Lake Charles Cogeneration and Entergy are still talking about synthetic gas. Or not, depending on whom you ask.
After Entergy walked away from two years of negotiations to buy LCC’s fuel made from pet coke, the firms were expected to return to the table two months ago after the Louisiana Public Service Commission asked them to. They are now scheduled to report back in May.
The two are at odds over the terms of the contract, which would require a 30-year purchase agreement from Entergy. Meanwhile, the City of Lake Charles is left wondering what the outcome might mean for the future of the $2 billion project.
LCC Project Manager Doug Barba says that negotiations continue, but that the matter has yet to be resolved. However, Entergy spokesman Philip Allison says the utility hasn’t had any communication from Lake Charles Cogen “since the LPSC staff sent them a letter outlining the issues that the commission wanted them to address.”
What happens if the two aren’t able to reach an agreement? “We have alternatives, but our priority is to work with utilities in Louisiana,” Barba says. “We’d like to have that done in the near future.”
Louisiana Economist Loren Scott says the low price of natural gas is one of the factors “messing up the deal.” Weaker demand for liquefied natural gas in Asia and Europe could drive up U.S. imports by as much as 36% this year, the U.S. Energy Information Administration estimates. And the discovery of the Haynesville Shale will pump even more onto the market.
“Suddenly, there’s an abundance of relatively cheap natural gas,” Scott says. “I think it’s made power companies wonder whether they should buy into something making natural gas out of pet coke. It’s slowed the Lake Charles deal down, and it’s sure got people over there worried about it.”
But Louisiana Economic Development Secretary Stephen Moret says that while a contract with Entergy would be the “best solution” for LCC, the company does have other potential customers—including those outside Louisiana. However, the project does require a long-term commitment.
“The probability for success probably definitely goes down if they don’t get an agreement with Entergy, but Entergy is not the only customer,” Moret says. “The project is a great project. It’s engineered; it’s ready to go. But the way their financing is structured, they just need someone to give them a guaranteed 30-year agreement.
“What I would say because they can pipe the syngas, they don’t necessarily have to serve an in-state customer or user,” he says. “Entergy has such a scale that it makes sense from the perspective of Lake Charles Cogeneration. Whether or not it makes sense for Entergy is another matter. As it’s currently structured, though, it needs a large portion of its syngas to be committed.”
