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U.S. Likely to See LNG Supply Growth from Atlantic LNG's Train 4

Atlantic LNG Co. of Trinidad and Tobago said that its $1.3 billion Train 4 liquefaction facility began producing liquefied natural gas (LNG) on Friday, "solidifying Trinidad's position as the largest exporter of LNG to the United States." However, the competition between the U.S. and Spain over LNG cargoes will remain a significant factor in determining how much LNG eventually arrives in U.S. ports.

Train 4 is designed to produce 5.2 million metric tons of LNG per year for export, and up to 12,000 b/d of natural gas liquids. Up to 690 MMcf/d of gas could be headed to the U.S. market. The train increases Trinidad's LNG capacity to 15 million metric tons or 720 Bcf per year (1.97 Bcf/d). The increase is about 60% more than what was exported to the United States in 2004.

Analyst Chris Theal of Calgary-based Tristone Capital said that Train 4 undoubtedly will supplement U.S. supply next year, but he also noted that competition for the LNG between the U.S. and with Spain will continue. "If you go back to the summer where you had prices that were so high even in Southeast Asia and Indonesia had issues with exporting [LNG], there was a cargo that went to Southeast Asia from Trinidad. I think it is a very fluid market and gas will migrate to the highest bid," he said.

"With the run-up in U.S. prices over the last week, Spain and the U.S. are close to parity, but winter prices are so strong in the U.K. and Spain, around $16, that as long as you have a $1 or $2 [arbitrage] gas is going to migrate to the other side of the Atlantic."

Theal predicts that U.S. LNG imports will climb in 2006 to about a 55% average load factor at the five existing U.S. import terminals from about a 38% load factor in 2005. "I think we'll see better than 38% in 2006, but we averaged about 55% in 2004 and I think that's probably as good as it's going to get in North America at least in 2006.

"We will see it get incrementally better as we bring on new capacity in 2007 and 2008... I would say we will see about 2-2.3 Bcf/d in 2006. We're going to be about 1.7 Bcf/d this year. If you are in a dynamic where you have real strong prices on the other side of the Atlantic, that may be an optimistic forecast."

The U.S. has a few other new trains on which to draw next year. Egypt brought on three trains this year, and there is one more new train in Nigeria. The Energy Information Administration is predicting that U.S. LNG imports will average about 2.74 Bcf/d in 2006.

Atlantic LNG's Train 4 is owned by the National Gas Co. of Trinidad and Tobago (11.11%), BP (37.78%), BG Group (28.89%) and Repsol YPF (22.22%). Train 4's first cargo will be lifted by BP.

Atlantic LNG's Train 4 began construction in 2003. General contractor Bechtel International Inc. partnered with over thirty local firms, employing 3,500 during construction. Atlantic LNG has increased its permanent employment from 120 at the start of its first Train in 1999, to 600 by the end of 2005.

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