Md. liquid gas terminal plans to nearly double capacity

Norwegian company to use extra space at Cove Point

Demand, prices have soared

February 12, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

With demand and prices for natural gas escalating sharply, the operator of the Cove Point liquefied natural gas terminal in Calvert County said yesterday that it plans to nearly double output capacity by 2008.

Energy company Dominion Resources Inc. said it wants to increase the daily output of its terminal from 1 billion cubic feet per day - enough to serve the energy needs of 3.4 million homes - to 1.8 billion cubic feet per day, enough for 6.2 million homes.

Dominion is proposing to double its storage tank capacity, expand its Maryland pipeline and build a new pipeline in central Pennsylvania.

"Most people in this service territory are getting the highest natural gas heating bills they've ever had in their lives, and that shows there is a need for more supplies in the area," said Dan Donovan, a Dominion spokesman.

Dominion said Norway's biggest oil and gas company, Statoil ASA, has signed a letter of intent to provide gas for the additional storage at the terminal, one of only four operating in the United States. Statoil plans to sell the gas in the Northeast.

Natural gas production has not kept pace with rising demand, experts say, driving up the market price. The average household pays 11 percent more to heat with natural gas this winter, according to the Energy Information Administration.

Federal Reserve Chairman Alan Greenspan has urged that the nation expand its ability to import liquefied natural gas, warning that tight domestic gas supplies would increasingly pinch consumers and businesses. It also is a factor in rising electricity costs since many new generating plants are fueled by natural gas.

Two percent of the natural gas used by homes and businesses comes from liquefied natural gas. The gas is chilled to 260 below zero to be stored and transported in insulated tankers, then reheated into gaseous form at terminals such as Cove Point before being piped to customers.

Imports of liquefied natural gas are expected to increase, said Chris McGill, the managing director of policy analysis for the American Gas Association. In 2003, liquefied natural gas imports were about 475 billion cubic feet, double the previous record of 260 billion cubic feet in a year, according to estimates by the association.

McGill said the nation's other three liquefied natural gas facilities - at Elba Island, Ga., Lake Charles, La. and Everett, Mass. - also have proposed expanding and 40 new terminals are being proposed.

"They all see the possibility of capturing the growth in the natural gas market ... with the vast natural gas supplies overseas that can be converted to liquefied natural gas," McGill said. "As long as facilities can be built or expanded, I believe there's a general consensus that there's a great upside for LNG supplying the U.S. market."

If capacity isn't increased by importing more gas, building larger pipelines and exploring for additional sources of natural gas, "we'll continue to demand gas, put pressure on the supply side and drive prices up," he said.

Dominion needs approval from the Federal Energy Regulatory Commission to expand and build the additional pipelines.

In Maryland, the new pipeline - which would be attached to the existing line - would run 47 miles from the terminal to the Potomac River, crossing Calvert, Charles and Prince George's counties, Donovan said.

The company said its proposal "is the most practical and efficient plan of many proposed for our nation so far," Thomas E. Capps, Dominion's chairman and chief executive officer, said in a statement.

"It's an existing terminal that functions well; it's on the shipping lane to Baltimore," said Donovan, the Dominion spokesman. "It just makes good economic sense for everybody."

Cove Point, built in 1978, had processed natural gas imports for three years before being mothballed. Under Dominion's ownership, the plant reopened in August.

Since then, it has taken in about five shiploads of liquefied natural gas a month. Statoil, Shell North America and BP bring in shipments through Cove Point, most of the gas coming from Trinidad and Tobago. The expansion would probably double the number of ships to about 10.

The letter of intent gives Statoil the exclusive right to negotiate a deal to use all the increased capacity at Cove Point for a 20-year period.

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