Coast Guard responds to LNG tank ship aground near Guayanilla, Puerto Rico

Coast Guard News, Dec 15th, 2009

SAN JUAN, Puerto Rico – Coast Guard Marine Investigators are investigating the cause that led to the grounding of the 920-foot double-hulled Liquefied Natural Gas (LNG) tank ship Matthew Tuesday.

The Norwegian flag tank ship grounded at 6 15 a.m. and was later refloated Tuesday morning, approximately a half nautical mile southeast of Cayo Caribe near Guayanilla, Puerto Rico. There are no reports or sightings of pollution at this time.

The vessel was later refloated whent the tank ship crew transferred cargo from the vessel’s forward to its aft cargo tanks allowing the vessel to successfully float free. The Matthew is now moored at the Eco Electrica facility, where underwater hull integrity assessments are scheduled to be conducted by contract divers.

Sector San Juan Coast Guard command center controllers were alerted Tuesday morning after receiving a report that the vessel had grounded onto rocks during their inbound transit to Guayanilla.

Coast Guard marine inspectors and pollution investigators from Regional Inspection Office Ponce and Sector San Juan are providing support on scene. Coast Guard controllers launched an Air Station Borinquen, Puerto Rico, HH-65 Dolphin helicopter crew to assist.

Source

Push for LNG pipeline from Oregon's Coos Bay

David R. Baker, San Francisco Chronicle, Sunday, October 4, 2009

Coos Bay snakes from the Pacific into the hilly Oregon coast, its waters sheltered from the ocean by a long, sandy spit.

Resident Jody McCaffree sees it as a place of sand dunes and shore birds, where the slumping local economy hasn't destroyed a high quality of life. But a group of energy companies, including PG&E Corp., sees Coos Bay as a potential source of fossil fuel.

The companies plan to build on the bay's northern shore a terminal for importing liquefied natural gas, deeply chilled fuel that, when warmed up, can run power plants, furnaces and stoves.

A proposed pipeline from the terminal would cut through 234 miles of rural land, mostly forest, before stopping at the town of Malin on the California border. There, an existing pipeline would move the gas north to the Pacific Northwest and south to California.

"You're tearing up half of Oregon for a pipeline to import foreign energy," said McCaffree, who has helped spearhead opposition to the project with her group Citizens Against LNG.

McCaffree fears that if an LNG tanker suffered an accident in the narrow bay, it would form a vapor cloud capable of igniting into a fast-moving fireball. About 17,000 people live within a 3-mile radius of the proposed terminal, called Jordan Cove.

"Maybe there's a reason California doesn't want these things on its shore," McCaffree said.

Radical market change

Five years ago, energy companies were racing each other to build LNG terminals on the West Coast. Natural gas production in the United States was falling, and prices were rising, pushing up home heating bills in the process. Despite fierce opposition from people like McCaffree, many state and federal officials saw importing liquefied natural gas as the answer.

But the natural gas market has changed radically since then. Improved technology helped energy companies tap gas that had been locked in shale rock in places like Arkansas, Louisiana and Texas. Domestic production boomed. Prices fell. And interest in LNG - at least in America - fizzled.

Diversify for future

So why are PG&E and its partners pushing ahead in Coos Bay?

Jonathan Marshall, a spokesman for the San Francisco company, said PG&E is trying to plan ahead. The company is part of a consortium that would build the $1.1 billion pipeline, called the Pacific Connector, while another consortium would build the $1.2 billion terminal.

"None of us has a crystal ball," Marshall said. "It goes back to supply diversity. As we've seen before, prices can shift very quickly. Right now they're shifting down. But small changes in demand, in supply, can trigger big changes in price."

The projects have applied for approval from the Federal Energy Regulatory Commission, and a vote could come as early as the commission's next meeting, later this month. The projects would still need permits from several other federal and state agencies.

