LNG Projects to Impact California
Russian Far East tagged as a source of natural gas as domestic supplies ''mature''
LOS ANGELES - 08/20/04 - The US "seriously needs to consider developing additional, reliable sources of natural gas to meet its growing demand" as North American supply basins "mature," according to the US Energy Information Agency (USEIA).
This, the agency said, is especially true for California - the nation's largest user of natural gas - which currently imports some 85% of its natural gas supply from those very basins.
According to energy experts, the answer, is liquefied natural gas or, more commonly, LNG - natural gas super-cooled to -259 Fahrenheit (-161 Celsius) into a colorless, odorless, and non-toxic liquid that weighs less than half the weight of water.
When natural gas is needed, the LNG is warmed to a point where it converts back to its gaseous state in a process called "regasification."
Because LNG occupies only a fraction - about 1/600 - of the volume of natural gas, and takes up less space, it is more economical to transport across large distances and can be stored in larger quantities.
There are more than 130 specially-designed, double-hulled ships - each up to 1,000-feet in length - that currently transport more than 120 million metric tons of LNG every year between the world's 40 LNG-receiving and re-gasification terminals.
Five of those terminals are in operation in the US and all are located east of the Mississippi River - namely, Everett, Massachusetts; Cove Point, Maryland; Elba Island, Georgia; Lake Charles, Louisiana; and Peas, Puerto Rico.
While a majority of the world's LNG supply comes from countries with large natural gas reserves like Algeria, Indonesia, Libya, and Malaysia, Russia is first out of the gate as a likely source to stock those proposed terminals.
According to sources, Russia is in "very, very advanced" contract negotiations to ship huge supplies of LNG across the Pacific to a terminal in northern Mexico from a plant on Sakhalin Island in the Russian Far East.
The Russian terminal is scheduled to open in 2007, becoming that country's first plant to chill natural gas for shipping, according to the Sakhalin Energy Investment Co., a production consortium led by Royal Dutch/Shell.
The end buyer and distributor, a Shell-Sempra Energy joint venture, is expected to give final approval to the contract in September.
The Russian government signed-off on the deal last month.
The joint venture expects to break ground on a $600 million re-gasification plant in Mexico by the end of this year. With completion scheduled to coincide with the opening of the Sakhalin facility.
The plant in Ensenada, about 80 miles south of San Diego, would "re-gasify" the super-chilled LNG for movement by pipeline to northern Mexico and Southern California.
The transit time for the transpacific crossing from Sakhalin would be 12 days, compared with 20 days and 17 days for inbound LNG shipments from Australia and Qatar, respectively.
Responding to a highly-charged and politically sensitive issue, the Bush Administration has come out in strong support of the Pacific port approach as Eastern Siberia is seen as a new source - more reliable than the Middle East - to supply both LNG and oil for not only California, but entire western US.
Over the last year, a number of companies have proposed plans to construct LNG import facilities in California and southward across the border in Baja California, Mexico.
Several of the proposed LNG terminals are planned for sites off the Southern California coast.
Such LNG facilities must conform to regulations administered by the US Coast Guard (USCG), which monitors the safety of US coastal waters and ensures the safety not only of the terminals themselves, but of the LNG tankers that serve them.
The USCG is mandated to cooperate with local port authorities and LNG facility operators "to ensure that proper procedures are followed," according to the Code of Federal Regulations (CFR).
Both the Coast Guard and the US Maritime Administration share responsibilities - and are currently drafting more detailed regulations for - the actual siting of all proposed off-shore LNG facilities in US coastal waters.
[For a detailed map of proposed LNG projects in both California and Baja California, go to http://www.energy.ca.gov/lng/images/west_proposed_lng_terminals.jpg]
One controversial on-shore project currently under consideration is being proposed by Southern California-based Sound Energy Solutions Inc. (SES) - a wholly owned subsidiary of Japan's Mitsubishi Corp. - and?Houston-based ConocoPhillips of Houston, Texas.
The joint venture partners?recently?unveiled plans to develop an LNG receiving terminal and re-gasification facility at the Port of Long Beach, the nation's second busiest container port.?
In July, the port?inched closer to contracting with Oklahoma-based Quest Consultants to conduct a hazards assessment of the proposed SES-ConocoPhillips terminal project.
A committee of the port's Harbor Commission approved a $130,000 one-year contract with Quest, despite public concerns over the quality of Quest's work at a hearing in June.
Both the developers of the proposed LNG terminal and Quest engineers have seen their share of controversy lately.
Opponents of the terminal have decried it as a safety risk and terrorist target, while Quest has come under fire for a report on LNG safety in Boston Harbor it submitted to Washington in?October 2001.
Members of the Commission reportedly first saw the Quest contract in June but asked the port's planning staff to address concerns over the Quest's Boston report, which was criticized by LNG scientists for not being thorough or accurate.
Quest's report said that the largest possible release of LNG would come from an LNG tanker colliding with another ship at high speed in Boston's harbor.
The company told the Commission that the company's brief was "to quickly determine the worst- case scenario for the federal government, not to provide a sweeping analysis of all potential risks."
The Department of Energy "wanted swift answers," so Quest submitted a report that was eventually leaked to the public and construed as being a comprehensive report on LNG safety, "which it was never intended to be," the company said.
"Much of the controversy stems from the fact that [the Department of Energy] asked Quest to analyze the largest possible release rather than giving them a broader assignment such as to analyze the range of credible release scenarios," the staff report said.
Port Planning Director Robert Kanter said Quest's work for the port will be "broader than its report to the federal government," and?include "analyses of possible aircraft or missile strikes on the storage tanks and LNG ships, as well as the grounding or collision of LNG ships with other vessels."
Any report on LNG safety "is bound to bring opposition," he said.
If given the go-ahead, the SES-ConocoPhillips Long Beach LNG terminal would provide California with a full 10% of its total annual natural gas demand.
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