French oil and natural gas major Total is close to signing a firm long-term sales agreement with Cheniere Energy to lift 3.5 million tonnes per annum (mtpa) of LNG from its Sabine Pass liquefaction project, according to sources close to the deal.
The structure of the deal is understood to be virtually identical to Cheniere’s 20-year sales and purchase agreement signed with BG Group last week, the first firm offtake deal signed by the project. Under that agreement BG will pay the US developer a fixed take-or-pay fee of $2.25/MMBtu to cover the procurement, liquefaction and loading costs at the Sabine Pass plus an interruptible 115% of US Henry Hub natural gas futures fetching fee paid to Cheniere to provide free on board (FOB) cargoes.
Total is also understood to be taking the commercial export agreement one step further by assuming an ownership stake in Cheniere’s Sabine Pass Liquefaction company. Specific terms of the equity stake were undisclosed.
Bringing an equity partner into the project has been seen as crucial for Cheniere if it is to secure its financial future and reduce its $3.14bn debt, which includes $2.2bn specifically related Sabine Pass.
While credit rating agency Standard & Poors (S&P) called Cheniere’s deal with BG a “significant milestone” in its efforts to generate future cash flows, it has reaffirmed its CCC+ junk-status rating with a negative outlook.
“Assuming its current liquidity does not materially improve, Cheniere will not be able to make its 2012 maturity payments,” S&P said in a report released on Monday.
“The company must generate significantly more liquidity to avoid further credit deterioration or default. We believe its options include further asset sales and terminal use agreements (TUAs), incremental LNG marketing activity, equity offerings, and debt restructuring.”
Closing in on sales threshold
A firm 3.5mtpa sales commitment from Total would bring Cheniere to the 7mtpa threshold, a figure that chief executive Charif Souki told ICIS Heren last week was the target for moving forward with the first phase of the liquefaction project.
Phase One at Sabine Pass is planned for two liquefaction trains of 4.5mtpa capacity each, with Cheniere indicating that it will retain and market the remaining 2mtpa.
Cheniere and Total both declined to comment when contacted to confirm the deal.
Total is already an import capacity holder at Sabine Pass where it has 1 billion cubic feet/day – 0.2 million cubic metres/day – of regasification capacity as part of 20-year terminal utilization agreement.
The agreement with Cheniere follows Total’s declaration last week that the company has been studying the possibility of exporting US gas but provided no additional details.
- USA: Cheniere, BG Ink LNG Sale and Purchase Deal (mb50.wordpress.com)
- LNG Demand East of Suez Expected to Surge (mb50.wordpress.com)
Southern Drilling Company, a wholly owned subsidiary of Marine Drilling Company, and Bethlehem Steel Corporation‘s Beaumont, Texas, shipyard, recently commissioned a 250-foot water depth mobile offshore drilling unit.
The rig was christened J Storm XVI by its sponsor Mrs. Jack K. Larsen, wife of the executive vice president of Mesa Petroleum Company. Senator John G. Tower, senior Senator from Texas, gave the keynote address at the ceremony. The multimillion-dollar rig has been under construction for nearly 10 months and, upon delivery, will begin drilling operations in the Gulf of Mexico for Mesa Petroleum Company.
James C. Storm has been a long-time customer of Bethlehem Steel Corporation’s shipyard at Beaumont.
Sherman C. Perry, general manager of the shipyard, said this commissioning marks a significant milestone in the history of the shipyard. It extends to 50 the number of jackup drilling units commissioned by the Beaumont yard since it built the first 100- foot water depth jackup in 1954. The commissioning also marks the fifth rig to be delivered this year by the yard, as well as the 87th offshore rig delivered by Bethlehem yards.
The J Storm XVI is a mat-supported jackup designed for deepwell drilling operations. On location, the rig will have a total variable drilling load capacity of 4.5 million pounds and handle hook or rotary, plus setback loads of 950,000 pounds.
