Statoil Concludes Long Term LNG Supply Agreement

Statoil has concluded its first long-term agreement covering deliveries of liquefied natural gas to the Cove Point terminal in Maryland. The three-year deal commits the group to buying a billion cubic meters of natural gas per annum between 2003 and 2006 from Tractebel LNG North America.

Statoil is due to supply up to 2.4 billion cubic meters of gas annually to the USA through Cove Point from the Snohvit field in the 2006-23 period. Until this Barents Sea development comes on stream, the group will be buying LNG from other producers.

One of four US import terminals for LNG, Cove Point reopened in mid-August after being mothballed since 1980 and is now operated by America's Dominion energy company.

Statoil has leased a third of the capacity at the terminal, which lies in a thriving natural gas market with connections to the pipeline network and many large gas clients. BP and Shell share the remaining two-thirds of the capacity between them. LNG is stored and regasified at the terminal before being piped to customers.

"High gas prices make it commercially advantageous for us to sell LNG to the USA despite the long transport distance involved," explains Otto Granli. He is vice president for LNG marketing and shipping in Statoil's International Exploration & Production business area.

A separate American company created for gas marketing and trading under the name Statoil Natural Gas LLC is located with Statoil's other US operations at Stamford in Connecticut.

The gas will be sold to local distribution companies which can supply households, power generators and manufacturers in the surrounding region.

While the USA has had sufficient pipeline gas in recent years from domestic production and imports, declining output at home and rising demand mean that the country needs to import greater volumes of LNG.

America already buys this commodity from Nigeria, Trinidad and Tobago, Algeria and producers in the Middle East.