What's Going On - Estimating Dominion Cove Point Liquefaction Feedgas Volumes

Everyone in the North American gas industry knows that a big wave of U.S. LNG exports is coming. Although Cheniere Energy’s Sabine Pass terminal in southwestern Louisiana started shipping out LNG in 2016, exports really started having a major impact in 2017 — increasing demand for U.S.-produced gas, providing an outlet for Marcellus and Utica supplies, and affecting physical flows at the Henry Hub and in south Louisiana more generally. But with the first four liquefaction trains at Sabine Pass all but fully ramped up, attention in recent months has been turning to the next facility being commissioned: Dominion’s Cove Point terminal on Chesapeake Bay in Maryland, which exported its first cargo in early March. But tracking gas pipeline flows into the Cove Point plant has not been easy, and in today’s blog, we consider the various possibilities and discuss our view of how best to monitor the amount of LNG feedgas going into Cove Point.

We covered the specifics of Cove Point in our Down by the Seaside blog last year. The terminal — located in Maryland’s Calvert County — has long played a role as an import facility serving demand in the U.S. Northeast. It was originally designed to regasify LNG and move it into the U.S. gas pipeline system, and included seven storage tanks totaling 14.6 Bcf, six electric generation units and a tunnel connecting the offshore pier (where the tankers docked for offloading). However, with the emergence of shale gas, particularly the growing Marcellus/Utica production nearby, imports have all but dried up, with the import terminal now almost exclusively used for sending out gas on peak winter days. And, last month, in early March, Cove Point became the second major LNG facility in the Lower 48 (after Cheniere Energy’s Sabine Pass LNG) — and the first on the East Coast — to export U.S.-produced gas. The Cove Point liquefaction project began its commissioning phase last fall, contracting with Shell for feedgas supply and eventually sending out its first commissioning cargo on March 2. Dominion announced Tuesday (April 10) that the facility has officially started commercial operation.

The Cove Point liquefaction project included a single train with a nameplate capacity of 5.25 million ton per annum (MTPA), the equivalent of about 0.7 Bcf/d, which is anchored by two 20-year firm contracts:  half of it by ST Cove Point (STCP), a joint venture of Japan’s Sumitomo Corp. and Japanese utility Tokyo Gas Co., to supply both Tokyo Gas and another major Japanese utility, Kansai Electric Power Co.; and the other half with GAIL Global USA LNG, the American subsidiary of India’s state-owned processing and distribution company GAIL India Ltd. In addition, the project also included an expansion of compressor stations at two major interconnects on Dominion’s bi-directional Cove Point Pipeline (CPP), a relatively small, short-haul pipe that connects the LNG terminal to the gas pipeline grid.

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