New Players Enter the North American LNG Supply Foray

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). In July of 2001, the North American LNG supply sector consisted of two operational terminals, two in the planning phase of re-commissioning, and an estimated seven proposed LNG receiving terminals. See archived IIR Industry Alert: Future Natural Gas Demand Forecasted To Exceed 30 Trillion Cubic Feet Per Year by The End Of The Decade for details.

In the past two years, the picture has changed considerably and the total number of North American LNG supply projects has increased to thirty proposed LNG terminals, three operational terminals and one in the process of re-commissioning. These totals do not include more than a handful of terminal projects that have come and gone either through permitting problems, local opposition, or by companies like El Paso Energy (NYSE:EP) (Houston, Texas) exiting the LNG market.

Small players like Cheniere Energy (NYSE:LNG) (Houston, Texas) have progressed multiple LNG projects by securing partners, off-take contracts, awarding the FEED contracts and filing with the FERC. At the same time, some of the majors such as ExxonMobil (NYSE:XOM) (Irving, Texas), ConocoPhillips (NYSE:COP) (Houston, Texas) and BP (NYSE:BP) (Reading, United Kingdom) have entered the foray and in a way have legitimatised it as an expansion opportunity in the same way IBM did by initiating the manufacturing of personal computers after Apple began.

Four market areas have come to the forefront for sites for these new facilities. First there is New England and Atlantic Canada. New England is experiencing a high demand for natural gas especially in the winter heating season and areas in Atlantic Canada such as Nova Scotia still seek to develop local distribution of gas.

Pipelines such as Maritime & Northwest are awaiting new capacity for planned expansions and are not being supported by current exploration programs such as Sabo Island in the offshore sector. An LNG facility located along this line would supply the needed capacity for expansion plans which, include eight new turbine based compressor stations and major looping plans. Currently, there are four LNG terminals being considered in this region. (PEC 62000203) (PEC 61000188)

California is an area of focus, but two LNG projects there have already been buried due to local opposition going as far as purchasing of one proposed site by one opposition group (PEC 06003831) (PEC 06003910). Australian based BHP and a Houston energy firm are seeking to construct two offshore LNG offloading facilities with re-gasification units and a sub-sea pipeline to the Coast. A single LNG facility could supply California with 20 percent or more of its natural gas needs.

Just south of the border in Mexico, there are four LNG projects being considered on the Pacific Coast by companies such as Marathon Oil (NYSE:MRO) (Houston, Texas), Shell Gas & Power (NYSE:RD) (London, United Kingdom) and Sempra Energy (NYSE:SRE) (San Diego, California) (PEC 65000292) (PEC 65000307) (PEC 65000308). The majority of the incoming gas would supply local power generation needs with the remainder being sent north to California. Further phases of these projects would have the majority of the import capacity designated for California. The federal and state permitting process is just as strict in Mexico as in the US, but the permitting time period is considerably shorter.

The Bahamas have become an area of interest for three separate energy companies including AES Corporation (NYSE:AES) (Arlington, Virginia) are planning to construct LNG receiving and storage terminals in Freeport Bahamas with 90-Mile plus sub-sea pipelines making landfall in Southern Florida. Two of the three projects have proceeded to the permitting phase. LNG Projects in this area are targeting the growth of the power generation market in Florida. (PEC 05002017) (PEC 05002177) (PEC 05002330)

The largest area of focus for LNG projects is the Gulf Coast area, with an ongoing expansion of TrunkLine LNG's existing terminal in Louisiana (The first of two phases) (PEC 02004660) (PEC 02005076), and ten or more new LNG terminals at different levels of planning and permitting.

Cheniere Energy leads the pack number wise with four planned terminals, of which three are in Texas and one in Louisiana (PEC 01008551) (PEC 02005137) (PEC 01008554) (PEC 01008557). Three of these projects are proceeding and Cheniere has secured the engineering resources of Black & Veatch Pritchard Incorporated (Overland Park, Kansas) for the FEED contracts for its Sabine Pass Louisiana and Corpus Christi LNG terminal sites and has partnered its Freeport Texas site.

ExxonMobil is looking at three possible locations to locate two terminals, two locations in Texas and a third in Alabama (PEC 01009513).

BP is examining a site near Tampa Florida (PEC 05002281), Sempra Energy purchased Dynegy's (NYSE:DYN) (Houston Texas) Louisiana LNG project and has proceeded to the permitting stage (PEC 02004677).

ChevronTexaco is planning an offshore LNG project a few miles off the Louisiana coast and there are two projects being planned for the Gulf Coast of Mexico (PEC 65000291). The numerous gas pipelines that cross Texas and Louisiana provide existing capacity and ease of expansion to handle increased volumes of natural gas.

These companies are certainly not the last that will propose LNG receiving and re-gasification terminals in North America and certainly not all will be constructed. In a generous case scenario five or six of these new terminals will be constructed, each with a capacity of between 750 mmscfd and 2.1 Bcf/d and at a capital cost of $500 million to $1.2 billion. A combination market demand, project location, access to capital and first to market will tell in time who will win the foray to capture this now legitimized market.

For details of all above-mentioned projects please contact Industrialinfo.com's Member Center.