Tuesday, Jul 20, 2004

When ExxonMobil and Cheniere Energy proposed terminals in Mobile, Alabama, to import much needed liquefied natural gas into the US, the community balked at the risks an accident or terrorist attack might pose.

ConocoPhillips then proposed building an LNG terminal offshore. But residents were outraged that those plans included a process for cycling sea-water into the facility, killing any marine life taken in with it.

The US desperately needs new sources of natural gas and analysts believe LNG is the best hope for a country that widely opposes energy exploration in environmentally restricted areas. But local opposition to terminals needed to import LNG is blocking the construction of facilities - even though the energy industry considers their dangers highly exaggerated.

John Gass, president of ChevronTexaco's Global Gas group, says nobody would contemplate building the terminals - at a cost of Dollars 750m-Dollars 1bn (Euros 604m-Euros 805m, Pounds 401m-Pounds 534m) - if they were not safe to operate. But public perception of LNG terminals has proved hard to change.

"It is a challenge to find a place to locate these things if you're not talking about putting one well offshore," Mr Gass says.

LNG is natural gas cooled into liquid form, which shrinks its volume 600 times for easier and more economic transport by sea. At the other end, terminals heat it back into gas. Analysts say LNG is not stored under pressure, would vaporise if accidentally released and if ignited, would burn slowly. No one is certain LNG could explode.

Don Felsinger, president and chief operating officer of Sempra Energy, notes that tens of thousands of shipments of LNG have been sent worldwide since the late 1960s with no significant transport incidents. "The only way we'll find out about (the effects of an LNG accident) is to have something happen," he says.

Casi Callaway, executive director of Mobile Bay Watch, wanted ExxonMobil's worst-case scenario when company officials spoke to her environmental group about building a terminal in Mobile.

Because of the industry's strong LNG safety record, ExxonMobil could offer no concrete answers. But Ms Callaway pointed to a hypothetical analysis that determined that "we're all going to die in a two-to-three mile radius" in an explosion.

"There just seems to be an extraordinary amount of misinformation about these facilities. They're very, very safe," says Bob Davis, ExxonMobil spokesman. He notes the world's 44 LNG terminals, including four in the US, are not new technology.

Even so, Mobile residents' concerns and opposition have forced both ExxonMobil and Cheniere to look elsewhere.

The few accidents with LNG have caused minimal damage - with one big exception. An LNG accident in January in Algeria killed 21; analysts faulted outdated equipment and an unsafe terminal. More recently, an explosion at Trinidad's modern Atlantic LNG facility forced a shutdown but caused no injuries.

Jim Trifon, a managing consultant at Wood Mackenzie, said the concerns were not just about routine LNG safety but also the intentional sabotage of tankers. That could raise the risk profile, he said, but should not necessarily justify not building terminals.

Such logic would have kept the World Trade Center from being built, given the damage done by the September 11 2001 terrorist attacks.

Energy centres such as Texas and Louisiana have been courting new LNG terminals. Three proposals for Corpus Christi, Texas, for example, have been endorsed by every public entity there.

But local communities have quashed LNG proposals in Alabama, California, Maine, Massachusetts and North Carolina, raising serious questions about how to deliver natural gas to the US north-east and California.

Local opposition probably goes beyond safety concerns: plans for the toweringly high facilities also pose a threat to local property values.

"We will never build a site in a community where the community doesn't want us," says Charif Souki, Cheniere's chairman and chief executive. But he has not given up: "We will wait for the excitement to disappear and try again."

He could persist despite public opposition, as the Federal Energy Regulatory Commission can override public dissent in permitting LNG terminals. Ferc is now processing permits for 12 projects, half of which have attracted public opposition.

Mark Robinson, Ferc's director of energy projects, said the commission decides what is in the "overall public interest" after a thorough review of environmental, safety and security issues. The US consumes 25 per cent of the world's natural gas but contains just 4 per cent of reserves, he said. Meanwhile, domestic supplies are flat and demand is growing.

"You are more likely to die in a car accident than an LNG fire," says Sara Banaszak, a natural gas expert with PFC Energy. "If the public relations battle is lost, it would be a terrible shame, because we would pay for it through much higher gas prices."

By SHEILA MCNULTY

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