the Phase II construction is expected to be performed simultaneously with Phase I construction.

"From the beginning of this year, BG has had rights to 100% of the capacity at the Lake Charles terminal -- North America's largest. This expansion of our send-out capability will ensure we are well equipped to deal with future market opportunities," said BG LNG Services LLC CEO Betsy Spomer.

LNG is a core business for BG Group, which has significantly expanded its LNG market presence in the last couple years. The company is involved in developing LNG projects in Trinidad and Tobago, Egypt, Italy and the United Kingdom.

In December 2003, BG completed an agreement with El Paso Merchant Energy (EPME) to acquire all of EPME's capacity in the Elba Island LNG regasification terminal near Savannah, GA, and related LNG purchase and gas sale agreements. The company also has teamed up with KeySpan to turn an existing LNG storage plant in Providence, RI, into an LNG import terminal.

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