With the Northeast transforming to a supply area from a market area “at an even quicker pace than anyone anticipated,” US supplies of natural gas will now outstrip demand in 2016—a year earlier than previously projected—and liquefied natural gas (LNG) exports from Cove Point, in Maryland, will provide “significant benefits” against a backdrop of “ample supply,” Dominion vice president Don Raikes told attendees at Hart Energy's recent Marcellus-Utica-Midstream conference.

Dominion's Cove Point LNG project is expected to be in service in fall 2017. The company in September 2013 received a Department of Energy license to export LNG to non-FTA countries. Dominion has also applied for approval from the Federal Energy Regulatory Commission, which it expects to receive in the first half of this year.

In terms of US natural gas prices, “current price projections remain relatively stable through 2030,” according to Raikes, who showed price projections in a range of $4 to $6 per thousand cubic feet (Mcf) through the next decade. By comparison, recent natural gas prices in Europe and Japan have been $15 to $16 and $19 to $20 per Mcf, respectively. “This is the justification economically for the transaction,” he said.

Raikes said the project will make gas demand in the Northeast more resilient.

“We need more demand. We have the production. Cove Point is going to be a significant outlet for gas in the Northeast,” he said. “It helps support the gas prices that we have today and helps avoid boom-and-bust structures.”

The Cove Point facility, currently a dedicated import facility, will be converted to LNG export at a projected cost, exclusive of financing, of $3.4- to $3.8 billion. The major costs relate to the liquefaction facilities, which are designed for 5.25 million tons per annum of LNG output. Cost savings are achieved as a result of the prior construction of a pier for LNG shippers, a pipe system and seven storage tanks that offer 14.6 billion cubic feet (Bcf) of storage capacity.

Raikes said “critical milestones” had been reached at Cove Point. Last April, capacity became fully subscribed through 20-year terminal service agreements with two customers. One is a US affiliate of Sumitomo Corp. of Japan, the other an affiliate of GAIL (India). In addition, after a final investment decision was made last April, an engineering, construction and procurement contract was awarded to IHI/ Kiewit Cove Point.

Raikes emphasized Japan's need to resolve its energy supply issues in the wake of the tsunami that led to—as of last summer—only two of its fleet of more than 50 nuclear facilities being in operation. As for India, he offered as an example of its demand growth the more than 800,000 compressed natural gas-fueled vehicles running in the city of Delhi alone. Environmentally, switching to natural gas would benefit both Japan and India, countries that rely on coal and oil for 65% and 87% of their energy needs, respectively.

Benefits of the Cove Point project include 7,000 short-term jobs and 14,600 long-term jobs. The project is expected to generate $1 billion per year in federal, state and local taxes. The royalty payments from the project are estimated at $9.8 billion over the life of the contract, and the US trade deficit will be helped by between $2.8 billion and $7.1 billion per year, Raikes said.

—Chris Sheehan