Natural gas volumes in the first quarter surged 78% to 3.85 Bcf for New Orleans-based independent McMoRan Exploration Co. However, revenue growth was offset by higher production costs.

The producer, which reported 1Q2007 results Tuesday, said output in 1Q2007 averaged 70 MMcfe/d net to McMoRan, compared with 1Q2006 average production of 46 MMcfe/d. Sales volumes in the first three months of 2007 totaled 3.8 Bcf of gas and 417,000 bbl of oil and condensate, compared with 2.2 Bcf and 311,200 bbl in 1Q2006. McMoRan’s comparable average realizations for gas were $7.59/Mcf, down from $8.12 in 1Q2006. McMoRan received an average of $54.24/bbl of oil in 1Q2007 from $57.15 for the same period a year ago.

McMoRan also is continuing discussions with potential liquefied natural gas (LNG) suppliers to develop commercial arrangements for its Main Pass Energy Hub (MPEH) facility, a Gulf of Mexico deepwater hub that will be located 16 miles offshore Louisiana, Co-Chairman Richard C. Adkerson told investors on a conference call Tuesday. The U.S. Maritime Administration and the U.S. Coast Guard approved McMoRan’s license application for the $1.4 billion port in January (see Daily GPI, Jan. 5).

As approved, the MPEH will be capable of regasifying LNG at a peak rate of 1.6 Bcf/d, storing 28 Bcf of natural gas in salt caverns and delivering 3.1 Bcf/d, including gas from storage, of gas to the U.S. market. McMoRan plans to build a 90-mile federally approved gas pipeline offshore, which would interconnect with eight interstate pipelines. MPEH also would interconnect with offshore pipelines that would ship regasified LNG ashore to Louisiana.

“We’ve taken a major step forward on Main Pass,” Adkerson said. “The next step is to develop the commercial arrangements now that we have the permit.” Adkerson said MPEH had several “advantages” as an LNG facility, with its offshore location in 200 feet of water. “With our location in the eastern Gulf, we’ll be closer to potential suppliers, and our proposed pipe into Alabama west of Mobile, we’ll be able to reach two-thirds of the natural gas markets. The fact of our location and with the salt cavern, we have a very attractive project now that we have the permit. We are entering into discussions with investors and potential suppliers.”

Adkerson said McMoRan does not believe LNG offtake will pose a “serious challenge” for the company. Last June, the company amended its application to include the use of the more expensive closed-loop technology rather than open rack vaporization (ORV) technology (see Daily GPI, June 16, 2006). McMoRan took this action after Louisiana Gov. Kathleen Blanco denied the company’s application for the deepwater LNG port, citing concerns about the ORV technology (see Daily GPI, May 9, 2006).

McMoRan is projecting the MPEH will cost $800 million to construct, with up to $600 million more for pipelines and cavern storage based on preliminary engineering estimates.

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