Two Trinidad-based LNG exporters are protesting a rate hike request by Southern LNG for terminaling at its Elba Island import station, saying the request would result in 260% cumulative increases since the project was first proposed. They warned that because of “inefficient high-cost bottlenecks in the gas chain, the United States’ gas market will become less attractive as a destination for LNG supplies.”

Point Fortin LNG Exports Ltd. (PFLE) and BG LNG Train 3 Ltd. (BGLNG), whose shareholders are affiliates of producers offshore Trinidad, filed a protest last week with the Federal Energy Regulatory Commission (RP02-129). They pointed out that the project that originally had been estimated to cost $20.7 million, had already gone through one cost increase to $34.8 million and now seeks an increase to 74.8 million.

They urged the Commission to summarily reject portions of the Section 4 filing and set the rest for hearing. Southern LNG had sought to have the new rates become effective Feb. 1. In making the filing Dec. 21, 2001 Southern LNG said the rate hike is intended “solely” for the purpose of updating costs underlying the initial rates for service at its LNG terminal located on Elba Island, GA.

PFLE and BGLNG have contracts with El Paso Merchant Energy (EPME) to sell production from the second and third LNG trains currently under development at Point Fortin, Trinidad. While their contracts are to deliver gas to the inlet of the Elba Island terminal, outside FERC’s jurisdiction, the cost of terminaling has a direct effect on the cost of the LNG, the two said. They are particularly concerned about “the lack of an arms-length relationship” between the owner of the terminal, Southern LNG, and EPME, which has leased 100% of the terminal capacity. Both are subsidiaries of El Paso Energy.

LNG from Trinidad has “the lowest LNG production costs in the world,” and it’s a short haul to Elba Island, but “inefficiencies in United States LNG terminals will not only depress the ability of the United States market to access and attract LNG generally, but may have a specific impact on LNG imports from Trinidad.

“If inefficiencies at the United States end of the LNG chain decrease the netback prices, on the basis of which the Republic of Trinidad and Tobago is compensated, it may be very difficult for producers to persuade the government to approve future LNG exports to the United States as opposed to attractive alternative LNG markets such as Europe.”

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