Dow Chemical has signed 20-year agreement for the liquefied natural gas (LNG) processing capacity at the proposed Freeport LNG import terminal, which is being built by Cheniere Energy and Contango Oil & Gas Co. on Quintana Island in Brazoria County, TX.

The agreement will give Dow processing rights for 3.6 million tons per year of foreign-sourced LNG (500 MMcf/d) for a period of 20 years, beginning in 2007. The anticipated LNG supply would be used to in part satisfy Dow’s demand for gas at its petrochemical facilities along the Gulf Coast. Dow’s facilities in this region consume nearly 700 MMcf/d of gas and sell unneeded supply to other industrial consumers and to key Gulf Coast natural gas hubs in Texas.

“In spite of Dow’s tremendous strides to reduce energy intensity (energy use per pound of product produced) and a historic focus on cogeneration, energy efficiency and conservation, it continues to be challenged with unprecedented increases in costs for U.S. hydrocarbon and energy — particularly for natural gas,” says B.J. “Jody” Sumrall, Dow’s business manager for LNG & Texas Gas. “The U.S. Gulf Coast region is very important to us. For Dow to continue to grow here we must have access to a globally competitive supply of natural gas and natural gas liquids that we use to make our products.

“The Quintana Island terminal is well located to serve Dow’s Freeport operations, which is essentially adjacent to the terminal. Dow will further explore supply opportunities with LNG producers with the expectation that mutually advantageous relationships can be established,” said Sumrall. “This is important as Dow believes that LNG will be required to meet the growing natural gas demands in the United States.”

Michael S. Smith, CEO of Freeport LNG Development LP said he expects the Freeport terminal to be one of the first new terminals to be approved and built in the continental United States in more than 20 years. Sempra’s Hackberry LNG terminal in Louisiana is the only other new import terminal to be approved for service, although Dominion’s mothballed Cove Point terminal in Maryland was recommissioned and will open for import service this year.

Freeport LNG has completed all major state and federal governmental filings necessary to secure environmental and technical approval. The next key milestones include governmental approvals, an engineering, procurement and construction agreement and completion of the final terminal use agreement with Dow.

It is anticipated that the facility will be designed with storage capacity of 320,000 cubic meters (6.9 Bcf) with a vaporization send-out rate of 1.5 Bcf/d. The natural gas would be transported through a 9.4-mile pipeline that will extend to Stratton Ridge, TX, which is a major point of interconnection for a number of Texas intrastate systems.

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