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LNG Rising

Despite development challenges, LNG capacity is destined to play a bigger role in the U.S. energy mix.
Fortnightly Magazine - April 2004

of the total fuel mix," says Donald L. Mason, a commissioner with the Public Utilities Commission of Ohio. "Sourcing LNG is similar to any other contract. If you are locking in prices similar to what indexed prices are showing, then it's a prudent decision. Right now, the numbers show that LNG provides a good alternative source of gas supply." -M.T.B.

Disaster in Algeria

When Unit 40 of the Skikda gas liquefaction plant exploded, the shockwave began a chain reaction that detonated two adjacent units, leveled nearby administrative buildings and shattered windows more than a mile away. More than 27 workers were killed, and dozens more were injured-many apparently as a result of inadequate emergency systems and procedures. Unit 40 itself suffered chronic technical problems due to design defects, according to a spokesman for Kellogg Brown & Root (KBR). KBR revamped three of the units at Skikda in the late 1990s, but not Unit 40, which was supposed to be shut down.

The dead were scarcely buried before activists began using the Skikda incident to illustrate LNG's hazards-despite the fact that the same explosion could not have happened at a modern regasification facility, which would not use a steam boiler like the one that exploded at Skikda.

"A liquefaction factory is much more complicated than a receiving and regasification terminal," says Otto Granli, vice president for Atlantic Basin LNG with Statoil in Norway. "The risks connected to a regasification terminal are not comparable with the liquefaction side. But we realize that incidents like this will scare people."

In response to such fears, developers are stepping up their public-education campaigns. Shell US Gas & Power, for example, launched a Web site with a streaming video program addressing LNG safety and security (

Regulators also are reviewing safety considerations and studying the Skikda incident. In January the Federal Energy Regulatory Commission (FERC) offered its assistance to Algerian officials investigating the explosion at Skikda, but Algeria hadn't responded at press time in early March. Additionally, in February FERC entered an interagency agreement with the U.S. Coast Guard and the Department of Transportation to coordinate review of safety and security issues at LNG import terminals. -M.T.B.

FERC: A Preferred Venue?

The longstanding feud between state and federal authorities is heating up in the LNG industry. Developers of liquefied natural gas (LNG) terminals seeking a streamlined siting and permitting process-such as that being developed by Federal Energy Regulatory Commission (FERC) and other federal agencies-are encountering resistance from state regulators who don't want their jurisdiction usurped by the feds.

A current case involves an LNG terminal project at the Port of Long Beach in Southern California, being developed by Sound Energy Solutions (SES), a Mitsubishi subsidiary. The California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) both filed motions to intervene in the project's application at FERC. (FERC Docket No. , filed Jan. 26, 2004)

"The CPUC informed SES … that SES was a public utility under California law," the CPUC motion states. "It would be necessary for [SES] to apply for a CPCN [certificate