KeySpan apparently had a grand design in mind when it purchased the Algonquin LNG peak shaving facility in Rhode Island from Duke Energy last December. The company has announced an agreement with BG LNG Services to upgrade the facility and turn it into an LNG import terminal that could be ready to take deliveries in 2005.

KeySpan said it expects the project will cost about $50 million. The 600,000 bbl FERC-regulated LNG storage and peak shaving facility in Providence currently provides LNG storage to local gas utilities, including KeySpan Energy Delivery and New England Gas Co., which includes the former Providence Gas Co.

The facility currently is filled each summer by tanker trucks that bring LNG from Tractebel’s LNG terminal in Boston. The proposed upgrades would allow those deliveries to be made instead by ship and would include infrastructure improvements to allow gas to be transported to market via the Algonquin Pipeline G-System.

“KeySpan sees this initiative with BGLS at the Providence facility as an investment in the future of the New England region and its growth and vitality, as well as a way of enhancing the overall reliability of the region’s energy supply,” said KeySpan CEO Robert B. Catell. Currently LNG provides 10-15% of New England’s annual gas requirements and about 35% on peak use days during the heating season.

BG LNG has been on an aggressive growth track, buying 80% of the capacity in the Trunkline LNG terminal in Lake Charles, LA, filing plans to build a new Louisiana pipeline to create an alternative route to deliver the LNG to the Gulf Coast gas grid and lining up significant LNG supply for Lake Charles and its other LNG terminal in Canvey Island, England. This deal with KeySpan will further bolster its presence in the U.S. LNG business.

BG LNG Services recently signed agreements with Nigeria LNG Ltd. for a 20-year supply (116.2 Bcf/year, beginning in 2005 or early 2006) from the NLNG Plus project (Trains 4 and 5) in Finima, Bonny Island, Nigeria. Subsidiary BG Gas Marketing Ltd. also signed an agreement with a Marathon Oil subsidiary for a 17-year supply of LNG (3.4 million tonnes per year or about 158 Bcf/year) beginning in 2007 from a proposed LNG project to be developed by Marathon and its partners on Bioko Island, Equatorial Guinea.

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