Woodlands, TX-based Excelerate Energy LLC, which acquired the rights to El Paso’s Energy Bridge assets and technology last year, is well on its way toward having the world’s first offshore liquefied natural gas (LNG) terminal in service in the Gulf of Mexico by December or next January. Excelerate President Kathleen Eisbrenner said in an interview with NGI that she believes the project will be an eye opener for companies that have been struggling with local opposition to their proposed onshore LNG terminals.
“I’m hoping that in January 2004 when we have real videos showing how this really works, some of the people who have being spending a lot of time trying to find [locations on the West and East Coasts] will turn to us,” said Eisbrenner. “That would be real exciting growth potential.”
The first-of-its kind offshore Louisiana Energy Bridge project received a record of decision last December from the U.S. Coast Guard and is on schedule and on budget, said Eisbrenner.
“We’ve had our nose to the grindstone since we acquired the project rights and the ships from El Paso,” she said (see Daily GPI, Dec. 18, 2003).
Advanced Production and Loading (APL), a former Statoil subsidiary, is manufacturing and installing the specialized buoy and the flexible pipe and riser that will transfer the vaporized gas from the ships directly into the offshore Gulf of Mexico pipeline grid. Statoil started APL about a decade ago to develop the special technology. It had crude oil production in the North Sea that it was not feasible to gather via pipeline so it developed a floating, production, storage and off loading shuttle tanker operation. The special buoy became the enabler for the operation in the North Sea, and Excelerate has copied that for its gas delivery application.
The one part of the project that has not been tested is the onboard vaporization that will be added to each LNG cargo ship. “The vaporizers are in use all around the world,” Eisbrenner noted. “Probably 30% of the receiving terminals use the same vaporizers that are being used by Excelerate but they’re normally in a vertical fixed configuration.” Excelerate is laying the vaporizers on an incline 10 degrees off horizontal on the decks of the ships. The vaporizer units also are subjected to waves and constant motion.
In order to study the configuration, Excelerate built a full-scale hydraulic testing system for the high pressure and low pressure pumps and the vaporizer and simulated maximum sea conditions. “The tests actually turned out to give us a wider operating envelope than we designed for by about 10-15%,” said Eisbrenner. “That was really the final stamp of approval that gave us the confidence that not only is this going to work, it is going to work up to our expectations.”
Excelerate has contracted with El Paso Field Services for construction of the eight miles of pipeline and the metering platform that will connect the buoy to both the Sea Robin and Blue Water gathering systems in the Gulf. The platform currently is being constructed in Louisiana. “The pipe has been ordered, all the mooring chains are being built and we will be in the Gulf physically in the July timeframe to start the physical construction offshore Louisiana,” said Eisbrenner.
Nevertheless, many competitors continue to doubt the technology and the economics of offshore LNG terminals. Charif Souki, chairman of Cheniere Energy, which is planning five onshore LNG terminals in the Gulf, said recently that he remains skeptical about them because their technology is “untested, unproven and extremely expensive.”
He said the onshore facilities are at a “huge cost advantage.” According to Souki, offshore LNG projects are three to five times more expensive to build than onshore facilities.
“We’ll let people think that,” said Eisbrenner. “It is surprising to me that the industry hasn’t been open minded enough to really do the math and figure out that it isn’t the case. People intuitively believe that it might make sense for short haul trades but to draw an extreme case, I would like to say that it is economic even if we were to contemplate a long-haul full train transaction from the Middle East.”
Eisbrenner admitted, however, that it costs about $28 million more to build/modify each Energy Bridge cargo ship. One Energy Bridge buoy adds $60 million. “The total cost for the starter kit on top of the investment in the ships is $120 million. In my extreme case of a future long haul trade, it would be somewhere between $350 and $500 million. Most of the land based terminals are costing more than that, plus we can contemplate larger ships,” she said. “I think it will evolve over time and we’ll see who is right about the economics.”
In order to build onshore facilities, one also has to find the right locations, and that hasn’t been easy. Two onshore LNG projects recently were cancelled on the East and West Coasts because of local opposition. Undoubtedly more will follow. Meanwhile, the Gulf Coast has been basically picked clean of potential terminal locations.
“We have expansion capability at our project in the Gulf,” said Eisbrenner. “We also have a project off the East Coast that we are going to go public with in the next month or so. We haven’t spent any time on the West Coast, but our technology is ideal for West Coast deliveries.”
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