LNG facility hoping to begin exporting natural gas

PASCAGOULA — Big changes may be coming for Gulf LNG, the liquefied natural gas terminal that has two huge storage tanks on the horizon south of Pascagoula.

The owners want to begin exporting natural gas.

It would be quite the turnaround for the $1.1-billion terminal built more than two years ago to import the super-chilled gas from tankers, store it, then warm and distribute it throughout the U.S. upon demand.

It was the demand that never came.

The market changed as U.S. gas production jumped in recent years and there has been no need for imports. Now the profit is in exporting.

In this case, the terminal never received a shipment of liquefied natural gas after the first deliveries, used to christen it and acclimate the tanks to the product.

So Gulf LNG, now as Gulf LNG Liquefaction Co., acquired approval in 2012 from the U.S. Department of Energy to export 11.5 million tons of LNG a year to countries approved under the Free Trade Agreement, such as Australia, Canada and some in South and Central America. That would allow it to export 1.5 billion cubic feet of natural gas a day for the next 25 years.

And it’s trying to get approval to export the same amount to the rest of the world, which would include Japan and the United Kingdom.

“We’ve not disguised the fact that we want this to be an export facility,” said Richard Wheatley, spokesman for Kinder Morgan, the parent company for a subsidiary that holds 50 percent interest in Gulf LNG.

The company is converting its Elba Island terminal in Savannah, Ga., and this could mean changes for Pascagoula as well.

“Being an export facility, there will be jobs and economic opportunity in the future,” he said.

The terminal is situated on 33 acres south of the Chevron Pascagoula Refinery and has been a major hope for increasing traffic through the Port of Pascagoula. The two christening tankers in June 2011 boosted the port’s third-quarter cargo tonnage that year by 27 percent over 2010.

The terminal became fully operational in October 2011 with two customers on board — one from Angola and one from Italy.

It contracted with those customers for 20 years, which means they pay for use of the terminal whether they use it or not and the terminal in turn pays the port $1 million a year in rent, half of which goes to the state Tidelands fund.

The Port of Pascagoula had pinned its hopes on the terminal bringing in $2 million or $3 million more in cargo fees as supertankers moved in and out with the product — natural gas chilled to minus 260 degrees so it can be stored as liquid.

The port has obligations to the terminal, such as keeping the tanker berth dredged to the proper depth.

So it’s still hoping for activity at the terminal, a spokesman said, though the port hasn’t been budgeting extra cargo fees.

Wheatley said even if Gulf LNG makes the conversion to export use, the terminal likely would remain able to receive, store and re-gasify.

Making the changes would create a major construction project that would hire from the region and create more permanent jobs.

There are 43 workers there now on shifts around the clock, keeping the terminal prepared even though there are no shipments coming in.

The modifications would allow it to liquefy domestically produced natural gas delivered to the terminal via pipeline.

The gas would be chilled then stored in the two existing tanks — so big they could hold enough gas to meet Mississippi’s needs for a year — and any additional storage tanks they may need to build, Wheatley said, and then loaded into tankers for export.

At this time, he said, the company can’t offer specific numbers on jobs because that would be based on the final design of the project.

The conversion also would create additional tax revenues for Jackson County, he said.

The original terminal construction took more than three years and employed hundreds. The terminal paid $2.16 million in taxes to Jackson County in 2012 and $5.6 million to Pascagoula schools.

And it has been held up by state officials as a major part of the state’s economic future, an example of the state’s open-mindedness toward bringing in this type of industry.

 

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