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Panhandle Chief Says LNG Demand Could Triple by 2010

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 country.

"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."

John Norris

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