August 12, 2011 / 4:53 PM / 8 years ago

UPDATE 2-Dominion seeks to re-export LNG from idle Cove Point

* Dominion hope to re-export from Dec 1

* Follows number of other terminals already re-exporting

* Company brings in cargo for $8 per mmBtu (Adds detail, background)

By Edward McAllister

NEW YORK, Aug 12 (Reuters) - Dominion Resources (D.N) has applied for a license to re-export liquefied natural gas from its idle Cove Point terminal in Maryland, according to the DOE website.

Cove Point has not received a cargo since February, thanks to low U.S. natural gas prices, and re-export could allow customers more flexibility and potentially increase imports.

Dominion was forced to pay a dear price for an August cargo just to keep the terminal’s empty tanks cold.

Royal Dutch Shell (RDSa.L), which owns capacity at the terminal, sold the cargo to Dominion at a handsome premium to U.S. gas prices, which have fallen way below global price levels thanks to an explosion of shale gas supply in recent years.

The cargo, expected on Aug 15, was purchased for 95 percent of benchmark British gas prices, a Dominion spokesman said, costing around $8 per million British thermal units (mmBtu). U.S. gas futures are now around $4.10 per mmBtu.

Dominion will sell the gas to the principle capacity holder Statoil STL.OL for $4.75 per mmBtu, the spokesman said.

Dominion has requested approval from the Department of Energy to re-export 150 billion cubic feet over two years beginning on Dec 1.

Re-export would allow customers to import cargoes, store them at the terminal and later send them to higher-paying markets in Asia or Europe.

Other terminals in the U.S., which also receive only occasional deliveries, have already begun re-exporting LNG, mainly to Asia where spot prices have hit $15 per mmBtu this year. Deliveries to those terminals have picked up slightly as a result.

DISAGREEMENT

Dominion, which is also mulling plans to build an LNG production and export plant at Cove Point, is looking for ways to ensure the Cove Point terminal remains operational, for now.

The company has asked its customers to deliver at least one cargo each a year, but they are reluctant. In a letter to the federal regulator last month, Shell said it wanted to retain its flexibility by sending gas to the best-paying markets overseas.

The August cargo will keep tanks cold for another few weeks, but beyond that there is no plan. For now the terminal will remain operational, the spokesman said.

“As far as we can see, our customers want to keep the terminal open,” he said. (Reporting by Edward McAllister; Editing by John Picinich)

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