Saying worldwide demand and relatively low prices in the United States have slowed deliveries of liquefied natural gas (LNG) to its Texas terminal, Freeport LNG Development LP is looking to reverse the spigot by seeking permission to export previously imported LNG to Europe and Asia.

In a filing with the Department of Energy’s (DOE) Office of Fossil Energy, the company requests an order granting blanket authorization to export on a spot market basis over a two year period up to 24 Bcf of LNG that has been imported and stored in the United States. Freeport expects to export the LNG to the United Kingdom, Belgium, Spain, Japan, South Korea, India, China, Taiwan, France and Italy. Freeport did not request authorization to export domestically produced natural gas or LNG.

Last month the Federal Energy Regulatory Commission (FERC) gave Freeport the green light to begin service at its LNG terminal, located on Quintana Island, about 70 miles south of Houston (see Daily GPI, July 2). The terminal came on-line about four years after FERC approved the project (see Daily GPI, June 22, 2004). The Freeport facility received two tanker shipments in April and May from Trinidad, with a combined load of 6 Bcf, to commission and cool the LNG plant. Future shipments would depend on natural gas prices in the United States versus gas prices in Japan and Europe, the company said.

“Although the capacity of Freeport LNG’s facilities is fully subscribed by third-party customers, increasing worldwide demand for LNG and relatively low market prices in the United States has resulted in slower than anticipated LNG deliveries to the United States,” the company stated in its application. “Freeport LNG anticipates that, so long as global market conditions persist, supply to the terminal will be in direct competition with global LNG markets.”

In a report issued last month, the Energy Information Administration said LNG imports to the United States through the first half of 2008 were roughly 60% below the amount received during the first six months of 2007 (see Daily GPI, July 9).

“Given the global increase in demand for LNG and the concurrent disparity in natural gas prices in the United States relative to global markets, it is unclear when a constant and continuing supply of foreign sourced LNG will begin to arrive at the Freeport LNG facility and other U.S. import terminals,” Freeport said.

The Phase 1 facilities at Freeport have a sendout capacity of up to 1.5 Bcf/d of regasified LNG, with the ability to meet 1.75 Bcf/d of peak demand. Phase 1 also includes two 160,000-cubic-meter LNG storage tanks and one piled dock capable of handling LNG tankers in excess of 200,000 cubic meters. The marine terminal has the capability of unloading 200 ships per year.

The Freeport terminal is located near two large gas trading hubs (Katy and the Houston Ship Channel) and is adjacent to large industrial gas consumers. The terminal’s capacity is fully contracted under three separate long-term use agreements with ConocoPhillips (0.9 Bcf/d), Dow Chemical Co. (0.5 Bcf/d) and Mitsubishi Global Gas Corp. (0.15 Bcf/d).

In September 2006 FERC approved Freeport LNG’s request to raise the sendout capacity of the terminal to 4 Bcf/d. The company has targeted these Phase II facilities for completion in September 2009 (see Daily GPI, Sept. 25, 2006). The expansion of the facility will include an additional LNG vessel berth, LNG tank storage and vaporization capacity. Freeport LNG also is planning to construct a 7.5 Bcf underground storage cavern at Stratton Ridge that will be integrated into the operations of the terminal.

If granted an export permit, Freeport would become only the second LNG export facility in North America. It would differ from an export terminal which has been liquefying and exporting LNG from the Alaska coast for nearly 40 years in that Freeport currently has no liquefaction facilities and would only be able to serve as an LNG storage and transit station.

DOE recently granted an extension of a permit allowing the Kenai LNG terminal in Alaska to export LNG (see Daily GPI, June 5). With the extension, which lasts from April 1, 2009 until March 31, 2011, ConocoPhillips and Marathon Oil Corp.’s may export up to 98 Bcf to Japan and other countries on either side of the Pacific Rim. The Japanese have been importing LNG from the Kenai terminal since 1969 and some in Alaska believe additional LNG liquefaction and imports to thirsty Asian markets should be included in the state’s plans to commercialize its vast North Slope gas reserves (see Daily GPI, May 19).

Proponents of that more than 20-year old North Slope LNG export plan, at one time called the TransAlaska Gas System (TAGS) project sponsored by Yukon Pacific (see Daily GPI, March 30, 1998), have long maintained that prices paid in Asian markets make the project the economic choice over a mega-pipeline to the Lower 48. Roadblocks to LNG exports in the past have come from those who want to keep American resources for Americans, and the fact that there is in place a framework of U.S. and Canadian laws and an international treaty dating back to the 1970s underpinning the pipeline (see Daily GPI, Nov. 16, 2001).

Chesapeake Energy CEO Aubrey McClendon has said his company is considering investing in LNG export facilities (see Daily GPI, Aug. 4; May 2).

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