Sithe Energies Inc. and Cabot LNG Corp., a wholly ownedsubsidiary of Cabot Corp., made a 20-year gas sales and purchaseagreement valued at more than $4 billion. Cabot LNG subsidiaryDistrigas of Massachusetts will be the principal supplier of gas tofuel Sithe’s Mystic Station, a 1,600-megawatt generating plant inEverett, MA.

Cabot will supply Mystic with 70 Bcf/year, which is equivalentto 25 LNG cargoes per year.

“This agreement provides our Mystic Station facility with areliable, long-term energy source at an attractive and preferentialprice. As a result, Sithe will be the lowest-cost, mostenvironmentally sound power generator in Boston and New England,”said Sithe CEO William Kriegel.

Mystic Station is expected to begin commercial operation in2002. Cabot LNG will make the necessary infrastructure upgrades atits LNG import terminal, also in Everett, to accommodate therequirements of the new customer. Cabot will bring in LNG fromAlgeria, which has proven gas reserves of more than 130 Tcf, andfrom the world’s newest LNG export facility in Point Fortin,Trinidad, a location with proven gas reserves exceeding 20 Tcf.

Cabot LNG CEO Gordon Shearer said the price of the LNG isindexed to market prices. The deal benefits from the Cabot facilityand the power plant being so close that pipeline transportation isunnecessary. Shearer said the Mystic volumes represent about 55 to60% of what Cabot is running through its terminal currently.However, plans call for expansion of the terminal and additionalLNG supply commitments.

Cabot LNG is a 10% shareholder in the Trinidad LNG plant, andcurrently contracts for 60% of the plant’s supply. In addition, theowners of the Trinidad plant are considering a proposal that wouldtriple the Trinidad facility’s capacity to convert gas produced offthe country’s coast into LNG for export to the United States andEurope.

LNG imports to the United States have been on the rise (see DailyGPI, Jan. 11). Last year’s third quarter1999’s saw a significant percentage jump in LNG imports. According tothe U.S. Department of Energy’s Office of Natural Gas & PetroleumImport and Export Activities, total gas imports grew by 15% over thethird quarter of 1998 while LNG imports were up a strong 221% over thesame period.

Shearer attributed the continuing rise in LNG importation to anabundance of LNG in the Atlantic now that a number of LNGdevelopments have come on line. Also, the U.S. market is attractiveto LNG sellers relative to Europe and Asia. Shearer said he expectsLNG import growth to continue. Within five to seven years he saidthe United States could be importing 2 Bcf/d of LNG, up from about1 Bcf/d currently.

Cabot LNG is wholly owned by Boston-based Cabot Corp., a globalspecialty chemicals manufacturer. Cabot LNG is also the parent companyof Distrigas of Massachusetts Corp., which imports and resells LNG togas utilities, independent power producers, marketers and others inthe northeastern United States. Last August it was announced thatCabot LNG would be separated from Cabot Corp. through the issuance ofa targeted stock as a value-enhancement initiative (see Daily GPI, Aug. 17).

Sithe, founded in 1984 and headquartered in New York City, has aglobal portfolio of more than 28,000 megawatts in operation, underconstruction, or in active development. Of the company’s 50-someplants, 40 are located in the northeastern United States. The companyis 60% owned by Paris-based Vivendi, a utilities and environmentalservices company. Marubeni Corp., a Japanese trading company, owns30%, and the remaining 10% is owned by Sithe management. In OctoberSithe hired Goldman, Sachs & Co. to advise it in the sale of thecompany (see Daily GPI, Oct. 22).

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