Panhandle Chief Says LNG Demand Could Triple by 2010
Christopher Helms, president of CMS Panhandle Pipe Line Co.,
estimated that LNG use will swell to take up 3.5% of the predicted
30 Tcf of gas demand by 2010. In an interview with NGI, Helms said
Panhandle is working toward building LNG trade to the same level as
crude oil trading, complete with a futures and financial market,
with Lake Charles serving as the hub for all operations.
Helms said he is confident that LNG trade will grow by leaps and
bounds from its current level of just under 1% of the U.S. gas
demand. LNG imports to the Lake Charles facility have increased
sizably since CMS bought Panhandle from Duke in 1998. Twenty eight
cargoes are already scheduled this year, compared to 27 for the
entire year 1999 and 17 delivered cargoes in 1998. Just last week,
CMS Marketing Services & Trade announced an agreement to import
10 LNG shipments (equal to 24 Bcf) from Qatar (see NGI, April 24).
And CMS has just started to tap the facility's potential. Helms
said Lake Charles could legitimately receive 150 cargoes per year,
or one every other day.
"The challenge is to get a good baseload business, which we're
working toward," Helms said. "My job is to make that transition and
to make sure that LNG is competitively priced so that it is a
viable option. The demand is there. We have a large market in the
Midwest. Our customers there consume 250 Bcf/year. Why shouldn't
LNG be a part of that?"
The time is right to be an LNG importer, Helms said, thanks to
high domestic prices. "We have found a strong market for our spot
cargoes. With $3 gas at the wellhead, LNG is very competitive. It's
a great environment right now to sell LNG."
Despite the admission that the LNG tanker fleet is "getting long
in the tooth," Helms believes the transportation situation and
specifically LNG tanker construction is picking up. Many
international companies are beginning to construct new vessels.
Tankers are selling for around $140 million each, whereas a couple
of years ago, the price was over $200 million. While Panhandle does
not own any ships currently, Helms said the company is considering
it and would ideally like to own "a couple of vessels."
More LNG players are on the horizon. El Paso Energy and Columbia
Energy (soon to be NiSource) are currently in the process of
reactivating LNG import facilities on the East Coast. Sonat, now an
El Paso subsidiary, successfully petitioned FERC to re-open the
Elba Island LNG facility in Georgia, and Columbia is working on
getting the go-ahead for the Maryland-based Cove Point plant (see
NGI, Jan. 17 and March 20). The long-running Massachusetts-based
Distrigas plant is the only other LNG import terminal in the
"Will Cove Point and Elba Island compete with Lake Charles?
Yes," said Helms. "But in the overall picture, these new plants
signal a more active LNG industry, which is good for Panhandle. The
fact is this market is growing."
Helms said the Lake Charles facility is prepared to handle the
increased demand and he said the facility offers a wide range of
services that LNG customers find useful. Chief among these
advantages is the facility's 6.3 Bcf of above-ground LNG storage.
These storage facilities enable flexible withdrawal capabilities
and can be almost completely refilled with only two cargoes. He
also said that there are some disadvantages to the facility, such
as its location. Based in Lake Charles, LA, the facility is farther
away than its competitors from the LNG producing regions.
Projects are underway to add more value to the Lake Charles
plant. Helms said a good possibility in the near future is the
addition of a gas processing plant, so that the liquids produced
through the fractionation process can be marketed. "We want to
develop and effectively sell a whole set of products and services
that the domestic industry as well as the producers will want to
take advantage of," he said. "With oil in the $25/barrel range, the
value of liquids is key." Also on the horizon is the launch of an
electronic bulletin board for the LNG facility. Helms said that
could be available as early as this summer.
Overall, Helms said momentum is building within CMS and
throughout the industry for LNG trade. "LNG was once the red-headed
step-child. Our crew at Lake Charles used to see only a couple of
imports per year. Now, there is genuine excitement about the future
of the facility. Just recently, we imported five cargoes in one
week. We look forward to this growth continuing."