Dominion Cove Point LNG Inc. (DCP) is seeking long-term, multi-contract authorization from the Department of Energy (DOE) to export domestically produced liquefied natural gas (LNG) from its import terminal in Lusby, MD, south of Baltimore. Export approval would boost activity at DCP’s terminal, ease constraints on northeastern pipelines and give Marcellus Shale gas producers an additional outlet for their supply, according to the company.
The subsidiary of Richmond, VA-based Dominion filed an application to export up to 1 Bcf/d of domestic natural gas, or approximately 7.82 million metric tons per year, over a 25-year period to any country that has, or in the future develops, the capacity to import LNG via tanker, or that has — or in the future enters into — a free trade agreement (FTA) with the United States. Assuming it receives DOE approval, DCP said it expects to begin exports by the end of 2016.
DCP said it will file in the near future a separate application request for long-term, multi-contract authorization to export domestically produced LNG to any country that does not have a FTA with the United States.
DCP said its request is part of a plan to develop, own and operate facilities at its existing LNG import terminal to liquefy domestically produced natural gas and export it to foreign markets. DOE authorization hinges on the Federal Energy Regulatory Commission first giving DCP the go-ahead to construct liquefaction facilities, the company said.
It anticipates entering into one or more long-term (more than two years and up to 25 years) contractual agreements with customers for gas liquefaction and LNG export services. DCP said it does not intend to hold title to the LNG itself and is requesting authorization to act as agent on behalf of other shippers/customers that will hold title to the LNG.
The DCP terminal connects, via its own pipeline, to the major Mid-Atlantic gas transmission systems of Transcontinental Gas Pipe Line, Columbia Gas Transmission and Dominion Transmission.
“Many of the major gas pipelines in the northeastern U.S. are already feeling the effects of growing natural gas production from the Marcellus Shale (one of the largest shale plays, with among the lowest development costs) as well as the Utica Shale, another promising shale play. The pipeline industry in this area has recently experienced a surge in pipeline expansions as the gas producers look for ways to get their gas to markets. With export authorization, DCP would be able to provide an additional outlet for these growing domestic gas supplies,” DCP said.
Some natural gas customers have protested the export applications of U.S. LNG terminals, urging the DOE to be cautious in approving applications that would change the U.S. from a gas importer into a gas exporter based primarily on shale deposit discoveries (see NGI, Aug. 15a).
In August DCP filed an application with the DOE to re-export foreign-sourced LNG, saying this would give its import customers the flexibility to respond to demand and price swings in foreign markets and would maintain DCP’s terminal in a “cooled-down state” so it can continue to operate [FE Docket No. 11-98-LNG].
The application still is pending at DOE (see NGI, Aug. 15b). DCP is seeking permission to re-export up to a total of 150 Bcf of LNG that was previously imported into the United States from foreign sources. The re-exports, which would span a two-year term, would begin on Dec. 1 and would be shipped from DCP’s terminal to any country that has the capacity to import LNG via tanker and with which trade is not prohibited by U.S. law or policy. DCP also will need the approval of FERC.
Under its proposal, DCP said it intends to operate its terminal as a temporary storage facility for its import customers, thus giving them “increased flexibility to respond effectively to changes in domestic and world markets for natural gas and LNG.”
DCP customers won’t be the only ones to gain if DOE approves the application. “The ability to use re-export capability to attract cargoes is also beneficial to the LNG terminal remaining in a cooled-down state so that it is operationally capable of providing DCP’s certificated services. With re-export capability, DCP will be more likely to receive cargoes even when prices are higher elsewhere since DCP’s import shippers will have the flexibility to sell LNG in a higher-priced market even after initial delivery,” DCP said.
Regular arrival of cargoes — approximately one every four months — is critical to keep the DCP terminal’s cryogenic facilities cooled to a temperature of about minus 260 degrees Fahrenheit. This allows the terminal to be fully operational and able to receive LNG imports. However, the terminal has received only one cargo since the beginning of the year.
The decline in usage of the Cove Point LNG terminal and related facilities is largely driven by development of the Marcellus and other shale gas plays, and the wide disparity in the price of LNG between the United States and other world markets, the company said. These factors have led to a plentiful and inexpensive supply of natural gas in the U.S. and higher demand and prices for LNG elsewhere in the world.
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