The rig consists of a platform measuring 176 feet by 109 feet supported by three 12-foot-diameter columns fixed to a mat that is 210 feet by 170 feet. Outfitted with deepwell drilling equipment, the rig can operate in waters of up to 250 feet while experiencing forces resulting from 70-knot winds and 35-foot-high waves. The J Storm XVI contains onboard, air-conditioned living accommodations for 48 persons. This marks the 18th time that one of the 50 Beaumont rigs was commissioned for the James C. Storm interests.
The J Storm XVI is No. 18, and the J Storm XVII No. 19 is scheduled for commissioning and delivery later this year.
Mr. Storm’s dealings with the yard follow a direct line back to 1949. Then in November 1954, the Beaumont yard delivered the Mr. Gus, the first mobile drilling platform capable of operating in 100 feet of water.
Mr. Gus was built for the C.G. Glasscock Drilling Company; Mr. Storm became a partner in that company shortly after he joined it at the close of World War II. In 1957, the Beaumont yard delivered Mr. Gus II, the prototype of the mat-supported jackup rigs built at the yard today. It was the first mobile drilling unit that could drill in up to 150 feet of water. Mr. Storm was involved with that rig also. And Mr. Gus II, after 24 years of service, is still drilling for oil and natural gas. After the Glasscock interests disposed of their drilling rigs, Mr. Storm formed Storm Drilling Company for whom the Beaumont Yard built Stormdrill I, Stormdrill II, Stormdrill III, and Stormdrill IV. Another Storm company, Southern Marine Drilling Company, ordered Stormdrill V. Subsequently Storm Drilling Company was sold.
Mr. Storm then formed Marine Drilling Company and ordered J Storm I from the Beaumont shipyard. J Storm I was initially ordered with capability to operate in 225 feet of water. Mr. Storm asked if the columns could be strengthened and lengthened. The yard added 25 feet of capability, and the rig became the prototype for B e t h l e h e m ‘ s series of 250-foot jackup rigs.
He also ordered the first jackup drilling unit capable of working in up to 375 feet of water. The yard designed this platform to utilize telescoping legs so it would be manageable under tow to different locations, yet be able to work in deeper waters. This rig, J Storm VII, was delivered in 1976. Mr. Perry, general manager of the yard since June 1, 1978, reported that Beaumont has work for the next 1H years. “We have orders for 12 offshore mobile drilling units, which will take us into 1983, and negotiations are being conducted for additional contracts.” The general manager said that the yard has delivered four jackup drilling units thus far this year, and anticipates delivery of four or possibly five more by the end of the year.
That would match or nearly match 1980, when nine drilling units were delivered. For 1978 and 1979, the yard delivered five units each year.
Contracts on hand and the customers are: Marine Drilling Company, one unit in addition to the J Storm XVI; Houtech Energy, Inc., four units; O & U Drilling Co., Inc., one unit; Griffin-Alexander Drilling Co., three units; Teledyne Movible, one unit, and Alfa Drilling, one unit.
The yard presently has more than 2,300 employees at work on the drilling units with two shifts generally being worked, and can accommodate six units under construction simultaneously.
The shipyard’s principal products are offshore mobile drilling units, primarily jackups, and oil and gas production and storage facilities for offshore service. The Beaumont yard has built many ships and barges, principally for the petroleum industry, and can handle any repair, reconditioning, conversion or jumboizing of ships. It has a floating drydock with lifting capacity of 17,500 tons and extreme length of 648 feet. Its mobile floating crane has a capacity of 500 tons.
- Offshore Drilling Pioneers – James C. Storm (mb50.wordpress.com)
- High-Spec Jackup Market: Hercules Offshore increases stake in Discovery Offshore (mb50.wordpress.com)
- Feds approve Murphy drilling project using Helix emergency equipment (mb50.wordpress.com)
- USA: Drilling at Eugene Island Starts Next Week, Says Leni (mb50.wordpress.com)
Map of Corpus Christi in 1887.
