UPDATE 3-Dominion eyes Cove Point LNG export by 2015

Tue Feb 1, 2011 3:27pm EST

 * Plant would export natgas produced at Marcellus shale
 * Follows similar plans from other U.S. LNG importers
 * Dominion to work with Statoil on potential export
 (Adds detail on conditions to proceed)
 By Edward McAllister
 NEW YORK, Feb 1 (Reuters) - Dominion Resources Inc (D.N) is
considering plans to build a liquefied natural gas export plant
on the site of its existing import terminal at Cove Point,
Maryland, by 2015, a company spokesman said on Tuesday.
 Dominion follows other LNG terminal developers looking to
switch plans and export U.S. natural gas overseas as ample
domestic supply outstrips tepid demand.
 "The earliest for the liquefaction plant would be 2015,"
the spokesman said.
 The export plant would source gas from the prolific
Marcellus shale gas field, which stretches across two thirds of
Pennsylvania and parts of surrounding states.
 LNG is natural gas cooled to a liquid for transport in
tankers to markets overseas.
 Late last week, Dominion Chief Executive Tom Farrell spoke
about the export plans at the release of the company's
fourth-quarter results.
 "We have discussed the potential for liquefaction
facilities at Cove Point with a number of very major
companies," Farrell said on a conference call Friday.
 Farrell said that Dominion will proceed with the project if
it  is tied to long-term supply and offtake agreements.
 He said that Dominion will work with Norway's Statoil
(STL.OL), which has import capacity at Cove Point and
production acreage in Marcellus, to build a connection between
Marcellus and the proposed export plant.
 "If you think about Cove Point, where it sits there in the
Mid-Atlantic, a couple hundred miles from the Marcellus region,
it has got all the facilities it needs other than the
liquefaction itself," Farrell said.
 The spokesman said on Tuesday that Dominion was in
discussions with natural gas producers at Marcellus.
 Dominion has not said how the project would be financed or
how much it would cost.
 Dominion's move is part of a wider change in the U.S. gas
market where increased supply outstrips demand, thanks to huge
rises in shale gas production.
 Most U.S. LNG import terminals built on the expectation
that the U.S. would be a major LNG importer now sit largely
idle as shippers send their gas to higher-paying markets in
Asia, Europe and South America.
 Shipments to Cove Point have dropped significantly over the
last few years, from 220 billion cubic feet (bcf) in 2005 to
147 bcf in 2007 and 43 bcf in 2010, according to figures from
Waterborne LNG analysts in Houston.
 Statoil wrote down the value of the terminal last year, due
to increases in U.S. domestic gas supply. [ID:nLDE66S0ZY]
 As part of Dominion's plan to build a liquefaction plant,
Statoil's import contract to Cove Point has been shortened to
ten years from 18.
 Last June, Cheniere Energy (LNG.A) announced plans to build
a liquefaction plant at Sabine Pass in Louisiana, on the site
of its existing import terminal. Cheniere plans to export LNG
by 2015.
 Private developer Freeport LNG announced similar plans for
its Texas terminal in November.
 These other projects will likely include facilities to
export and import LNG, but the Dominion spokesman said that it
will likely focus only on export.
 (Editing by Alden Bentley)

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