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Dominion says Cove Point LNG production to start in November

Houston — Dominion Energy Monday said it expected to begin production in November at its long-awaited Cove Point LNG export terminal in Maryland, as buyers in Asia look for greater access to growing US supplies.

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Dominion specified the timing of production at its liquefaction plant in a slide presentation that accompanied the release of its third-quarter financial results. It did not say exactly when it would ship its first cargo, and executives did not address the issue during a conference call to discuss quarterly results.

The company has said previously it expects feedgas to flow to the facility by Tuesday. The plant was still not flowing any feedgas to the liquefaction plant as of Monday. However, once flows begin, receipt volumes at both the Loudoun and Pleasant Valley interconnects with Columbia Gas Transmission and Transcontinental Gas Pipeline, respectively, can be expected to increase as the two points are the main supply meters for the liquefaction plant.

"The Cove Point Liquefaction construction is effectively complete and the facility is going through its advanced-commissioning phase," CEO Thomas Farrell said.



Cove Point has long-term service agreements with Gail India and ST Cove Point, which is a joint venture of Japan's Sumitomo and Tokyo Gas, to supply LNG produced from the facility. Since those agreements cover substantially all of the LNG capacity from the facility, Dominion has said it is unlikely it will be shipping spot cargoes, something Cheniere Energy has been adept at since starting production at its Sabine Pass terminal in Louisiana.

Farrell reiterated that Monday, saying that any excess capacity on the system will go to Cove Point's current long-term shippers.

The move will allow shippers the choice to load additional volumes for incremental cargoes, above their current long-term contacts, or resell the excess gas back into the US Northeast markets. That decision will depend on the pricing environment at the time in both the Northeast and delivery markets, data compiled by Platts Analytics' Bentek Energy show.

Once in operation, Cove Point will be the second US exporter of LNG produced from shale gas. Cheniere became the first in February 2016 when Sabine Pass launched its initial cargo to Brazil. While several other facilities are under construction, another dozen with proposals pending before US regulators have faced challenges securing long-term contracts to buy their LNG amid persistent fears about a supply glut through early next decade.

Also Monday, Farrell addressed the progress of the 604-mile, 1.5 Bcf/d Atlantic Coast Pipeline. The project, which recently received permit approval from the US Federal Energy Regulatory Commission, should obtain water permits from West Virginia, Virginia and North Carolina by mid-December and "be underway" with construction sometime after that, Farrell said.

Atlantic Coast Pipeline would move gas from Harrison County, West Virginia, to delivery meters in Virginia and North Carolina. The 301-mile, 2 Bcf/d Mountain Valley Pipeline will transport gas from a receipt point in northern West Virginia into Columbia's WB System and finally into Transco Zone 5.

Platts Analytics data show that both Atlantic Coast Pipeline and Mountain Valley Pipeline will help fill power demand in the Mid-Atlantic as natural gas continues to replace coal for power generation. Atlantic Coast Pipeline will work more to alleviate the constraint of natural gas leaving the Northeast, while Mountain Valley Pipeline is backed by producers and therefore can be expected to increase production coming out of West Virginia, Platts Analytics data suggest.

Both projects have faced strong opposition from environmental groups. Conservationists said last week they sent a letter to Virginia water control board officials explaining why they believe the two projects' state permits should not be approved at this time. Among other things, they say the developers have not provided sufficient information to assure that the pipelines will not harm streams, rivers and wetlands.

--Harry Weber, harry.weber@spglobal.com

--Jack Winters, jack.winters@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com