LNG: Trying to find a (reasonable) solution

As the debate over the efficacy of expanding or building an LNG storage and offloading facility intensifies, perhaps it's worthwhile to take a step back from the rhetoric and attempt to examine the facts. I'll save the hard numbers for others, but I think it safe to say that, with energy demands rising, New England would benefit from an increase in the natural gas supply.

However, there are risks, of which we are constantly reminded. Apart from predictable "nimbyism", the degree to which these warnings should be of real concern varies. First and foremost, despite intimations to the contrary, there has been no shipping accident in the LNG industry, to my knowledge, in at least 30 years. I believe that deeper research would reveal that the LNG transport and storage safety record is one to be applauded. Nevertheless, it is difficult to shake one of the foreboding feeling, encouraged by LNG critics, that "it could happen." The visit by Richard Clarke to analyze the potential terrorist threat has been a very public "reminder" of this.

Thus, it is important to realize that very real, and understandable, emotions (specifically fear) cannot be removed from the equation. However, informed by the aforementioned safety record, I believe that many of these fears can be calmed. However, there is this:

"Before 9/11, these terminals were very safe," says Anne Korin, director of policy and strategic planning for the Institute for the Analysis of Global Security. "Then terrorism was introduced as a factor. The risk shifted from the remote possibility of an accident to malevolence."

Commenting elsewhere on this, I said that this "is why the hyperbole and hysteria don't sound quite so hyperbolic and hysterical. In our post-9/11 world, attaching the appellation of 'potential terrorist target' to anything will doom it. It is difficult to argue that the chances are remote, after all: We saw what happened with our own eyes. Thus, despite my strong belief that the leaders of the oppositon to LNG do so for political reasons and are using the spectre of terrorism because it is convenient (though, unfortunately, appropriate), I think what needs to be focused on is how technology can give us a safe and cost-effective method of increasing the storage and off-load capacity for LNG in both Rhode Island and New England in general."

One option is to locate LNG off-load and regasification facilities offshore, but some have expressed doubts. The Providence Journal, in an editorial, which relied on this news story, brought attention to the problem of locating an offshore facility.

In a desperate attempt to keep liquefied-natural-gas tankers away from their port cities (yet hoping, of course, for infinite energy supplies), the mayors of Providence and Fall River, shoreline residents, yachtsmen and the tourist industry have cited offshore LNG facilities as the way to go. They seem to prefer focusing economically on sailboats and kayaks, rather than on maritime commerce -- even though winter does somewhat cut into water-sports profits.

The Associated Press's Lolita Baldor, in a fine story last month, illustrated the hypocrisy and fecklessness surrounding this issue. She wrote of the proposal for an LNG terminal offshore of Gloucester, Mass.

The people in that area who want both lots of energy and no energy facilities are facing problems not generally recognized by foes of LNG facilities. (In fact, most such opponents know next to nothing about the engineering and science, much less the economics, involved.) For one thing, many people oppose an offshore facility anywhere near them, such as in the fishing area off Cape Ann, which has been touted by the Providence and Fall River foes of LNG terminals in their cities. . . . A terminal offshore of Gloucester would bring tankers into this important fishing ground, where as many as 150 vessels hunt for groundfish and lobster.

Then there are the numerous practical drawbacks to offshore LNG facilities. For instance, as Ms. Baldor points out, the offshore platforms have no storage space for large amounts of liquefied gas. Sorry, folks, but as the Federal Energy Regulatory Commission notes, New England needs such storage space to meet its high energy demands. Meanwhile, because of the region's rocky terrain, the stuff has to be stored in tanks above ground, rather than hidden below. Reality again!

Further, bad weather could often make offshore facilities unusable. Only one offshore LNG facility exists so far in this country -- off Louisiana's Gulf Coast, where the weather is generally calmer and waves lower than in New England. (Yes, it gets hurricanes, but we get hurricanes and nor'easters.)

The $55 million floating project would be built about five miles off the coast of Rosarito Beach by Moss Maritime, a global leader in LNG tanker construction, and Mexican partner Terminales y Almacenes Maritimos de Mexico (TAMMSA). . . ."This concept has less impact on the environment compared to shore-based and gravity-based platforms," Ocaña said.

The process took more time for Sempra Energy, which plans an $800 million onshore terminal north of Ensenada, and ChevronTexaco, which envisions a $650 million platform that would be secured to the ocean bed near the Coronado Islands.

Both of those ventures have gained the necessary approvals to start construction, but Sempra's LNG terminal is being challenged in Mexican courts and is under investigation by Baja California's legislature.

"Fifty-five million is peanuts," said George Baker, a Houston-based Mexican energy consultant.

By converting an LNG tanker into a floating storage and regasification unit – known in the energy industry as an FSRU – the developers can significantly slash the cost of a project, Ocaña said.

Because the terminal will float, she said, it will have less impact on the marine, land and air conditions where the FSRU will operate.

The project's storage capacity is expected to be 4.4 million cubic feet, she said, while the regasification facility would process additional amounts of the fuel.

"We would process for other companies," she said. "We only would offer the service."

Energy industry analysts note that companies using Moss' FSRU would be able to buy LNG on spot markets, which are likely to offer a considerable cost savings compared with long-term supply agreements reached by ChevronTexaco, Sempra and Shell, which plans to process liquefied natural gas at the Sempra terminal.

Companies using the Moss-TAMMSA facility also would have the option of selling the natural gas on either side of the U.S.-Mexico border. The ship would be connected to the Baja California natural gas pipeline system through a sub-sea pipeline.

Although I think there are still many more specific questions that need to be answered, I believe this post has laid the groundwork for more solid, and objective, analysis. Stay tuned.