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Americas: Dominion considering exporting LNG from Maryland terminal

https://www.chemnet.com   Mar 11,2011 Platts
Dominion Resources is confident it can export LNG supplied from the Marcellus Shale to markets in Europe and Asia, although it has no timeline for when it will apply for the necessary federal approvals, CEO and President Thomas Farrell said Wednesday.

Speaking at CERAWeek, a conference sponsored by the consulting firm IHS CERA, Farrell said its Cove Point terminal in Maryland has a plum geographic position to move burgeoning Appalachian supplies to markets overseas.

"We can offer producers flexibility to get the gas to Europe or Asia or to keep it domestically," Farrell said.

Richmond, Virginia-based Dominion's pipeline system sits atop the Marcellus Shale and the firm has recently enhanced its infrastructure to move those supplies to downstream Northeast markets.

Dominion is considering reversing flows on its system to get supplies to the terminal for export.

Farrell said Dominion has "no timeline" to apply for the required federal permits.

While Dominion is willing to foot the bill to build liquefaction facilities at Cove Point, it is on the lookout for producers and shippers to take up that export capacity.

The cost structure Dominion is mulling, Farrell said, would be some sort of tolling agreement whereby it would deliver the gas through its pipeline and liquefy it without ever taking ownership of those supplies.

Dominion is the latest in a slew of LNG terminals in North America positioning themselves to export gas in 2015. Others include Freeport LNG terminal in Texas; Sabine Pass and Cameron LNG in Louisiana; and the Kitimat facility in Canada's British Columbia.

Analysts have recently said Kitimat likely would have the lowest shipping costs to Asian markets, although they stated the Gulf Coast ones would ultimately get built, given they are not greenfield projects.

Farrell acknowledged there would be stiff competition from other such projects, but continued to tout Cove Point's geographic flexibility as a unique selling point.

Cove Point already has three major integrated oil and gas companies as its partners: BP, Statoil and Shell, all of whom likely would be interested in arbitrage opportunities an Atlantic basin export facility could afford.

Statoil is also a major Marcellus producer through its joint venture with Chesapeake Energy, while Shell also holds shale acreage in the play it acquired with the purchase of East Resources last year.

Meanwhile, "$4/MMBtu gas is going to be necessary" to keep the shale plays economical, Farrell said later Wednesday in an interview on the CNBC cable channel.

But the current price of gas is beneficial for Dominion, Farrell said, noting "low gas prices is a very good thing for our customers."

Dominion owns 27,600 MW of power generation, which helps to provide power for its retail customers across 13 states. Some 10% of that generation portfolio is natural gas-fired.

A total of 28% of the portfolio -- comprising the regulated North Anna and Surry plants and unregulated Millstone and Kewaunee plants -- is nuclear powered.

Farrell also said the current low price of gas -- which some analysts suggest erodes the economics behind an expansion of the US nuclear fleet -- would not hurt the company's plans for more uranium powered generation.

Dominion plans to build a new nuclear unit at its North Anna site, although in October the company said it had slowed the development of the reactor to allocate money elsewhere.

But Farrell said gas prices would not have a similar impact. He said the company was investing for the long term, given that power plants have a 60-year life cycle, and that the US needs a "diversity of fuel sources."



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