The role of liquefied natural gas (LNG) in the U.S. gas supplymix continues to grow. Last year’s third quarter saw a significantpercentage jump in LNG imports, and that trend likely will continuewith LNG import facilities being reopened in Maryland and Georgia.

Last week saw Columbia LNG Corp. go ahead and buy the other halfof the Cove Point LNG Limited Partnership it did not already ownfrom Potomac Electric Power Co. unregulated subsidiary PotomacCapital Investment Corp. An affiliate of Columbia LNG Corp. paid$40.7 million. The sale gives Columbia total ownership of the CovePoint LNG terminal. Cove Point LNG plans for an open season nextmonth for bids on import capacity. Pending approval by the FederalEnergy Regulatory Commission, Cove Point plans to reopen its LNGmarine terminal facilities by late 2001.

Located in Lusby, MD, the Cove Point terminal includes LNGstorage and terminal operations, and an 87-mile gas pipelinethat connects with pipelines in northern Virginia. It is able tosend out up to 1 Bcf/d. The Cove Point LNG terminal currentlyprovides peak shaving services to meet high-demand periods forcustomers in the mid-Atlantic and southeastern regions. PCI andColumbia had owned 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.”

Meanwhile, Southern LNG Inc. won Department of Energy approvallast week to begin importing up to 82 Bcf/year from Trinidad andTabago over 22 years to its currently idle Elba Island, GA,terminal. Last month FERC gave Sonat preliminary authorization torecommission the terminal at a cost of $26.2 million after nearly20 years of inactivity. The plant will have a baseload sendout rateof 330,000 Mcf/d and a peak-day sendout of 540,000 Mcf/d.

Sonat recently had a successful open season for a revitalizationof the of the mothballed Elba terminal. The winner of all 4 Bcf ofcapacity was Sonat Energy Services (see NGI July 5).

The FERC authorization was good news not only for Southern LNGbut also for Atlantic LNG of Trinidad, which owns the liquefactionplant in Trinidad that would supply LNG to Elba Island. AtlanticLNG plans to proceed with an expansion of its Trinidad LNGfacility, while an overseas consortium — known as the NCMADevelopers — plans to develop offshore gas reserves to beliquefied by Atlantic LNG and shipped to the Southern LNG terminalfacility.

Increased demand for LNG in the United States is being driven bya number of factors, according to Bridges. Obviously, demand forgas is growing, for power generation in particular. However, theLNG picture also is supply driven. “There are gas reserves allaround the world. There are a lot of companies looking for ways tomonetize their reserves and looking for ways to get them to market.LNG is a very viable way to get natural gas to the marketplace. TheUnited States is a very attractive market.” He cited gas pricetransparency in the US that attracts LNG sellers from around theglobe.

In the short term, there is excess LNG capacity worldwide,thanks mainly to the economic downturn in Asia, Bridges said.As Asian markets start to pick up and new markets for LNG developin India and China, some of that will begin to dry up, Bridgessaid. Long term, he expects LNG to come to Cove Point from theAtlantic basin and other areas. Deliveries from the Middle and FarEast likely will be on the spot market. “LNG by its nature isn’tgoing to dominate a market like pipeline gas might.”

According to the U.S. Department of Energy’s Office of NaturalGas & Petroleum Import and Export Activities, total gas importsgrew by 15% in the third quarter of 1999 over the third quarter of1998 while LNG imports were up a strong 221% over the same period.

During the third quarter of last year, four companies —Distrigas; Duke Energy; CMS Marketing; and Coral Energy Resources— imported 11 spot LNG cargoes from five different countries:Algeria, Australia, Malaysia, Qatar, and Trinidad. The importstotaled 23.7 Bcf. The period marked the first time LNG has beenimported from Malaysia with a cargo brought in by Coral in August.

Under long-term LNG contracts, Distrigas imported 2.5 Bcf fromAlgeria at $2.36/MMBtu and 16 Bcf from Trinidad at $2.24/MMBtu.Duke imported 7.92 Bcf from Algeria at $2.00/MMBtu. And 16.9 Bcf ofLNG was exported to Japan from the United States at $2.90/MMBtu(delivered).

Under short-term contracts, Distrigas brought in 5.9 Bcf fromTrinidad at $2.12/MMBtu. Duke imported 5.6 Bcf from Algeria at$2.25/MMBtu. CMS imported 2.3 Bcf from Australia at $2.04/MMBtu and7.4 Bcf from Qatar at $2.40/MMBtu. Coral brought in 2.6 Bcf fromMalaysia at $2.15/MMBtu.

Looking at the first three months of 1999 and comparing them tothe same period of 1998, the DOE found LNG imports grew by 109%over the period to 120.9 Bcf from 57.9 Bcf.

Joe Fisher, Houston

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.