Strong and growing interest in LNG importation spurred ColumbiaLNG Corp. to go ahead and buy the other half of the Cove Point LNGLimited Partnership it did not already own from Potomac ElectricPower Co. unregulated subsidiary Potomac Capital Investment Corp.

An affiliate of Columbia LNG Corp. paid $40.7 million. The salegives Columbia total ownership of the Cove Point LNG terminal. CovePoint LNG plans for an open season next month for bids on importcapacity. Pending approval by the Federal Energy RegulatoryCommission, Cove Point plans to reopen its LNG marine terminalfacilities by late 2001.

Located in Lusby, MD, the Cove Point terminal includes LNGstorage and terminal operations, and an 87-mile gas pipeline thatconnects with pipelines in northern Virginia. It is able to sendout up to 1 Bcf/d. The Cove Point LNG terminal currently providespeak shaving services to meet high-demand periods for customers inthe mid-Atlantic and southeastern regions. PCI and Columbia hadowned the facility equally since 1994.

“The completion of this sale will allow PCI to focus its capitalresources on its high-growth telecommunications strategy,” saidJohn D. McCallum, PCI President.

Columbia LNG President Michael Bridges said, “Columbia saw agood business opportunity here with the LNG import business.There’s clearly a renewed interest in LNG imports into the UnitedStates.” He cited recent LNG import activities by Coral Energy andEnron, among others and said his company has talked to a number ofpotential importers who have expressed “strong indications ofinterest” in Cove Point with an eye toward serving Mid-Atlanticmarkets.

“Most companies recognize that Cove Point being up on the EastCoast is a very strategic location.” Increased demand for LNG inthe United States is being driven by a number of factors, he said.Obviously, demand for gas is growing, for power generation inparticular. However, the LNG picture also is supply driven. “Thereare gas reserves all around the world. There are a lot of companieslooking for ways to monetize their reserves and looking for ways toget them to market. LNG is a very viable way to get natural gas tothe marketplace. The United States is a very attractive market.” Hecited gas price transparency in the United States that attracts LNGsellers from around the globe.

The role of LNG in the U.S supply mix continues to grow. The thirdquarter of 1999 saw a significant percentage jump in LNG imports (seeDaily GPI, Jan. 11). According to theU.S. Department of Energy’s Office of Natural Gas & PetroleumImport and Export Activities, total gas imports grew by 15% over thethird quarter of 1998 while LNG imports were up a strong 221% over thesame period.

In the short term, there is excess LNG capacity worldwide,thanks mainly to the economic downturn in Asia, Bridges said. AsAsian markets start to pick up and new markets for LNG develop inIndia and China, some of that will begin to dry up, Bridges said.Long term, he expects LNG to come to Cove Point from the Atlanticbasin and other areas. Deliveries from the Middle and Far Eastlikely will be on the spot market. “LNG by its nature isn’t goingto dominate a market like pipeline gas might.”

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