New Orleans-based independent McMoRan Exploration Co. last week said its natural gas volumes in the first quarter surged 78% to 3.85 Bcf. However, the producer’s revenue growth was offset by higher production costs, which weighed on profits.

The producer said output in 1Q2007 averaged 70 MMcfe/d net, compared with 1Q2006 average production of 46 MMcfe/d. Sales volumes in the first three months of 2007 totaled 3.85 Bcf of gas and 417,000 bbl of oil and condensate, compared with 2.2 Bcf and 311,200 bbl in 1Q2006. McMoRan’s comparable average realizations for gas were $7.59/Mcf, down from $8.12 in 1Q2006. For oil, McMoRan received an average of $54.24/bbl, down from $57.15 for the same period a year ago.

McMoRan Co-Chairman Richard C. Adkerson, who presided over a conference call to discuss the quarter, said the company’s discussions with potential liquefied natural gas (LNG) suppliers are continuing as it moves forward to develop commercial arrangements for its Main Pass Energy Hub (MPEH) facility. The Gulf of Mexico deepwater hub will be located 16 miles offshore Louisiana. The U.S. Maritime Administration and the U.S. Coast Guard approved McMoRan’s license application for the $1.4 billion port in January (see NGI, Jan. 8).

As approved, the MPEH will be capable of regasifying LNG at a peak rate of 1.6 Bcf/d, storing 28 Bcf of natural gas in salt caverns and delivering 3.1 Bcf/d, including gas from storage, of gas to the U.S. market. McMoRan plans to build a 90-mile federally approved gas pipeline offshore, which would interconnect with eight interstate pipelines. MPEH also would interconnect with offshore pipelines that would ship regasified LNG ashore to Louisiana.

“We’ve taken a major step forward on Main Pass,” Adkerson said. “The next step is to develop the commercial arrangements now that we have the permit.” Adkerson said MPEH had several “advantages” as an LNG facility, with its offshore location in 200 feet of water. “With our location in the eastern Gulf, we’ll be closer to potential suppliers, and our proposed pipe into Alabama west of Mobile, we’ll be able to reach two-thirds of the natural gas markets. The fact of our location and with the salt cavern, we have a very attractive project now that we have the permit. We are entering into discussions with investors and potential suppliers.”

McMoRan does not believe LNG offtake will pose a “serious challenge” for the company, Adkerson said. Last June, the company amended its application to include the use of the more expensive closed-loop technology rather than open rack vaporization (ORV) technology (see NGI, June 19, 2006). McMoRan took this action after Louisiana Gov. Kathleen Blanco denied the company’s application for the deepwater LNG port, citing concerns about the ORV technology (see NGI, May 15, 2006).

Based on preliminary engineering studies, McMoRan is projecting the MPEH will cost $800 million to construct, with up to $600 million more for pipelines and cavern storage.

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