Liquefied Natural Gas (LNG) imports could play a larger role inserving U.S. gas demand next year if strong domestic gas prices andan abundance of LNG on the spot market remain. While LNG servesonly a fraction of U.S. demand, imports have been growing thisyear, most recently with two agreements announced last week.

In the larger of last week’s two deals, CMS Marketing, Servicesand Trading, bought seven additional cargoes from Qatar LiquefiedGas (Qatargas). The LNG is being bought for next year for deliveryat the CMS Trunkline LNG receiving complex in Lake Charles, LA,with the first cargo loading in January. The remaining cargoes willbe loaded throughout 2000 at 55-day intervals. Terms of theagreement are confidential.

The shipments will come from the Qatargas facilities in RasLaffan Industrial City about 50 miles north of Doha. The gas fromthe shipments will be transported on CMS Trunkline’s gas pipeline.

“Our ability to conclude these purchases with Qatargasdemonstrates the innovative relationship between Qatargas and CMS,”said David Geyer, vice president of CMS Marketing, Services andTrading. “The LNG purchase agreement we have in place allows theparties to react quickly to the changing U.S. gas market and takesadvantage of CMS Energy’s unique array of LNG, gas trading and riskmanagement capabilities.”

Also last week, Coral Energy of Houston said it bought an LNGcargo from the North West Shelf Venture in Australia for deliveryat CMS’ receiving complex. The cargo of about 2.9 Bcf is Coral’ssecond LNG purchase. Coral entered the LNG import market in July1999 with the purchase of a Malaysian cargo of about 2.8 Bcf.

In September, CMS Marketing, Services and Trading bought threeLNG shipments from Qatar. The three cargoes, carrying a combined8.1 Bcf, will be delivered in November, December and February toLake Charles.

“Probably over the last two years, spot supplies of LNG havebeen abundant, and then over the last two years in the U.S. youwill see that the price of gas has been strong also, so it allseems to work together to make [LNG imports] work,” said CarlThompson, director of LNG supply for CMS Marketing Services andTrading.

Thompson said CMS will import eight LNG cargoes into LakeCharles on its own behalf in 1999. Next year the company isexpecting to bring in at least nine cargoes on its own behalf.

“Right now, world demand [for LNG] is off a little bit. Plus, in’99 and in 2000 there will be some new LNG plants coming on line,so that means there’s more supply.

“Generally speaking, if the Nymex [gas price] is probably lessthan $2.20, it would probably start to get pretty tough [to do anLNG deal], but we have done deals at that level or lower. It’s nota standard rule, but it gets harder.”

The United States competes with the Far East and Europe for LNGon the world market. Asian countries pay more for LNG because theyhave no pipeline gas supplies. LNG also fetches higher prices inEurope, but the gap with the United States is narrowing. Europeannatural gas prices are coming down with the advent of pipeline openaccess and increased pipeline supplies compared to five years ago.

The spot market for LNG has only been around five or six years,Thompson said. “It’s still new. To the U.S. it’s only been goingmaybe about three years. I think we have a long way to go before itis being bought and sold like oil, but we are getting there.”

CMS said it expects up to 25 LNG shipments to be delivered intoits Trunkline system this year. By comparison, the complex had 17total shipments delivered in 1998.

CMS bought the Trunkline system from Duke Energy in November1998. Since the purchase, CMS has intensified the activity of theLake Charles facility. CMS-MST in April agreed to buy 9.3 Bcf ofLNG in several shipments from the North West Shelf LNG project inAustralia for delivery to the CMS Trunkline LNG facility.

Joe Fisher, Houston

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