LNG Grabs Larger Share of NE Power Market
The birth of a New England power plant will spawn more imports
of LNG to the United States. Last week it was announced that Sithe
Energies Inc. will feed its 1,600 MW Mystic Station in Everett, MA,
with LNG imported by nearby Cabot LNG Corp.
Sithe and Cabot LNG, a wholly owned subsidiary of Cabot Corp.,
made a 20-year gas sales and purchase agreement valued at more than
$4 billion. Cabot LNG subsidiary Distrigas of Massachusetts will be
the principal supplier of gas to fuel Mystic Station. Cabot will
supply Mystic with 70 Bcf/year, which is equivalent to 25 LNG
cargoes per year. "This agreement provides our Mystic Station
facility with a reliable, long-term energy source at an attractive
and preferential price. As a result, Sithe will be the lowest-cost,
most environmentally sound power generator in Boston and New
England," said Sithe CEO William Kriegel.
Mystic Station is expected to begin commercial operation in
2002. Cabot LNG will make the necessary infrastructure upgrades at
its LNG import terminal, also in Everett, to accommodate the
requirements of the new customer. Cabot will bring in LNG from
Algeria, which has proven gas reserves of more than 130 Tcf, and
from the world's newest LNG export facility in Point Fortin,
Trinidad, a location with proven gas reserves exceeding 20 Tcf.
Cabot LNG CEO Gordon Shearer said the price of the LNG is
indexed to market prices. The deal benefits from the Cabot facility
and the power plant being so close that pipeline transportation is
unnecessary. Shearer said the Mystic volumes represent about 55% to
60% of what Cabot is running through its terminal currently.
However, plans call for expansion of the terminal and additional
LNG supply commitments.
Cabot LNG is a 10% shareholder in the Trinidad LNG plant, and
currently contracts for 60% of the plant's supply. In addition, the
owners of the Trinidad plant are considering a proposal that would
triple the Trinidad facility's capacity to convert gas produced off
the country's coast into LNG for export to the United States and
LNG imports to the United States have been on the rise (see NGI Jan.
17). Last year's third quarter 1999's saw a significant percentage jump
in LNG imports. According to the U.S. Department of Energy's Office of Natural
Gas & Petroleum Import and Export Activities, total gas imports grew by
15% over the third quarter of 1998 while LNG imports were up a strong 221%
over the same period.
Shearer attributed the continuing rise in LNG importation to an
abundance of LNG in the Atlantic now that a number of LNG
developments have come on line. Also, the U.S. market is attractive
to LNG sellers relative to Europe and Asia. Shearer said he expects
LNG import growth to continue. Within five to seven years he said
the United States could be importing 2 Bcf/d of LNG, up from about
1 Bcf/d currently.
Cabot LNG is wholly owned by Boston-based Cabot Corp., a global specialty
chemicals manufacturer. Cabot LNG is also the parent company of Distrigas
of Massachusetts Corp., which imports and resells LNG to gas utilities, independent
power producers, marketers and others in the northeastern United States. Last
August it was announced that Cabot LNG would be separated from Cabot Corp.
through the issuance of a targeted stock as a value-enhancement initiative
(see NGI Aug. 23). Joe Fisher, Houston