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Maryland’s Cove Point LNG starts production

31 Jan 2018 21:22 GMT
Maryland's Cove Point LNG starts production

Houston, 31 January (Argus) — The Cove Point LNG export terminal in Lusby, Maryland, started producing LNG today, facility owner Dominion said.

Richmond, Virginia-based Dominion said earlier this week that the $4bn project would likely start long-term contractual service in early March and that LNG production was "imminent." Cove Point was previously scheduled to start exporting in late 2017. Dominion has not said what caused the slight delay.

Shell is providing the commissioning gas and will export test cargoes produced before the start of long-term service.

Cove Point will become the second major LNG exporting terminal in the contiguous US. It has peak capacity of 5.75mn t/yr, equivalent to 770mn cf/d (8bn m³/yr) of gas, and nameplate capacity of 5.25mn t/yr. The Sabine Pass LNG terminal in Louisiana came on line in February 2016.

Japanese trading house Sumitomo and Indian state-owned gas utility Gail each have 20-year take-or-pay contracts for 2.3mn t/yr of liquefaction capacity at Cove Point. Sumitomo has, in turn, signed 20-year deals to sell most of its supplies to Japanese utilities, with 1.4mn t/yr going to Tokyo Gas and 0.8mn t/yr to Kansai Electric.

Gail earlier this month issued a tender to sell 24 of its Cove Point cargoes in 2019-20, as it is oversupplied with US LNG and does not have adequate shipping to export all its US cargoes. Gail also has a contract for 3.5mn t/yr of Sabine Pass supplies that begins on 1 March.

Gail has said it wants to renegotiate is US contracts to pay lower capacity fees, but Dominion and Sabine Pass owner Cheniere Energy have said they expect the Indian firm to honor its contracts. Gail pays Cheniere a liquefaction fee of $3/mmBtu and likely pays a similar amount to Dominion, although its Cove Point fee has not been disclosed.

Because of the Cove Point delay, Gail last week issued a tender seeking a cargo for 1-17 March delivery to India's Dahej terminal, with the Dabhol terminal a secondary option.