After signing a 20-year agreement earlier this year for one-third of the liquefied natural gas (LNG) output at the FERC-certificated Freeport LNG terminal, Dow Chemical has decided to purchase a 15% ownership stake in the partnership that is building the terminal.

Dow subsidiary, Texas LNG Holdings LLC, purchased the stake in Freeport LNG Development LP for an undisclosed sum. The Freeport terminal, which is being built on Quintana Island, near Freeport, TX, is expected to begin service in early 2009.

“We believe very strongly in this project, and we have the greatest respect for Michael Smith [CEO of Freeport LNG Development, LP] and his Freeport LNG team,” said B.J. Sumrall, president of Texas LNG Holdings LLC. “Our nation clearly needs a greater supply of natural gas to meet demand. LNG is an essential part of the answer to this problem.”

Smith noted that Dow has been “tremendously important to the success of the Freeport LNG project. We believe that their subsidiary’s participation as an equity owner reflects continued support and adds a valuable new dimension to the project.”

Upon receiving FERC’s authorization in June, Freeport LNG became the second new LNG terminal project approved for construction in the United States in more than 25 years. The proposed project will include a marine terminal, LNG transfer lines and LNG storage and vaporization units. The marine terminal will have the capability to unload 200 ships each year. The sendout capacity of the facility will be up to 1.5 Bcf/d, and two LNG storage tanks each will have the capacity to hold 3.5 Bcf of gas.

The project also calls for the construction of nearly 10 miles of 36-inch diameter pipeline extending from the import terminal to a proposed meter station at Stratton Ridge storage hub in Brazoria County, TX.

ConocoPhillips has entered into an agreement to fund the construction of the LNG facility (more than $500 million) in exchange for the remaining 1 Bcf/d of capacity. ConocoPhillips also owns 50% of the general partner in Freeport LNG Development LP. Smith owns the other 50%.

The partnership’s limited partners are now Freeport LNG Investments LLP (45%), Cheniere Energy (30%), Texas LNG Holdings LLC (15%) and Contango Oil & Gas (10%).

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