BP has purchased a land lease option from the Port of Galveston for a planned liquefied natural gas (LNG) import terminal on Pelican Island, which is about five miles north of Galveston, TX. A BP spokesman said the project is in the early planning stages but about 1.2 Bcf/d of sendout capacity is expected and there is enough space at the site for a large expansion.

The project is expected to cost $500 million with another $100 million to fund pipeline construction. The Pelican Island terminal would be BP’s second LNG proposal in North America. Its first is the Crown Landing project, which would be located on the New Jersey coast in Logan Township.

“What you are looking at right now is the next phase of growth in our LNG business,” said Pelican Island project manager Bob Boyce. He said the company has been looking for a good location for a second terminal for two years and picked this one for three main reasons: the close proximity of a large market, the remote area for the terminal location and good marine access.

“It is very close to a major market,” said Boyce. “Within five miles we have about 0.5 Bcf/d of consumption. We have our own Texas City refinery and all those chemical plants and refineries on the way up through to the Houston Ship Channel. I think between here and Beaumont, we have about 5 Bcf/d of demand, so we have a very major market with really good interconnections. We have about seven to nine interstate and intrastate pipelines that we could connect to. Market and good access was one feature.

“Another feature, and quite an important one, is that the site is remote. We are on the northeast tip of Pelican Island, surrounded by a large Corps of Engineers dredge spill site, which has about a 50-year life so we won’t have development around us for the next 50 years, or in effect for the foreseeable life of the project.” He said the nearest populated area is the Texas A&M campus, which is about two miles away.

BP isn’t the only company that has picked the Gulf Coast of Texas for an LNG terminal site. In fact, seven other terminals are planned, and a total of 18 import terminals are planned along the entire Gulf Coast and offshore in the Gulf of Mexico. But Boyce said BP isn’t concerned about an LNG supply glut in the region.

“Compared with today’s prices of $5-6/MMBtu, we’ll see a reduction [before our terminal is built — in 2009 at earliest]. But after all, that’s exactly what the market is saying: that we need more LNG,” he said. “I don’t think we are going to go back to the days of $2 gas. I also don’t think we’ll see a [supply glut], and the main reason is because the other side of the equation is the supply of LNG.

“Our view is that supply is the key to which projects will go,” said Boyce. “A lot of these projects that are developed by entrepreneurs are looking for supply. A lot of them just won’t go. I don’t think they will get the financing, and I don’t think they will want to run a merchant plant.”

Boyce noted that BP is a partner in Atlantic LNG in Trinidad, the largest exporter of LNG to the United States currently. BP also has an LNG liquefaction project in Egypt. Boyce said BP also plans to grow its LNG supply portfolio.

Meanwhile, BP’s other proposed LNG import terminal, the 1.2 Bcf/d Crown Landing project, is pending at FERC and also is expected to be in service in 2009. Spokesman Neil Chapman said the company has not ruled out additional LNG import terminals in North America. For a status report on all the planned LNG terminals in North America, see NGI’s list of LNG terminals at https://intelligencepress.com/features/lng/terminals/lng_terminals.html.

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