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Lloyds List: OceanWay in latest bid to change minds of Californians

Tony Gray, Lloyds List
Published: Sep 11, 2007

AUSTRALIAN companies have so far had little luck persuading Californians to import the liquefied natural gas that America’s most populous state will soon so badly need, writes Tony Gray.

In May, California governor Arnold Schwarzenegger rejected BHP Billiton’s proposal to build a floating LNG terminal off the coast of Malibu after intense pressure from Hollywood thespians and former colleagues such as Pierce Brosnan and Halle Berry.

A major reason BHP Billiton’s Cabrillo Port proposal provoked opposition was that it required an LNG terminal to be moored permanently off the Malibu coast.

Woodside’s OceanWay deepwater project may prove to be less offensive to celebrity sensitivities about the environment, safety and property values: it will have no permanent offshore facilities above the waterline and no offshore storage.

OceanWay intends to use regasification vessels, each with a gross storage capacity of 220,000 cu m, delivering into a deepwater port 45 km offshore Los Angeles and comprising two delivery buoys connected to underwater pipelines and associated mooring lines.

When a vessel is not delivering gas, the delivery buoys submerge 100 ft below the ocean surface.

Earlier this month, OceanWay took ‘a major step forward’ when the US Coast Guard and the city of Los Angeles determined that the project’s application for a license to operate offshore had met federal and state requirements to begin a full environmental assessment.

This decision has now triggered the public review of the OceanWay proposal.

Woodside Natural Gas president Steve Larson commented: ‘We are one step closer to the day when OceanWay can deliver clean, affordable natural gas to California consumers. OceanWay will safely bring in the natural gas we need to power California’s booming economy and hold down heating and electricity costs in the region.’

However, Woodside has acknowledged that its project is far from being a certainty, even if it may have advantages over the reviled rival Cabrillo Port proposal.

Although Californian authorities encouraged the company to proceed with its application following BHP Billiton’s failure, Woodside group chief executive Don Voelte said last month that OceanWay probably had a 50:50 chance.

California produces just 15 % of the natural gas it needs to meet its demand.

The state relies on pipelines from other states and Canada to deliver the other 85% of its gas requirements.

But Woodside points out that California is now facing unprecedented competition for those gas supplies from the fast-growing states of Colorado, Arizona and New Mexico, as well as rapidly increasing demand for these gas supplies in the north-eastern states and Canada.

‘Unfortunately, California consumers will ultimately pay the price if the state fails to secure new natural gas supplies,’ Mr Larson said. ‘California leaders and energy agencies have recommended the construction of a new natural gas import facility in the state, and OceanWay is positioned to provide a solid solution.’

Woodside, in which oil major Shell has a 34% stake, is a significant force in the LNG industry through Australia’s North West Shelf project and has several other developments in hand.

The company says it has safely delivered more than 2,300 LNG cargoes around the world, including to the US.

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