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Cove Point LNG delayed as renegotiation denied
Dominion Energy has decided to bring a cheaper imported LNG commissioning cargo for its Cove Point project in Maryland as gas price in the north east of the US has been very high due to the high seasonal demand in the region.
Global LNG Info’s market analysts report that Dominion Energy has decided to bring a cheaper imported LNG commissioning cargo for its Cove Point project in Maryland as gas price in the north east of the US has been very high due to the high seasonal demand in the region.
While Dominion could import the cargo from the nearby Cheniere-operated Sabine Pass LNG export plant, it had to import it from abroad (Nigeria), Mosi Nabi , Senior Consultant at Global LNG Info said, reminding that The Jones Act, adopted in 1920, requires that all goods (i.e. LNG) transported by water between US ports be carried on US-flag ships, constructed in the United States, owned by US citizens, and crewed by US citizens and US permanent residents. "For now, there is no available LNG ship to be operated under this act and therefore US can only import LNG from abroad!"
Dominion Energy received a tanker fully laden with LNG in Nigeria at its Cove Point LNG export facility on 14-Dec. The Maran Gas Delphi ship carried the cargo which was supplied by Shell NA LNG to be used for commissioning the facility, though normally a new LNG export project used its already produced LNG for cooling down its storage tanks and other facilities before exporting the first cargo.
Bloomberg reported that spot gas prices more than tripled in New England to the highest in over three years and turned the region into the world’s priciest market as US total gas consumption jumped 31% to 115.7 BCF . “This is truly a gas demand driven event because the temperatures are so cold and it’s still December. The market is set up in a certain way in December, it’s not prepared.”
Gas for next-day delivery on Enbridge’s Algonquin city gate in New England, including Boston, settled at $35.35/MMBTU on the Intercontinental Exchange on 26-Dec. Algonquin gas last rose that high in February 2014 during the polar vortex.
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In other development, Dominion Energy announced that it is continuing with final commissioning work at its 5.2 MMT/Y Cove Point LNG export facility and looks forward to commercial operations early next year instead of fourth quarter of 2017 as was expected. “All major equipment has been operated and is being commissioned following a comprehensive round of thorough testing and quality assurance activities.”
Dominion Energy has also reiterated that “the characterization of contract renegotiations is false. Conversations are ongoing with export customers in preparation for beginning commercial operations but there have been no changes in the contract terms since initial contract execution, and Dominion Energy does not intend to renegotiate contract terms in the future.”
Earlier, Indian officials have called the US LNG exporters (Dominion Energy and Cheniere) to renegotiate their LNG contracts with Gail India as they see that US LNG is too expensive to be affordable in the price-sensitive Indian market. India's oil minister, Dharmendra Pradhan, said that the state-run utility was indeed renegotiating its agreements with Dominion and Cheniere Energy as he asserted that the latest talks took place in November.




On 1-Dec-2017, Dominion Energy said that the construction of its Cove Point LNG export project is 99.3% complete. “Works continued on the modification to the existing plant in the areas of the jetty platforms and tie-in scope, as well as on the final grading, insulation, tie-ins and electrical/I&C installation.”
On 5-Dec-2017, Dominion Energy announced that feed gas has been introduced into its newly constructed Cove Point LNG export facility, which is currently undergoing commissioning.
“Shell NA LNG is providing the natural gas needed for liquefaction during the commissioning process and will off-take the LNG that is produced. When commissioning is complete.” However it has not said where Shell plans to take its first cargo. Often, that decision is not made until vessels are preparing to leave or in transit, based on market prices and buyer needs.
Construction of the liquefaction facility began in October 2014, following more than three years of federal, state and local permit reviews and approvals, Dominion Energy said, adding that “with a cost of $4 billion, it is the largest construction project ever thus far for Maryland and for Dominion Energy.” “Construction has involved more than 10,000 craft workers and a payroll of more than $565 million.”

Source(s) Global LNG Info, Bloomberg, Dominion, Reuters