Demand fuels project

But Bob Braddock, project manager for the terminal, said neither the terminal nor the pipeline will be built if there isn't demand for the gas. If LNG exporters overseas don't think they can get a good price in America, they won't sign contracts to use either facility.

"This will never be built unless the capacity for the terminal and the pipeline are contracted," he said. "Right or wrong, (the exporters) are making decisions based on what they see the prices will be in America 25 years from now."

Big energy infrastructure projects - from coal-fired power plants to wind farms - often provoke opposition. But not like LNG. Fierce resistance already helped block proposals to build LNG import terminals in Eureka and Long Beach, on Vallejo's Mare Island and off the coast of Ventura County.

Opponents tend to focus on safety.

Ignition danger

LNG is natural gas cooled to minus 260 degrees Fahrenheit, at which point it turns into a clear liquid. Ships carry it in insulated tanks. If those tanks are punctured and the liquid escapes, it will turn back into gas and hover on the surface of the ocean until it disperses in the wind, rather than forming a slick like spilled petroleum.

But before it disperses, spilled LNG can ignite. In 1944, a Cleveland facility that produced and stored liquefied natural gas leaked, creating a vapor cloud that seeped into a nearby residential neighborhood. The vapor ignited, and 130 people died. In 2004, an explosion at an Algerian LNG plant killed 27 people.

Proponents of the fuel say that despite those rare incidents, the LNG industry has a good safety record. And some parts of the world welcome LNG. San Ramon's Chevron Corp., for example, announced recently that it would build a $37 billion project off Australia's northwest coast to pump natural gas from undersea reservoirs, chill it and ship it to customers in China, Korea and Japan. Chevron has already signed contracts for much of the gas.

Purpose questioned

The fact that other countries are eager to buy LNG while America isn't makes McCaffree and other Jordan Cove opponents wonder if it isn't an export terminal in disguise.

The Pacific Connector pipeline, they note, could easily link to another proposed pipeline, called Ruby, that would enter Oregon from the east, supplying the West Coast with natural gas from the Rocky Mountains. If Jordan Cove is really designed for export, then any private property condemned to build the Pacific Connector pipeline would be condemned solely for corporate profit, McCaffree said, not to fill a community need the way an import facility arguably would.

"I just don't understand why PG&E's still pursuing it, unless it's going to be an export terminal," she said. "There's no way we need all that gas." She considers any LNG project - import or export - a waste of money and effort when the country needs to be building more renewable power facilities and weaning itself off fossil fuels.

Export too costly

Braddock said that turning Jordan Cove into an export terminal would require completely redesigning the project and reapplying for government permits. And the proposed site on Coos Bay isn't big enough to accommodate the equipment needed for cooling the natural gas into a liquid, he said. An export terminal would also cost far more to build - closer to $5 billion.

"I couldn't make the economics of that work no matter how hard I'd try," Braddock said. "It's not like someone can just flip a switch. The technical issues are huge."

E-mail David R. Baker at dbaker@sfchronicle.com.

Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/04/MNGM19SPCT.DTL

Exxon's Weapon of Gas Destruction

By LIAM DENNING, Wall Street Journal, June 25, 2009

ExxonMobil has a loaded gun pointed at the U.S. natural-gas market -- and it isn't the only one.

The ammunition is liquefied natural gas. Exxon is scheduled to start up another three LNG projects in Qatar this year. They will produce more than 3.0 billion cubic feet per day of natural gas and freeze it for transportation. Europe and Asia are potential markets. But the U.S. could be a magnet for LNG cargoes, despite not really needing it -- a paradox that spells low prices.

LNG is joining up the world's hitherto largely regional natural-gas markets just as demand is faltering. Declining natural-gas production in countries such as the U.S. and U.K., and rising energy prices, prompted LNG production and receiving terminals to sprout on coastlines around the world.

Two things have turned this scenario on its head. One is recession. The other is the development of unconventional natural-gas resources in the U.S., leaving it over-supplied for now. Several Wall Street analysts expect inventories to reach the maximum capacity of around 3.9 trillion cubic feet later this year.

