The Freeport LNG terminal is six miles from open water off a 45-foot deep ship channel in Quintana Island, Texas, which can accommodate LNG carriers as well as LNG vessels.

The facility consists of a marine berthing dock and associated unloading facilities for LNG ships, a new and expanded vaporization system, two LNG storage tanks, and a 9.6-mile long natural gas send-out pipeline.

Phase 1 of the construction included two 160,000 cubic meter LNG storage tanks and one piled dock capable of handling LNG vessels in excess of 200,000 cubic meters, in order to accommodate the largest LNG tankers under construction today. The first phase of the project allows the facility to have a send-out capacity of 1.75 Bcf/d.

Expansion

Phase 2 of the project, which has undergone the permitting process and will be built when market conditions allow, will increase the LNG import terminal's planned send-out capacity from 1.75 billion cubic feet per day to 4.0 Bcf/d. Also, it will increase from 200 to 400 the number of LNG carriers the terminal can handle in a given year.

Phase 2 plans call for the following improvements: an abandoned barge dock will be removed, a second ship berth will be dredged adjacent to the Phase 1 berth, the existing vaporization facilities and utility systems will be expanded to accommodate increased terminal capacity, and a third LNG tank will be built west of and adjacent to storage tanks.

Natural gas will be transported through a 9.4-mile pipeline to Stratton Ridge, Texas, which is a major point of interconnection with the Texas intrastate gas pipeline system.

Liquefaction Capacity

On November 22, 2010, Freeport LNG and Macquarie Energy—a major North American natural gas marketer owned by the Australia-based Macquarie Group—announced a proposal to build four liquefaction trains at the terminal. In effect, Freeport LNG would become a natural gas exporter. The decision to pursue this course of action, rather than add gasification capacity, reflects the increasingly abundant production and inventories of natural gas in the United States. A dramatic increase in production from domestic fields such as the Haynesville, Marcellus, and Eagle Ford shale plays has increased the possibility that the U.S. could become a net natural gas exporter.

Each of the four new, medium-sized liquefaction trains at Freeport would be capable of converting 330 MMcf/d of natural gas into LNG. Aside from its access to the extensive U.S. pipeline network via two large natural gas trading hubs nearby (Houston Ship Channel and Katy Hub), Freeport LNG's location near the Gulf of Mexico will allow it to reach the Asian market once the Panama Canal begins to allow the passage of LNG carriers in 2014.

Freeport LNG will be the project's lead developer, obtaining government approvals and acting as the facility's sole owner and operator. Macquarie, which is contributing toward project development costs, will oversee all upstream and downstream arrangements. Both companies will exclusively market at least 50 percent of the liquefaction capacity, and Freeport will offer 50 percent of the capacity to its existing customers. Otherwise, both companies will jointly market capacity.

Freeport LNG's existing authorization from the Federal Energy Regulatory Commission (FERC) already covers a portion of the liquefaction project, which would be located entirely within the existing terminal's footprint. However, the developer will begin the approval process with FERC for the expansion shortly after filing for an export license with the U.S. Department of Energy.

Freeport LNG expects the government approval process to take approximately two years. It anticipates an early 2015 start-up of the liquefaction trains.