Dominion Cove Point LNG LP is pursuing construction right now of the Liquefaction Project, which would enable Cove Point to liquefy domestically-produced natural gas for export as LNG, reported parent Dominion Resources (NYSE: D) in its Feb. 27 annual Form 10-K report.
The U.S. Department of Energy (DOE) previously authorized Dominion to export LNG to countries with free trade agreements. In September 2013, the DOE authorized Dominion to export LNG from Cove Point to non-free trade agreement countries.
In September 2014, Cove Point received a Federal Energy Regulatory Commission authorization for the project with certain conditions. In October 2014, Cove Point commenced construction of the project, with an in-service date anticipated in late 2017. The Cove Point facility is authorized to export at a rate of 770 million cubic feet of natural gas per day for a period of 20 years.
In April 2013, Dominion announced it had fully subscribed the capacity of the project with 20-year terminal service agreements. ST Cove Point LLC, a joint venture of Japan’s Sumitomo Corp. and Tokyo Gas Co. Ltd., and GAIL Global (USA) LNG LLC, a wholly-owned indirect U.S. subsidiary of GAIL (India) Ltd., have each contracted for half of the capacity. Following completion of the front-end engineering and design work, Dominion also announced it had awarded its EPC contract for new liquefaction facilities to IHI/Kiewit Cove Point, a joint venture between IHI E&C International Corp. and Kiewit Energy Co.
Cove Point has historically operated as an LNG import facility under various long-term import contracts. Since 2010, Dominion has renegotiated certain existing LNG import contracts in a manner that will result in a significant reduction in pipeline and storage capacity utilization and associated anticipated revenues during the period from 2017 through 2028, the Form 10-K noted. Such amendments created the opportunity for Dominion to explore the Liquefaction Project, which, assuming it becomes operational, will extend the economic life of Cove Point and contribute to Dominion’s overall growth plan. In total, these renegotiations reduced Cove Point’s expected annual revenues from the import-related contracts by approximately $150 million from 2017 through 2028, partially offset by approximately $50 million of additional revenues in the years 2013 through 2017.
In December 2014, Cove Point applied for FERC authorization to construct and operate facilities that will provide firm transportation service for a new power plant located in Maryland. The $31 million St. Charles Transportation Project will provide 132,000 Dths per day of firm transportation service from Cove Point’s interconnect with Transcontinental Gas Pipe Line in Fairfax County, Virginia, to CPV Maryland LLC’s planned power facility in Charles County, Maryland. Service under a 20-year contract is expected to commence in June 2016.
In December 2014, Cove Point also filed an application at FERC to construct and operate facilities that will provide firm transportation service for a second new power generating facility located in Maryland. The $37 million Keys Energy Project will provide 107,000 Dths per day of firm transportation service from Cove Point’s interconnect with Transcontinental Gas Pipe Line in Fairfax County, Virginia, to Keys Energy Center LLC’s project in Prince George’s County, Maryland. Service under a 20-year contract is expected to commence in March 2017.
As an example of construction progress on the LNG terminal, a FERC official on March 4 signed off on a Dominion Cove Point LNG request to proceed with construction of the outside battery limit (OSBL) areas at the facility. A request was also approved to proceed with construction of the following spill containment systems: Amine Sumps 1, 2, and 3 within the pretreatment area; the Truck Loading/Unloading Area Sump within the OSBL area; and the Heavies Sump 2 within the liquefaction area.