So why would anyone ship LNG to the U.S.? In part, it's simple economics. Many projects were sanctioned and financed when lower natural-gas prices prevailed.

In Exxon's case, valuable liquids also produced in its Qatari projects take the market breakeven price of the natural gas itself "towards zero," says Deutsche Bank analyst Paul Sankey. Factoring in processing and shipping costs, that gas can be landed in the U.S. for less than $2 per million British thermal units, reckons Noel Tomnay, head of global gas at Wood Mackenzie. The current Nymex price is about $4.

Competing markets also look oversupplied. Wood Mackenzie estimates annual demand in Asia east of India will rise by 1.3 trillion cubic feet by 2015. New projects targeting the region and close to final investment decision amount to more than two trillion cubic feet of capacity.

In Europe, the prevalence of long-term pipeline contracts limits the size of the market up for grabs. Wood Mackenzie estimates about 4.9 trillion cubic feet of discretionary piped and liquefied natural gas per year will compete for a market half that size over the next three years.

The U.S., with its large, liquid natural-gas market, will be a natural destination for this surplus LNG. As a cap on prices, this effect of globalization in the natural-gas market is great news for customers.

In a buyer's market, though, higher-cost sellers suffer. A big increase in low-cost LNG supply would displace some U.S. natural-gas production. The average U.S. field requires a Nymex natural-gas price of $7.79 per million BTU to earn a 10% return on capital, according to Jonathan Wolff at Credit Suisse.

Yet, as Mr. Wolff points out, natural-gas drillers' capital expenditure is still outpacing cash flow, as it has since 2006. The number of operating natural-gas rigs actually rose last week.

Increasing globalization means a bigger range of factors affect U.S. natural gas and the fortunes of its producers. An extended spat between Russia and Ukraine this winter, for example, would help draw more LNG cargoes towards Europe.

Barring this, prices and drillers will likely remain under pressure. A question haunting the sector is why majors like Exxon have not rushed in to scoop up distressed companies sitting on large U.S. natural-gas reserves. The answer may be that, with more LNG pointed at already weak markets they can afford to take time, and take aim.

Write to Liam Denning at liam.denning@wsj.com

Pacific Trail Pipelines Kitimat to Summit Lake project clears another hurdle

The Canadian Press, March 24, 2009

VANCOUVER, B.C. - Pacific Trail Pipelines Limited Partnership said Monday that its proposed Kitimat to Summit Lake Pipeline Looping Project as cleared another hurdle.

The company said a decision under the Canadian Environmental Assessment Act has found that, with appropriate mitigation measures, the project is "not likely to cause significant adverse environmental effects."

"The receipt of the decision marks the next major milestone in the development of the KSL Project following the receipt of the B.C. Environmental Assessment Authority environmental certificate last year," the company said in a statement.

The project includes the construction of 463 kilometres of pipeline and compression facilities to allow the transportation of up to one billion cubic feet per day of natural gas from Summit Lake to Kitimat LNG Inc.'s proposed liquefied natural gas.

PTP is a partnership between Pacific Northern Gas Ltd. (TSX:PNG) and Galveston LNG Inc., the parent company of Kitimat LNG Inc.

---

British Columbia LNG project gets green light

Cowan Thant Zin
Portworld News
24th March 2009

Some 463 km of pipeline to be laid

The west coast of Canada could soon have a loading terminal for LNG carriers at Kitimat in north-western British Columbia.

Pacific Trail Pipelines (PTP) had proposed a pipeline project to move up to 1 billion ft³ per day of natural gas from Summit Lake to Kitimat LNG Inc's proposed LNG export terminal in Kitimat.

The Kitimat to Summit Lake Pipeline Looping Project (KLS Project) needs approval under the Canadian Environmental Assessment Act before it can move along.

Federal authorities last week issued a go-ahead decision, saying that “with appropriate mitigation measures”, the project “is not likely to cause significant adverse environmental effects”.

