Shell’s 136,600 m3 LNG carrier Gemmata has berthed at the Cove Point terminal on the US East Coast to load the facility’s first export cargo. Operated by Dominion Energy, Cove Point is the second new LNG export project to go onstream in the US, following the start-up of Sabine Pass in Louisiana in February 2016.
Located on the Chesapeake Bay in Maryland, Cove Point started life as an LNG import terminal. The facility was commissioned in March 1978 to handle the large volumes of gas expected to arrive from Algeria under long-term contract. The project faltered from the outset due to a pricing dispute, and Cove Point was mothballed in 1981.
The terminal was reopened as an expanded receiving facility in August 2003, as dwindling US gas reserves prompted a resurgent interest in LNG imports. However, within a decade, drillers had discovered how to exploit the country’s vast shale gas resources and cargo discharges at Cove Point have been sporadic in recent years.
Dominion Energy decided to give Cove Point a new lease of life as an LNG export facility through the provision of a bi-directional capability. With storage tanks and marine jetties in place, all that was needed for the new role was a liquefaction plant.
Dominion has invested US$4Bn to provide Cove Point with a single liquefaction train with a nameplate LNG production capacity of 5.25 million tonnes per annum (mta). Although Shell has signed up to lift several initial cargoes, the bulk of Cove Point’s capacity has been booked by GAIL of India and Japan’s ST Cove Point under 20-year, take-or-pay contracts.
GAIL had signed up for 2.3 mta of the Cove Point output. The Indian state-owned gas utility had also sought to charter nine LNGC newbuildings to lift its Cove Point cargoes as well as a second LNG tranche of 3.5 mta it agreed to purchase from Sabine Pass.
However, no charter party contracts were concluded and over the past 18 months GAIL has been seeking to reduce its US commitments. The decision was taken because the company is currently unable to absorb all the US LNG it has signed up for and, in addition, does not have access to sufficient LNGC tonnage to lift all the contracted cargoes.
GAIL has now been successful in either swapping or selling about 60% of the 5.8 mta of US LNG it had agreed to buy. In its latest initiative, in January 2018, the company issued a tender to sell 24 of its Cove Point cargoes over the 2019-20 period.
GAIL believes that the reduced volume of US LNG to which it is now committed will require only two or three ships. In September 2017 the company secured one of the vessels when it agreed with Total to take a 165,500 m3 LNGC on a three-year charter.
It will use either Marib Spirit or Arwa Spirit to service the GAIL charter. Total has taken this Teekay pair on long-term charter to lift Yemen LNG cargoes but the Yemen plant is currently shut down due to hostilities in that country and the ships are available.
ST Cove Point, a Sumitomo/Tokyo Gas joint venture, has also agreed to take 2.3 mta of the Cove Point capacity. Tokyo Gas will purchase 1.4 mta of that allotment while Kansai Electric Power will take 0.8 mta, or almost 90% of Sumitomo’s share.
Tokyo Gas will use four 165,000 m3 LNGCs under construction at the Japan Marine United yard to lift its Cove Point allotment. The quartet are fitted with tanks built to IHI’s self-supporting, prismatic-shape, IMO Type B (IHI-SPB) design and are the first LNGCs to be built with this cargo containment system in 23 years.
Among the vessels that Kansai Electric will call on to carry its Cove Point cargoes is LNG Sakura, a 177,000 m3 ship whose delivery from Kawasaki Heavy Industries is imminent. The spherical tank vessel is jointly owned with NYK Line.
Back at Cove Point, the 2004-built, spherical tank Gemmata will be followed at the terminal’s twin loading jetties by further vessels in the weeks ahead as the liquefaction plant ramps up production. Methane Spirit and Meridian Spirit, two sister ships of Marib Spirit and Arwa Spirit, are en route to the terminal.