Gulf LNG Energy is in the final stages of securing a supply of liquefied natural gas to feed the terminal it is about to build on industrial Bayou Casotte, just east of Pascagoula.

Supply is the key.

That's why Gulf LNG, out of Houston, is breaking ground on its new Pascagoula docks in a few weeks and lining up contractors to build its $600 million regasification plant, and others are not.

"We have two different supplies lined up," said John McCutchen, chief operating officer for Gulf LNG. "We're in the final stages of negotiations. That's the reason we're starting."

McCutchen did not reveal the two sources that will feed liquefied natural gas to the new terminal via tankers, but one of the clocks in the company's new administrative office in Pascagoula is set to tell what time it is in Angola.

The Gulf LNG project is much further along than another proposed LNG plant at Chevron's Pascagoula refinery. That project has no construction date and isn't expected to have one in the near future.

Margaret Cooper, with Chevron Global Gas media relations, said in an interview recently that Chevron's Casotte Landing LNG doesn't have the supply in place, which leaves the construction date a mystery.

"We can place it in the next decade," Cooper said. "But when (they decide to build) will depend on the gas supply, when there's LNG available.

"You align construction with gas supply projects," she said.

LNG, which is natural gas cooled to a liquid at 260 degrees below 0, is produced and exported by countries whose natural gas reserves often exceed their own demands.

The product is brought to the United States, warmed back to a gas at an LNG terminal and piped into the market for home heating and other uses.

A change is coming

So begins the process of making Pascagoula an LNG destination.

Gulf LNG has hired a dredging company that, on or around Nov. 1, will start moving 3 million cubic yards of silt from the bottom of Bayou Casotte where the terminal docks will be located. This is to make way for berths to accommodate 1,000-foot tankers. The dredge company is due to arrive at the end of next week.

The terminal will take up 33 of 100 acres that Gulf LNG has leased from the Port of Pascagoula called the old Texaco site. The property is south and west of the Chevron gasoline refinery. McCutchen said the lease with options is for 72 years.

When complete, the terminal is expected to host 115 tankers a year and the plant will have the capacity to warm and distribute 1.3 billion cubic feet of natural gas a day.

"I can't read the future," said McCutchen. "But I hope it will make natural gas more economical."

How long it will take to get the terminal and plant running at full capacity is still an unknown, he said, but the start up date is 2011.

He said that the construction schedule is for 43 months.

The plant will have two, 180-foot tall storage tanks that can each hold 160,000 cubic meters of gas.

During construction, contractors are expected to employ 600 to 800 people. The permanent staff at the plant will be 50.

The Katrina factor

Both LNGs received the major federal regulatory permits they needed earlier this year, but the process of getting those permits and exploring the concept of locating an LNG on the spit of land that extends south of Pascagoula began before Katrina.

The storm's surge gave Gulf LNG leaders cause to rethink protection for the plant.

They plugged the Katrina data into a computer model, including wave height, and made the necessary engineering adjustments.

McCutchen said the plant's retaining wall, designed to stop storm surge, would now be in excess of 27 feet.

"The main jetty structure will be 37-plus feet," McCutchen said. That encompasses the docks and berths.

What about safety?

County leaders and Port officials know that anytime an industry handles volatile material, there's a risk.

But in a recent Jackson County Board of Supervisors meeting, they pointed out that the LNG plants are to be built at the end of Industrial Road, near compatible industry, chemical plants and a gasoline refinery.

The Federal Energy Regulatory Commission's staff listed nine major reasons they gave the project the go-ahead. Some of the safeguards they cited included sufficient planning that considered environmental concerns, assurances of ship and site security, the initiation of an environmental monitoring program and the decision to build in an industrial area.

Jackson County Supervisor Manly Barton said that based on what he learned during the federal regulatory process "the risk is not greater than what we already have out there."

Gulf LNG officers have pointed to the safety records of two LNG plants that have been operating in the United States since the 1970s -- one at Boston and one on Elba Island near Savannah, Ga. There are also LNG regasification plants in Lake Charles, La., Cove Point, Md., and Puerto Rico.

The Pascagoula project has borrowed experienced staff and engineers from Gulf LNG's Elba Island plant.

McCutchen has years of experience in the business and Scott Wagner, who is to be terminal manager in Pascagoula, has engineering experience with Gulf LNG and 12 years active duty with the U.S. Coast Guard.

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Wealth will be shared

The Gulf LNG plant, breaking ground next month, is such a major player that its rent, taxes and fees are expected to put the Port of Pascagoula well on the road to self-sufficiency where it no longer depends on tax dollars to function.

Also, the anticipated $5.6 million in school taxes a year that the plant will generate will be distributed among all the school districts in Jackson County as dictated by a law passed by the Legislature this year. So Ocean Springs, Gautier, Moss Point and Jackson County schools will share the wealth with Pascagoula. Jackson County leased land to Gulf LNG last year and the money began to roll in:

--During the three to four construction years, Gulf LNG will pay the Port of Pascagoula $233,000 a year and the Mississippi Tidelands Trust $116,000 a year.

--When construction is complete, that figure will increase to $500,000 per year for both the Port and the Tidelands Trust.

--During construction, Jackson County can collect taxes on the work in progress at a rate of half the value, so when the terminal is half complete, the county would collect on half of $300 million in value, which could be as much as $2.6 million in taxes.

--When it is complete, the county will likely grant a 10-year tax exemption, but MGCCC and county school taxes are not exempt and are estimated to be at $5.6 million a year on a plant valued at $600 million.

--The Port is expecting to get between $2 million and $3 million a year in fees for docking, wharfage, etc.

--The Port will receive $44,000 a year in rent for three years for a lot in the Stennis Industrial Park that will be used for staging construction of the plant.

Copyright (c) 2007, The Sun Herald, Biloxi, Miss. Distributed by McClatchy-Tribune Information Services.

Related Project
Gulf LNG Clean Energy Project
Facility Type: LNG Owner: Gulf LNG Energy (El Paso Corp., 50%; Crest Group, 30%; Sonangol USA, 20%)
Scope: New Construction Location: Pascagoula, MS United States