“The receipt of the decision marks the next major milestone in the development of the KSL Project following the receipt of the B.C. Environmental Assessment Authority environmental certificate last year,” said PTP.

The KSL Project entails the construction of approximately 463 kilometres of 36 inch diameter pipeline and compression facilities.

The Kitimat terminal is slated to have facilities for storage, loading, delivery and liquefaction.

According to a press release, PTP, a 50/50 partnership between Pacific Northern Gas Ltd. and Galveston LNG Inc., the parent company of Kitimat LNG Inc., was formed for the purpose of developing the KSL Project.

Greg Weeres, vice president operations and engineering for Pacific Northern Gas said,"We are very pleased to have these major environmental approval processes completed successfully and look forward to delivering the many potential benefits this project would bring to our existing customers, to First Nations located in the Summit Lake to Kitimat area and to our shareholders.”

According to PTP, Kitimat LNG Inc. has already received provincial and federal permits and certificates for the construction and operation of the terminal.

According to another source, Mitsubishi has tentatively agreed to buy 1.5 million tonnes per year of terminal capacity and acquire a minority equity interest in the terminal.

PTP says its company mission is "moving natural gas from Western Canada to Asian markets."

Natural Gas, Suddenly Abundant, Is Cheaper

COMMENT: COMMENT: Natural gas prices were an intense subject of discussion years ago with the GSX Pipeline. At the time, BC Hydro's energy economist was predicting a long term future price for natural gas of $3 a thousand cubic feet. Gas had recently shot up to $10 with the California energy crisis, so GSX opponents were taking every opportunity to observe that $3 might be a tad unrealistic. As you can see from the gas price chart at the bottom of this article, BC Hydro and the BC government abandoned their economist and bailed on the Duke Point gas plant and the GSX, just before gas flared up to $16/mcf.

These high prices stimulated investment in getting cheap gas to North America and elsewhere in the high-demand, developed world - the LNG industry took off in tandem with the prices and we witnessed proposals for LNG import terminals all around North America. Well, prices have fallen again, with the discovery of a lot of shale gas from northeastern BC to Texas, and with global economic collapse. And fallen too have been many of the LNG import proposals. One of BC's LNG projects, Kitimat LNG, last year said it was reversing direction and would be exporting LNG (though some observers think the company is just trying to mollify its investors and keep the project alive, somehow, anyhow). The Texada Island project of WestPac LNG has disappeared from sight, gone silent, economically unviable, and resoundingly unpopular, with BC Hydro stating categorically that it has no intention of buying electricity from any new natural gas fired generation plants in BC.

That doesn't mean it is dead. More likely it is undead, out there among the vast wasteland of other unviable and unbuilt projects which came in with so many exuberant promises ... and quietly faded away a year or two later.

By CLIFFORD KRAUSS, New York Times, March 20, 2009

HOUSTON — The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries.

A liquefied natural gas plant on an island near Russia will supply Asia and the United States. (Natalia Kolesnikova/Agence France-Presse — Getty Images)

Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.

Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.

With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.

That is good news for American consumers and many businesses, since gas provides about a fifth of the power generated by electric utilities and is a vital component for fertilizers, plastics and other industrial products. But it is bad news for proponents of energy independence, who cheered the boom in domestic gas drilling and production over the last four years.

Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year. That comes as domestic producers have lowered their rig count in natural gas fields around the country by 50 percent in the last several months because of the fall in prices, leading to an expected drop in production by the end of the year.

Normally a decline in production would result in a rising gas price, leading to an eventual recovery in drilling. But energy executives say that increasing imports will probably delay a recovery in production, which until now depended almost entirely on national market forces.

“The United States used to have gas bubbles all by itself; now the world can have a gas bubble,” said Donald Hertzmark, a consultant who advises energy companies on international gas projects. “Over the next few years, a globalized gas market will exert a moderating influence on gas prices here in the United States.”

