Dominion Fires Warning Shot over US LNG Contracts

As the Cove Point LNG export terminal gears up to start commercial operations early next year, operator Dominion Energy is keen to deny talks that there is any likelihood of changes to the contract terms with buyer Gail, from India.

Indian oil minister Dharmendra Pradhan reportedly said in the lower house of parliament December 18: “Gail has held number of discussions with Cheniere Energy (Sabine Terminal) and Dominion Cove Point LNG LP (DCP Terminal), for re-negotiation of the contracts. The discussions have been held at the working level as well as management level. The most recent discussions with both the parties were held during the month of November 2017.”

However Dominion Energy has denied this is the case, although it did not refer to India or any company in its December 19 statement, most of which was a status report on the construction work at the 5.25mn mt/yr terminal. "The characterisation of contract renegotiations is false. Conversations are ongoing with export customers in preparation for beginning commercial operations but there have been no changes in the contract terms since initial contract execution, and Dominion Energy does not intend to renegotiate contract terms in the future," said Dominion.

Gail is due to buy 2.3mn mt/yr of LNG from Dominion for 20 years, under terms agreed in a different price environment and with generally much less flexible terms for the buyer than are now available as the market is expected to be long for at least a few more years.

Dominion insisted it "looks forward to commercial operations early next year under the terms of previously negotiated 20-year contracts with ST Cove Point, which is the joint venture of Sumitomo Corporation and Tokyo Gas, and for GGULL, the US. affiliate of Gail."