A shakeout of the multitude of Gulf Coast liquefied natural gas (LNG) import projects began last week with both BP and ExxonMobil canceling terminal plans.

Following through on its plan to stick with only one onshore terminal, ExxonMobil said Monday that it will probably sell the Vista del Sol project near Corpus Christi, TX, to another operator before the end of the year and will focus on its Golden Pass LNG project, which is already under construction in Sabine Pass, TX.

“We’ve decided not to go forward with Vista del Sol, and the reason is we basically do not need two locations,” said ExxonMobil spokesman Bob Davis. He noted that Golden Pass is farther north and is in closer proximity to ExxonMobil’s Beaumont, TX, refinery and to other gas markets. “They are both excellent sites with deepwater, but we are going to be running 2 Bcf/d through Golden Pass. I think the closer proximity to the refinery from a feedstock basis” plus the 70-mile pipeline to Starks, LA, made Golden Pass the better option.

Davis noted the company already has made steady progress on Golden Pass. ExxonMobil awarded a $1 billion lump-sum turnkey contract to Chicago Bridge & Iron Co. (CB&I) earlier this month for construction of the terminal, which is expected to be completed in 2009 when it will begin receiving LNG from Qatar.

Golden Pass will have an import capacity to process 15.6 million tons per year of LNG. The terminal includes two ship unloading berths, five full-containment LNG storage tanks, each with a capacity of 155,000 cubic meters, a regasification and sendout system, and related ancillary facilities. Initial engineering, procurement and site preparation activities are under way.

Golden Pass LNG LLC, the owner of the Golden Pass LNG terminal, is expected to be 70% owned by an affiliate of Qatar Petroleum, with affiliates of ExxonMobil and ConocoPhillips each owning a share in the balance of the interest in the terminal.

The $600 million Vista del Sol project, about two miles west of Ingleside along the Gulf Coast in San Patricio County, TX, was approved by the Federal Energy Regulatory Commission (FERC) in June 2005. It would have sendout capacity of 1.1 Bcf/d as well as three 155,000-cubic-meter storage containment LNG storage tanks and a 25.3-mile pipeline with potential interconnects with up to eight existing interstate and intrastate pipeline systems.

“Vista del Sol has been pretty much sitting,” said Davis. “We’ve done no site work or anything like that. We are looking to market the property and permit. We have an option on the property, and I believe that option expires this year so there is certainly some timing consideration relative to the market. If the option expires it would be kind of a moot situation.”

Davis noted that ExxonMobil has spent a considerable amount of money finding the best location for an LNG project along the Gulf Coast. In addition to Vista del Sol, ExxonMobil also canceled the Pearl Crossing offshore LNG deepwater port and another onshore project originally planned near Mobile, AL. “We were looking at a number of options,” he said. “That’s pretty normal in these kinds of things just to give us some flexibility.”

A day later, BP said it has put its Bay Crossing LNG project, planned for Pelican Island in Galveston, TX, indefinitely on hold “due to its assessment of the project’s economics.” The company said it does not intend to file an application for the $600 million project with the Federal Energy Regulatory Commission at this time. The terminal was expected to provide 1.2 Bcf/d of sendout capacity with 320,000 cubic meters of LNG storage.

“The company will continue to keep this position under review,” BP said. Despite its decision, BP is still leaving itself some flexibility by renewing for another year its lease option with the Galveston Wharves Board for the proposed project on Pelican Island. The renewal is for the third and final year allowed under the agreement.

BP executives recently told Galveston officials about the decision and cited concerns about market conditions, particularly the abundance of other planned LNG import projects along the Gulf Coast, according to The Galveston Daily News. “This is strictly a business decision that has nothing to do with either politics or litigation,” BP spokesman Neil Geary told the Daily News.

In addition to the two operating LNG import terminals in the Gulf region (Trunkline LNG in Lake Charles, LA, and Gulf Gateway LNG offshore Louisiana), nine other regional LNG terminals have been approved by federal and state regulators and applications for at least nine more are being processed by regulatory commissions.

Given a favorable ruling by the U.S. Supreme Court, BP said it still plans to move forward with its Crown Landing LNG project in New Jersey on the Delaware River. The state of Delaware is trying to block the Crown Landing project due to concerns over the environmental and safety impact to its coastal areas, but the state of New Jersey, which favors the project, has taken the case to the Supreme Court, citing a longstanding agreement over its use of the Delaware River shoreline.

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