Wednesday, July 4, 2007
UPDATE: LNG firm Excelerate seeks judicial review of UK gas entry
July 4, 2007
Platts Commodity News
US LNG terminal developer Excelerate Energy is seeking permission to take British energy regulator Ofgem to court over gas entry rights, according to legal documents seen by Platts.
It has hired lawyers Watson, Farley and Williams, who filed a request for judicial review of Ofgem's decision at the High Court June 29, the documents show.
There is no date set yet for the High Court to decide whether to allow a review to go ahead. Regulator Ofgem has three weeks to reply.
The issue centers around gas entry rights. Any LNG shipper or North Sea field operator wanting to put gas into Britain's national transmission system must secure entry rights from National Grid. These are sold in a variety of auctions, with spare capacity released on the day.
Ofgem obliges system operator National Grid to make available a set "baseline" of entry capacity at each entry terminal on the British coast, including Teesside PX, where Excelerate Energy's LNG facility feeds in gas.
But the baseline that National Grid must provide can be changed. Last December, when publishing the latest price controls for National Grid, Ofgem suddenly slashed the baseline entry capacity for Teesside from 70 million cubic meters/day to 33 million cu m/day.
As well as Excelerate's Teesside Gasport facility, fields such as the North Sea Armada and Everest gas fields feed into Teesside Px through the CATS gas pipeline. Before Excelerate's new Teesside LNG terminal came onstream, peak flows into Teesside from these fields were already around 30 million cu m/day. So if National Grid is only obliged to release 33 million cu m/day, that does not necessarily leave much room for Excelerate's 11 million cu m/day LNG terminal to feed in its gas too.
Excelerate said earlier this year that if it had known Ofgem would cut back Teesside entry rights, it might not have invested in an LNG facility at Teesside.
Ofgem wants gas companies to commit to long-term capacity bookings. If Excelerate had booked entry capacity at Teesside in long-term auctions before December 2006, Ofgem probably would not have cut back the baseline so far.
But Excelerate's business model is to land LNG cargoes opportunistically, wherever prices are highest, so it does not really want to commit to buying long-term entry rights. It only wants to feed in gas when and where the prices are best. And traditionally it has been relatively easy to obtain entry rights in the short-term markets.
Excelerate wants an order that would quash the cuts to Teesside baseline entry capacity, the legal documents show.
Excelerate's application for a judicial review comes at the same time as Ofgem is awaiting a decision from the Competition Commission on E.ON UK's appeal against Ofgem's decision on exit rights.
The two cases show Ofgem's attempts to move the gas transmission network to a longer-term commitment model under attack from companies that would rather book their rights to put gas in and out of the national network on a shorter-term, more flexible basis.
