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Cove Point LNG starts long-term service

10 Apr 2018 19:09 (+01:00 GMT)
Cove Point LNG starts long-term service

Houston, 10 April (Argus) — The Cove Point LNG export terminal near Lusby, Maryland, has started long-term contractual service for gas liquefaction and LNG exports, facility owner Dominion said today.

"After completing a planned maintenance outage, the facility has been ramping up to full production of LNG from natural gas provided by its export customers since late March," Dominion said.

The BP-controlled Patris LNG vessel, which has capacity of 173,400m³, equivalent to about 3.6 Bcf (102mn m³) of gas, may load the first long-term cargo at Cove Point. The vessel was offshore the mid-Atlantic coast today, but still indicated an estimated arrival date of 9 April at Cove Point.

A shipping source told Argus that BP will not lift the cargo but declined to elaborate. Indian state-owned gas utility Gail, one of the two Cove Point customers, does not have enough ships to take all its US LNG so it likely will need to charter ships from other parties for some its cargoes.

Shell provided the gas to commission the facility and received the right to export all test cargoes. It may have loaded its second test cargo on the Gemmata, which has capacity of 138,000m³, equivalent to about 2.8 Bcf of gas. The ship left Cove Point on 6 April after docking on 2 April, but was anchored today at the mouth of the mid-Atlantic's Cheasapeake Bay.

Dominion said it would not comment on ship loadings.

Gas intake at Cove Point has averaged 747mn cf/d since 4 April, after averaging 279mn cf/d on 1-3 April, according to pipeline nominations. That indicates that the sole liquefaction train at the facility, which has peak capacity of 5.75mn cf/d, equivalent to 770mn cf/d of gas, has been operating at close to maximum output since 4 April.

Cove Point is the second major LNG export terminal to come on line in the contiguous US, after Cheniere Energy's Sabine Pass LNG facility, which started exporting in February 2016.

Sabine Pass gas intake has averaged 2.8 Bcf/d since 4, April, so Cove Point since then has increased US gas consumption for LNG exports by an average of 27pc, to an average of 3.55 Bcf/d.

Four other LNG export terminals are on track to come on line this year or next, raising combined US baseload export capacity to 60mn t/yr, equivalent to about 8 Bcf/d (83bn m³/yr) of gas, and combined peak capacity to about 70mn t/yr.

The start of long-term contracts at Cove Point likely means the terminal will export at least 4.6mn t/yr of LNG. The two customers at Cove Point, Indian gas utility Gail and a Japanese joint venture of Sumitomo and Tokyo Gas, each have 20-year contracts for up to 2.3mn t/yr of liquefaction and export capacity, with at least 1.4mn t/yr earmarked for Sumitomo and 0.8mn t/yr for Tokyo Gas.

The customers must to pay for all their capacity whether they take LNG or not. Dominion has not disclosed the liquefaction fees. Cheniere Energy at Louisiana's Sabine Pass LNG terminal charges most of its customers $3/mmBtu.

The Cove Point customers are responsible for procuring their own gas and pipeline transportation. Much of the supply is expected to come from the prolific Marcellus gas field centered in Pennsylvania.

Gail has signed a 20-year deal to receive up to 415mn cf/d from WGL Midstream, with a minimum of 328mn cf/d. The Indian firm has relinquished its 20-year contract for 407mn cf/d of transportation capacity along the 88-mile Cove Point pipeline to WGL.

Sumitomo has a 20-year deal to receive up to 338mn cf/d for 20 years from Cabot Oil and Gas. Sumitomo has signed a 20-year deal for 415mn cf/d of capacity along the Cove Point pipeline, which connects with the Transcontinental, Columbia Gas and Dominion Transmission interstate pipeline systems.