NGI The Weekly Gas Market Report
FERC last week awarded Southern LNG Inc. a preliminarydetermination (PD) on the non-environmental aspects of its proposalto build new facilities and re-activate its liquefied natural gasterminal on Elba Island, GA to handle imports equaling 330 MMcf/d.
The Commission said the project was consistent with its newpolicy statement on new facility construction. It “concludes thatSouthern LNG’s project can proceed without subsidies from, ordegradation in service to, its existing customers” or adverseimpacts. Southern LNG is an affiliate of of Southern Natural Gasand a subsidiary of El Paso Energy.
The PD issued by the Commission last Wednesday was good news notonly for Southern LNG, whose Elba Island facilities have beenmothballed since the 1980s, but for Atlantic LNG Co. of Trinidadand Tobago, which owns the liquefaction facility that would supplyLNG to Elba Island [CP99-579].
Based on the favorable PD from FERC, Atlantic LNG plans toproceed with an expansion of its Trinidad LNG facility, while anoverseas consortium – known as the NCMA Developers – will developadditional offshore natural gas reserves to support the expansion.The Southern LNG project is targeted to be in service at thebeginning of the third quarter of 2002.
The Southern LNG project will be of “immediate benefit” toSouthern Natural customers, who have been footing the cost for theexisting, mothballed Elba Island facilities. Once reactivated, thepipe customers no longer will be obligated to pay the unrecoveredinvestment of $58 million for the existing LNG facilities. Thecosts will be shifted to Southern LNG’s marketing affiliate, SonatEnergy Services Co. (SES), which has contracted for the terminalcapacity on Elba Island.
Southern LNG held an open season last June, after which itexecuted a binding contract with affiliate SES for 100% of thecapacity of the Elba Island terminal. The contract, which has aterm of 22 years, will enable SES to store up to 4 Bcf of naturalgas in LNG form, and receive up to 330 MMcf/d of gas in vaporizedform.
In November, SES asked the Department of Energy (DOE) forpermission to import up to 82 Bcf/year for 22 years from theAtlantic LNG project in Trinidad. SES said the largest increase inLNG demand is forecasted for the southeastern section of the U.S.Furthermore, it said the interconnection of Southern LNG’sfacilities with Southern Natural’s pipeline and other pipelineswould potentially open up markets for the imported gas in otherparts of the nation. DOE granted SES the authority earlier thismonth. SES is banking on the demand for LNG becoming as hot in theUnited States as it is in overseas markets.
Southern LNG said initial rates for the project would be basedon recommissioning costs of $26 million and an annualcost-of-service of about $23 million.
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