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LNG: US moves offshore

The US Energy Information Agency (EIA) expects domestic gas production to reach 20.5 trillion cubic feet (cf) by 2010, well below the 26.2 trillion cf demand it forecasts for the same year. As the US increasingly turns to imported liquefied natural gas (LNG) to help close the supply/demand gap, energy companies have revealed plans to construct more than 40 facilities to store and regasify LNG, writes Anne Feltus

However, opposition from community activists who are concerned about safety, security and environmental issues has forced the cancellation of more than a half-dozen proposed onshore projects.

After revisions to the Port Deep Water Act in 2002 paved the way for construction of LNG facilities in US coastal waters, potential importers began exploring the option of siting terminals offshore. Offshore terminals would not only be situated well away from populated areas, but would also remove a major obstacle to onshore LNG terminal development: the limited availability of ports that are capable of accepting the bigger, deeper-draft vessels required to transport LNG.

Most of the offshore projects are planned for the Gulf of Mexico, which has an extensive pipeline infrastructure that can be used to transport the gas to shore. However, a handful of projects are also proposed offshore New England and California.

The US' four existing receiving facilities, all shore-based, were built in the 1970s and early 1980s during a gas shortage. But they were blindsided by the Natural Gas Policy Act of 1978, which deregulated the gas industry and led to a supply surplus. As a result, three were mothballed. Then, as the cost of liquefying, transporting and regasifying natural gas began to drop and the boom in gas-fired power plant construction boosted demand, the terminals resumed operations. All four have undergone or are planning expansions.

Only one LNG terminal has been completed in US coastal waters to date, but about a dozen have been proposed (see Table 1). Because it typically takes one to two years to obtain the necessary permits and three years to construct an offshore LNG facility, only four are expected to begin operating by the end of this decade.

Excelerate Energy set the pace when it accepted its first trial delivery at its Gulf Gateway Energy Bridge in February. In 298 feet of water off the Louisiana coast, the 0.5bn cf/d facility is the world's first offshore LNG receiving terminal. LNG destined for the Energy Bridge is reconstituted aboard three built-for-purpose tankers, then fed through a docking buoy into a flexible riser that connects to a subsea pipeline. Tethered to the ocean floor by eight lines, the buoy remains about 100 feet underwater until it is raised to the surface to connect with an offloading tanker.

Both Excelerate and Tractebel plan to build regasification and storage facilities offshore Gloucester, Massachusetts, to serve the large and growing northeast market. Tractebel's sister company, Distrigas of Massachusetts, already operates an onshore terminal in nearby Everett – the longest continually operating LNG import terminal in the US.

 Port Pelican on hold


Although the Gulf Gateway Energy Bridge is the first offshore LNG facility to be ready for business, initially ChevronTexaco had expected to achieve that milestone with its proposed 1.6bn cf/d Port Pelican LNG project. In November 2003, Port Pelican became the first LNG import terminal to receive government approval in 20 years and the first deep-water petroleum terminal to be sanctioned since the application for the Louisiana Offshore Oil Port was granted in 1997.

ChevronTexaco plans to build the Port Pelican LNG storage system and regasification facility on top of two concrete structures that will sit on the seabed about 40 miles off the Louisiana coast. However, it has put the project on hold, reportedly because projects that were intended to supply it with LNG will not come on stream until later in the decade.

The third offshore LNG terminal to receive federal approval, Gulf Landing, has been proposed by Shell. The energy giant's plans call for constructing the concrete, gravity-based structure in 55 feet of water, about 38 miles from Cameron, Louisiana. Although the 1bn cf/d terminal would be the first Shell-operated LNG depot in the US when it comes on stream in late 2008 or 2009, the company already owns rights to a third of the 0.75bn cf/d capacity of Cove Point, the largest of the onshore LNG terminals, and all of the capacity of a 360m cf/d expansion scheduled for completion next year at another terminal, near Savannah, Georgia.

Main Pass Energy Hub will become the country's second offshore LNG terminal when it starts up in late 2007, off the Louisiana coast. McMoran Energy will develop the 1bn cf/d facility using an existing platform that has been idle since the firm shut down sulphur-mining operations there in 2000. As well as building conventional cryogenic storage tanks, the firm will develop a massive salt cavern that lies below the terminal, which would boost its peak delivery capability to 2.5bn cf/d. HNG Storage also intends to use salt-dome storage, which is significantly less expensive than conventional, above-ground cryogenic storage tanks, at its Freedom LNG Terminal, offshore central Louisiana.

At least three other LNG-import facilities have been proposed for the Gulf of Mexico, including ConocoPhillips' Beacon Port and Compass Port terminals, and ExxonMobil's Pearl Crossing. In addition, two projects are planned to store and recondition LNG offshore Oxnard, California: Crystal Energy plans to convert an abandoned oil platform into a facility for regasifying LNG from Alaska; and BHP Billiton intends to complete construction of its Cabrillo Port facility in 2008.

In addition to LNG terminals proposed offshore the US east, west and Gulf coasts, facilities planned off Mexico and the Bahamas will help to meet the US' growing gas demand. All the proposed terminals are scheduled to start up by 2010, by when, the EIA claims, US LNG imports, which totalled about 229bn cf in 2002, will exceed 2.2 trillion cf.

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