Chesapeake Bay is renowned for its skipjacks, the late-19th
century wooden ships that "drudge" the waters in search of succulent
oysters. But starting next week, a different kind of ship will be
making waves here: a tanker that looks like a floating thermos
loaded with liquefied natural gas (LNG).
The gas will be the start of regular shipments to this remote but
picturesque facility located about an hour east of the nation's
capital. The LNG - basically natural gas that has been refrigerated
to minus 260 degrees F. - will be unloaded and then regasified and
sent through pipelines to huge underground storage facilities for
use this winter when it gets cold.
The US has been importing LNG for years, and it's the only way
natural gas can be transported over water. But this Maryland
facility, run by Dominion Cove Point LNG LP, will be the largest to
date. Once it is fully operational, it will send out enough natural
gas every day to heat 3.4 million homes. Its importance will be
underscored next week when the secretary of Energy, Spencer Abraham,
is expected to visit.
Despite the need for increased security for public fears of
explosions, everyone from Federal Reserve Chairman Alan Greenspan to
environmentalists is hailing the effort to import LNG, a clean-
burning fuel that will help the economy during a time of high
natural-gas prices. To illustrate the importance of LNG, Mr. Abraham
will host an LNG summit later this month. Currently, LNG supplies
about 1 percent of US gas needs. In the future, some experts believe
it might supply 10 to 12 percent.
"It's part of the solution, an important part," says Mr. Abraham
in an interview. "There could be a lot of possibilities if we had a
greater capacity to receive it."
In the pipeline
There could be more development, given there are proposals to
build 20 to 30 new LNG terminals. One company wants to use an old
oil rig in the Santa Barbara Channel as a dock to pump gas onshore
at Oxnard, Calif. Another group is dreaming up an undersea pipeline
from the Bahamas to Florida. There are several proposals to build
terminals in Mexico and then pipe it north of the border.
Fueling all the interest is the high price of natural gas. The
Cove Point facility, for example, was originally opened in 1978, the
same year gas was deregulated. Deregulation spurred exploration, and
within two years, the LNG terminal shut down because prices were
low. It was later used only to supply natural gas during times of
"Cove Point is economical when gas is $3.50 per mcf [thousand
cubic feet]," says Dan Donovan, a spokesman for Dominion. Gas is now
selling closer to $5.50 per mcf.
At the same time, the cost of liquefying natural gas has come
down as major consumers such as Japan have helped develop the
technology. And the technology has improved at just the right
moment. "Fortunately, the world is awash in stranded gas [gas
resources without nearby markets]," said Daniel Yergin, chairman of
Cambridge Energy Research Associates at a DOE natural-gas summit
last month. …