Hydrocarbon Processing - April 2021 - GP-24

LNG TECHNOLOGY
tional oil companies), big plants (millions
of metric tons of production yearly), big
ships (1,000-ft long), big users (public
utilities) and big money enable it to happen. More recently, a few entrepreneurial
companies have tried a different approach
to the LNG market, building much smaller, fuels-scale projects and shipping their
product in small containers to the end users, with good success. Some projections3
are that more than one-third of global
LNG production growth over the next 4
yr will come from U.S.-based small-scale
(< 2 metric tpy) newbuild facilities.
However, despite this initial and projected success, these small operations
have grown slowly. Challenges faced by
producers and distributors of small quantities of LNG include:
* Energy efficiency-Modern,
full-scale LNG production plants
consume nominally 8% of their feed
gas as fuel. Small-scale plants have
been required by economic necessity
to minimize CAPEX and, as a result,
tend to be much less energy efficient,
consuming 12%-20% of feed gas as
fuel (or equivalent imported power).
* GHG signature-With lower energy
efficiency comes higher carbon
dioxide (CO2) emissions (whether
directly or indirectly, via imported
power). The world is increasingly
focused on achieving best available
technology with regard to CO2
emissions. The CO2 savings for
the end user are substantial, but
production emissions are relatively
high compared to achievable values.
* Material handling-It is challenging
to move substantial quantities of
liquids in relatively small containers.
A small, 2-MMtpy LNG production
facility shipping in conventional
155,000-m3 carriers would require
28 ships/yr, or about one every
2 wk. Moving this same small
plant capacity in the biggest ISO
containers [nominally 40-ft (43m3) long] would require more than
100,000 containers/yr to be filled,
transported, emptied and returned,
or 280 containers/d.
* Shipping costs-A significant
portion of shipping costs are
independent of volume. Moving
LNG long distances in small
quantities disproportionately
increases the unit cost, making the
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small-scale product economically
unattractive outside of regional
deliveries. Many small-scale facilities
would be unable to shoulder the
burden of infrastructure costs to
accommodate large-scale shiploading operations and are restricted
to regional markets.2,3
* Export port priorities-Large
export facilities needing to move
substantial quantities of LNG may
be unable to make sufficient loading
windows available for small-scale
ships and barges and still load their
annual commitment of cargoes.
* Security of supply-Today, LNG
in small quantities is not widely
available from multiple parties.
With diesel or fuel oil, production
issues at one supplier can readily
be accommodated by others. In the
present LNG market, if a single,
dedicated, small LNG ISO container
or barge-loading facility were to
become temporarily unavailable
(i.e., due to weather, maintenance
or unplanned outages), the receiving
facility could be seriously challenged
to access replacement suppliers
in the short term.
* Financing-This is a significant
issue; historically, funding for the
substantial costs to underpin the
development of LNG liquefaction
infrastructure has been underpinned
by long-term (20-yr), take-or-pay
contracts with credit-worthy buyers.
The small-scale market can be much
more diverse, seasonal, variable
in demand and comprise buyers
without access to investment credit
ratings. Financing for small-scale
facilities will require a different,
more flexible model.
The key to success for small-scale
LNG lies in finding a pathway that alleviates these substantial challenges while
still being positioned to take advantage of
the growing, and increasingly diverse and
dispersed LNG consumer market opportunities. This pathway will focus on logistics-finding the solution that enables
the capture of big-project economies of
scale on the production and transportation end, coupled with small-project innovation and flexibility on the consumer
end through the evolution of the LNG
value chain, supported by financial backing that can enable the development.

Economic drivers. On a fundamental energy basis, classic, large-scale LNG competes commercially with coal. Despite
the substantial environmental advantages
that natural gas provides compared with
coal (e.g., 50% lower CO2 emissions per
unit volume of energy, lower NOX and
SOX, vastly reduced particulate emissions, elimination of Hg emissions, much
less invasive production), coal remains in
high demand due to low cost and previously invested capital, representing 27%
of global energy production in 2019.1
The challenge is that as renewables
grow rapidly in the market, they tend to
push out the more expensive fuels first,
regardless of the environmental profile.
Small-scale LNG competes more directly
with oil, specifically with diesel fuel, fuel
oil and ship bunker. In this market, LNG
holds the economic advantage. Even in
a low-oil-price market, such as that seen
during most of the ongoing COVID-19
pandemic, global average diesel prices
are higher than global average natural gas
and LNG prices.4 This makes the smallscale LNG market an attractive economic
opportunity, if the challenges can be effectively solved.
Market opportunities. Renewable energy is now emerging as the energy source of
choice in a world increasingly concerned
with greenhouse gas emissions and climate change. As noted above, in many
markets including Europe and Japan, renewables have had more success in displacing natural gas than coal, driven more
by economics than by environmental concerns, despite the better fit of natural gas in
reacting to variations and sudden changes
in renewable energy production.1,4
Going forward, the growth of LNG
and natural gas in the traditional markets
of large power generation facilities, industry, commercial and residential heating
will be increasingly challenged by the accelerating growth of wind and solar power. Small-scale LNG operating in different
market dynamics that compete more directly with liquid fuels is less challenged
by renewables in some key markets-this
generates opportunities. Considerations
associated with these market opportunities are discussed here.
Marine. The global shipping industry consumed 4.36 MMbpd of fuel
oil/bunker fuel in 2019,5 equivalent to
200 MMtpy LNG (56% of 2019 LNG

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Hydrocarbon Processing - April 2021

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