While offshore LNG projects in the Northeast may raise other environmental concerns, the issues surrounding the open rack vaporization (ORV) process, which consumes hundreds of millions of gallons of water daily to warm super cooled LNG back into a gaseous state, won’t be among them, project sponsors say. Both the Neptune project, sponsored by Suez Energy, and the Northeast Gateway project sponsored by Excelerate, will use a closed loop process.

ORV has been a significant stumbling block for the LNG industry, particularly in the Gulf of Mexico. Several state governors have cited it as the key factor impacting their decisions to oppose ports. The Coast Guard stopped the regulatory clock on multiple projects because of the potential impact on fish eggs and larvae from the ORV seawater intakes and outtakes. Despite the conclusion by the Coast Guard that the impact of individual LNG ports would be minor, environmental groups have expressed concerns about cumulative impacts of several offshore LNG terminals built in the same region.

The Energy Policy Act of 2005 requires the Department of Energy, Coast Guard and National Oceanic and Atmospheric Administration (NOAA) to study the issue and report on their findings (see Daily GPI, June 28, 2005).

Offshore LNG port developers in the Gulf plan to use the ORV system because it’s cheaper. ExxonMobil estimated that reusing water in a closed loop process would cost an additional $20-40 million/year in vaporization costs because it would require 1.5% of the LNG cargo to be used for heating.

But New Englanders won’t have to worry about developers using ORV off their coast.

“We chose the closed loop system, and we did that for two reasons,” said Clay Harris, CEO of Suez LNG North America. “The main one is that the water is colder in New England than in the Gulf of Mexico. We wouldn’t get the same efficiency if we used sea water vaporization in the same capacity at the end of the day.

“The other reason is the environmental issues in New England on emissions [are too restrictive]. The [closed loop system] keeps everything internal to the vessel and we don’t use steam turbines. This is a system that works well with a dual fuel diesel/electric system.”

It also doesn’t hurt that gas delivered to New England fetches a significant premium to gas delivered in the Gulf Coast region. The combination of the economics, the colder water and the emissions regulations make closed loop a more logical choice.

Excelerate spokesman Doug Pizzi said his company chose a closed loop process because water that is 40 degrees or lower can cause some vaporization equipment to freeze up and malfunction. The closed loop process still requires a large amount of water, but not nearly the amount used by ORV. Pizzi said Excelerate also has found a way to cut its original estimates of water intake by 95% to about 2.7 million gallons of water per day. Excelerate’s vessels will discharge about 0.9 million gallons per day, using the remainder for ballast.

The regulatory clock was stopped on the two Northeast projects last November by the Coast Guard with about eight months of regulatory review remaining. Pizzi said it is unclear when the clock will be restarted but there are no outstanding data requests. He said there will be an eight-month construction window following issuance of a permit.

Meanwhile, Excelerate is actively monitoring the environmental impact of its existing LNG operation offshore Louisiana. The Gulf Gateway project already uses an ORV system. Pizzi could not say whether the system has had an adverse environmental impact on fish or other marine life as NOAA predicted in a study done several years ago.

NOAA Fisheries estimated that about 0.1-3.8% of the annual red drum catch in the Gulf could be lost if one LNG terminal with an open sea water vaporization process were built.

Suez’s Harris said the NOAA study greatly exaggerated the impact on marine life, and another study done since then by consulting firm Exponent supports that conclusion (see Daily GPI, Jan. 18). “The closed loop system is a little more expensive. But certainly the study that NOAA did went a bit overboard on the potential environmental impact [of the ORV process],” said Harris.

“These are fairly small systems when you talk about the volumes of water being circulated and the temperature differentials of intake and outlet on these systems. Most of the terminals in the world have open rack vaporization and submerged combustion so they can use both depending on their location with respect to ambient temperatures.”

These environmental disputes and other issues delaying LNG regasification in the U.S. won’t be significant factors in delaying new supplies of natural gas to the United States’ Harris added. The more important issue will be liquefaction capacity, he said.

The world is going to be short natural gas liquefaction capacity for at least a few more years. “It could be through 2010,” said Harris. “The big LNG projects in the Middle East (Qatar, in particular) will be in service by then with potential expansions on stream in Nigeria as well. Trinidad is more of a developing story,” he said.

“Just a few days ago [Prime Minister Patrick] Manning came out and said that their intention is to build two more LNG trains, one utilizing gas from Venezuela and another utilizing indigenous gas. Whether there are enough gas resources in Trinidad to do another LNG expansion and a long list of domestic gas supply/demand projects that they are promoting is a question,” he said.

“But when these Qatar projects come on stream, the Nigerian expansions are on and Egypt is up and running, it will be a close race with Trinidad for top LNG supplier to North America.” That’s when prices may start to come down, he said.

Harris will be discussing these and other LNG issues at the GasMart conference and trade show in Denver May 3-5. FERC Chairman Joseph Kelliher will be keynoting the conference, and Questar Chairman Keith Rattie, Kinder Morgan Natural Gas Pipelines President Scott Parker and veteran Houston analyst John Olson will be among those making presentations (see https://gasmart.com/).

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