To assist in the understanding of the Calhoun LNG project, this document has been prepared
to answer many of the most frequently asked questions
associated with LNG projects:
What is Liquefied Natural Gas (LNG)?
Liquefied Natural Gas is the same natural gas that you
are familiar with in your home for heating or
cooking. But instead of being in gaseous form,
LNG is cooled to minus 260 degrees Fahrenheit, and condensed to a liquid.
As a liquid, LNG
only occupies 1/600th of the space of
natural gas in a gaseous state, which allows transportation
of the LNG over long distances at sea and efficient
storage on land. LNG weighs less than half as
much as water and is odorless, colorless, non-toxic,
non-corrosive and leaves no residue once it evaporates.
LNG neither explodes nor burns as a liquid. While at sea and on land,
LNG is stored at atmospheric pressure.
Just like
all natural gas, LNG actually contains mostly
methane, with some smaller quantities of ethane, propane and butane. Most of the ethane,
propane and butane (together often called natural gas
liquids – NGL) will be separated
from the LNG for use as a chemical feedstock.
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How is it made?
LNG is made at very large and expensive plants located
in Trinidad & Tobago, Asia Pacific, Australia, North and West Africa, and the Middle
East. Natural gas from fields in these areas
is gathered and treated to remove water, sulfur, mercury, carbon dioxide, oxygen, and
nitrogen and to separate any heavy liquids
such as pentane and heptane. The treated natural
gas is then chilled in a series of refrigeration processes down to negative 260 degrees
Fahrenheit and stored at atmospheric pressure
in large heavily insulated tanks. LNG vessels
are then loaded for shipment to receiving terminals located throughout Europe, Asia,
and North America.
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How does LNG compare to other very cold liquids?
The most familiar very cold (cryogenic) liquid is liquid
nitrogen at minus 320 degrees Fahrenheit. Liquid
Nitrogen is used in many processes and industries requiring refrigeration, including
food processing. It is also commonly used
in High School science class experiments.
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What is the nature of the project that will be built?
Gulf Coast LNG Partners, L.P., in conjunction with The
Port of Port Lavaca-Point Comfort, will permit, design and construct an LNG receiving
terminal and storage facility. The main features of this terminal will be:
- a new state of the art berthing facility to receive the LNG carriers
- insulated storage tanks to hold the LNG until it can be vaporized and sent via
pipelines to industrial and residential customers
- regasification facilities to warm the LNG back into gas
The facility could be operational in late 2009 or early 2010. Up to 600 people will be
employed during the construction phase of the facility. Once operational, approximately
25-40 full-time employees will staff and run the facility.
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How will this project be financed?
This project can be financed through either 1) conventional
project financing utilizing 75%-85% project debt
and the balance in project equity as raised through the capital markets or 2) through
the use of industrial revenue bonds
as several other facilities have been financed
at the Port of Port Lavaca-Point Comfort. The Port of Port Lavaca – Point Comfort’s
Board passed a resolution in October 2004 to induce industrial revenue bonds that
are non-recourse to the local tax base in order
to finance the construction of an LNG Re-Gasification Terminal at the Port. The
determination as to which structure to use to
finance the project will be impacted by a multitude of
factors.
All development activity up to project financing will be funded and driven by Gulf Coast
LNG Partners, L.P. and coordinated with the Port. In addition, Gulf Coast LNG Partners
will be responsible for obtaining all the necessary permits as coordinated through the
Federal Energy Regulatory Commission (“FERC”) and other regulatory agencies
for this facility to be constructed.
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How does the terminal function?
The sequence of activity is rather simple. The ship will moor at the new berth and connect its discharge
manifold with the terminal’s unloading arms. Once connected the pumps on the tanker move the
LNG into the storage tank. The unloading of a typical sized ship takes about 12 hours. Once completely
unloaded, the ship will embark on a return voyage for another cargo.
The stored LNG is pumped from the storage tank over into a separation tower to create
two product streams – pipeline quality natural gas and NGL for chemical plants. The
liquid methane is then pumped through warmers where each cubic meter of LNG is turned into
600 cubic meters of gas at about 40 degrees Fahrenheit for sending to a pipeline as demanded
by the market. The NGL stream is sent via pipeline to chemical customers.
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What chemical processes will be used?
None. Liquid natural gas is essentially condensed natural gas at very cold temperatures. There are no
chemical changes made to the molecule of natural gas – it is in condensed (liquid) form when
it arrives. The facility will warm the liquid until it turns into a gas at about 40 degree Fahrenheit.
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Are other similar facilities in operation in the United States?
Yes. Four facilities currently exist in the U.S.
- Trunkline LNG – Lake Charles, Louisiana
1.2 Billion cubic feet (Bcf) per day of send-out
with 6.3 Bcf of storage
- Southern LNG - Elba Island,
Georgia (near Savannah)
1.2 Bcf/d of
send-out with 6.0 Bcf of storage
- Cove Point
LNG - Cove Point, Maryland
1.0 Bcf/d of send-out
with 5.0 Bcf of storage
- Distrigas LNG - Everett,
Massachusetts (near Boston)
1.0 Bcf/d
of send-out with 3.5 Bcf of storage
FERC also has recently issued two permits for new facilities to be built, Cameron LNG
in Louisiana and Freeport LNG in Texas, and numerous other LNG projects that have been
announced.
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How does the planned LNG terminal compare to the existing
facilities and those proposed in Texas
and Louisiana?
The technology employed in all these terminals is very similar, and has been well proven over many years
of successful operation.
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Why are you bringing LNG into the Port of Port Lavaca?
This facility is being built to provide a source for low and stable cost natural gas and natural gas
liquids to customers who will contract to buy the gas and the liquids. Furthermore, the site is in
close proximity to many large pipelines that can take the natural gas to many other customers all along
the Texas coast.
