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'Have LNG, Will Travel': Woodside Shifts CA Terminal Lite Plan

Unlike most of the other developers of liquefied natural gas (LNG) terminals along the Southern California coast, Australia-based Woodside Natural Gas has plenty of reserves and liquefaction capacity poised to target the most attractive markets in Asia and North America. As a result, it has gone to a two-vessel concept for its Ocean Way proposal that would inject new gas imports into California without building permanent storage and regasification facilities offshore or on land.

Helping Woodside set apart its proposal, which surfaced just last year, are its intent to be a peaking -- not a baseload -- source of gas, and to use regasification vessels (one or two) to offload the LNG and ship it to shore as a gas via a 20-mile undersea pipeline. At any time shipments could be diverted to other terminals when the demand in California did not warrant a shipment.

Jane Cutler, the president of Woodside's Santa Monica, CA-based U.S. LNG operations, outlined the company's latest proposal for an overflow energy industry audience at The LDC Forum -- Rockies and West Tuesday in Los Angeles, and in a follow-up interview with NGI. As part of a question to a panel of energy providers, Cutler said she thinks California's leaders eventually will realize the state needs at least one LNG terminal to help keep down future gas prices.

Woodside is very interested in the California market by itself from 2011 forward, Cutler told NGI. And if the permitting doesn't work out, the company is looking elsewhere to market its LNG in North America, whether it is the Gulf or East Coasts, or farther north along the West Coast. The preference, however, is clearly California, she said.

Cutler and a panel of four other Western competitors involved in LNG, interstate pipeline or storage were divided on how many, if any, additional LNG terminals along the West Coast eventually will be built in the next 10 years in addition to Sempra Energy's Costa Azul facility now under construction in North Baja, Mexico. Cutler said at least one, and maybe more, projects will be permitted, but whether any are ever built in California will depend on the market.

Noting that as strictly an oil/gas producer, Woodside is relatively small, Cutler said that in the LNG space looking ahead to 2010 and 2015 it is projected to be among the larger providers, wedged between Shell and BP. It is the operator of the North West Shelf, Australia's largest resource project at 1.6 Bcf/d of LNG, with 2.1 Bcf/d projected by 2008. Its overall LNG production in 2015 is supposed to hit 5.6 Bcf/d.

Woodside is currently building a fifth liquefaction production train after 17 years of building and operating four other production trains. A ready market for this gas in the post- 2011 time frame, according to Cutler, is North America where Woodside projects that during the next 10 years demand will grow by 25%, domestic reserves will continue to fall, and more western Canadian and U.S. Rockies supplies will be shipped to the East.

"That leaves an anticipated supply gap of 8-11 Bcf/d by 2015," Cutler told the LDC Forum audience. "We have tried to focus on all of the issues that people around the United States have been raising about LNG development."

Stressing that there is nothing visible from the shore, Woodside's Ocean Way project would have the specially built regasification vessels pick up the LNG from a transoceanic tanker. The regasification ship will be equipped to connect with a submerged buoy that in turn is linked to a subsea natural gas pipeline running to connect with the existing Southern California Gas Co. transmission system along the coast near Los Angeles International Airport. The regasification process will be air-based, using ambient air to heat the LNG, as opposed to using seawater or burning portions of the LNG to heat the bulk of the cargo, Cutler said.

Woodside previously had looked at including regasification aboard the same tankers carrying the LNG, but more recently abandoned this approach because regasification equipment is heavier and the LNG transportation tankers would be too slow and use too much energy to transport the gas. In addition, there would have been a need for more of the specially built, and more expensive, tankers.

"This also gives us the ability to take LNG shipments from anywhere; they don't have to be one of our tankers," Cutler said. "Our base case for a project bringing in the equivalent of 400 MMcf/d would require one regasification vessel; it would take about five days to discharge the LNG. When demand became greater we could double our supplies and add a second regasification vessel and subsea buoy. This gives us a lot of flexibility to add a lot of volume without huge additional investment."

At this point, Woodside's local marketing arm is talking to prospective buyers in California. "We're trying to get an understanding of what services would be of use to them, what they are prepared to pay for those services, what their future needs will be, and then when we move to a point where we get focused on the needs and price we will focus on making the commercial arrangements needed to be put in place to get the permitting done (U.S. Coast Guard and City of Los Angeles)," Cutler said. "The state waters in which this project would flow through are under the jurisdiction of the city."

"Another question we get is why the undersea pipeline is not a straight line, and that is because of the underwater topography, which is a series of canyons, so we want to avoid very steep topography and canyons wherever we can, and we tried to avoid the main shipping lanes running parallel with the shore (10 to 15 miles offshore). We're in about 3,000-foot water depths."

Cutler is careful not to call the special regasification ships "mobile LNG terminals" because they can be moved to wherever the action is longer term. She said if California "is able to solve renewables and conservation questions so it doesn't need natural gas in the future, we can take our ships and go elsewhere."

Woodside owns and produces reserves in the Gulf of Mexico. That is its principal North American play currently; it has nothing on the West Coast except the Ocean Way LNG proposals, said Cutler, adding that her company is not in the natural gas pipeline or storage business. Similarly, Woodside has no intention at this point in seeking partners for its LNG project, she said.

"We're trying to find flexible markets to underpin commercialization of our own project," Cutler said.

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