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CMS Plans to Expand LNG Terminal Deliverability

CMS Plans to Expand LNG Terminal Deliverability

Ending a record year for LNG imports, CMS Trunkline LNG Co. announced plans for a possible deliverability expansion at its LNG import terminal in Lake Charles, LA. The company is conducting an open season to offer firm, long-term LNG terminal services starting in January 2002.

"The outcome of this open season will help CMS Trunkline LNG plan for the future use and potential expansion of its LNG terminal in Lake Charles, LA. This terminal will be an important contributor in helping to satisfy the growing natural gas demand in the U.S. market," said Christopher A. Helms, president of CMS Panhandle Pipe Line Companies. Helms said the open season would determine the size of the expansion but he noted that the company would like to add 300 MMcf/d of deliverability, bringing the facilities total delivery capacity to 1 Bcf/d, which is equal to the capacity of downstream pipeline partner Trunkline Gas.

In contrast to the tight economics of the past, record high domestic gas prices have preserved favorable economics for LNG imports for years to come. Helms said overseas LNG producers likely would get $5/MMBtu netbacks in the current U.S. market.

"The LNG is priced at the Henry Hub price and is sold by any one of the eight shippers that have used the terminal," said Helms. "Today about 60% of the LNG has gone up Trunkline's longhaul pipeline so that means 40% of what has come through the terminal has gone into [Louisiana pipeline grid] and probably to the Northeast [Florida or Texas]." Maximum rates for CMS Trunkline LNG service are about $1.20/MMBtu and transportation rates to the Henry Hub via Trunkline range between 7 and 12 cents, said Helms.

"A number of the people we are talking to include importers, marketing companies and producers who are developing LNG projects. As these producers are looking at bringing new LNG projects on line in 2002, 2003 or 2005, they want to be assured that they have an outlet to the North American market and we are to the point right now where demand will soon exceed deliverability."

CMS is not alone in the LNG boom in the United States this year. There has been a frenzy of activity in the relatively small U.S. LNG sector, including plans to recommission two mothballed terminals: Cove Point LNG in Maryland and Southern LNG's terminal at Elba Island, GA. In addition, Columbia Gas sold its ownership stake in the Cove Point facility to Williams, and Cabot LNG sold its LNG facility in Boston --- the only other active import terminal besides CMS's Lake Charles facility --- to Belgium's Tractebel.

The CMS LNG facility has an existing capacity to receive 90 ship cargoes per year at 2.8 Bcf of gas per ship on average, and is expected to receive a record 55 ship cargoes with a total of 135 Bcf of gas by year-end.

The open season for the expansion extends from Dec. 15 through Feb. 15. Requests for service should have a minimum length of 10 years.

Rocco Canonica

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