Greentech Lead America: Lake Charles Clean
Energy (LCCE), a subsidiary of Leucadia Energy, has secured major
long-term commercial off-take contracts with BP Products North America, Air
Products and Chemicals, and Denbury Onshore, a subsidiary of Denbury Resources,
for the Lake Charles Clean Energy project located at the Port of Lake Charles,
Louisiana.
The commercial offtake contracts enhance Leucadia
Energy’s ability to seek and obtain necessary third-party financing for the
project prior to commencing construction. This project, employing commercially
proven gasification technologies to cleanly manufacture industrial products
from petroleum coke, would be the first of its kind in the U.S. LCCE is
expected to be one of the world’s lowest-cost producers of methanol and
hydrogen and a low-cost producer of other products used in the chemical and
refining industries.
In addition to extraordinary limitations on emissions of
Criteria Pollutants, the plant is designed to capture, compress and sell 90
percent of its carbon dioxide production for use in Enhanced Oil
Recovery (EOR) in the US Gulf Coast.
BP Products North America Inc. will purchase the majority
of the methanol production and Air Products will purchase all of LCCE’s
hydrogen and argon and also provide the air separation units to supply the
required oxygen for the project. Denbury Onshore LLC will purchase all of the
captured CO2.
A final investment decision in the
project remains subject to third party financing and board approval by Leucadia
National Corporation.
The project represents a capital investment of more than
$2.5 billion and is expected to provide up to 1,500 construction jobs during
the 3-4 year construction period, beginning in 2013. Leucadia Energy will be
managing construction of the project. Turner Industries Group of Baton
Rouge, La., will construct the project, and Kellogg, Brown and Root,
(“KBR”), will provide design, engineering and procurement
services.
Operations and management at the plant will cost
approximately $2 billion during its 30-year life. The majority of costs will go
to pay local workforces and purchase locally procured materials and services.
The project would have a tremendous economic multiplier effect in the
surrounding area, through housing demand and services needed for the facility
and its employees.
LCCE was awarded $1.56 billion of Gulf Opportunity Zone
(GO Zone) and Hurricane Ike tax-exempt bonds by the Louisiana State Bond
Commission. The issuance of these bonds demonstrates the state of Louisiana’s
strong financial support for the project. The low-cost GO Zone financing
provided by the state was a large incentive to develop the project in Lake
Charles.
In addition to the state bond financing, the LCCE project
is one of three large-scale industrial carbon capture projects that were
awarded a Department of Energy (DOE) grant as part of an effort to
capture carbon dioxide from industrial sources for storage or beneficial
use. The DOE grant is for approximately $261 million.
As part of the clean fuels aspect of the project, all of
the captured CO2, which is expected to equal approximately 4.5 million tons
annually, will be sold to Denbury Onshore, LLC for use in its Gulf Coast EOR
operations. Denbury currently produces over 35,000 barrels of oil per day
from its Gulf Coast CO2 EOR operations and will use the captured CO2 to further
increase this production. When used in EOR, CO2 is stored in underground
oil producing formations.