Corpus Christi was founded in 1839 by Colonel Henry Lawrence Kinney as Kinney’s Trading Post, or Kinney’s Ranch, a small trading post to sell supplies to a Mexican revolutionary army camped about 25 miles (40 km) west. In July 1845, U.S. troops under General Zachary Taylor set up camp there in preparation for war with Mexico, where they remained until March 1846. Then about a year later the city was named Corpus Christi and was incorporated on September 9, 1852. The Port of Corpus Christi was opened in 1926 and the Corpus Christi Naval Air Station was commissioned in 1941.
On Feb. 23, 1861, in a statewide vote on secession, the vote in Corpus Christi was 87 for secession and 40 against, which brought the total vote in Nueces County to 164 for and 42 against. There were many Union sympathizers in the city. Some originally came from the North and some were veterans of the Mexican War.
In the second week of August, 1862, five Union warships under the command of Lt. J.W. Kittredge sailed into Corpus Christi Bay and bombarded the city. Stores and houses below the bluff made easy targets for Kittredge’s guns. The bombardment did considerable damage to the town. Many of the residents had evacuated before the battle. After it was over, people began to return to town. The Confederates, provoked by the attack, then began to take revenge by plundering the homes and property of known Union supporters.
Port of Corpus Christi
The port of Corpus Christi opened in 1926 after culminating efforts that began as early as 1848 to obtain a deep-water port. The Port of Corpus Christi currently is the sixth largest U.S. port and deepest inshore port on the Gulf of Mexico, it handles mostly oil and agricultural products. In 2005 it was ranked as the 47th largest in the world by cargo tonnage.
BAYTOWN, TEXAS. Baytown, a highly industrialized city of oil refining, rubber, chemical, and carbon black plants, is on Interstate Highway 10 and State Highway 146, thirty miles east of downtown Houston in southeastern Harris and western Chambers counties. Among its first settlers were Nathaniel Lynch, who in 1822 set up a ferry crossing at the junction of the San Jacinto River with Buffalo Bayou that is still in operation, and William Scottqv, one of Stephen F. Austin‘s Old Three Hundred, who received a land grant in 1824. His two leagues and one labor of land, over 9,000 acres, covered most of the area of present Baytown. Near his home on San Jacinto (Scott’s) Bay, a settlement grew to include a small store and a sawmill. It was called Bay Town.
Later area settlers included Ashbel Smith, who in 1847 purchased a plantation named Evergreen on Tabbs Bay. He lived there for forty-nine years. Also living in the area for a time were Mrs. Anson (Mary Smith McCrory) Jones, David G. Burnet, and Sam Houston.qqv At the outbreak of the Civil War Smith organized a local unit called the Bayland Guards for Confederate service. They later became part of the Second Texas Regiment and saw action at Shiloh and Vicksburg.
A shipyard established at the mouth of Goose Creek in the early 1850s by John and Thomas S. Chubb built one ship, the Bagdad, which was launched in 1864 and had to run a Yankee blockade at Galveston to escape. In 1867 Dr. Smith and several associates founded the Bayland Orphans’ Home for Children of Confederate soldiers (see BAYLAND ORPHANS’ HOME FOR BOYS) on the west side of Goose Creek. The orphanage moved into Houston in 1888.
The area, though, remained largely undeveloped and isolated into the twentieth century. A rough county road ran from Crosby to Cedar Bayou, a small community of stores, shipyards, and brickyards. The only other entry into the area was by boat. Then, in 1908, after two unsuccessful drilling attempts, an oil strike was made beside Tabbs Bay. In 1916 the Goose Creek oilfield became famous as the first offshore drilling operation in Texas (second in the nation) and the third-largest producing field, after the Humble and Sour Lake oilfields.qqv
The towns of Pelly and Goose Creek developed near the oilfield in 1917–18. In 1917 Ross S. Sterling and his associates decided to build a refinery near the Goose Creek field and founded the Humble Oil and Refining Company (Exxon Company, U.S.A.qv). They bought some 2,200 acres in the William Scott survey and called their site Baytown. Construction began in the fall of 1919.
