King & Spalding’s global energy practice has advised Freeport LNG on the liquefaction tolling agreements for the first of three proposed liquefaction trains to be built near Freeport, Texas, at Freeport LNG’s existing LNG import terminal.
All three trains are expected to be fully subscribed by the end of 2012 and, once completed, will be capable of liquefying approximately 13.2 million tons per annum of natural gas.
Freeport LNG’s liquefaction tolling agreements with Osaka Gas and Chubu Electric Power will cover 100% of the first train’s liquefaction capacity. Subject to regulatory approval and a final investment decision, Osaka Gas and Chubu Electric will each acquire rights to 2.2 million tons per annum production capacity of the first train over an initial 20-year term.
King & Spalding will continue to represent Freeport LNG on the two remaining trains of the liquefaction project, with definitive agreements for both expected before year-end. The firm also represented Freeport LNG on the front-end engineering and design (FEED) contract for the facility earlier this year.
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Freeport LNG announced that it had entered into an option agreement to purchase approximately 400 acres of land located about one mile southeast of the city of Oyster Creek near County Road 690 and State Highway 332 in order to relocate the future site of a natural gas pretreatment facility, which is part of Freeport LNG’s overall natural gas liquefaction project.
Freeport LNG originally purchased 500 acres of land located off of CR 792 to use as the site for its natural gas pretreatment facility. However, this property had only one point of ingress and egress (which was shared by a few neighboring communities), was closer to a greater number of residents, and was not behind the surge protection levee (which would have resulted in needing to elevate the site). These limitations led to concerns being raised by nearby residents regarding the aesthetic impact as well as safety concerns regarding ingress and egress, and the limitations of the site presented significant, additional development hurdles to Freeport LNG. Freeport LNG continued to search for other available properties that could alleviate the community’s concerns and the limitations of the CR 792 site. When the new site near County Road 690 and State Highway 332 recently became available, Freeport LNG was able to obtain an option on the property.
While certain requirements must be met before Freeport LNG can utilize the new location, the new site provides Freeport LNG with several benefits over its previously announced site for the pretreatment facility, including: (1) the new location is currently being used for industrial purposes as a fill dirt excavation site (so fewer acres of native ground will be impacted by the development), (2) the new location will be accessible by multiple routes, allowing for more efficient development and operation of the facilities while minimizing the impact of traffic on neighboring homes and businesses, (3) the new location is more remote from current residences and (4) the new site is located behind the surge protection levee, so the elevation will not need to be raised to the same extent as the prior site. In addition, because the facilities would be built at a lower elevation behind the levee, and in an area bordered by substantial woodland and foliage barriers, noise, lighting or other aesthetic impacts of the facilities will be significantly reduced as compared to the prior location.
“The new site is a ‘win-win’ for us to be able to find a location that addresses the concerns of the residents in the area near the prior site, and alleviate certain development limitations with the prior site.” said Mark Mallett, FLNG’s Vice President of Operations and Engineering. “This is a solution to an issue that benefits both the surrounding communities and Freeport LNG.” Freeport LNG’s natural gas liquefaction project is an important investment in the Brazoria County community, involving over $4 billion of direct capital investment in the area, adding over 2,000 local jobs during the project’s four year construction, and adding approximately 180-190 full time positions to Freeport LNG’s operations.
With the proposed relocation of the pretreatment facilities, Mr. Mallett had this to say regarding the prior location of the facilities: “We do not have any permanent plans for the property on County Road 792 at this time. However, we do not plan to build any facilities on it. For now, we plan to retain it as we progress through the permitting process, potentially using it as part of our overall wetland mitigation plan.”
