Friday, July 6, 2007
Excelerate Seeks Legal Review Of Cut To UK LNG Entry Capacity
July 6, 2007
Dow Jones International News
LONDON (Dow Jones)--U.S.-based liquefied natural gas shipper Excelerate Energy is seeking a judicial review of U.K. gas and electricity market regulator Ofgem's decision to cut capacity to enter gas into the U.K. network at its new LNG terminal in Teesside, a senior company executive said Friday.
Rob Bryngelson, vice president of development and downstream services at Excelerate, said he was concerned Ofgem's cut of baseline entry capacity at Teesside from 70 million cubic meters a day to 33 mcm/day would hinder his company's ability to utilize the LNG terminal in the long term.
"The Teesside Gasport was built to provide gas to the U.K. at periods of high demand on short notice," he said. A capacity of 33 mcm/day wouldn't give the terminal sufficient flexibility and negate its whole purpose, he said.
At peak operation the Teesside LNG terminal can deliver around 16 mcm/day of gas into the U.K. network. Teesside also receives gas from numerous gas fields in the Central North Sea. Combined gas flows from these fields into Teesside were typically around 25 mcm/day in Winter 2006-2007.
A spokesman for Ofgem was unable to comment on the detail of Excelerate's complaint because it may now be subject to a legal case. He said they are considering their position and will decide whether to defend their decision within 28 days.
National Grid PLC (NGG) and Ofgem have previously argued its capacity allocations at entry points to the U.K. gas network are based on firm commitments from network users. Capacity will be cut if gas shippers don't indicate they need it by making long-term capacity purchases.
Excelerate said National Grid and Ofgem should also consider gas flow forecasts when it allocates capacity because many gas shippers who intend to use a network entry point prefer to buy more flexible short term capacity.
In a submission to Ofgem in May, Excelerate argued as North Sea gas production declines, unused capacity at the St. Fergus gas terminal in Scotland should be transferred to Teesside.
Bryngelson said Excelerate has been working with Ofgem and U.K. gas and electricity network operator National Grid to find a solution. Excelerate's decision to seek a judicial review hasn't ended these discussions, he added.
Excelerate also operates an LNG terminal off the coast of Louisiana in the Gulf of Mexico and has another under construction near Boston in the Bay of Massachusetts. The Boston terminal is on track to become operational in December, he said.
Last week it announced plans to build another terminal with German utility RWE AG (RWE.XE) in the port of Wilhelmshaven by 2010.
A joint project between Excelerate and Pakistani industrial conglomerate Associated Group isn't proceeding as quickly as originally envisioned, Bryngelson said. He said Excelerate is still interested in the project, but the original April 2008 deadline for the project is now looking uncertain.
