Consumer group asks US FERC to reject Statoil-Dominion LNG deal

Consumer group asks US FERC to reject Statoil-Dominion LNG deal

Washington (Platts)--16May2005


Consumer group Public Citizen on Monday urged the US Federal Energy Regulatory
Commission to reject a proposed liquefied natural gas supply agreement between
Dominion and Norway's Statoil, saying the deal would harm gas consumers. In a
letter to the agency, Public Citizen and state environmental organization
Green Delaware said Dominion's request to "waive market transparency rules"
for the proposed expansion of its Cove Point, Maryland LNG receiving terminal,
invited "collusive, anti-competitive behavior." 

The two groups said that under the deal, Statoil will have exclusive rights to
market all LNG unloaded from Cove Point. In addition, the group said Statoil
is delivering the LNG to Cove Point from Norway in company-owned tankers.
"While this arrangement will result in spectacular financial returns for the
two companies, consumers will be guaranteed to be price-gouged," the two said.

In their letter, the groups asked FERC to ensure that open season rules and
cost-of-service regulation govern the terms of any contract to deliver gas
from Cove Point. "Such rules ensure that a company operating a monopoly
business like an LNG facility cannot cut side deals with favored companies and
deny consumers access to competitive prices," the organization added. 

A Dominion spokesman said the company believes the Statoil deal is "the right
way to go" and said FERC has looked favorably on similar arrangements at other
LNG terminals. The Cove Point facility now has a throughput of about 1 Bcf/d
and the gas is marketed by three companies--Statoil, BP and Royal Dutch Shell,
the spokesman said. Under the expansion proposal, Statoil would have the right
to market all of the 800,000 Mcf/d of throughput that would be added under the
expansion. Dominon hopes to complete the expansion in 2008, the spokesman
added.

This story was originally published in Platts Natural Gas Alert
http://www.naturalgasalert.platts.com

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