From Argus Media

Houston, 29 August (Argus) — Morgan Stanley is seeking authorization to export compressed natural gas (CNG) out of the US, indicating that the bank plans to maintain physical positions in some commodity markets while selling its physical oil trading desk.

Morgan Stanley, through subsidiaries Wentworth Gas and Wentworth Compression, plans to install a facility near Freeport, Texas that could export CNG equivalent to 60 Bcf/yr (1.7bn m³/yr) of gas. It has applied to the US Department of Energy (DOE) to export up to that amount for 20 years to countries that have free-trade agreements (FTAs) with the US.

The project could serve the domestic market as well as export to Caribbean and Central American nations, the bank said. In the near term, the intended export markets are the Dominican Republic, Panama, Guatemala, El Salvador, Honduras and Costa Rica, which all have FTAs with the US. Potential domestic markets include marine transportation, local CNG fueling stations and enhanced oil recovery applications.

Morgan Stanley said it may apply in the future for authorization to also export to non-FTA nations.

The company declined to comment to Argus regarding the start-up date and cost of the project. It said in the DOE filing that construction would last one year.

A number of small US LNG export projects are targeting nearby Caribbean and Central American nations, and Wentworth is among the first CNG projects eyeing the same markets. In November 2013, Emera CNG, a wholly owned subsidiary of the Halifax-based energy and services company, applied to the DOE to export up to 25mn cf/d of CNG for 20 years to both FTA and non-FTA nations. Emera is primarily targeting the Bahamas.

Caribbean and Central American nations primarily use fuel oil and diesel for power generation and want to convert to using natural gas, which could be a cheaper alternative, especially if it comes from the US at current Henry Hub prices. Most markets in those regions are either islands or not connected to a regional pipeline grid, so they need to import LNG or CNG to use more gas.

A major obstacle is that individual Caribbean and Central American markets are relatively small and most do not have significant gas import or distribution infrastructure. Small LNG and CNG export projects in the US plan to use special delivery methods, such as barges and ISO containers, to serve such markets, but the economics of such projects are still unproven.

Morgan Stanley plans to fill ISO containers with CNG, truck the containers about 1 mile (1.6km) to the Port of Freeport and then ship them to customers. The project would be built on a 50-acre site leased from the Port of Freeport and would receive gas from a Texas intrastate pipeline called Brazoria Interconnector Gas Pipeline, which also will bring gas to the large Freeport LNG export terminal scheduled to come on line in 2018.

Stricter US and EU financial regulations have forced a number of banks their re-examine their participation in commodities markets. Morgan Stanley’s deal to sell its physical oil trading desk to Russia’s state-controlled Rosneft is expected to close this year.

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