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Shell-Owned LNG Tanker Arrives at Dominion's Cove Point for First Export Cargo

A liquefied natural gas (LNG) tanker owned by a subsidiary of Royal Dutch Shell plc arrived at Dominion's new export facility on Chesapeake Bay in Maryland on Wednesday and was expected to depart possibly within hours with the facility's first cargo.

Genscape Inc. analyst Jason Lord told NGI that a camera set up at the berth of the Dominion Energy Cove Point LNG LP terminal at Lusby, MD, showed the Gemmata, a Singapore-flagged, G-Class tanker owned by Shell NA LNG, docking early Wednesday morning. Three ship-tracking websites -- FleetMon, MarineTraffic and VesselFinder -- also confirmed the location of the 290-meter long ship.

Lord said LNG cargoes typically take 18-24 hours to load onto ships. However, since it is the first time Dominion would be running the terminal's LNG pumps in the opposite direction, it may take longer.

"That is generally expected in the commissioning process," Lord said. "It's going to be longer than usual, longer than a typical loading or unloading at a facility."

Cove Point's marketed capacity is fully subscribed under 20-year service agreements. Pacific Summit Energy LLC, a U.S. affiliate of Japan's Sumitomo Corp., as well as Gail (India) affiliate Gail Global (USA) LNG LLC, have each contracted for half of the marketed capacity. Sumitomo has agreements to serve Tokyo Gas Co. and Kansai Electric Power Co. Inc.

Although Lord did not know where the Gemmata is destined once it leaves Cove Point, the LNG would be marketed by Shell in the spot market, he said. Dominion spokesman Karl Neddenien said he could not comment on the ship's status, schedule or destination.

With the Gemmata's departure, Cove Point would become the second U.S. facility to export LNG sourced from domestically produced natural gas in the Lower 48. Cheniere Energy Inc.'s Sabine Pass LNG terminal in Cameron Parish, LA, began exporting LNG in February 2016. Lord said Cove Point would have an important distinction from Sabine Pass: Japanese customers under long-term contract.

"If you look at Cheniere's customers, they have not been Japanese buyers, even though spot cargoes have ended up in Japan," Lord said. "That's pretty unique to the facility in this perspective."

According to the U.S. Department of Energy (DOE), the Gemmata departed Sabine Pass twice in 2016, in February and April. On both occasions, the ship was loaded with enough LNG to convert to more than 2.9 Bcf and was bound for Chile. The report for 3Q2017, the most recent, was prepared by DOE's Office of Regulation and International Engagement, Division of Natural Gas Regulation.

"That would be expected, as Shell is a customer of Sabine," Lord said, who also confirmed the Gemmata's visits to Sabine Pass. "This shows how the market is changing from an 'A-to-B' type LNG market with repeating routes, and a portfolio player like Shell can optimize their routes and shipping.

"It would not be uncommon for this ship to go wherever, come back, maybe pick up from Sabine again, go elsewhere, come back to Cove Point -- whatever they've optimized. That is another thing we'll see develop. And we've seen other Shell ships that have delivered into [Kinder Morgan Inc.'s Elba Island LNG terminal near Savannah, GA] for example, and after they've done that, come right to Sabine to load up and go elsewhere."

On Monday, Shell issued a report that found LNG demand was strong in 2017, and predicted that it would increase at an average rate of 4% per year over the next 20 years. Shell also reported that 1,100 spot cargoes were delivered in 2017, a 17% increase year/year, and equivalent to three cargoes delivered every day.

DC Media Group, a citizen journalism site with ties to the Occupy movement, reported Wednesday that the Gemmata had arrived off Cove Point last Sunday, and that its arrival was three days early. The ship left the northbound shipping channel in Chesapeake Bay and steamed into the cove before dropping anchor off the point, according to the report.

"It did come in and anchor just down the way," Lord said, adding that Genscape's camera at Cove Point also saw the ship arrive on Sunday. "That could be typical. I don't think anything unusual of it. It's just probably the timeline of when they wanted the ship to show up to load the commissioning volume."

Last December, an LNG tanker docked at Cove Point to assist with the commissioning process. The Federal Energy Regulatory Commission in November issued an authorization for Dominion to export LNG produced during commissioning activities via vessel [CP13-113].

India's oil and gas minister said state-owned Gail has been trying to renegotiate its contract with Dominion. However, the company called the minister's claims a mischaracterization.

In late January, the Sierra Club agreed to drop a lawsuit contesting approvals of LNG exports from four U.S. facilities, including Cove Point.

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