The race to build a liquefied natural gas (LNG) import terminal in the Bahamas with a pipeline to the coast of Florida got a lot tighter last week as AES Corp. got final FERC approval for its Ocean Express project, and FPL Group, parent company of Florida’s largest electric utility, bought an option to become a partner in El Paso’s Bahamas LNG/pipeline project.

El Paso Corp. subsidiaries sold to FPL Group Resources an option to purchase the development rights of the High Rock LNG facility on Grand Bahama Island and an option to take a 50% equity interest in the proposed Seafarer system, which would transport 750 MMcf/d of gas from High Rock to southern Florida. Terms were not disclosed.

The deal pushes the project an immediate step forward in the development process. Up to this point, Seafarer had fallen behind two other competing pipeline projects in the race to deliver gas from a Bahamas-based LNG terminal. However, now it appears possible that more than one project, and possibily as many as three, could eventually be built.

So far, AES’s Ocean Express pipeline project and its associated LNG plant has taken lead in the regulatory and development race, while competitor Tractebel’s Calypso project and its proposed LNG terminal in Freeport, Grand Bahama, are not far behind.

Ocean Express won a presidential permit and final authorizations from FERC last Wednesday to build the 54-mile U.S. leg of a pipeline that would transport 842 MMcf/d of gas to southern Florida from a proposed LNG import terminal in the Bahamas. The $440 million pipeline project would extend to interconnections with Florida Gas Transmission (FGT) and Florida Power and Light’s distribution system near its Fort Lauderdale power plant. The pipeline has been pegged for service by late 2005 to mid-2006. The majority of its proposed capacity is under contract to affiliate AES LNG Marketing. AES is dredging sand and soil to create its own 90-acre industrial island, called Ocean Cay, for its LNG plant.

Tractebel’s Calypso project has been granted a favorable draft environmental review and preliminary determination on non-environmental grounds from FERC.

Meanwhile, El Paso’s project has been stalled in part because of the company’s financial difficulties, but also because of competition in the Florida marketplace. A significant market, Florida Power & Light’s Martin power plant, was lost last year to the Gulfstream Natural Gas System (see NGI, July 28, 2003). With FPL now a potential partner in the project, however, any future market concerns could be eliminated. Florida has significant and growing power generation needs and so far FPL has been the main developer of new generation in the state.

John W. Somerhalder II, president of El Paso’s regulated group, noted that a partnership with FPL would significantly advance El Paso’s project. “FPL Group Resources has recently formed a highly experienced LNG group charged with bringing cost-competitive LNG supplies to customers in the south and central Florida markets, and a partnership with them will provide a unique opportunity to maximize the expertise of each company,” he said. “We believe this project provides the best solution to bringing a critical fuel source for a region expected to demand an additional 2 Bcf/d of natural gas by 2010.”

Brad Williams, vice president of gas projects for FPL Group Resources, said, however, that FPL expects heated competition among the various gas pipeline/LNG projects to continue. “We believe that this project presents FPL Group Resources with a viable opportunity to bring added fuel supply diversity to Florida and offer Florida investor-owned utilities, municipalities and co-op’s in the state enhanced reliability at competitive prices for their customers.

“There are numerous supply projects being proposed for Florida,” he noted, “and I expect that this project will have to prove itself to be the most efficient based on a competitive process.”

Among other factors, the pace of the development and negotiation of numerous agreements, including operational permits, addressing Bahamian environmental concerns, and long-term commitments for a substantial percentage of the gas sales, will determine when and if FPL Group Resources exercises its option with El Paso, FPL said.

El Paso said the Seafarer pipeline route has been modified to eliminate the extension from a proposed interconnection with Florida Gas Transmission (FGT) in West Palm Beach to Martin County. The pipeline route originates at the proposed LNG facility on Grand Bahama Island and continues to the Exclusive Economic Zone boundary 87 miles away. The pipeline will continue for 35 miles and make landfall at Riviera Beach Power Plant and continue onshore for nearly six miles along existing utility and roadway corridors and connect into the existing FGT system. The 128-mile, 26-inch diameter Seafarer pipeline system would have a design capacity of 750 MMcf/d and is expected to be in service by 2008.

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