Dominion Resources and Statoil ASA announced last Monday they have signed a 20-year agreement that gives Statoil access to increased capacity at the Dominion Cove Point liquefied natural gas plant (LNG) located on the Chesapeake Bay in eastern Maryland.

With the deal, which is to take effect in 2008-2009, Statoil said it has secured a fourfold increase in its access to LNG in the U.S. market. The Norwegian oil company currently owns 250 MMcf/d of terminal send-out capacity at Cove Point, and the transaction would give it an additional 800 MMcf/d of plant send-out capacity when Dominion completes its planned expansion of the LNG terminal.

Statoil would have access to 1.05 Bcf/d of the total 1.8 Bcf/d of plant send-out capacity at the expanded Dominion Cove Point facility. The remaining 750 MMcf/d of capacity will be owned Shell, BP and peaking customers, said Dominion spokesman Dan Donovan.

The planned expansion also would hike the storage capacity of the LNG facility by 6.8 Bcf to 14.6 Bcf, with all of the new capacity going to Statoil, he said. Statoil currently has 2 Bcf of storage capacity at the Dominion Cove Point plant.

The expansion also calls for associated pipeline expansions in Maryland and Pennsylvania, and a related storage project in Pennsylvania, Donovan said. The energy company plans to file an application seeking FERC approval of the facility expansion and pipeline projects in the fall, he told NGI.

Construction of new LNG storage tanks would begin as soon as regulatory approval is received and will take about three years to complete, Richmond, VA-based Dominion Resources said. New pipelines in Maryland and Pennsylvania will be timed to go into service no later than the completion of the new LNG facilities, which is anticipated to be in late 2008.

Cove Point’s location “is strategically important [to us] for two reasons,” said Peter Mellbye, executive vice president for natural gas in Statoil. “One relates to the sailing distance for LNG from our Snohvit development in the Barents Sea and possible future LNG projects. The other is the terminal’s proximity to important end-user markets with a big demand for natural gas around Washington DC and New York.”

After Snohvit comes on stream, he estimated Statoil will be importing 0.25 Bcf/d through Cove Point.

Dominion purchased the LNG terminal at Cove Point in 2002 and re-opened it in the summer of 2003. The plant is located on the Chesapeake Bay, just south of Baltimore.

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