NORTH BEND — The Federal Energy Regulatory Commission's decision to deny Jordan Cove's permit came as a surprise to most people.

For Jordan Cove officials though, it was not the decision itself, but its timing, that was surprising.

With the company under pressure to prove demand for liquefied natural gas, Jordan Cove senior adviser Bob Braddock updated the Bay Area Chamber of Commerce Wednesday on the project's prospects and outlook for the rest of the year.

"We knew that we had not fully demonstrated to satisfy FERC at that time," Braddock said. "What surprised us was that they ruled on it at that point. Folks didn't expect for this to come down the pipe for some time."

Having been in negotiations to secure customers for the past few years without tangible contracts to provide to FERC, Braddock explained some of the issues the company has faced, now that it has announced a preliminary agreement with JERA Co. Inc.

"We have been working for the past three years with potential customers that would demonstrate need, and it just so happens that the process has gone on longer for a number of reasons," Braddock said. "Most of them have been just the state of the global economy, but primarily in our instance, one of our prospective customers was in the process of going through a merging of their energy purchasing activities with another."

The joint venture of the first and third largest electrical utilities in Japan, JERA is the largest purchaser of LNG in the world.

Veresen Inc.'s agreement with JERA calls for the purchase of one quarter of the plant's planned design capacity. Braddock played up the significance of JERA and also quantified the economic impact of its commitment.

"The process for entering into a contract for a customer of this size and a quantity that is quite significant, while the numbers may not mean much to you, when we talk about the commitment they are making, a 25 percent commitment for this facility is essentially the equivalent of about $3 million per day for the next 20 years," Braddock said. "It is not trivial. It is a commitment that requires a high level of approvals and a demonstrated need by the customer that they are prepared to enter such a significant financial commitment."

To explain why JERA would be interested in purchasing liquefaction capacity from Jordan Cove, Braddock described the company's position in the market and their plans for diversifying their sources for LNG in the future.

Over 40 percent of JERA's LNG currently comes from the Middle East, 10 percent from Russia and nearly none from North America.

Keeping their demand from Russia constant, the vision is to reduce dependency on the Middle East and purchase more from North America by 2022.

"They want to grow North America from essentially zero up to close to 10 percent," Braddock said. "They're building a portfolio more diversified and dependent on North America to take advantage of the recent technology breakthroughs that have occurred to generate a surplus of natural gas in North America."

LNG could be shipped from Jordan Cove to Japan in half the time it would take to ship it from the Gulf Coast. ]

"They are nine transit days away from Tokyo. Even for other North American sources, which they are seeking from the Gulf Coast, it's roughly twice the sailing time, and the importance of that to a firm like this is to get the same quantity of LNG, they'd need twice the amount of ships if they come from the Gulf," Braddock said.

Braddock said it was not a trivial investment, with each ship a $200 million investment.

As for what's to come, Braddock announced that JERA had kicked off its due diligence with lenders Wednesday, which would take 12-18 months to complete.

Intending to file for rehearing by April 11, Jordan Cove hopes to obtain a FERC certificate by the end of this year and if it does so, start construction in the second half of next year.

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Reporter Devan Patel can be reached at 541-269-1222, ext. 249, or by email at devan.patel@theworldlink.com. Follow him on Twitter: @DevanJPatel.