Baytown grew up around the refinery. At first the community was only a collection of army tents, barracks, and small shacks; it became permanent in 1923 when Humble laid out streets, provided utilities, sold lots, and even furnished financing for employees’ homes. Humble also furnished housing for its supervisors and skilled employees in a special “company addition” and built a large community building for their recreational needs. A special management-labor Joint Conference was formed to handle work-related problems. Later, this group also discussed municipal problems and became, in effect, the city council for the community. These and other employee-relations programs were initiated to reduce labor problems like those that had occurred in the Texas-Louisiana oilfield strike of 1917. Leading up to that incident, management policies, inflation, and poor working conditions had brought about the organization of a union local in Goose Creek in December 1916. When the oil producers refused to discuss grievances with union representatives in October 1917, 2,000 Goose Creek workers joined approximately 10,000 oilfield workers in seventeen Texas and Louisiana oilfields in a walkout on November 1, 1917. With hired guards and army troops maintaining order, the producers negotiated directly with the Department of Labor in January 1918 and effected a settlement that rejected all significant union demands. This near total victory for the producers undermined union effectiveness for several years. In the late 1930s and early 1940s the Congress of Industrial Organizations made several attempts to represent Humble employees instead of the Joint Conference, and later the Baytown Employees Federation attempted to organize, but each time Humble employees voted for the company union by large margins.
Due to this pervasive paternalism of Humble, the community of Baytown never incorporated, and this enabled Pelly to annex the “contiguous and unincorporated” territory of Baytown in December 1945. But, when Pelly and Goose Creek voted to consolidate in early 1947, the citizens selected the name Baytown for their new combined city. On January 24, 1948, the city of Baytown was established.
Baytown grew in population from 20,958 in 1948 to 67,117 in 1990 and in area from 7½ square miles to more than thirty-two. Its boundaries stretch from near the San Jacinto River eastward into Chambers County and include several former communities such as Cedar Bayou and Wooster.
Exxon, still a major employer, runs one of more than ten major petrochemical plants now in the Baytown area. In 1970 United States Steel opened the Texas Works near Baytown, and during its peak years the plant employed more than 2,000 workers with an annual payroll of $35 million. Due to the nation’s economic downturn and the decline of American steel in the early 1980s, the plant closed in July 1986.
In 1992 Baytown had twenty-three public schools, Lee College (a two-year community college), sixty-seven churches, seven banks, two savings and loan associations, three credit unions, three modern hospitals, a daily newspaper, a radio station, cable television, and a large public library. One of the nation’s largest single-level shopping malls houses major retailers and employs nearly 2,000. The city is served by two railroads and an interstate highway. In September 1953 the Baytown-La Porte Tunnel, which crossed the Houston Ship Channel, opened for traffic. In the mid-1990s the innovative eight-lane, 450-foot, twin-tower, cable-stayed Fred Hartman Bridge replaced the forty-year-old tunnel. In 2000 Baytown had 66,430 residents and 2,565 businesses.
Anne Rebecca Daniels, Baytown during the Depression, 1929–1933 (M.A. thesis, Lamar University, 1981; Ann Arbor: University Microfilms, 1983). Margaret Swett Henson, History of Baytown (Baytown, Texas: Bay Area Heritage Society, 1986). Henrietta M. Larson and Kenneth Wiggins Porter, History of Humble Oil and Refining Company (New York: Harper, 1959). Walter Rundell, Jr., Early Texas Oil: A Photographic History, 1866–1936 (College Station: Texas A&M University Press, 1977). Buck A. Young, “A Remembered Utopia,” East Texas Historical Journal 20 (1982).
Buck A. Young