United States LNG Terminal Update Enron Global Markets November 20, 2000
Existing U.S. LNG Terminals Everett, Massachusetts Cabot LNG Terminal (Tractebel) Cove Point, Maryland Cove Point LNG Terminal (Williams) Elba Island, Georgia Southern LNG Terminal (El Paso) Lake Charles, Louisiana Lake Charles LNG Terminal (CMS) Penuelas, Puerto Rico EcoElectrica LNG Terminal (Enron/Edison Mission)
Cabot LNG Terminal (Tractebel) • Current Operations • Receives 30 - 40 cargoes/year from Trinidad and 9 - 17 cargoes/year from Algeria (Algeria contract expires in 2003). • Located in Everett, Massachusetts. • Recently purchased from Cabot Corp. by Tractebel • Terminal is “closed access” thus all deliveries to the terminal are in fact LNG sales to Tractebel • Market location is ideal - very strong basis throughout the year • Claim to be actively looking to contract for 20 - 40 additional cargoes by 2004. • Enron Related Activity • Have previously negotiated with Cabot on a variety of proposals • Short and long term sales • Sale of Cabot essentially put those discussion on hold. • Tractebel has recently indicated a willingness to resume discussions. • Negotiations to start within November on a long term deal for up to 38 cargoes. • Possibility to use some of Enron’s Elba capacity as a backstop.
Cove Point LNG Terminal (Williams) • Current Operations • Operating as a peaking facility, using a 25MM SCFD liquefier and existing storage, sendout facilities • Located on the Chesapeake in Cove Point, Maryland • Reactivation plans underway • Open season closed on March 16, 2001 • Capacity awarded to El Paso, BP, and Coral • Enron submitted bid with equal financial terms but included a Board of Directors approval condition precedent - excluded from capacity award • Capacity winners still working on a terminal sharing agreement • FERC certificate to be submitted when terminal sharing agreement is complete - scheduled for early next year • Originally planned to reactivate by Jan. 1, 2002 but likely will be late 2002 • Annual cost of service = $28MM to $37MM/year (estimate) • Available throughput capacity = 750 MMSCFD • Enron Related Activity • Potential to protest decision to exclude Enron from capacity award at FERC. • Enron has approached the current capacity holders to determine interest in selling capacity. • El Paso is most likely candidate as they are the only one without captive LNG production - possible deal to fall out of eventual Elba settlement.
Elba Island LNG Terminal (El Paso) • Current Operations • Mothballed since 1980. Reactivation Underway - FERC Certificate received and accepted. • Current application at FERC to expand the vaporization capacity to 660 MMSCFD • Application to FERC for blending facilities to treat high Btu gas was withdrawn on November 17, 2000 • El Paso Merchant Marketing has contracted rights to 100% of the Elba Island Capacity (4 bcf of storage, 440 MMCFD of send-out capacity) • El Paso has 2 main supply contracts - BG (Trinidad) and Enron • Terminal to be onstream by fall, 2001 • Enron Related Activity • Enron has 17 year contract with El Paso (extendable by up to 5 years) which provides access to approximately 40% of Elba’s capacity (1.2 MMTA) • Contract is structured as a “put” option • Enron determines if a delivery is to be made (no obligation) • El Paso must purchase a cargo if Enron decides to deliver. • Enron can also opt to market the gas to downstream natural gas buyers. • Enron pays $11-$13 MM demand charge (plus a variable charge). • Elba provides an anchor for Venezuela or an excellent opportunity for merchant activities. Need to move now on arranging supplies for 2001/02. • Key issue remaining to resolve is the quality specification for LNG deliveries.
Lake Charles LNG Terminal (CMS) • Current Operations • Currently operating with majority of cargoes delivered in the past year on a spot basis • Very flexible, very large terminal • Can accommodate very high Btu LNG and has excellent pipeline access • Basis generally trades $0.07 to $0.12/MMBtu below Henry Hub • Taking great advantage of current market conditions • Large overhang of LNG supply (mostly out of Middle East) • Limited LNG terminal capacity in Western Hemisphere • Limited markets in Eastern Hemisphere • Strong U.S. natural gas prices • Enron Related Activity • Previously delivered spot cargoes out of the Middle East to Lake Charles • Purchases of natural gas supplied as LNG from Algeria to the Lake Charles Terminal • Potential to use Lake Charles to round out the market for the Jose project. • CMS has indicated the potential to hold an open season in 2001