Dominion Cove Point LNG LP (DCP) has filed an application with the Department of Energy (DOE) to re-export foreign-sourced liquefied natural gas (LNG), saying this would give its import customers the flexibility to respond to demand and price swings in foreign markets and would maintain its near-idle terminal in a “cooled-down state” so it can continue to operate.

DCP, a subsidiary of Richmond, VA-based Dominion, is seeking permission to re-export up to a cumulative 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 in Calvert County, MD, to any country with 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 the Federal Energy Regulatory Commission (FERC).

Under its proposal, DCP said its 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 stressed that it will not export domestic gas supplies.

“When U.S. gas supply and demand are in relative balance, LNG will be imported to the LNG terminal, regasified and used to supplement domestic gas supply. When U.S. gas is plentiful and inexpensive, as it is currently, DCP’s import customers will have the option of importing LNG with the ability of later re-exporting it to serve other markets if desired,” DCP said said in the application filed with DOE’s Office of Fossil Energy [FE Docket No. 11-98-LNG].

“DCP does not intend to hold title to LNG itself and is requesting authorization to act as agent on behalf of other entities who themselves hold title to LNG,” the company said.

DCP’s 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 LNG cargoes — approximately one every four months — is critical at the DCP terminal because the cryogenic facilities must remain cooled to a temperature of about minus 260 degrees Fahrenheit in order to be fully operational and able to receive LNG imports, according to the company. However, DCP has not received a cargo since February (see NGI, June 6).

In late July FERC approved an interim partial settlement under which Shell NA LNG LLC will make a one-time delivery of LNG via cargo “on or about Aug. 15, but no later than Aug. 31” to DCP’s terminal in Maryland to keep its cryogenic facilities cooled (see NGI, Aug. 1).

Under the terms of the limited settlement, Shell will deliver, or cause to be delivered, approximately 2,560,000 Dth of LNG to the Cove Point terminal by tanker, where Cove Point will accept it and then sell it to Statoil Natural Gas LLC at a price of $4.75/Dth. And it stipulates that on the following day Statoil shall nominate for vaporization and delivery natural gas quantities not to exceed 22,000 Dth/d, except with written consent of Cove Point, which it says will not be unreasonably withheld.

The interim settlement, which DCP and its import customers hammered out at a technical conference on July 14, will apply only to this one delivery of the Shell LNG cargo to the Cove Point terminal in August. It is intended to give the parties more time to arrive at a more lasting solution.

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 told FERC. 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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