Dominion Cove Point LNG LP and Cameron LNG LLC have found ways to keep the storage tanks at their LNG import terminals cold and operational even with scarce LNG cargos, but the best strategy - only available to those with terminals in the right U.S. markets - is to keep up business as usual.
Liquefaction facilities in the Lower 48 do not yet exist, but re-exports of LNG or a regular import business can keep tanks at their required operational temperature of about minus-260 degrees Fahrenheit. Lacking these activities, terminal operators must rely on measures such as facilities that can convert boil-off gas back to LNG or tariff provisions that can help bring in LNG cargos.
"I would think the operators want to keep their facilities operational, and that means in a cooled down mode," Bill Cooper, president of LNG industry group Center for Liquefied Natural Gas, said July 18. "If you don't have the re-export cargos coming in, then certainly you're going to have to take measures to keep those facilities cool, much like Cameron or even Cove Point." He said the specifics of these types of business decisions are up to the operators and depend on the individual terminals.
Zach Allen, president of Raleigh, N.C.-based Pan EurAsian Enterprises Inc., said the boil-off gas concept proposed by Sempra Energy subsidiary Cameron LNG and used at other terminals is a necessity. "In today's world, given the value on the world market of LNG and the slow movement of LNG in the U.S., you would want to have a boil-off gas facility because you are just going to lose the gas," he said. "Even though the tanks are very efficient, you still need the ability to keep it from just disappearing on you."
Allen said Dominion Resources Inc. subsidiary Cove Point's FERC-approved tariff arrangement was also effective. "The settlement is really a mechanism for paying for a maintenance cargo," he said. "It's a way to recapture the cost. None of the three users wants to carry the cost of bringing in a cargo themselves, so there has to be a way to share it."
On the other hand, William Baerg, media relations manager for Kinder Morgan Inc., said Southern LNG Co. LLC's Elba Island Import Terminal near Savannah, Ga., has pulled in enough LNG to maintain its tanks. "It's been fairly active," he said.
Allen backed up the assessment of Elba Island. "They've been running at a pretty good clip," he said. "They just had a cargo come in the other day. They have been running somewhere around 150 to 200 MMcf/d of sendout, which means they are still able to get the LNG at Henry Hub index prices."
"The one that's under real stress is the SUEZ Everett terminal [operated by Distrigas of Massachusetts LLC, or DOMAC] in Boston," Allen said. "SUEZ has until recently had that plant pretty much shut down. The only activity at that plant is to provide gas for the power plant next door. Other than that until recently they haven't been sending anything out into the commercial pipeline systems. "
The Everett Marine Terminal, which serves New England market, was one of the most active import facilities in 2011. Inquiries to DOMAC parent GDF SUEZ Energy North America Inc. were not returned by press time.
Copyright 2012 SNL Financial LC. All Rights Reserved.
(Originally published July 20, 2012, in SNL Daily Gas Report.)