The Freeport LNG natural gas pretreatment facility is necessary to process and treat the incoming natural gas so that it can be transported to Freeport LNG’s Quintana Island Terminal for liquefaction. When the natural gas arrives at the pretreatment facility, it is the same quality natural gas that is used every day by consumers and burned in furnaces, gas stoves and hot water heaters in private homes. However, all natural gas contains very small or trace quantities of impurities that, while unnoticeable and safe in the gas burned in private homes, negatively affect the natural gas liquefaction processes. The purpose of the pretreatment facility is to remove the trace impurities from the natural gas that will be delivered to the LNG Terminal on Quintana Island.
Freeport LNG points out that the natural gas coming into the facility is of the same quality as that delivered to nearby homes but the gas must be further purified before it can be liquefied at its Quintana Island facilities. No liquefied natural gas (LNG) will be present at the pretreatment plant. The types of processes utilized at Freeport LNG’s pretreatment facility are very similar to those processes utilized in numerous gas processing plants in and around Brazoria County.
Pending approval of the liquefaction project by the Federal Energy Regulatory Commission (FERC) and other permitting agencies, construction of the Liquefaction Plant and support facilities will begin in mid-2013. “Local residents will continue to have opportunities to be part of the permitting process.” said Mallett. “FERC will be scheduling a public scoping meeting within the next couple of months to discuss the project and provide an opportunity for comments.”
Freeport LNG will continue its work during the upcoming facility design and development phases to prevent or reduce impacts on nearby residents. Environmental stewardship is a hallmark of Freeport LNG’s operations and will be at the center of planning, designing, and decision-making during all phases of the liquefaction project. The company is committed to operating safe and efficient facilities at the pretreatment plant site and will continue to communicate with nearby residents and engage local, state and federal officials as the Project moves forward.
In particular, Freeport LNG is in the preliminary stages of creating a community outreach program for the liquefaction project in order to provide a forum for citizens to meet with Freeport LNG on a regular basis as it progresses the project through the design phase and into construction and operation. Through the permitting processes and its community outreach efforts, Freeport LNG seeks to collaborate with neighbors and local stakeholders in a positive and constructive manner to design and construct the pretreatment facilities while minimizing negative impacts to the local community. If successful, Freeport LNG’s liquefaction project will not only grow Freeport LNG’s business and employee base but will also bring thousands of quality jobs and significant economic benefits to Brazoria County.
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Luke Johnson 16 February 2012 17:51 GMT
Zachry and CB&I will engineer and design a trio of 4.4-million-tonnes-per annum liquefaction trains and corresponding pre-treatment facilities that will be located near the existing Freeport LNG regasification terminal at the Quintana Island terminal near Freeport, Texas.
The two companies will develop a fixed-priced, fixed-schedule proposal within the three-train design for both a one-train initial development and a two-train initial development, Freeport said in a statement.
“This optionality will provide Freeport LNG with the ability to choose the optimum size of the initial phase of the project based upon customer demand and financing considerations,” Freeport said.
Financial terms of the deal were not disclosed.
LNG companies like Freeport and Cheniere Energy – which, just a few years ago, were anticipating being net importers of the fuel – are trying to reinvent themselves as exporters in the wake of a gas glut in the US thanks to the shale boom.
Cheniere is well on its way, having secured sales deals and proper permitting to export gas as soon as 2015.
Freeport is in the process of securing permits. The Department of Energy has given the OK to export LNG while Freeport has started preliminary applications for approval from the Federal Energy Regulatory Commission (Ferc).
It expects to file a formal Ferc application by the end of the first quarter this year and hopes to have all permits in place to begin construction early next year.
Construction will take about 32 months, Freeport says on its website, with start-up at the facility expected in early 2016.
The liquefaction facility will have a processing capacity of about 1.9 billion cubic feet per day of gas. The gas will come via interconnecting intrastate pipeline systems operated by Dow Pipeline, Kinder Morgan and Brazoria Interconnector, through Freeport LNG’s existing Stratton Ridge metre station.
The gas will be liquefied and stored in full-containment LNG storage tanks as it awaits export by tanker, according to Freeport’s website.
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