CMS to Expand LNG Terminal, Customer Services

North America's largest liquefied natural gas terminal is getting bigger --- CMS Energy officials confirmed last week they will expand the Lake Charles, LA terminal within a few months if federal approval is received. The LNG facility, which now produces up to 700 MMcf/d could eventually increase its daily production to 1.25 Bcf/d, CEO William McCormick said.

Just last week, McCormick said CMS had received a record 20 major bids to provide long-term capacity from its Lake Charles facility, which eventually could transport up to 120 cargoes a year. The CMS news follows recent announcements by other major energy producers, including El Paso Corp. and Enron Corp., which both have announced plans to build LNG facilities for U.S. use (see NGI, Feb. 12).

The CMS terminal received a record 55 cargoes in 2000 and McCormick said he expects LNG business there "to do at least that well, probably more" this year. At the briefing, McCormick and his executive team also outlined plans where they expect to see the most growth for the entire company in the near term.

Besides LNG, the CMS team discussed its part in the coming electric restructuring in Michigan, where the company serves 3.2 million gas and electric customers through Consumers Energy. They also provided insight into future expansion of its Powder River-area pipeline as well as highlighting plans to expand customer relations services and "rapidly grow its traditional businesses."

On LNG, McCormick admitted that the United States probably could accommodate "three or four large facilities" but expects some recent announcements to be "problematic."

"I think there's certainly room" for more facilities," he said because the "economics" of LNG are "so attractive," and will continue to be with the high cost of natural gas. "But some of the proposed terminals announced are problematic, such as the suggestion of a Florida pipeline," announced recently as a potential Enron Corp. LNG facility site.

McCormick predicted the proposed Florida site would have permitting problems because of its location, and other sites would take time to develop. "I certainly do not think there will be any more (facilities) anytime soon," because of the two-to-three year delay in siting and regulatory approval. "Having said that, there are opportunities to expand our (Lake Charles) facility, particularly from a contract position. We're number one, and we're going to aggressively maintain our leading position."

The Dearborn, MI-based company, which supplies energy and services in 20 states across the Midwest, Gulf Coast and Rocky Mountain region, will target growth in its regional U.S. businesses and in selected global markets, but McCormick left the door open as to future acquisitions or merger possibilities.

"We have excellent assets and there are a lot of attractive opportunities," McCormick said. "The situation has changed from our position since a year ago. The market has changed quite a bit. The business we have is more attractive."

Among other things, CMS has seen more demand for its firm capacity, and more long-term contracts. Tamela W. Pallas, COO of CMS Marketing, Services and Trading Co. (MST) said that one of the "positive" outcomes from the situation in California for CMS has been a request for more long-term contracts.

"In California, the situation may have slowed down deregulation (across the country), but on the positive side, we're seeing more long-term contracting," Pallas said. She said CMS's renewed focus on customer satisfaction also is paying off. "Integrity is more important in the marketplace," and she said that a company couldn't just talk about what it can provide. It has to follow through.

Earlier this month, MST was ranked first in customer satisfaction among the 68 largest natural gas marketing companies in the United States in an independent study by Mastio & Co. For the fourth time, researchers surveyed 1,200 energy buyers on 39 different customer satisfaction attributes, placing MST ahead of the pack.

Along those lines, Pallas expects CMS Viron Energy Services unit, which contracts with institutions to manage energy, to become on of the company's faster growing segments. Just yesterday, the Alameda County Board of Supervisors in California approved installing several energy efficiency projects by Viron to reduce and stabilize future energy costs.

"In the facility management area, we are looking for acquisitions," Pallas said. "A lot more companies are outsourcing their energy services and are concerned about energy consumption. This is a great area for CMS because we cover the market." Energy conservation services are a natural for CMS, she said, and as utility bills rise, more companies will look for a trusted provider.

CMS will leverage its gas pipeline business to grow across other CMS businesses, including aggressively developing West Texas and Powder River gas, McCormick said. That will mean actively marketing its Panhandle/Trunkline/Guardian transportation capacity for new gas-fueled power plants along the line. In the past 18 months, 5,650 MW of power plant load has committed to Panhandle and Trunkline, about 25% of its maximum daily capacity.

The Guardian pipeline's final certification should be completed "shortly," McCormick said. It received a favorable final Environmental Impact Statement in January, and should be in service by November 2002. The Centennial Pipeline, which extends from the U.S. Gulf Coast to Illinois to carry refined petroleum products, is expected to be in service January 2002.

The Fort Union gathering expansion in the Powder River Basin, which CMS owns 33% interest in, is expected to be in service by the fourth quarter. With that, COO William J. Haener said another expansion might be viable in three years. Capacity will increase to 634 MMcf/d this year, a 200 MMcf/d increase from current production.

Carolyn Davis, Houston

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