$450M LNG onshore terminal set to boost Coast economy

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Published: November 8,2004

Pascagoula — When asked how safe the new liquefied natural gas (LNG) receiving terminal being proposed along the populous Gulf Coast would be, the man behind the project had only two words to say.

“Trent Lott,” said Dee S. Osborne, president of the Gulf LNG Energy, LLC, of Pascagoula. “The senator’s residence is probably the nearest one to the LNG terminal, less than three miles away. There’s not going to be a deal done without his support.”

Last month, the Houston-based investment firm acknowledged that it is seeking a permit from the Federal Energy Regulatory Commission (FERC) to construct a $450-million liquefied natural gas terminal — Gulf LNG’s “LNG Clean Energy Project” — at the Port of Pascagoula.

The permitting process is expected to take 18 to 24 months, followed by a three-year construction phase, which will employ approximately 1,500 construction workers. The terminal, which will create 50 high-paying jobs, is expected to open in 2009.

“If gas prices had not declined in the late 1970s, Pascagoula would have been the site of the next LNG terminal built in the U.S., making it only the fifth in the nation,” said Osborne.

The four existing LNG import terminals are located in Cove Point, Md.; Elba Island, Ga.; Everett, Mass.; and Lake Charles, La.

“Tenneco had an LNG terminal in Trinidad and was looking for a place to bring LNG into the U.S.,” he said. “They literally searched every potential site on the East Coast and Gulf Coast and selected the Bayou Casotte site at the Port of Pascagoula. Tenneco did all the necessary studies on this exact site to get a permit. They were ready to start construction when gas prices collapsed. One of the Tenneco executives in charge of that project now lives in Austin and is a consultant for us.”

Of the two applications for LNG onshore facilities that FERC approved earlier this year, Osborne’s group originally owned 100% of the one in Freeport, Texas, a $400-million-plus project that is entering the construction phase.

“I started looking at LNG projects five years ago, before prices started getting attractive again,” said Osborne.

Mark McAndrews, executive director of the Jackson County Port Authority in Pascagoula, said Osborne contacted him in August 2003 about the 40-acre site surrounded by open water and more than 200 acres of unoccupied land.

“The company will pay for all infrastructure improvements, including dredging the channel,” he said. “They haven’t asked for any financial help from the state.”

Gulf LNG will pay the state $1 million a year to rent the land. Another $2 million annually is anticipated from dockage and other fees associated with cargo and ship activity. When open, a ship is expected to dock at the terminal every three days; the terminal is expected to store a daily average volume of one billion cubic feet of LNG.

“Pascagoula will initially have one loading terminal, but we’re designing the berth to accommodate two loading terminals by making some minor improvements,” said Osborne, who said the Houston engineering firm Technip, which handled the Freeport project, has been employed to handle front-end engineering and environmental work.

“Right now, our daily operations consist of doing a lot of technical and engineering work, coordinating a lot of different pieces of the puzzle with engineers and consulting firms and so forth,” he said. “Also, we don’t have sources committed at this point, but we’re talking to two or three producers with gas. That’s the key to the next step because these projects don’t get built on speculation. You’ve got to have a gas source. That’s why all these porting applications are dead in the water until they do.”

In the last two years, nearly 40 LNG terminals have been proposed or planned along the U.S. coastline.

“Fortunately, we have the best site for an LNG receiving terminal,” said Osborne. “Pascagoula has all the characteristics you could possibly ask for: lots of pipeline access, good access to the channel, a remote location. That puts us in good stead.”

The company has commissioned an economic impact study of the project, which should be completed by year-end, said Osborne.

“We want to get a handle on the kind of ancillary activity this terminal could foster,” he said. “We are committed to giving as much work to Mississippi businesses as possible. Any long-term gas user feels very secure about having an import terminal there with a long-term supply of gas, so it would potentially attract long-term gas users and help keep those you have.”

Environmentalist camps are divided over opposition to LNG expansion projects, because natural gas is much needed and is a cleaner fuel source.

“During the permitting process, the company will be working with all interested local parties, with open meetings conducted by FERC,” said Osborne. “Everyone will be fully apprised of what’s happening. We’re very conscious of the feelings of people in the area and want to address issues that concern them every time we can.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

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