For Mr. Hertzmark the decline in natural gas prices will mean a major stimulus for the domestic and world economies. American oil executives see it another way.

Rodney Waller, a senior vice president at the oil and gas company Range Resources, called the expected surge in liquefied natural gas imports part of a “pile on” of problems including plummeting demand, prices and credit besetting companies that stretched their exploration and production budgets in recent years to meet expanding demand.

“Any time you push the price down, you push down the ability of U.S. independents to add reserves and production domestically,” he said. He warned that some small and midsize oil and gas companies “with debt that are in trouble now will simply get pushed over the brink.”

Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.

But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.

The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011.

“We had many years of ever increasing demand so the world geared up for that, but what the world did not prepare for was an economic recession that is global in scope and in impact,” said Darcel L. Hulse, president and chief executive officer of Sempra LNG, a division of Sempra Energy that operates an import terminal in Mexico and is completing construction on a facility in Louisiana. “That is what has exacerbated the imbalance of supply and demand to such an excess.”

Some analysts say companies may slow completion of a few of the new export terminal projects. “The companies will want to bring them on line because they want to recoup their investments made over four to five years and pay off their loans,” said Nikos Tsafos, an analyst at PFC Energy, a firm that advises governments and energy companies.

The international gas glut and expected surge in gas imports represent a reversal from trends of less than a year ago when the world suffered a shortage of liquefied gas and prices spiked in the United States and elsewhere.

Natural gas in the United States costs a little over $4 per thousand cubic feet, down from a peak of more than $13 last year. Oil now costs a bit more than $51 a barrel, down from a peak of more than $145 in July. On average, world spot prices for liquefied natural gas cargoes have come down by more than two-thirds since last summer.

Market elusive for US West Coast LNG imports

By Edward McAllister, Reuters UK

NEW YORK (Reuters) - Woodside Petroleum's decision to scrap a liquefied natural gas import terminal in California last month bodes ill for developers on the U.S. West Coast already struggling to bring projects to fruition.

Australian-based Woodside said poor market conditions prompted it to shelve its Oceanway project offshore Los Angeles, clouding the fortunes of the remaining West Coast proposals.

Problems in attracting supply, as well as a questionable need for more imports in the near term, have made the West Coast less friendly territory than the East and Gulf coasts for building import terminals.

In 2007, California authorities vetoed BHP Billiton's $800 million (553.27 million pounds) Cabrillo Port facility over environmental concerns.

Analysts say scant demand and low U.S. natural gas prices threaten the other four plans to import super-cooled gas to the region in the short term.

"Our view is that it is unlikely in the short and medium term that an LNG terminal on the West Coast (of the) U.S. will be built," given the healthy supply scenario there, said Murray Douglas, a global LNG analyst at Wood Mackenzie.

Northern Star Natural Gas' Bradwood Landing project in Oregon has won regulatory approval and three other terminals are proposed. Together they have a potential import capacity of nearly 5 billion cubic feet of natural gas per day.

But convincing federal and state authorities of the need for LNG is a major hurdle.

Developers say that the Pacific Northwest and California face a gas supply shortage, but analysts disagree.

"At the moment with peak demand in the winter, storage levels are pretty high, prices are down and it appears by all accounts that demands for natural gas are being met," said Randy Roesser, California Energy Commission energy analyst.

California is a beneficiary of the recent jump in gas output from unconventional onshore sources like shale plays.

Total U.S. marketed gas production is estimated to have increased by 5.9 percent in 2008, thanks to shale gas development, according to U.S. government figures.

Two pipelines are being considered to bring gas to the West Coast from the Rocky Mountain region -- the Ruby pipeline to California and the Sunstone pipeline to Oregon.

The existing Kern River line is currently being expanded.

"Given approvals for new pipelines out of the Rockies and the increase in Rocky supply makes you wonder whether people will even bother with imported LNG," said Martin King, vice president of institutional research at FirstEnergy Capital.

