Friday, November 7, 2008
Excelerate Discusses Floating Liquefaction Plans
November 7, 2008
Platts LNG Daily
Ron Nissimov
Houston--Excelerate Energy and its partners in a proposed floating liquefaction venture would build floating liquefaction vessels only if agreements have been reached to monetize specific gas reserves with those vessels, an Excelerate official told Platts Friday.
"This is not going to be like regas, where we speculatively built vessels," said Excelerate Director of Upstream Development Anthony Schiller. "We will identify an opportunity and engage in a study to identify the value for the particular reserve or owner."
The venture plans to own the LNG and market it, but it does not plan to seek ownership of gas reserves and develop them, Schiller said. Rather, it plans to buy gas from producers for liquefaction, he said. The supplies would not necessarily have to be delivered by Excelerate's onboard regasification vessels or delivered to the company's terminals, he said.
Excelerate announced earlier this week that it formed an alliance with Belgian shipper Exmar and US engineering firm Black and Veatch to develop floating liquefaction solutions, but it did not provide details.
The venture plans to use a modular system that would allow it to successfully monetize reserves of various sizes, with possible production ranging from 1.5 million mt/yr (192,000 Mcf/d) to 4 million mt/yr, Schiller said. He declined to comment on cost projections for vessels or liquefaction, but said the unit cost would be comparable to onshore liquefaction plants with similar sizes. Larger onshore liquefaction projects would likely be able to produce LNG more cheaply because of economies of scale, he said.
Although floating liquefaction projects have been discussed for a number of years, until relatively recently they were viewed as uneconomical. But technological advances have made it possible to liquefy gas using vessels at prices comparable to onshore plants, which often require large investments for pipelines to the liquefaction facilities.
Some other companies are further advanced in their floating liquefaction plans. For example, Flex LNG has contracted with South Korea's Samsung Heavy Industries to build its fourth floating LNG production vessels, each with capacity of 1.7 million mt/yr, and plans to open the world's first floating liquefaction plant in 2011 offshore Nigeria. The total cost of the vessel for that project, which is slated to produce 1.5 million mt/yr for 15 years, is at least $1 billion. Japan's Mitsubishi, an equity partner in the project, would buy the entire output.
Nevertheless, the Excelerate venture is confident it could compete in the growing floating liquefaction sector because of its track record in floating LNG storage and regasification, as well as its access to markets worldwide, Schiller said.
"A lot of things make Excelerate different," he said. "We've got a pretty substantial downstream asset base. We're not simply a technology provider, as Flex LNG might be. We're trying to advance the capacity we have to market (LNG), to the extent we can take ownership of the molecules and maximize the value of the reserve owner's gas."
Black and Veatch would not have equity in the vessels, but only provide its proprietary liquefaction technology that has been used for onshore facilities, Schiller said.
He said it is too soon to comment on possible timelines or on whether Exmar would have equity in the vessels. Exmar has significant equity in the fleet of onboard regasification vessels that Excelerate operates.
Excelerate was the first company to build and operate onboard regasification vessels. It opened its first terminal offshore Louisiana in March 2005 and in December 2006 opened a terminal in Teesside, England. But because of the company's inability to secure long-term LNG contracts in the ongoing tight liquefaction market, many industry experts said last year the company was in deep financial trouble.
Excelerate's technology was originally developed by El Paso, but Oklahoma businessman George Kaiser bought the rights to the technology and formed the company with some former El Paso employees.
Earlier this year, Germany's RWE bought 50% of Excelerate for $500 million. The infusion of cash from RWE and increasing demand for onboard regasification vessels have seemingly benefited the company. This year, Excelerate was hired by Argentina to provide an onboard regasification vessel and deliver supplies during the South American country's dry season, and next year Excelerate will start providing an onboard regasification vessel to Kuwait. It is unclear if Argentina plans to hire Excelerate next year, as officials have said they hope to not import LNG then because it is much more expensive than pipeline gas. Schiller said he could not comment on the matter.
In addition, increasing diversions of Atlantic Basin LNG supplies to Asia has provided Excelerate with more opportunities to charter its vessels. RWE owns gas assets offshore Egypt, but Schiller said those would not be used for floating liquefaction projects. He said the areas Excelerate is exploring for floating liquefaction are the same as the areas being explored by other companies. Those areas include offshore West Africa, Australia and Southeast Asia, he said.
