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LNG: Excelerate Commissions Gulf Gateway Deepwater Port

4/28/2005

Excelerate Energy announced the successful commissioning of its Gulf Gateway Deepwater Port on April 6, seven days after the 138,000 m3 Excelsior finished discharging its first cargo. Gulf Gateway is the world’s first offshore receiving facility, as well as the first new import terminal in the United States in 20 years. It is also the first application of the Energy Bridge technology, which involves regasification on specially equipped ships. The Excelsior arrived at Gulf Gateway from Malaysia’s Bintulu complex early on March 17 but did not connect to the buoy until preparatory work was completed later that night. There were no problems docking to the buoy, although in this case the ship’s rescue boat assisted with the retrieval of the messenger line. This was connected to a forerunner dropped from a specially designed compartment on board the ship and then drawn onto the vessel via a hydraulic winch. Normally, the forerunner and the messenger line from the buoy would be grappled by a member of the crew and joined together before being thrown back into the water and hoisted into the ship.

Connection was followed by several days of equipment trials, including tests to ensure that the ship could rotate 360º around the buoy. These were monitored by the Coast Guard, Bureau Veritas, the American Bureau of Shipping, buoy manufacturer Advanced Production and Loading, Korea’s Daewoo shipyard and Exmar, the Excelsior’s owner. The vessel received its certificate of compliance from the Coast Guard on March 18. It subsequently began vaporizing LNG on March 20, completing this discharge process on March 30. Of the 2.675 Bcf that was discharged from the ship, nearly 2.3 Bcf was directed into the Sea Robin pipeline owned by Panhandle Energy. The remainder went into the Blue Water system and was directed up its eastern leg into El Paso’s Tennessee Gas Pipeline. Blue Water is jointly owned by El Paso Corp and NiSource, who also owns Columbia Gulf Transmission. Gulf Gateway can access both Tennessee and Columbia Gulf from Blue Water, giving Excelerate three takeaway options from the buoy. The company has agreements in place with each of these pipelines, as well as with three onshore processing plants.

In this case, the Sea Robin pipeline and the Sea Robin gas plant made the best offer in terms of pipeline transport and liquids removal. Excelerate’s marketing deal with ChevronTexaco is for residue gas only and the liquids that are removed from the gas stream are sold by the processing plants for a fee. The Malaysian cargo was quite rich, with a Btu content per cubic foot of 1,123 at arrival, and the resulting liquids boosted the cargo’s overall economics. Since transportation costs to the downstream markets essentially net back to the same number at the buoy, the decision which pipeline to use comes down to who can offer the most competitive processing package. This will vary from cargo to cargo, as each gas plant has slightly different equipment and recovery rates. In addition to the Sea Robin plant owned by Amerada Hess, Excelerate has framework agreements with Dynegy’s Yscloskey plant on the Tennessee line and ExxonMobil’s Blue Water plant on Columbia Gulf.

The marketing arrangement with ChevronTexaco allows Excelerate to nominate gas from any of the three processing plants. This deal runs through the end of the year, although an extension is possible. ChevronTexaco paid an average of $7.06/MMBtu for the 2.583 Bcf of dry gas it received from Excelerate at the Sea Robin and Yscloskey plants. But the gas is priced on the daily market and prices reached as high as $7.15/MMBtu during the discharge period. The difference between the 2.675 Bcf that was discharged from the ship and the 2.583 Bcf purchased by ChevronTexaco is accounted for by plant thermal reduction, which is a combination of the liquids removed from the gas stream and plant fuel. If the liquids market is positive, as it was this time, Excelerate also gets paid from the sale of these liquids less plant fees. Processed gas must meet pipeline specifications, but should be around 1,050 Btu/cf. Excelerate is in the process of finalizing a deal for startup volumes from Egypt’s new Idku project and the lower Btu content of this gas will mean less in the way of liquids.

Sea Robin has only been able to guarantee about 300 MMcf/d of takeaway capacity from Gulf Gateway, and this was the reason it took 10 days to discharge the cargo. But this will rise to 500 MMcf/d when one of two compressors located on Vermillion 149 is overhauled and brought back into service. The pipeline operator is putting together a cost and timing estimate for the work, which is unlikely to exceed $2 million. Despite this constraint, Excelerate was able to test the ship’s two onboard vaporization systems at design capacity by directing incremental flows into Blue Water whenever the discharge rate surpassed Sea Robin’s allowable limit. The equipment on the Energy Bridge ships is designed to vaporize LNG at a peak capacity of 690 MMcf/d in open loop mode using heat from seawater. A closed loop alternative that relies on re-circulated water heated by steam from the vessel’s boilers can operate as high as 450 MMcf/d. The closed loop system actually performed above its rated capacity while the open loop mode peaked at 687 MMcf/d, just below maximum design. Although the ship sustained this vaporization level for some time, the rate was subsequently reduced for commercial reasons.

Gulf Gateway is situated on Blue Water’s southwest extension and gas moves up this section of pipe before it is directed on to the system’s western or eastern legs. The extension can handle around 500 MMcf/d, giving Excelerate some 800 MMcf/d of takeaway capacity from Gulf Gateway between Blue Water and Sea Robin. This should rise to 1 Bcf/d when the necessary repairs are made on Sea Robin. Excelerate would be able to discharge at this rate if it installed a second buoy at Gulf Gateway and the option is under consideration. The current arrangement, however, allows the company to pick and choose which system to flow gas on and this gives it leverage in its negotiations with the processing plants as well as the pipelines themselves. Another buoy at Gulf Gateway could erode this advantage. It may therefore make more sense to choose a separate site on the US Gulf Coast and apply for a new permit. A decision on this second buoy is unrelated to the firm’s Northeast Gateway project off the Massachusetts coast, which is a company priority.

The gas discharged into Sea Robin was well below the maximum allowable operating pressure and Excelerate operated fully within the pipeline’s tariff specifications. Some offshore gas producers were not prepared for the resulting pressure increase, however, and a number of customers were unable to deliver gas into the pipeline. While this was a relatively short-lived event lasting no more than a few hours, it does highlight the problem offshore terminal developers face when tying into existing transportation systems. With offshore output in decline, pipelines have been running below tariff pressure in order to accommodate gas producers. These customers run the risk of getting bumped off the system when large amounts of regasified LNG are introduced upstream of their operations, as was the case with the Excelerate cargo. Much of this offshore gas is produced from high pressure reservoirs and has historically flowed without compression. But reservoir depletion has caused pressure levels to drop and these producers may have to add compression to meet the new operating standards.

This article appeared in Poten & Partners monthly publication LNG in World Markets – April 2005. Reference LNG and natural gas data is available at the LNGAS Data/News Website. Please click here to sample these services and order them.

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