BP, Denbury Onshore Sign Contracts with Lake Charles Clean Energy’s Gasification Project

Lake Charles Clean Energy (LCCE) yesterday said it has secured long-term commercial offtake contracts with BP Products North America, Air Products and Chemicals and Denbury Onshore for its $2.5 billion gasification project.

The renewable power plant, to be located at the Port of Lake Charles, La. (pictured), will use gasification technology that converts petroleum coke into clean-energy products. The plant will be one of the world’s lowest-cost producers of methanol, and the first gasification project of its kind in the US, according to the company.

The plant is also designed to capture, compress and sell 90 percent of its CO2 production for use in enhanced oil recovery in the US Gulf region.

Construction is expected to begin in 2013, LCCE says.

LCCE will acquire petcoke from Koch Carbon under a long-term feedstock supply and logistics service agreement, which will amount to 7,000 metric tons of petcoke a day from Gulf Coast refiners. Through this process, LCCE would extract the energy in petcoke while avoiding emissions and producing no waste product.

According to the contracts, BP will purchase the majority of the methanol production. 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, a subsidiary of Denbury Resources, will purchase all of the captured CO2, which is expected to equal about 4.5 million tons annually, for use in its Gulf Coast enhanced oil recovery operations.

Now that the project has secured long-term commercial offtake contracts, Leucadia Energy (LCCE’s parent company) can seek necessary third-party financing for the project prior to construction, according to the company.

The Louisiana State Bond Commission has awarded LCCE $1.56 billion of Gulf Opportunity Zone and Hurricane Ike tax-exempt bonds 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 grant as part of an effort to capture carbon dioxide from industrial sources for storage or beneficial use. The DOE grant is for about $261 million. The project has also been awarded a $128 million federal investment tax credit.

A final investment decision in the project remains subject to third-party financing and board approval by Leucadia National Corporation.

After completion the plant will employ about 165 full-time employees, the company says. Operations and management at the plant will cost approximately $2 billion during its 30-year life.

In August, Air Products announced it will build and operate a 50 MW renewable energy plant in the UK using waste-to-energy gasification technology, divert up to 350,000 metric tons of non-recyclable waste from a nearby landfill per year.


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