First U.S. LNG from Cove Point Arrives in U.K.

LNG Carrier at Sabine Pass
LNG Carrier at Sabine Pass

By MarEx 2018-03-22 18:15:29

The first LNG cargo from the newly operational Cove Point terminal on the U.S. East Coast arrived at the U.K.'s Dragon terminal on Wednesday, according to S&P Global Platts. It is only the second cargo of U.S. LNG to land in the U.K. since U.S. shale-gas based LNG exports began in February 2016.

The cargo was delivered aboard the Gemmata, which was diverted from its original route toward the Pacific basin, and landed in the U.K. at a time when LNG stocks are severely depleted following two periods of extreme cold weather. Despite northwest Europe suffering, U.S. LNG shipments have been rare. Excluding Wednesday's arrival, only two cargoes of U.S. LNG have landed in northwest Europe - one in June 2017 to the Gate terminal in the Netherlands and one in July 2017 to the U.K.'s Isle of Grain plant.

It had been expected that the liquid U.K. and Dutch gas hubs would attract U.S. LNG given a perception of an oversupplied global LNG market that would have seen U.S. LNG cargoes taken into the National Balancing Point (NBP) and Title Transfer Facility (TTF) hubs as markets of last resort.

However, the LNG market has remained relatively tight, with most destination-free U.S. LNG volumes able to find homes either in the more premium northeast Asian LNG markets or those closer to home in Latin America, especially Mexico.

Even the delivery of U.S. LNG into Gate last summer was not a signal of increased supplies from Sabine Pass to the Netherlands. The Gate delivery was a contractual substitute for supply by Statoil from its Snohvit plant which was undergoing maintenance at the time.

U.S. LNG supplies into Gate are set to increase, though, after Austria's OMV signed up in December for a term supply of U.S. LNG from the Cheniere Energy-operated Sabine Pass terminal in the Gulf of Mexico. 

Elsewhere in Europe, U.S. LNG from Sabine Pass - which before the start-up of Cove Point was the only LNG export facility in the US lower 48 - has found homes in a number of countries. Since the first exports in February 2016, Turkey has taken 12 cargoes, Spain 10, Portugal eight, Italy three, Lithuania two, Poland one and Malta one.

U.S. LNG export capacity is set to increase to some 100 Bcm/year by 2020 as other new projects come on stream. Europe may attract more U.S. LNG this summer as European hub prices are expected to remain high on significant demand from gas storage sites, which have been heavily drawn down after the cold European winter.

The Dominion Cove Point LNG terminal has a nameplate capacity of 5.25 million mt/year, with 20-year export contracts with India's GAIL and Japan's Sumitomo and Tokyo Gas. Most recently, GAIL has been actively reselling its offtake from both Cove Point and Sabine Pass.

Source: Platts