Sempra says Northeast's LNG port will be US Gulf
Tue May 17, 2005 08:55 AM ET
By Timothy Gardner
LA JOLLA, Calif., May 17 (Reuters) - The U.S. Gulf of Mexico's existing petroleum infrastructure and comparative lack of local opposition make it the best place to locate LNG ports and storage that will supply the densely populated U.S. Northeast, a Sempra Energy (SRE.N: Quote, Profile, Research) executive said on Tuesday.
Sempra, which is building the first LNG plant in the North American West in Baja California, Mexico, has learned to find places that welcome LNG ports rather than wage slow permitting wars against communities that oppose the ports for security and environmental reasons.
Currently 3 percent of the natural gas used in the United States, the world's largest energy consumer, is liquefied natural gas, the super-cooled, transportable form of the fuel exported from Trinidad, Qatar, Indonesia and elsewhere.
In 15 years, LNG is expected to make up 25 percent of the gas burned in the United States, according to the federal Energy Information Administration.
There are more than 40 LNG terminal projects being proposed in the United States, with BP (BP.L: Quote, Profile, Research) , Excelerate Energy, Hess LNG and others proposing terminals in northeastern states.
LNG ports can cost between $500 million and $1 billion. "For infrastructure projects of this size, time is money," Sempra President and COO Donald Felsinger said at conference on Latin American energy. "Every year of delay, every month of delay has a big impact."
San Diego-based Sempra learned the lesson from trying to site an LNG port in the U.S. West. "We looked all up and down the West Coast ... and we just knew because of the fact that we live here you can't get anything done in California," he said, referring to groups that fought energy development even during the period of historically high gas prices during the 2000-2001 California energy crisis.
So Sempra turned to the Mexican government, which he said was open to the idea of LNG ports because it had bitter memories of the U.S. cutting gas imports to it during the 2000-2001 energy crimp.
In the U.S. Northeast, the world's largest heating fuel hub, Sempra saw LNG opposition similar to California's. "So we came back around and focused on the Gulf Coast," said Felsinger.
He said the gulf, where Sempra is developing two LNG ports -- one in Hackberry, Louisiana, and the other in Port Arthur, Texas -- is more used to energy plants. "It's an industrial person's heaven," said Felsinger. "People in the gulf understand this type of infrastructure, they want the jobs and they want the tax base."
He said as the United States receives more LNG from more places, it will come in varying qualities. And the gulf is a better placed to strip out compounds like butanes and ethanes from the fuel because it already has the infrastructure.
Texas and Louisiana also have vast network of pipelines that reach to the Midwest and East that will become under-used as energy production in the Gulf of Mexico declines, he said.
And storage can be built to protect companies against the gulf's infamous hurricane season. Last year, Hurricane Ivan drove up oil and gas prices by delaying shipments and damaging oil and gas platforms out at sea.
To protect against delayed shipments, Sempra is developing inland underground storage systems called Liberty Gas and Pine Prairie, which will double the LNG storage of its gulf ports to 40 billion cubic feet.
"It's a lot cheaper and it's a lot less controversial to store gas underground," said Felsinger.
Sempra's $800 million Coastal Azul port in Baja California and its $700 million Louisiana port are scheduled to receive LNG in 2008. Its $700 million Port Arthur, Texas, port is expected to begin receiving the fuel in the following year.
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