Hawaii Gas plans to begin shipping limited amounts of liquified natural gas to Hawaii within two months, it said after the Federal Energy Regulatory Commission ruled Thursday that the project does not require federal authorization.
Hawaii Gas, formerly known as The Gas Co., submitted an application to FERC in August seeking approval to ship LNG to Honolulu Harbor in specialized containers. Hawaii Gas currently supplies its customers with synthetic natural gas it makes from a petroleum derivative called naphtha which it buys locally from Tesoro Corp.
LNG has the potential to provide a lower-cost energy alternative to petroleum-based products that provide the bulk of Hawaii’s energy needs, according to Hawaii Gas.
Company officials said their goal is to have the first LNG shipments arriving before the planned closing of the local Tesoro refinery in April. Although Tesoro had pledged to import refined petroleum products to honor contracts with its customers, Hawaii Gas wants to make sure it has contingency plans in place in the event its naphtha supply is disrupted, said Jeff Kissel, company president and chief executive officer.
"This ruling is hugely positive," Kissel said. "We still have to get state and local authorities comfortable with the plan, but we hope to have the first shipments here in 60 days," he said.
Hawaii Gas employees have been on the mainland undergoing training on handling LNG, which will be shipped to Hawaii from California in 40-foot cryogenic intermodal containers, Kissel said. The company plans to bring in 20 containers each containing 8,600 gallons of LNG each in the first phase of the project.
After offloading the containers at Pier 38, Hawaii Gas in most cases will use a mobile "regasification" unit to convert the liquid fuel back into gas form and inject it into an existing Hawaii Gas pipeline. The company also could opt to transport the LNG containers directly to its customers’ sites, where the regasification process would take place, the company said.
The cost to ship LNG to Hawaii is considerably less than making synthetic natural gas locally from naphtha, according to Hawaii Gas.
LNG brought in during the first phase of the project would be used to supply the firm’s existing residential and commercial customers. The company envisions using tanker ships in later phases to bring in larger quantities of LNG that could be used for electricity generation. Those plans include development of a commercial LNG import terminal that might require FERC approval.
Hawaii Gas estimates that it could provide LNG for electricity generation at a price ranging from $44 to $64 less than the equivalent price of a barrel of oil. Hawaii’s utilities use oil to generate nearly 80 percent of the electricity they sell. High oil prices are the primary reason the average electricity bill in Hawaii is three times the national average.
FERC said in its ruling Thursday that its authorization was not needed because the project planned by Hawaii Gas does not trigger requirements outlined in the Natural Gas Act. In addition, FERC’s jurisdiction under the act is limited to facilities used to import or export natural gas between the U.S. and a foreign country, not between two U.S. facilties, according to the ruling.
"We have concluded that the proposed project would not constitute an LNG terminal as contemplated by Congress. Therefore, in this case we find no basis for asserting Section 3 authority over the described facilities or operations," according to FERC.
