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ENERGY RENEWAL Plans set to reopen LNG operations

COVE POINT — Cove Point -- It's one of the world's most expensive wildlife refuges. The chain-link fence surrounding the 300 acres supports about 30 bluebird boxes. The rocks placed over the top of a mile-long concrete tunnel dug into the mud of the Chesapeake Bay provide ideal habitat for striped bass and other fish. Many of the high structures of the ship terminal have been colonized by nesting ospreys.

For over a decade, the birds and the fish have pretty much had the run of the place, but in the next two years the wildlife will have to learn to cope with a much higher level of human activity at the Cove Point liquefied natural gas terminal in Calvert County, as steps are taken to reactivate the plant by 1993.

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Idle since 1980, the $400 million Cove Point LNG plant was designed to be a major supplier of natural gas for gas retailers and industries in the eastern United States. Specially built ships would bring foreign-produced LNG -- natural gas that has been transformed to a liquid by cooling it to minus 260 degrees Fahrenheit -- to Cove Point, where it would be heated back up, converted to a gas and injected into a pipeline connected with the domestic gas transportation system at a point in Loudoun County, Va.

The plan worked for just two years. The first LNG ship arrived at Cove Point from Algeria in 1978. The LNG shipments continued at a rate of almost one a week for two years. But then a pricing dispute with the Algerian producers of the LNG and ample supplies of affordable domestic natural gas brought the shipments to an end.

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The last ship unloaded LNG at Cove Point in April 1980. Columbia LNG Corp., the Columbia Gas System subsidiary that owns the plant, kept the storage tanks cold for another six months in the hopes that the shipments would resume.

"To cool down this terminal is no little task," observed Max Levy, Columbia LNG's president. "You don't just cool it down and heat it up again."

Instead of returning, the three ships that supplied Cove Point were put into mothballs, and the storage tanks have remained empty ever since. The future for Cove Point looked so bleak that in April 1988 Consolidated System LNG, a subsidiary of Consolidated Gas System of Pittsburgh, simply walked away from its 50 percent ownership of Cove Point, leaving Columbia LNG with sole ownership.

Since then the prospects for LNG projects in the United States have improved dramatically. Foreign producers have shown greater pricing flexibility through a willingness to sign agreements under which they receive a percentage of the market price of the gas. In the past they insisted on more rigid contracts based on fixed prices; in addition the so-called "bubble" of domestic gas supplies has dwindled, according to Columbia LNG officials. All this has happened at a time when environmental concerns are greatly increasing the appeal of natural gas as an alternative to more-polluting fuels like coal or oil.

The reactivation of the Cove Point plant makes sense at current price levels, according to Mr. Levy, who expects the profitability to improve. "What everybody is betting on is a general increase in the price of gas," he said.

With the improved economic outlook for LNG projects, Columbia joined hands with Houston-based Shell Oil Co. in an effort to reopen Cove Point. Shell now owns 5 percent of Columbia LNG and has agreed to purchase a 50 percent share for $110 million over the next year or two, Mr. Levy said.

Columbia and Shell have been negotiating supply agreements with Algerian and African suppliers. Mr. Levy expects those agreements to be in place by the end of the year.

With the economic issues falling into place, Columbia and Shell needed to arrange transportation of the gas. The breakthrough on that front occurred a month ago when a settlement was reached in a legal dispute over control of the same three specially built LNG tankers that supplied Cove Point a decade ago. As a result of the settlement, two of those ships will be used bya Royal Dutch Shell Group subsidiary to supply Algerian gas to Cove Point.

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The clearing of that hurdle, freed Columbia LNG to begin the reactivation of Cove Point plant, a process that Mr. Levy estimates will take about two years.

The physical part of that process should be relatively easy, despite the length of time the plant has been out of operation. Standing on the ship terminal built on stilts a mile from shore, Mr. Levy said, "Everything is in mint condition."

The terminal has a staff of 17 workers who check and maintain the equipment. The loading equipment, for example, is tested every two weeks, Mr. Levy said. The main question focuses on the instrumentation designed to measures performance and ensure safety. "You can't test instrumentation in a down facility," Mr. Levy said.

