OCTOBER
2016
LNG
INDUSTRY
21
longer absorbed by large Asian buyers. LNG prices have
dropped so much that some LNG projects that looked very
profitable just two years ago are now finding it more difficult to
attract investors. However, current prices reflect a temporary
imbalance between LNG supply and demand. When the LNG
demand comes back, prices will firm up again.
Meanwhile, the European gas market, which was a market
of last resort when the LNG prices were high in Asia, does not
hold much promise at the moment. Norway and Russia are
making abundant, cheap pipeline gas volumes available in the
European gas market and LNG has a hard time competing on
price.
Areas for optimism
If there is one obvious bright spot, several European buyers are
prepared to pay the LNG premium in order to be independent of
Russian pipeline gas supplies. One such example is Lithuania,
which kick-started its LNG imports using the aptly named
FSRU Independence
to be less reliant on Russian pipeline gas
supplies. Poland has also built an LNG import terminal to reduce
its reliance on Russian pipeline gas.
Lithuania followed the template established in
South America several years earlier; using floating storage
regasification units (FSRUs) to quickly start LNG imports. The
FSRU is essentially a converted LNG carrier that pressurises and
vaporises its own LNG cargo and then sends it out via a pipeline
into the national gas grid. This was pioneered first in Brazil
almost a decade ago, and later successfully rolled out in
Argentina and Chile. The FSRU option often circumvents the
long and complex permitting process for a land-based LNG
import terminal, and reduces construction time of the facility
itself from approximately 4 years to less than 2 years. In fact,
the Excelerate Energy Escobar LNG FSRU terminal in Argentina
was up and running within 9 months from the intial go ahead.
Just as importantly, FSRUs are also significantly cheaper than
their land-based counterparts, making them attractive to
developing countries.
The lower LNG prices and the low cost, quickly deployable
FSRU option helped to open up markets such as Pakistan and
Egypt, which are both developing countries with large
populations and rapidly growing power demand. Soon,
Bangladesh will become an LNG importer, also relying on an
FSRU to start up LNG imports. After Egypt, Ghana and
South Africa could also become LNG importers on the African
continent.
LNG as transportation fuel
All of these projects are supplying gas to the gas pipeline
grid, but there are other applications for LNG. With ever more
stringent emissions limits coming into effect, LNG as a fuel is
a solution to reduce emissions from a variety of transportation
methods, including the following:
Ships
Norway still leads the way in terms of numbers of
LNG-fuelled sea-going ships thanks to its incentive scheme
to make ships more environmentally friendly. Elsewhere
in Northwestern Europe, LNG-fuelled vessels are coming
into operation. Canada and the US are also seeing the first
LNG-fuelled vessels entering the fleet. At the same time, China
has embarked on an ambitious programme to reduce emissions
from shipping on the Yangtze river by switching to LNG.
Land-based and offshore drilling rigs
The availability of gas fromwell heads and pipelines, as well
as LNG, combined with the high price of diesel fuel, prompted
some land-based drilling rig operators to convert their gensets
from diesel-only to dual-fuel operation up until 2014. With the
falling oil price, the number of active land rigs reduced sharply,
as drilling new wells became unprofitable. More stringent
emission requirements and the availability of gas, as well as the
ever improving dual-fuel engine technology, will sustain the
move to gaseous fuel and LNG in land-based drilling rigs now
that the rig count in the US starts to move up again.
Road transport
Gas-fuelled trucks and buses have been around for a long
time. CNG is the most popular form of gas fuel, but LNG
is beginning to make inroads. LNG is especially interesting
for heavy trucks that travel greater distances. According
to International Finance Corp. (IFC), a member of the
World Bank Group, in China there were over 100 000
LNG-fuelled vehicles in 2014 and, in the US, the courier service
UPS has over 1200 LNG-fuelled trucks on the road.
2
Railroads
There were a few attempts at LNG fuel for locomotives in the
1980s and 1990s, but it did not develop beyond the trial stage.
Today, in the US and Canada, railroad companies are testing new
LNG-fuelled locomotives and the conversion of their existing
locomotives to LNG as fuel. The two main locomotive builders
in the US, Progress Rail and GE, have released LNG-fuelled
prototypes. In the US, regulatory issues with the fuel tender cars
may slow down the introduction of LNG-fuelled locomotives.
Russia is planning to build LNG-fuelled, turbine powered
locomotives and India has signalled its intention to develop
LNG-fuelled locomotives alongside CNG-powered railcars.
Airplanes
LNG requires more storage volume for the same energy
content, but is approximately 20% lighter than kerosene per
unit of energy. LNG can be stored in aluminium tanks and
is compatible with jet engines. Boeing has been working
on an LNG-fuelled airplane design, but does not expect the
technology to be ready until 2040 or even later. Ironically,
Qatar Airways has been pioneering the use of synthetic jet fuel
made from natural gas (methane) in Shell’s Pearl Gas-to-Liquids
plant in Qatar. In the Soviet Union, tests were made with a
specially modified passenger airliner using LNG as fuel as far
back as the early 1990s.
Figure 3.
Air emissions from marine transportation
(image: Alexander Harsema-Mensonides).
