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LNG tanker used for Cove Point commissioning takes small cargo as commercial deliveries set to begin

Dominion Energy may be ready to ship the first commercial cargo from its LNG export terminal in Maryland as two tankers were scheduled to arrive over the next week and a third that was used during the commissioning process left the facility Friday with what appeared to be a small cargo.

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The market has been eagerly anticipating the beginning of commercial service for the second US exporter of LNG produced from shale gas. Dominion said Tuesday that commercial service under long-term contracts with Gail India and a joint venture of Sumitomo Corporation and Tokyo Gas had officially started, though it didn't disclose when shipments to those offtakers would begin.

Since the beginning of April, the Shell-owned Gemmata tanker, which carried Cove Point's first commissioning cargo to the United Kingdom in March, has returned to the terminal twice. The first time, it left with the same draught as when it arrived, suggesting it wasn't carrying any LNG produced at Cove Point. The second time it left, on Friday, its draught -- the depth of the vessel below the waterline -- was approximately 1 meter lower than when it arrived, suggesting the vessel was heavier and, therefore, carrying some LNG from the facility, data compiled by Platts cFlow trade flow software shows.

A Dominion official did not respond Friday to a request for comment, while a Shell official declined to comment, saying the matter was commercially sensitive.

Cove Point LNG feedgas volumes remained steady at just under 800 MMcf/d during the week following pipeline transportation contracts becoming active at the facility on March 31. After that, volumes declined, reaching a low of 163 MMcf/d on Thursday, and then rebounded to a preliminary estimate of 589 MMcf/d for Friday, S&P Global Platts Analytics data shows.

Meanwhile, two unladen LNG vessels, the Kawasaki Sakaide and the Meridian Spirit, were expected to arrive at the facility on April 19 and April 21, respectively, raising the potential that commercial deliveries were being prepared. Feedgas volumes can be expected to ramp back up to close to 800 MMcf/d in the days leading up to the vessel arrivals. How much LNG will leave Cove Point over the next few months remains unclear. Japan, the world's biggest LNG importer, is entering its seasonal demand lull and has been bringing more nuclear reactors back online, including ones for Kansai Electric Power, which is a major LNG consumer and the expected destination of some of the LNG to be shipped from Cove Point under the contract with the joint venture involving Tokyo Gas.

The new Cove Point Pipeline capacity contracts were executed with Pacific Summit Energy -- the marketing subsidiary of LNG offtaker Sumitomo -- and Gail Global (USA) LNG. Both shippers executed transport contracts for 430 MMcf/d over roughly 20-year terms.

Two new pipeline expansion projects -- Columbia Gas Transmission's WB XPress and Transcontinental Gas Pipe Line's Atlantic Sunrise -- are set to enter service by the end of this year and will aid in supplying the 860 MMcf/d of natural gas currently under contract by the two shippers combined. In general, the facility will be supplied by Northeast Pennsylvania and West Virginia production.

Gail commenced a long-term commercial agreement with Cheniere Energy's Sabine Pass LNG export terminal in March. Platts Analytics estimates Gail will have around seven cargoes a month to market, import or sell via shipments from Sabine Pass and Cove Point as of May.

--Harry Weber and Jack Winters,

--Edited by Kevin Saville,