PGW seeks plans to buy, market its natural gas
Apr 05, 2016
By Andrew Maykuth STAFF WRITER
Philadelphia Gas Works is moving forward on a plan to expand its liquefied natural
gas plant in Port
Richmond to produce fuel for non-utility customers, exposing the city-owned utility
to potential profits and perils - of competitive business markets.
On Tuesday, PGW will seek proposals from companies to buy and market LNG produced
from a $120
million expansion at its plant. The utility believes there is a growing demand for
LNG to fuel long-haul
trucks, trains, marine vessels, and remote power-generation facilities.
The utility's leaders are confident that sales of LNG will generate enough revenue
to cover estimated
annual debt service of $7 million for the new project and also provide rate relief
for customers. PGW has
sold 2,000 truckloads of surplus LNG from the plant in recent years, earning
millions for its ratepayers.
"We believe LNG is a fertile opportunity for us," said Craig White, PGW 's chief
executive.
PGW 's request calls for gas-marketing companies to submit proposals by May 23,
which could include
plans to build rail-loading or ship-loading facilities on the Delaware River. PGW
plans to select a vendor
by Sept. 1.
The marketing agreement would form the foundation for PGW to then ask its board,
the Philadelphia
Gas Commission, and City Council to allow the utility to borrow an estimated $120
million to more than
double the liquefaction capacity of the Port Richmond plant.
The expansion project, which PGW would aim to build in Port Richmond's existing
footprint by early
2019, would be owned and operated by the utility.
The project would make PGW a larger player in discussions about an emerging
regional energy hub built
on expanded uses for gas produced from the Marcellus Shale region.
PGW aims to profit from the underused storage capacity of the Port Richmond plant,
located between I95 and the Delaware River, where twin insulated tanks together hold about 50
million gallons of LNG .
The 45-year-old plant was designed for a city with a greater population and a
larger appetite for energy,
and PGW now needs only about half the storage capacity to keep its customers
supplied with natural
gas during the winter.

 LNG is produced by chilling natural gas to 260 degrees below zero, where it
remains in liquid form as
long as it stays cold. PGW typically produces LNG in the summer, when there is low
customer demand
for natural gas. It converts the liquid back to gas during the winter.
The merchant LNG venture would mark a new frontier for the city-owned utility,
whose past
investments were designed to deliver a reliable supply of natural gas to its
500,000 customers.
Unlike investor-owned utilities, whose shareholders would bear the risk of any
nonregulated business
ventures, PGW 's customers would be on the hook for the costs of the project should
it fail.
The utility's LNG capabilities attracted much interest from bidders when the Nutter
administration
sought to privatize it in 2014. When City Council killed the proposed $1.9 billion
sale of PGW , some
Council members said they were reluctant to give up the utility's profit-making
potential to private
investors.
White said PGW needs growth opportunities to offset the long-term decline in
consumption by its static
customer base, which is facing higher costs to replace the utility's aging
infrastructure. He believes the
LNG expansion could generate incremental revenue of up to $15 million a year, twice
the project's debt
service.
"I've been here 36 years, and that's the single largest new load opportunity we've
been able to generate
at Philadelphia Gas Works," he said.
The Port Richmond expansion project would not be aimed at exports. New large LNG
export terminals
now coming into service along the Gulf Coast and in Lusby, Md., produce billions of
gallons of fuel a
year.
White said the expansion project would consume about 21 million cubic feet of gas a
day to produce
250,000 gallons of LNG and would require no additional pipeline capacity. PGW
estimates it will produce
an additional 63 million gallons of LNG a year.
An LNG venture is likely to face opposition from climate-change activists, who
oppose any expansion of
fossil-fuel markets as harmful to the environment. Protesters disrupted a hearing
last April organized by
Councilman David Oh to explore potential LNG export ventures for the city.
amaykuth@phillynews.com
215-854-2947 @maykuth