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First onshore US LNG port in 25 yrs nears startup
March 25, 2008 / 10:23 PM / 10 years ago

First onshore US LNG port in 25 yrs nears startup

FREEPORT, Texas, March 25 (Reuters) - Freeport LNG import terminal hopes to receive its first liquefied natural gas cargo by the end of April and be commercially open for business by June 1, officials told a kickoff briefing Tuesday.

The $1-billion project, which will have the capacity to send out 1.5 billion cubic feet of natural gas per day when operational, would be the first new onshore U.S. LNG import terminal opened in more than 25 years.

“It’s very satisfying,” Charles Reimer, president of Freeport LNG Development LP, told a briefing to prepare the news media for the event.

Another terminal, 90 miles northeast near Port Arthur, also is very near completion and running a close race with Freeport for startup.

The $1.5-billion, 2.6 Bcf per day Sabine Pass LNG terminal expects its first cargo in the next few weeks and plans commercial startup before June 30. Its kickoff briefing and tour is scheduled for April 21.

When finished, the two will lead a parade of terminal startups that will double U.S. LNG import capacity in about 18 months. Opening of Sabine, Freeport and three other terminals will raise U.S. import capacity from about 6 Bcfd to 13 Bcfd.

LNG is natural gas cooled into a liquid, reducing it to 1/600th of its former volume, enabling its shipment overseas, beyond the reach of pipelines. Declining domestic U.S. supply has spawned a drive to build LNG import terminals.

A Coast Guard official at the Freeport briefing said it is hard to say whether Freeport or Sabine Pass will open first. “We believe they’re neck and neck,” said Matthew Hahne, LNG manager for U.S. Coast Guard District 8 in New Orleans.

In any case, oilman Michael Smith, lead investor in Freeport, said the current state of the LNG business worldwide means that whoever is first probably will not be at full capacity for some time to come.

LNG production expansion overseas has faced construction delays and cost overruns, and other consuming countries outbid the United States for LNG much of the year. Smith said the production bottleneck is expected to ease by 2012.

“You need to take a very long view,” Smith said.

LNG inevitably will become more important because U.S. domestic output is declining, said Bill Cooper, president of the Center for LNG, who was on hand for the briefing.

“We need the energy, and LNG is a source,” he said.

Conoco Phillips (COP.N) has bought two-thirds of the capacity of Freeport LNG and Dow Chemical DOW.N the remaining third, so officials said operation of the facility is financially secure even if it is not fully used at first.

At Sabine Pass, Cheniere Energy (LNG.A), parent of Sabine LNG, will own all its capacity until 2009, when Chevron (CVX.N) and Total SA (TOTF.PA) take 1 Bcf each.

Five other U.S. terminals are already operational, the oldest since 1971. The first offshore U.S. terminal opened in the Gulf of Mexico off Louisiana in 2005. A second offshore port is nearing commercial operation off Boston, Massachusetts. (Editing by Christian Wiessner)

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