BlueOcean Energy, ExxonMobil Corp.'s proposed $1 billion floating liquefied natural gas (LNG) project offshore New Jersey, has run aground in what have become choppy seas for new LNG projects in the rapidly changing U.S. natural gas market. The project has been "put on hold," an ExxonMobil spokesperson told NGI Friday.

ExxonMobil has suspended further pursuit of permits "while we evaluate the range of options for supplying natural gas to the region," said spokeswoman Rachael Moore. Industry and government sources in New Jersey indicated that the company had never pursued any state or local permitting for its three-year-old proposal, and it was still in the design phase.

A spokesperson for the New Jersey Environmental Protection Agency (EPA) said there are no filings before it or any other state entity regarding the project, although he was aware of it based on ExxonMobil's original announcement in December 2007.

Conceived in headier days for North American LNG prospects, ExxonMobil in late 2007 unveiled plans for going offshore with a floating LNG receiving terminal which it said would create a gateway to global supplies of natural gas to help meet the growing energy needs of New Jersey and New York (see Daily GPI, Dec. 12, 2007).

The BlueOcean Energy project was designed to have the capacity to supply about 1.2 Bcf/d, enough to meet the needs of more than five million residential consumers. ExxonMobil at the start acknowledged it was facing a long and rigorous permitting process involving state and federal agencies, as well as the general public.

To be anchored approximately 20 miles off the coast of New Jersey and 30 miles off the coast of Long Island, the facility was supposed to be far from shore and away from shipping lanes, ports and recreational areas.

Nevertheless, BlueOcean faced the same fate as various offshore proposals off the West Coast. Out of sight is not necessarily out of mind, and on both coasts local onshore activists have opposed the projects. The remaining New Jersey offshore LNG proposal, the 2.4 Bcf/d Liberty Deepwater Port, is facing the same thing on the connecting eight-mile onshore pipeline infrastructure linked to its proposed terminal. It was originally expected to be operational by late next year.

Liberty President Roger Whelan told NGI Friday that BlueOcean was on "quite a different path" and was a completely different proposal from his phased project, which currently has applications before the Federal Energy Regulatory Commission (FERC) and U.S. Coast Guard and is looking at completing permitting in 2012 and starting operations at the 600 MMBtu/d-1.2 Bcf/d range in 2014. "Theirs was a very different project, very different path," Whelan said.

"We're somewhat further ahead in the process, albeit theirs has been a somewhat higher profile," he said, noting that the New Jersey EPA is an intervenor in its cases, and LNG generally has raised a lot of red flags among activist groups in the state. "The opposition to LNG in New Jersey is very heightened because of BlueOcean and another project. Anytime anyone hears the word 'LNG' they assume the worst."

Regardless, Whelan thinks he can sell his project successfully by working through the regasification process and "pointing to the success of the Project Neptune in Boston Harbor." He admits that the project still has a long way to go in the environmental review at FERC and the Coast Guard.

On Thursday New Jersey Gov. Chris Christie reiterated his call to federal regulators to reject the proposed onshore transmission pipelines as being too environmentally risky. In addition, Christie argued that the pipelines will hurt the state's tourism and don't fit in the state's overall long-term energy plan.

It was siting roadblocks in other areas of the country for onshore LNG projects that drove ExxonMobil to pursue the offshore route. At its inception, ExxonMobil argued that the project would help the region in obtaining secure, safe and competitively priced energy, economic growth and development and environmental protection -- in alignment with goals of the New Jersey Energy Master Plan.

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