ON GUARD Coast Guard escorts bring LNG-carrying ships to port as a precaution against U.S.S. Cole-style terrorist attacks. (Photo courtesy of the U.S. Coast Guard)

A deadly explosion at a liquefied natural gas liquefaction plant in Skikda, Algeria, Jan. 19 has intensified debate over safety at the growing number of LNG terminals in the U.S. The accident, which killed 30 persons and injured 74, was the worst LNG-related incident in 30 years and blew away gas industry claims that LNG transportation technology has a "spotless" safety record. Now, officials at all levels are taking another look at LNG safety issues.

Rising gas prices and declining gas production in the U.S. have generated a surge of proposals to site LNG terminals (see table below). Four existing U.S. terminals have been reopened and two are being expanded. The National Petroleum Council says up to nine more terminals are likely to be built in the next decade.

Houston-based consultant Joseph Mathew says improvements in regasification technology have reduced the price of LNG to about $3 per million Btu. That makes it competitive with domestic supplies under current government pricing scenarios, which project average near-term gas prices between $3 and $4 per million Btu. NPC says a "fundamental shift" in supply and demand trends has boosted gas prices. It expects LNG imports to mushroom to as much as 15 billion cu ft per day by 2025, supplying 17% of total U.S. gas needs.

"LNG is pretty much the only large volume of gas available (to North America) for the next 10 to 20 years and it’s here to stay," says Amos Avadan, principal vice president for petroleum and chemical technology at San Francisco-based Bechtel Group. But safety concerns dog the steps of almost every proposed project. And since 9/11, the LNG safety issue has become entangled with the terrorism issue as critics charge that safety guidelines for permitting new plants do not account for large releases that could result from a terrorist attack.

New questions arose in December when John Cornwall, principal engineer with Quest Consultants, Norman, Okla., complained that the Dept. of Energy and industry groups were misusing a 2001 Quest report, which found relatively little hazard from LNG shipments through Boston Harbor, to justify projects elsewhere. Cornwall says people have "misunderstood" the study. He says the finding cannot be transferred exactly to other situations. Still, he believes that some other studies predicting greater dangers from accidents are too theoretical and do not account for key issues such as the release rate of gas from a ruptured hold.

A recent study by Lloyd’s Register of Shipping said that LNG tankers, with multiple internal hull designs, would hold up well to terrorist attacks and any gas release would be relatively small. Lloyd’s also stressed the importance of the Coast Guard escort system for LNG tankers, which is especially meant to stop U.S.S. Cole-style attacks by small boats.

Others claim the danger is still substantial. Studies of LNG transport in Massachusetts and Maine ports by James Fay, professor emeritus at Massachusetts Institute of Technology, warn that a terrorist attack could lead to a fire expanding two-thirds of a mile from the ship and could destroy people and property onshore in crowded eastern ports.

Late last year Energy Secretary Spencer Abraham asked Sandia National Laboratory to review the Quest findings. DOE officials say that after the Algerian explosion, Sandia was asked to enlarge the study into a comprehensive review of LNG safety issues

The Federal Energy Regulatory Commission also will review the Algeria explosion and incorporate relevant findings into its permitting process. But industry experts say the steam boiler, suspected as the source of the Skikda blast, was outmoded technology no longer used in modern U.S. plants.

Jim Heavner, senior vice president upstream of Fluor Corp., Aliso Viejo, Calif., says many of the proposed 30 projects will probably not be built and "the first ones in will be in the better position." Offshore LNG platforms are more sophisticated and expensive and must be larger to justify costs, he says. But they present fewer permitting and public relations problems and can compete with onshore projects. Fluor and Aker Kaeverner together have won contracts to design and manage construction on two ChevronTexaco offshore terminals.

Bechtel’s Avadan, whose group has won contracts for two onshore projects in Texas and Louisiana sponsored by Houston-based developer Cheniere Energy, says that the market potential for LNG projects is "large." While it won’t replace the gap left by the downturn in new powerplant construction "it’s certainly an important market," he says.