Looking to help meet North America’s ever-increasing appetite for natural gas, companies such as El Paso Corp. and Shell have been looking outside the box to find new sources of natural gas, and new methods to deliver it to the continent. El Paso announced that it has finalized LNG agreements with a Norwegian consortium, while Shell has proposed its floating liquefied natural gas technology (FLNG) for Timor Sea production. Shell also announced last week that it will invest in the first LNG export project in Venezuela, which intends to tap 10 Tcf of gas reserves and send them to the U.S. East Coast (see related story).

El Paso Corp. subsidiary, El Paso Global LNG, said last Monday that the LNG purchase and sale agreement signed in October 2001 with a consortium of natural gas production companies led by Statoil ASA received final Norwegian and United States government approvals on May 31.

As per terms of the finalized agreement, the consortium will develop the Snohvit Project in northern Norway and provide El Paso with an annual delivery of 1.8 million tons of LNG during the 17-year primary term of the agreement. El Paso said the agreement will account for more than 40% of the total capacity to be produced at the Snohvit Project’s LNG liquefaction facility, which will be located on Melkoya Island, just north of Hammerfest, Norway. The agreement was first announced last October (see NGI, Oct. 22, 2001).

The agreement also stipulates that the consortium will be responsible for developing the proven reserves that support the project, including constructing the pipeline infrastructure and liquefaction facilities, and making all necessary LNG shipping arrangements. El Paso said it will receive LNG shipments equivalent to an estimated 91 Bcf per year of natural gas beginning in 2006. Shipments will be delivered to the existing Cove Point, MD LNG regasification terminal, or to other North America and European destinations where the LNG will be regasified and sold as natural gas. El Paso currently has the capacity at Cove Point to deliver about 250 MMcf/dof natural gas into the East Coast pipeline infrastructure.

“We are extremely pleased with the efforts of the consortium in obtaining the approvals which now bring this contract to fruition,” said Greg G. Jenkins, president of El Paso Global Petroleum and LNG Group. “This approval advances El Paso’s LNG business in important ways. The contract provides both security of supply and destination flexibility, which we believe are important elements of the evolving LNG marketplace. We are confident in our ability to fill the entire capacity at the Cove Point terminal, and are well prepared to market additional supply if the consortium decides to expand the liquefaction facility.”

El Paso also recently announced the development of EP Energy Bridge(TM), a new ship-based LNG regasification system (see NGI, May 13). The new delivery system uses proven offshore buoy technology to moor the ship and proprietary technology to regasify LNG onboard the ship and discharge the gas through a subsea pipeline.

The company said that EP Energy Bridge enables flexible, environmentally safe, and cost-effective delivery of natural gas directly to coastal regions and provides supplemental supplies to growing North American markets.

Also last Monday, Shell Development Australia CEO Dr Alan Parsley said that Shell’s proposed development of the Sunrise gas fields in the Timor Sea using floating liquefied natural gas technology (FLNG) is a “shining example of sustainable development in action.”

Speaking at the South East Asia Australia Offshore Conference (SEAAOC) in Darwin, Parsley said the North American gas market opportunity is here and now for Sunrise. “Cost reductions delivered by the FLNG development make it possible for Sunrise LNG to compete on price in the growing North American gas market,” he said. “However, we cannot assume that this opportunity will remain open indefinitely.”

The FLNG facility is Shell’s proposal for developing the Greater Sunrise Gas fields, an abundant resource of more than 9 Tcf of gas. Woodside Petroleum is the operator of Greater Sunrise with a 33.44% stake, Phillips Petroleum holds 30%, Shell has a 26.56% interest and Osaka Gas of Japan owns 10%.

Parsley said, “FLNG technology is about doing more with less — less steel, less energy input and less environmental impact.” He added that because FLNG does not rely on pumping gas 500 kilometers to shore, the LNG produced required far less energy input per ton than an onshore plant development option.

“The result is a project which will emit 29% less CO2 and 83% less NOx emissions over its 35 year lifecycle. These environmental benefits are delivered mainly by locating the LNG facility offshore and close to the Sunrise field.”

Before Shell unveiled its FLNG plan in August of 2001, Shell and Woodside for three years aggressively marketed Sunrise gas to domestic customers in the Northern Territory, in Queensland and in South and East Australia, approaching over 30 potential customers. “Despite these intensive efforts, we were unable to secure sufficient gas sales volumes from credible customers at prices which would make Sunrise development commercially viable.”

Since then, Parsley said that Methanex — the principal foundation customer — has relocated the site of its methanol plant to Western Australia. Despite that, Shell agreed to a proposal by Phillips to revisit the potential domestic gas market in case there had been substantive changes that would make the commercial proposition credible.

Parsley said Shell still believes FLNG to be the only economic option to develop Sunrise at this point in time, but it was committed to a rigorous and transparent domestic gas review, and it was approaching the review with a completely open mind. “In the event that a credible market opportunity is identified, we believe that all options for gas supply from the Timor Sea should be considered in order to meet the demand.”

Shell’s FLNG facility would be the length of about nine Olympic size swimming pools or about 450 meters long, about 70 meters wide and 30 meters tall. It would be located in deep water about 450 kilometers from Darwin and 150 kilometers from East Timor. The facility would be able to store about 200,000 cubic meters of LNG, process up to 1,000 MMcf/d and produce on average 22,000 bbl/d of condensate. Shell added that the facility will produce about five million tons of LNG per year to be supplied to the West Coast Americas.

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