WATCHING WASHINGTON REOPENING COVE POINT

Along the Chesapeake Bay in southern Maryland is a multimillion dollar investment that Columbia Gas System wants to turn profitable.

A partnership of Columbia LNG and Shell Oil Co. plans to reopen Columbia's mothballed Cove Point, Md., LNG terminal.

The $300 million, 1 billion cfd terminal is linked to a Columbia trunkline in Northern Virginia by an 87 mile, $400 million pipeline with the same capacity.

Columbia and Consolidated Natural Gas Co. received the first shipment at the 1 billion cfd plant in March 1978, but shipments were suspended in April 1980 in a dispute over gas price. Columbia became sole owner in April 1988 after CNG walked away from its part of the investment.

WHAT'S PLANNED

The new Cove Point Trading partnership expects to sign purchase agreements for Algerian and Nigerian LNG before the end of the year, enabling Columbia to reopen Cove Point by early 1993, if regulatory permits are issued.

A major stumbling block was removed recently when the U.S. Maritime Administration agreed to the disposition of three LNG tankers. Argent Marine will buy two of the ships and charter them to Royal Dutch/Shell to move LNG to Cove Point. Cabot Corp. will buy the third ship, which will be used half the time to move Nigerian LNG to Cove Point and the other half to Massachusetts.

After the LNG supply contracts are signed, Columbia LNG will seek permits from the Federal Energy Regulatory Commission for recommissioning of the regasification plant, a tariff, and a connection with Transcontinental Pipeline in northern Virginia.

Columbia LNG hopes to have regulatory approvals by January 1992, then begin recommissioning the terminal and hiring staff. That will take another year.

The plant should be ready for its first shipment of Algerian LNG in late 1992 or early 1993.

Shell International Gas Ltd. is negotiating a 15 year Algerian LNG supply agreement, extendable to 20 years, for 220 MMcfd.

Nigerian LNG Ltd., owned 60% by Nigeria's national oil company, 20% by Shell, and 10% each by Agip and Elf, plans to ship 160 MMcfd to Cove Point after Nigeria completes a 600 MMcfd liquefaction plant in 1995 at Finima.

The Algerian deal is to involve 32 cargoes/year and the Nigerian 22 cargoes. Both will be based on netback basis, giving Sonatrach 65%, tanker companies 15%, and Cove Point Trading 20% of the sale price of the regasified LNG.

SUCCESS IN CONSTRUCTION

Even though it has been used only 2 years, the 12 year old Cove Point facility clearly is a success story.

Operators had to reach major agreements with environmentalist to build the terminal, including construction of a park, protection of a freshwater swamp, and construction of a 1.2 mile tunnel, rather than a pier, to a tanker terminal in Chesapeake Bay.

Now, although idle for a decade, the Cove Point terminal appears to be in excellent shape, primed to claim a share of the U.S. Northeast gas market.