The upside out of sight
  from: Offshore Engineer
  by: Marshall DeLuca
  Thursday, December 04, 2003

The fact that California is on the brink of an energy crisis and has long been a staunch opponent of energy development puts the state on the horns of a dilemma from which one company sees a big upside. Marshall DeLuca talks to BHP Billiton about its recently announced initiative to supply energydeprived California with LNG from an offshore facility.

The company has filed applications with the US Coast Guard/Maritime Administration (Marad) and the California State Lands Commission to construct and operate Cabrillo Port, an LNG regasification facility some 21.5 miles offshore Port Hueneme, Oxnard on the Ventura County, California coast and, more importantly, out of sight.

Cabrillo Port plans call for a floating storage and re-gasification unit, which in essence, will be comparable in design to a standard LNG carrier, although significantly larger. The unit will be a 938ft by 213ft barge permanently set in 2800ft of water on a turret mooring system. Gas will be stored onboard in three spherical storage tanks, each with capacity for 3.2 million ft3 of liquid equating to about 2bcf of natural gas for a total storage capability of 6bcf. These tanks when built, while based on the industry standard design used in facilities across the globe, will be the largest of their kind.

The re-gasification process will be performed from eight vaporizers onboard the vessel equipped to produce up to 1.5bcf/d but is only expected to produce approximately 800 million scf/d, supplying around 10% of California’s daily gas consumption. The gas will then be piped to shore and linked to a Southern California Gas Company connection in Ventura County. Additionally, the unit itself will be powered by natural gas with a backup diesel tank for use during the construction period or an emergency event.

Justification
Besides the Californian gas shortage, BHP says one of the main drivers behind the project is finding a market for the company’s gas reserves offshore Australia. ‘BHP Billiton has been involved in the LNG trade since the early 1980s with its stake in the North West Shelf project,’ says Steve Meheen, the company’s Cabrillo Port development manager, from his office in Oxnard, California. ‘Obviously we would like to grow this business. The Cabrillo Port project will establish a new market for the company and it is an area that we have identified that will have critical gas shortages in the future unless projects like this proceed.’

The company says it initially considered all potential alternatives including a less expensive and less technically challenging onshore facility for the project, but the latter concept was ruled out around 18 months ago not least because of the myriad regulatory and commercial issues facing onshore facilities on the West Coast. Being offshore creates minimal environmental and land use impacts, the companys says, and makes a very cost efficient connection point into SoCal’s gas pipeline system, the company says.

‘The reason we went with offshore is we understood the feelings of the Californians about big coastal developments, particularly large industrial facilities,’ Meheen says. ‘We wanted to position ourselves to be able to complete the project, have a minimum environmental and societal impact, and we thought the best way of doing that was going offshore, removing that facility from the coastline and not having an impact upon the coastline and the surrounding communities.’

While BHP says it began thinking of such a project in late 2001 and had done some preliminary work on proposed concepts and site selection, work did not begin in earnest until the following January.

Progress
Design work on the facility is substantially complete and, while it will be a first of its kind, the system will be based on existing technology, explains Meheen. ‘Most everything for this water depth level is tried and tested for the industry. The facility is an assemblage of technology and equipment that has been used and proven in industry for a number of years and has a significantly long track record.’

Further, the design has been reviewed by classification body Det Norske Veritas and has been found to meet operational and safety standards.

But the crux of the system, and that which has held up the advancement of floating LNG terminals to-date, is the transfer system used to load the LNG from the carrier to the terminal.

It had been argued that the transfer of LNG offshore was too sensitive an operation due to the stresses generated by the relative motions of terminal and carrier. Meheen counters this augument, however, by pointing out that earlier transfer systems had been considered in the context of the North Sea and other areas with extreme metocean and environmental conditions whereas testing has confirmed that the relatively benign waters off California would pose no such problem.

Cabrillo Port, says Meheen, will use a conventional side-by-side transfer system with a version of an SBT Atlanticdesigned LNG loading arm, suitably marinized with protective coatings and incorporating a greater range of freedom for movement of the arm at all axes. The design has been put through extensive testing at the Marin facility in the Netherlands to confirm its operability, he adds.

‘We really don’t see an issue with the side-by-side transfer at all. We have done very extensive and very thorough testing and just haven’t come across an issue yet,’ observes Meheen. ‘I am not sure we have answered anything that hasn’t been answered in the past. We have an area of favorable metocean conditions, which is probably the biggest key.’

Regulatory approval
The design work is nearly complete and the company ready to go, but BHP Billiton’s biggest hurdle by far on this project still remains to be cleared: regulatory approval.

For approval the project will have to go through a lengthy process of environmental review, public hearings and consideration by numerous federal, state and local jurisdictions. The company must prepare a federal Environmental Impact Statement for approval from the US Coast Guard that will cover the project’s potential onshore and offshore impact with respect to construction, operational safety, environmental issues, community issues and other areas of interest. Concurrently, the project must go through California environmental review under the jurisdiction of the California State Lands Commission as well as permitting review from several other agencies.

BHP Billiton filed applications with the Coast Guard for the federal process and with the California State Lands Commission for the local process on 3 September. From there the two entities will jointly conduct the regulatory and environmental reviews.

Meheen says they have already participated in some local public meetings and are trying to be very proactive in educating the public as much as possible about the benefits of LNG and the project including offering up a telephone number for more information and a website www.LNGsolutions.com.

According to Meheen, BHP Billiton is very optimistic that the project will be approved.

‘We believe our project offers genuine benefits for California and the local communities of Ventura County with minimal environmental impact. We think we understand the process well. It is a clear road map of who is involved and what their involvement is. It is also a large, but open and transparent process to the public,’ he says.

‘We have received good feedback from certain areas of the community about their understanding of the necessity for additional natural gas supplies to ensure California’s long-term economic viability.’

And the plan may have a new ally. California’s new governor-elect Arnold Schwarzenegger seems to be in support of LNG. According to his energy policy statement, the strongman-turned-actor sees LNG as a proven technology that provides an opportunity to assure a reliable natural gas supply, and he will direct the California Energy Commission and California Environmental Protection Agency to ensure that the fuel marketplace offers producers and consumers a real choice of fuels including LNG.

If all goes well, Meheen says, the company will secure its approvals by year-end 2004 and if things stick to that schedule, first production would begin during 2008. OE