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Who will own the facilities to be built?
The facilities will be built on Port property and the ownership will depend on the type of project financing
that is pursued. If a conventional project financing is used to construct the facilities, then the
terminal will have a private owner that will enter into a long-term lease of the land from the Port.
If industrial revenue bonds are utilized, these new facilities, including the land, will be owned by
the Port. These bonds will only be issued once the capacity of the Terminal is contracted for on a
long term basis by very large users; these users will be responsible for guaranteeing the repayment
of the construction bonds. Neither the Port nor the tax payers will be responsible for the repayment
of these bonds.
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What is the capacity of this new facility?
The capacity of LNG terminals is normally expressed as the volume of natural gas that will be sold to
buyers. The measurement of volume used is “millions of standard cubic feet of gas per day” normally
printed as “MMscfd”. This facility will be permitted for a capacity design of 1,000,000
MMscfd (or 1 Bcf/d).
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How many ships will be arriving at the Port?
For a 1 Bcf storage design capacity, there would be approximately 10 ships per month that come into the
Port.
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What size are these ships?
The size of LNG carriers is determined by the amount of cargo they can carry. The existing fleet of carriers
in service today ranges between 50,000 and 145,000 cubic meters of LNG. This is equivalent to approximately
1.0 to 3.5 Bcf of natural gas.
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Why is LNG such a popular energy source in recent years?
As we all know from our use of natural gas at home, it burns very cleanly. That is very important to
many industrial users and power generators that are being faced with compliance to very strict air
emissions rules. While demand for natural gas has been increasing rapidly during the last decade, domestic
production has remained fairly constant. There are large amounts of international proven gas reserves
and many locations that offer major increases in that proven reserve base. LNG is an economical way
to transport the gas from where it is abundant to the markets where it is needed. LNG offers long term
stability to gas prices as the volume imported as LNG significantly increases in the future from the
current level in the U.S today.
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How safe is LNG?
LNG is safe, odorless, non-toxic, non-corrosive, non-carcinogenic, and does not pollute land or water
resources. It is stored at atmospheric pressure in specifically designed ships, unloading lines,
and onshore tanks. LNG does not burn or explode as a liquid. It can only burn if vaporized, mixed
with the precise amount of air and then provided with a source of ignition.
LNG facilities and LNG tankers
are designed with safety as a priority. They are designed and operated
in strict accordance with international and U.S. codes and regulations. Ships must meet stringent
standards and codes including an extensive safety
review by the U.S. Coast Guard. The Port facilities
will meet very stringent environmental and safety codes from both the State of Texas and
from the Federal
Government.
LNG has the best safety record of
any form of hydrocarbon transportation. In the
past 40 years there have been more than 33,000
LNG ship voyages without a significant LNG release
or related fire or loss
of life, either in port or at sea. LNG ships, with their double-hull construction, are among
the best-built and most sophisticated in the world.
With regard to LNG receiving terminals, there
have been very few LNG related safety incidents
in the past 40 years with no incidents at an LNG import facility with off-site impacts
during
this time. This
is due to excellent equipment and facility design, excellent safety procedures employed in the
industry, stringent design and safety codes governing design, construction, and operation of
storage facilities,
and a well trained, highly experienced workforce. Furthermore, no incidents at receiving facilities
would have occurred under the current design and operational requirements used throughout the
industry today.
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How is this Project going to benefit Port Lavaca and the
surrounding cities?
The facility will provide a much needed, competitively-priced, reliable source of natural gas and natural
gas liquids for the large industrials in the region, enhancing their economic viability and stability
as the largest employers in this area. This much needed LNG imports will also help consumers by helping
stabilize this region’s natural gas prices used in cooking, heating and generating electricity
for our homes. The project will also create significant job employment during construction and operation
of the facility.
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How many contractors and permanent jobs will the facility
create?
During construction, it is anticipated that an average of 400 people will work on the site with as many
as 600 people during the peak of construction, many of which will be high paying specialty trades. During
operation approximately 25-40 permanent jobs will be created. Additionally, induced and indirect employment
opportunities will be generated.
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What happens if LNG is released?
LNG is always kept in closed systems, on board ships, and in the land-based LNG unloading lines and tanks.
As such, it is a very safe product. It is maintained at a very low temperature of minus 260 degrees
Fahrenheit and stored at atmospheric pressure.
If an accidental release occurs, the cold LNG will
quickly vaporize when it comes in contact with the warm air. While the cold LNG is warming
up to air temperature, it will cause the moisture
in the air to condense into fog, which will be
visible. Because it is much lighter than air, the now regasified
LNG will rise and dissipate.
LNG will not burn. Released LNG must first turn into its gaseous
state in order to burn. Igniting such a release
could be difficult because LNG burns only in specific circumstances. The amount
of air and
natural gas must be in a concentration range of 5% to 15% natural gas to air. Usually there is
no source of ignition. The ignition temperature is more than 500 degree Fahrenheit higher than
gasoline. Tests
have shown that even if vapor could ignite, it would not explode as it is not stored at pressure.
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Will a release kill the fish in the area?
If LNG is released on water, it will create a layer of ice at the surface; however, any marine life will
remain unaffected. The heat from the surrounding seawater will quickly vaporize the LNG into natural
gas. Since it is lighter than air it will rise and dissipate quickly, leaving marine wildlife unaffected
in their natural environment.
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What happens if there is a hurricane?
The Port and Calhoun LNG will institute rules governing hurricane preparedness. The facility
will be designed to withstand hurricane force winds and related 100 year storm tidal surge. The Terminal
facilities and equipment will be located on areas with elevations ranging from 20 feet to 36 feet
above sea level, an elevation which has proven adequate during previous storms.
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