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Researched by Industrial Info Resources (Sugar Land, Texas)--The U.S. Federal Energy Regulatory Commission (FERC) earlier this week gave final approval for the construction of Dominion Resources' (NYSE:D) (Richmond, Virginia) Cove Point liquefied natural gas (LNG) production and export terminal in Maryland. Dominion received permission to export LNG to countries without a free-trade agreement with the U.S. from the U.S. Department of Energy (DoE) in September of last year.
View Project Report - 300057132
The facility is the fourth to receive both DoE approval to export to non-FTA countries and construction and operations permission from FERC. The other three--Cheniere Energy's (NYSE:LNG) Sabine Pass facility, Sempra Energy's (NYSE:SRE) Cameron facility (both in Louisiana) and Freeport LNG's terminal on Quintana Island in Texas--are along the U.S. Gulf Coast. The Cove Point facility's East Coast location provides easier access to natural gas produced from the Marcellus Shale, but compared to the other facilities, the journey to the Panama Canal, which provides access to the Asian markets where LNG fetches premium prices, is farther.
Despite this, the Cove Point facility's production already has been fully subscribed in 20-year agreements with Japan's Sumitomo Corporation (Tokyo) and India's GAIL India Limited (New Delhi). Sumitomo has an agreement in place to sell 1.4 million metric tons per year of LNG from the project to Japan's Tokyo Gas.
While the agreements remain in place, Reuters recently reported that as global oil prices fall and U.S. natural gas prices creep up, some Asian companies are getting cold feet about the large volumes of U.S. LNG that they have agreed to purchase. This is the result of lower global oil prices, to which Asian gas prices are linked, and gradually increasing U.S. natural gas prices. U.S. LNG contracts to date have been based on Henry Hub prices with an added premium.
Reuters reports that Tokyo Gas offered to sell 750,000 metric tons per year of the Cove Point gas to a European firm, although the offer was rejected because of the large markup Tokyo Gas was attempting to add. Similarly, GAIL, which has agreed to purchase 2.3 million metric tons per year of LNG from Cove Point, is putting some of its future U.S. LNG purchases on the market, although this will be sourced from the company's LNG purchase from Cheniere's Sabine Pass plant, due to its closer shipping proximity to Asia.
In a company press release, Diane Leopold, president of Dominion Energy, said: "We are looking forward to starting construction in the very near future, building the terminal with the public's safety first and foremost in our mind, so that we can bring the economic benefits both locally and to our customers."
The facility, which is being constructed on the site of a former LNG import terminal, is expected to begin production in 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
View Project Report - 300057132
The facility is the fourth to receive both DoE approval to export to non-FTA countries and construction and operations permission from FERC. The other three--Cheniere Energy's (NYSE:LNG) Sabine Pass facility, Sempra Energy's (NYSE:SRE) Cameron facility (both in Louisiana) and Freeport LNG's terminal on Quintana Island in Texas--are along the U.S. Gulf Coast. The Cove Point facility's East Coast location provides easier access to natural gas produced from the Marcellus Shale, but compared to the other facilities, the journey to the Panama Canal, which provides access to the Asian markets where LNG fetches premium prices, is farther.
Despite this, the Cove Point facility's production already has been fully subscribed in 20-year agreements with Japan's Sumitomo Corporation (Tokyo) and India's GAIL India Limited (New Delhi). Sumitomo has an agreement in place to sell 1.4 million metric tons per year of LNG from the project to Japan's Tokyo Gas.
While the agreements remain in place, Reuters recently reported that as global oil prices fall and U.S. natural gas prices creep up, some Asian companies are getting cold feet about the large volumes of U.S. LNG that they have agreed to purchase. This is the result of lower global oil prices, to which Asian gas prices are linked, and gradually increasing U.S. natural gas prices. U.S. LNG contracts to date have been based on Henry Hub prices with an added premium.
Reuters reports that Tokyo Gas offered to sell 750,000 metric tons per year of the Cove Point gas to a European firm, although the offer was rejected because of the large markup Tokyo Gas was attempting to add. Similarly, GAIL, which has agreed to purchase 2.3 million metric tons per year of LNG from Cove Point, is putting some of its future U.S. LNG purchases on the market, although this will be sourced from the company's LNG purchase from Cheniere's Sabine Pass plant, due to its closer shipping proximity to Asia.
In a company press release, Diane Leopold, president of Dominion Energy, said: "We are looking forward to starting construction in the very near future, building the terminal with the public's safety first and foremost in our mind, so that we can bring the economic benefits both locally and to our customers."
The facility, which is being constructed on the site of a former LNG import terminal, is expected to begin production in 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
