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Texas facility tapping into liquid natural gas market
So Cool It's Hot

Things are heating up on the Texas coast thanks to a type of natural gas that is cooled to -260 degrees Fahrenheit. In 2004, Freeport LNG Development LP of Freeport, Texas plans to build a $450 million, 200-acre liquid natural gas (LNG) facility--Texas' first--on Quintana Island, about 50 miles south of Houston.

The facility would be the fifth in the United States and will put Texas on the map in the LNG industry, said Bill Henry, vice president of Freeport LNG.

Natural gas producers in Texas brought more than 5.1 trillion cubic feet of gas to the surface in 2002, and Texas' production accounts for more than one-quarter of the annual production in the U.S., according to the Energy Information Administration (EIA) of the U.S. Department of Energy. But U.S. production and imports lagged consumption by about three trillion cubic feet in 2002, making LNG a hot commodity in the effort to meet growing demand.

Liquid assets
LNG is not new to the U.S. Alaska has exported LNG since 1969, and the first receiving terminal, built in Everett, Mass., in 1971, still operates. Other facilities are in Cove Point, Md., Elba Island, Ga. and Lake Charles, La.

When natural gas is transformed into LNG, it is condensed to 1/600th its normal size, which allows for more efficient transportation and storage. When it is needed for generating electricity or for use in commercial businesses or homes, LNG is drawn out of holding tanks and into "vaporizers," which warm it until it reverts back to a gas.

Suppliers can then deliver the gas, primarily methane, to commercial and residential consumers through Texas' extensive pipeline system, which measures more than 160,000 miles, according to the Texas Railroad Commission.

LNG made up about 6 percent of total gas imports into the U.S. in 2001, but imports increased more than 13 times to almost 240 billion cubic feet between 1995 and 2001, according to the EIA.

Demand heats up
The tight supply, increasing demand and rising prices--Texas consumers have seen an increase of more than $1.20 per thousand cubic feet of natural gas since 1998--created the need for a new facility, Henry said.

"If you look at projections, the National Petroleum Council report published in 2003 projects a need for about eight terminals in the U.S. in the future," he said.

Texas is a prime location for at least one LNG facility, Henry said.

"What makes Texas a good destination is [that] while Texas is a large producer of gas, it's also the biggest consumer," he said. "[Texas] not only has big markets in the industry, but has a good pipeline infrastructure to move the gas to market, and there are deepwater ports in which these ships can come to offload."

Henry said that while the Freeport facility will help Texas meet consumer demand, it will also create good, full-time jobs that pay well.

"There's $450 million in construction to be done, and bids are out right now," he said. "The LNG storage tanks are the biggest and most expensive [in the world], and there are only about five companies that build them located throughout the world. Whomever does it, they'll hire local workers to complete construction, which creates local jobs."

Henry estimated construction will create about 500 local construction jobs everyday and 900 at peak times during construction. After the three-year construction phase is complete, it will create 40 to 50 full-time plant operators and specialist jobs in the Quintana/Freeport area.

New jobs are always good news, Freeport Mayor Jim Barnett said.

"Short- and long-term jobs both benefit [the community], and that's good," he said. "That's what we want to see. We've seen the impact of other short-term projects in relation to jobs, and the nice thing about those is you can readily see the impact with sales tax revenue and such."

When the construction work is done, the Freeport facility will take LNG cargo from ocean-going tankers and store it in insulated storage tanks. The Freeport facility will include two tanks, each capable of holding 1 million barrels of LNG, at 42 U.S. gallons per barrel.

Freeport and the surrounding communities, known as Brazosport, will certainly benefit from having LNG nearby, Barnett said.

"[The chemical] industry is our economic backbone, so this will ensure them an energy supply and provide economic stability," he said. "So it's important to our area, without a doubt."

LNG and water don't mix
Local residents posed many questions about spills and leaks, Henry said. If LNG is leaked or spilled from a holding tank, raised dikes capable of collecting the contents of a full tank prevent it from spreading.

Once exposed to the outside air, ground or water, LNG quickly reverts back to gas and does not soak into the ground or mix with water, preventing environmental damage or fish kills, according to Freeport LNG. LNG also is stored under normal atmospheric pressure, a plus over the gaseous form, methane, which is held under high pressure in pipelines--a potentially explosive mix.

Freeport LNG also is touting the LNG industry's safety record. There have been only two major accidents in the U.S. involving LNG--one in 1944 and one in 1973. The 1973 incident occurred when vapors from a solvent being used to clean an empty LNG tank exploded.

LNG will not burn as a liquid, and the storage tanks at the Freeport facility will include the latest in safety improvements developed over the last 30 years, said Henry.

Permits aplenty
Even with the safety precautions Freeport LNG plans to have in place, Henry said there is no shortage of local, state and federal permits to be handled.

"It's hard to count them all," Henry said. "But we're finishing up the permitting process mostly with the Federal Energy Regulatory Commission, the Army Corps of Engineers and TCEQ [Texas Commission on Environmental Quality]."

Norma Rodriguez, a TCEQ permit engineer familiar with the Freeport project, says Freeport LNG has done everything necessary to move the project along.

"They've been very responsive so far and disaster [prevention] has been something they are working very hard on," Rodriguez said.

Texas has a little history with LNG, with one small facility that used LNG as automotive fuel. That facility, however, is no longer operating. While that gave TCEQ some experience with LNG, the Freeport facility will be something new, Rodriguez said.

"We have dealt with some LNG, but not like this," she said.

Texas is signed up for a crash course on big-time LNG facilities. In addition to the Freeport facility by Freeport LNG, Houston-based Cheniere LNG Inc. is developing a proposed terminal of similar size for Corpus Christi, and ExxonMobil is planning one for Sabine Pass, near the Texas-Louisiana border, according to the EIA.

Clint Shields