The ship terminal has berths for two ships each 1,000 feet long. Alongside each berth rise five articulated loading booms that operate very much like a human arm, their long heavily insulated white sections connected by large black wheels that serve as joints.

Four of the booms, when connected to a ship, are capable of unloading the liquid at the rate of 50,000 gallons a minute. They take about 12 hours to empty a ship loaded with 750,000 gallons of LNG.

The fifth arm (actually the center one) carries gas vapor at minus-200 degrees to the ship. The vapor performs two crucial tasks. It fills the void created by the removal of the liquid from the ship's tanks, maintaining pressure as the tank empties. In addition, the vapor permits the ship to maintain its low temperature as the cold liquid is removed.

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Surprisingly, the ships do not require any refrigeration to transport their loads on the 8 1/2 -day, 4,000-mile journey between Algeria and Cove Point. Nor does the Cove Point plant use anything except insulation to keep the LNG at minus-260 degrees Fahrenheit.

Both the ships and the plant exploit the same basic principle that the temperature of a liquid will not rise above its boiling point. This fact is illustrated by a pot of boiling water on a stove. No matter how much you heat the pot, the water will remain at 212 degrees Fahrenheit. Raising the heat will, of course, increase the amount of steam produced until all the water is gone.

"We're dealing with a boiling liquid. There's always vapor being formed," Mr. Levy said.

Fortunately it's a useful vapor. The ships that carry the LNG use the vapor, in part, to fuel their engines. The Cove Point plant

uses the vapor as fuel for reheating the gas to 40 degrees Fahrenheit, the normal temperature of gas as it moves through the domestic pipeline system. As on the ships, the cold vapor that boils off from the LNG is circulated through the Cove Point plant as a sort of refrigerant. "That's how we keep everything cold," explained Wally Clifton, the plant manager.

Cove Point also burns the vapor in three gas turbines to produce electricity, enough for its own use plus some that can be sold.

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With most of the equipment in working order, several tasks remain before the plant can reopen:

* Hire and train 100 new employees.

* Obtain regulatory approval from two federal agencies, the Department of Energy and the Federal Energy Regulatory Commission.

* Settle any environmental or safety concerns.

Mr. Levy, while acknowledging that it is impossible to say how long it will take to acquire federal approv

al, said he expects the process to take about a year. Another year would then be needed to recondition the plant and train the workers.

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He now hopes the first ship from Algeria could arrive in early 1993. He hopes shipments from Nigeria will begin in 1995. At that point, Cove Point would be receiving more than one ship a week and would be operating at about half its capacity of 1 billion cubic feet of gas a day.

When Cove Point was first conceived, it precipitated strong opposition from environmentalists. To move the project forward, Columbia LNG agreed to a number of steps to reduce the project's impact, including building the mile-long tunnel from the plant to the ship unloading platform to minimize the disturbance of wetlands.

Columbia LNG has some reason to hope the armistice with the environmentalists will hold. Just last month the Maryland Conservation Council and the Sierra Club Potomac Council presented Cove Point with an award citing the terminal's protection of the site's "treasure of beach, marshland and forest." The groups thanked Mr. Levy and Columbia LNG for their "uncommon commitment to the environment."

The plans to reopen Cove Point will surely reawaken fears of a catastrophic explosion at the site, which is about four miles southeast of the Calvert Cliffs nuclear power plant. Mr. Levy insists that there is no possibility of an explosion. If there were a leak at the plant, dikes would confine the liquid. Whatever liquid did vaporize would not explode, he said. Although natural gas is explosive when it mixes with oxygen in a confined space like a room or a tunnel, in the open air the gas will burn but not explode, Mr. Levy said.

The idea that the Cove Point plant poses a threat to the Calvert Cliffs nuclear plant has been "reasonably well put to bed," he said. Asked whether he expected a battle on the safety issue, he replied, "Who knows?" adding, "I don't expect it to be much of a battle."


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