ATTRACTING LNG SHIPMENTS

Developers also face the problem of attracting supply from producers such as Australia and Indonesia, which traditionally supply LNG to the high-paying markets of Japan and South Korea across the Pacific.

Low U.S. gas prices compared to Asia make it difficult to attract supply without firm commitments from suppliers.

Earlier this year, the developers of the Kitimat LNG project in Western Canada swapped plans to import gas in favour of developing an export plant to supply Asian importers.

"The sponsors of projects like Bradwood will only raise finance if they have a credit-worthy company committing to the capacity. I don't see many of those around," one analyst said.

Financing is also made more difficult by the current global credit crunch, which affects all large energy projects.

Spot gas prices in southern California have been under $4 per million British thermal units. Even prices of $7 per mmBtu and higher for the East Coast terminals saw cargoes diverted to markets in Europe and Asia.

However, Northern Star, which is also developing the Clearwater Port project offshore of Southern California, remains positive.

Bradwood Landing could break ground as early as late this year as the company has received "significant interest" from both suppliers and customers, said Senior Vice President for External Affairs Joe Desmond.

"We feel confident that there is support for the project in light of the need for additional gas supplies," he said. "There are many suppliers looking for long-term contracts into the U.S. West Coast market."

(Editing by Jeffrey Jones and Christian Wiessner)

© Thomson Reuters 2009 All rights reserved.

Kitimat LNG has had interest in company stake

Edward McAllister, reporter, & Walter Bagley, editor; Reuters

NEW YORK, Jan 6 (Reuters) - Kitimat LNG has received interest for a stake in the company, following an invitation for expressions of interest in November, the company told Reuters late on Monday.

Kitimat, which is developing a liquefied natural gas export plant in British Columbia, Canada, said it had also received interest for gas capacity in, and off-take of LNG from, the plant.

"Large Canadian and major international energy players have expressed concrete interest in our project through the process," Ilene Schmaltz, vice president of supply marketing at Kitimat, told Reuters.

"Potential investors have expressed interest in all the opportunities Kitimat LNG is offering, including terminal capacity, offtake and equity in the company," she added.

Schmaltz said in December that it would consider a full takeover of its planned terminal, should the right offer come along.

Kitimat is talking to companies that submitted expressions of interest and is working towards a binding bid process, Schmaltz said, though discussions are only preliminary at this time.

Kitimat LNG, a wholly owned subsidiary of Galveston LNG, in September scrapped its plans for an LNG import terminal to pursue the development of an export plant, seeking to take advantage of the high-paying markets of Japan, South Korea and China.

It plans to export gas produced in Western Canada by 2013, with four to five shipments per month.

The proposed terminal will have two LNG storage tanks with capacities of 210,000 cubic metres, with potential future expansion to three tanks.

LNG is natural gas cooled to liquid for transport in specially designed tankers. It is regasified at a terminal for transport ashore through pipelines.

(Reporting by Edward McAllister; Editing by Walter Bagley)

COMMENT:

Kitimat LNG had a pretty dodgy business scheme back when it wanted to import LNG and ship it (supposedly) to the tar sands. It still has a dodgy scheme now that it says it will export BC gas. This industry and this government with all the geologists, engineers and economists had it wrong. The "markets" which in their unthinking way get everything right (according to market fundamentalists) also had it wrong. And North America, instead of running out of natural gas, apparently has lots of it, thanks mainly to shale gas. We're back to conditions which prevailed up to 2000 - lots of gas, or the LOG theory.

What this news item confirms is just how dodgy Kitimat LNG really is. There's "interest" in the company. Ooh, that is so far from money on the table. It's so far from open season commitments of interest. In fact, all we have here is a company desperate to get outa Dodge, er, Kitimat. What Kitimat LNG is looking for now is to sell out. "Schmaltz said in December that it would consider a full takeover of its planned terminal." Read: "begging for an exit."

By way of caveat, I acknowledge that my crystal ball was picked up at a dollar store.