May 14, 2009 / 4:28 PM / 11 years ago

Freeport LNG seeks partners for re-export plan

NEW YORK, May 14 (Reuters) - Freeport LNG, the operator of a liquefied natural gas import terminal in Texas, is seeking interest to begin re-exporting foreign-sourced gas from the terminal to other higher-paying markets.

Freeport received approval from the federal energy regulator last week to install re-exporting equipment at the terminal, but, before the work goes ahead, Freeport wants to attract firm interest from other parties.

“We haven’t started construction because we don’t have a deal yet. As of today, no one has signed up for storage, import and export,” Freeport LNG Vice President Bill Henry told Reuters on Wednesday. “There’s been a lot of interest. We think there’s potential market for it here.”

The modifications to the terminal would only take about 2 days, he said, and would be carried out by Freeport’s maintenance crew.

The Freeport terminal has the baseload capacity to send out 1.5 billion cubic feet per day of natural gas and a storage capacity of 6.4 bcf.

But it has not received a cargo since last May as low gas prices in the United States Gulf Coast have not attracted LNG cargoes, and Henry said that no cargoes were scheduled for the coming weeks.

However, the export facilities will allow Freeport customers to take advantage of higher gas prices in Europe and Asia.

“The theory behind this is that, while you have periods of low imports of LNG into the United States and the terminals are not being used for imports, we have customers who buy a cargo, store it in the summer and, as the market changes, re-export it to another market for additional profit,” Henry said.

“It’s good for us because we can utilise our tanks and get a storage fee from customers who are using our tanks.”

Currently, ConocoPhillips (COP.N), Dow Chemical (DOW.N) and Mitsubishi Global Gas Corp own import capacity rights at the terminal and Freeport LNG is considering them as potential users of the export service.

“It could be used by the customers we have, or by a third party,” Henry said.

ConocoPhillips told Reuters: “We are currently evaluating our options along with Freeport LNG and the other terminal users.”

Dow Chemical and Mitsubishi declined to comment.

Cheniere Energy (LNG.A) is also seeking regulatory approval to re-export LNG from its Sabine Pass terminal in Louisiana, another terminal that sat largely idle all winter.

Its aim is the same, to take advantage of lower gas prices in summer by buying cargoes to then re-export to other high paying markets in winter.

Cheniere urged the Federal Energy Regulatory Commission in a letter last week to approve construction of export facilities as, in waiting for approval, it had already had to pass up many commercial opportunities in this area. [ID:nN11361019] (Editing by Walter Bagley)

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