Harvey bankruptcy puts US LNG bunkering in focus
The fledgling US Gulf coast LNG bunkering market will not be significantly impacted by Harvey Gulf International Marine’s filing for bankruptcy protection, Harvey chief executive Shane Guidry told Argus.
The company has played a leading role in the promotion of LNG for bunkering in the region. Harvey Gulf is the sole LNG bunkering supplier in the Gulf of Mexico.
Harvey Gulf has LNG storage capacity of 270,000 USG, equivalent to about 22.5mn cf (637,000m³) of gas, in Port Fourchon, Louisiana from where it supplies LNG for bunkering via truck. The LNG is sourced from Pivotal LNG’s Trussville, Alabama, plant, and Clean Energy’s liquefaction facility in Willis, Texas.
Harvey Gulf’s fleet of 60 service vessels includes five LNG-powered offshore supply vessels (OSVs) – Harvey Liberty, Harvey Energy, Harvey Power, Harvey Freedom and Harvey America. Shell charters at least three of the OSVs to supply its deep-water operations in the Gulf of Mexico – Harvey Liberty, Harvey Energy and Harvey Power. Harvey Freedom, which was delivered in May 2017, is on a five-year charter with a “major oil and gas company.” Harvey Gulf has a sixth LNG-powered newbuild OSV, Harvey Patriot, which was expected to be delivered later this year.
Guidry told Argus today that the LNG-powered vessels are under charters from five to 15 years in duration, with the first of those charters scheduled to end in 2020. The company buys about 200,000 USG/month of LNG, he added.
In November 2017 Guidry formed marine transportation company, Q-LNG Transport. The company is 70pc owned by Shane Guidry and 30pc owned by Harvey Gulf. Q-LNG Transport announced the order of a 4,000m3 newbuild LNG bunkering barge, to be delivered the first quarter of 2020, was long-term chartered to Shell. The barge was slated to supply LNG for bunkering to Shell’s customers to various ports in Florida and the Caribbean.
Guidry stressed that Harvey and Q-LNG are different companies and Q-LNG is not involved in the bankruptcy proceeding.
Harvey Gulf last week filed for Chapter 11 bankruptcy protection primarily because the steep fall oil in prices since mid-2014 has significantly slowed exploration and production in the Gulf. Harvey’s fleet provides a variety of services to offshore platforms, so it has been hit by the downturn as well.
Harvey sought cost reductions of $87mn and signed long-term vessel use contract with key customers to mitigate the risk of low spot charter prices. The downturn lasted longer than Harvey expected, and it reached an agreement with most of its creditors to convert about $1bn in debt to equity in the company, at a 100pc ratio. Unsecured debtors would not be impacted.
The restructuring plan would allow Harvey to continue operations of its Jones Act vessels and reduce annual interest expenses by about $47mn, Guidry said in an affidavit to the bankruptcy court.
About 94pc of the creditors representing 75.5 of the debt have already approved the plan. Houston federal bankruptcy judge David Jones on 9 March gave preliminary approval to the plan and set an expedited hearing on 24 April for final confirmation. Objections must be filed by 16 April.
Guidry he said he expects the LNG bunkering market to develop more quickly along the US east and west coasts than along the Gulf coast.
The closest port to the US Gulf with an LNG for bunkering supply operation is Jacksonville, on Florida’s northeast coast. There are three LNG-fueled containerships that operate on the Jacksonville, Florida – Puerto Rico route. Two are owned by TOTE Maritime – Isla Bela and Perla del Caribe and one is owned by Crowley – El Coqui. Crowley will begin operating a second LNG-powered containership on this route later this year – Taino.
The TOTE vessels have been receiving gas trucked to Jacksonville from southeastern US peakshaving plants. They will procure LNG from JAX LNG’s bunkering facility being built in Jacksonville, and scheduled to come on line this year. Crowley has also contracted with Eagle LNG to provide LNG bunker fuel in Jacksonville. Eagle LNG is building a $300mn liquefaction plant at the Port of Jacksonville to serve the Crowley vessels, as well as export LNG and sell it to other domestic high-horsepower users. That facility is scheduled to come on line in 2019.
Shell is listed as one of Harvey Gulf’s creditors on its Chapter 11 bankruptcy filing, but is not part of the top 30 group. Harvey Gulf’s biggest creditor is engineering consulting company Woods Hole Group which is owed $570,250.