NuBlu building spec LNG plant in Louisiana

OREANDA-NEWS. October 11, 2016. NuBlu Energy has started building a liquefaction facility in Port Allen, Louisiana, to serve high-horsepower industries in the region that are converting from diesel or fuel oil to LNG.

The facility, located just west of Baton Rouge, is scheduled to come on line in the second quarter of 2017 with initial production capacity of 30,000 USG/d, equivalent to about 2.5mn cf/d (71,000m?/d) of gas. The plant would have storage capacity of 120,000 USG and production capacity could be expanded to 90,000 USG/d.

NuBlu told Argus today that it does not have long-term customers and is building the facility on a speculative basis, with the goal of proving its patented liquefaction technology and helping develop the domestic market for LNG.

The facility does not require federal oversight and has been fully permitted, NuBlu said.

A number of industries that use oil-based fuels for high horsepower applications — such as marine bunkering, trucking, rail, mining and exploration-and-production — are looking at converting to LNG to reduce emissions and potentially cut costs. But falling oil prices since mid-2014 eroded the potential economic gains and significantly slowed development in the industry.

LNG for vehicle, ship and engine use faces a "chicken-and-egg" dilemma, say many observers. Distribution infrastructure needs to be developed to entice more customers to spend the money to convert to LNG engines, but developers typically won't spend the money to build plants without long-term customers.

"I guess we're the egg — or maybe the chicken," Josh Payne, a NuBlu general partner in charge of sales and marketing, told Argus.

Payne declined to say what the plant will cost or what NuBlu will charge for LNG. NuBlu likely will sell some LNG at a premium to Henry Hub spot prices, but the exact price could depend on a number of factors, including volume, he said.

"We want this facility to jump-start the inland marine market, for tugboats and things like that," Payne said. "There is not LNG production in Louisiana at all for the domestic market, so we're kind of a filling a void in there."

One possible customer is Harvey Gulf, which earlier this year started fueling three vessels that service offshore rigs in Port Fourchon, Louisiana. The LNG is trucked to Harvey's facility from Pivotal LNG's liquefaction plant in Trussville, Alabama, and Clean Energy's liquefaction facility in Willis, Texas.

The NuBlu facility is next to a pipeline that would provide feed gas, but Payne declined to say which pipeline that is.

One of the main investors in NuBlu is High Roller Wells, an oil well services provider based in Center, Texas.

Environmental regulations that require significant reductions of sulfur emissions from ships operating within 200 nautical miles (230 miles, or 370 km) from the North American coastline are spurring development of LNG bunkering facilities in Jacksonville, Florida, and Tacoma, Washington. Those projects are backed by long-term customers.