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Excelerate Developing Ship-to-Ship LNG Cargo Transfer

While the global liquefied natural gas (LNG) infrastructure is being built on the back of long-term contracts, Excelerate Energy LP has begun to see its merchant model bear fruit as cargo fungibility and an LNG spot market continue to develop.

Last week at a Houston conference, Excelerate President Kathleen Eisbrenner conceded that her company's Gulf Gateway offshore LNG receipt terminal might someday be baseloaded, but she said Excelerate built the facility, which became operational last March, as a liquidity point to develop a global trading platform. "And that's what we're using it for," she said. "As a matter of fact, we will probably be bringing in more opportunistic cargoes."

While Excelerate got off to a slow start, delivering two cargoes and then lying dormant for four months, Eisbrenner said business has really picked up in the last six weeks or so with five additional cargoes. She said her company has taken cargoes from Malaysia, Egypt, Trinidad and Nigeria, and besides two deliveries to its Gulf Gateway facility, Excelerate has made deliveries to Cove Point as well as receipt terminals in France and Spain.

She told attendees at Ziff Energy Group's "Re-Shaping the Gas Storage Market for LNG" conference that she was late arriving because she was wrapping up an LNG deal with a Taiwanese counterparty.

While Eisbrenner is finding opportunity and excitement in the LNG spot market, her fellow speaker Darcel Hulse, president of Sempra LNG, said his company's land-based receipt terminals are backed by firm supply contracts.

"We won't build unless we know that we've got supplies firmly under control and locked up," Hulse said. "There are those that would speculate, though, and want to hold a lot of capacity open for pure trading and so forth. We're a large energy trader. Our trading company tells us that if you can sell that [LNG regasification] capacity, then you should sell all that you can and lock in your economics and don't hold any capacity unless you can market it."

Hulse said he doesn't see a spot market supporting the long-term investment needed to develop liquefaction capacity. He said flexibility needs to be built into LNG supply contracts, "but in order to have flexibility in the contract, those that have the gas will need to hold capacity in multiple places. Flexibility is expensive."

It's that kind of flexibility and the ability to offer it economically that Excelerate is banking on. The company has ordered five ships, two of which have been built and are on the water -- Excelsior and Excellence. The company is now working to expand the flexibility of its onboard regasification business model through transshipment, the offloading of liquefied gas from one vessel to another upstream of the Energy Bridge receipt terminal.

Excelerate did a transshipment dry run last November using Excelsior and Excellence. While under way, the two ships were maneuvered side by side and eight cryogenic hoses connected them. Eisbrenner said both ships were empty at the time because the company at the time lacked quick-release couplings for the hoses.

"We were excited about this because it gave us a chance to test a lot of the aspects of the transfer of LNG," Eisbrenner said. "Cryogenic transfer has happened three times, but in each instance [it was] under emergency conditions."

One of the practical applications for cryogenic transshipment is that it will allow any LNG vessel to, in effect, deliver all or a portion of its cargo to any offshore receipt terminal, including Excelerate's, which today can only receive Energy Bridge vessels, Eisbrenner explained.

"We think it's going to be important to offer the industry the opportunity to lighter their large LNG vessels," Eisbrenner said. She noted "dozens of huge ships under construction" that once on the water will be constrained by the number of ports to which they can deliver. "We believe there will be the opportunity to add flexibility to those large vessels to essentially break down those cargo lots and be able to get them into some of the other facilities.

"This is a really neat way to add flexibility to the industry by allowing ex-ship sales of LNG into a Henry Hub market but without any geographic constraints.We could go off to the Mediterranean and lighter an Egyptian ship and offer Henry Hub prices and sail back. We've extended the reach of our offshore terminal to essentially cover the rest of the world. In effect, what we want to do with the five vessels that we have under sail or under construction is use each one of them as a floating terminal."

After proving the feasibility of ship-to-ship transfer, Excelerate's next step is to use one of its Energy Bridge ships to receive deliveries from conventional ships right on the buoy.

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