September 16, 2010 / 8:13 PM / 9 years ago

Excelerate in slow talks to offer Gulf LNG import

* Excelerate offering regas capacity to third parties

* Deals will be hard given low U.S. gas prices

By Edward McAllister

NEW YORK, Sept 16 (Reuters) - U.S. liquefied natural gas terminal operator Excelerate Energy is in talks with three companies to offer import capacity at its Gulf Gateway terminal offshore Louisiana, the company’s chief commercial officer told Reuters on Thursday.

Excelerate has short-listed an energy trading house, a major oil and gas company and a financial institution for talks to strike a deal that could include offering import rights at its terminal 116 miles (187 km) off the U.S. Gulf Coast.

Excelerate announced the plan to offer import slots at the terminal in April. The Houston-based company is 50 percent owned by German utility RWE (RWEG.DE).

However, a deal could be hard to come by at this time given weak U.S. gas demand and ample domestic supply which has deterred shippers from sending much LNG to U.S. terminals this year, said Excelerate’s CCO, Andree Stracke.

“Discussions are a bit slow because Henry Hub gas prices are still very low compared to European markets,” he said.

The spread between U.S. and British gas prices — which helps determine the flow of LNG in the Atlantic — stood at $2.50 in favor of Britain on Thursday. British prices have been consistently, and increasingly, higher than U.S. prices since March. NG-NGLNM1=R

There are a number of liquid extraction units downstream from the terminal with which Excelerate has contracts. These can take propane and ethane out of the gas before it is shipped into the pipeline grid, but even with these in place the economics of sending gas to the terminal are not attractive.

“Whatever you can make from extracting liquids from the LNG, it is currently not sufficient to attract cargoes,” Stracke said.

The Gulf Gateway terminal, which can send up to 690 million cubic feet of gas per day into the grid and began operations in 2005, has sat idle over the last couple of years as U.S. gas prices slumped under the weight of increased domestic supply from unconventional sources such as shale.

A number of terminals onshore the U.S. Gulf Coast have received only sporadic volumes this year. This has led many operators to change strategies. Some are offering import capacity, others have applied for re-export licenses, and one — the Sabine Pass terminal in Louisiana — is proposing to build a liquefaction plant to export U.S. gas.

This year, new players such as trading houses and banks have begun to make inroads into the physical LNG market, trading cargoes and buying import capacity into U.S. and European LNG terminals.

Last month, Barclays Capital (BARC.L) announced a deal with Italy’s ENI (ENI.MI) under which Barclays would gain import rights to the Cameron LNG terminal in Louisiana. (Editing by Dale Hudson)

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