The Role of Small-scale LNG in Gas Markets
by Christina Nagy-McKenna, Enerdynamics Facilitator
The next big thing in the natural gas industry is small: small-scale LNG (SSLNG). Ideal for the maritime and long-haul trucking industries as well as for power generation in parts of the world that lack traditional gas infrastructure, the SSLNG is growing worldwide. Well-known players in the energy market including Shell, ENI, Gazprom, and General Electric are already on board.
In order to be successful in this industry, they must figure out how to bring LNG supplies to areas where infrastructure may not exist, but demand is growing. Market players are beginning to make this happen with integration of supply and distribution and complete infrastructure solutions that give the customer a fuel supply it can count on and a complete plant that is ready to go. For the LNG industry, SSLNG is an opportunity for growth.
During 2018, 18 LNG cruise ships were under construction. The 18 ships represented 25% of all cruise ships on order, and the first was delivered in December 2018. Yet, during the same period of time, only six bunkering vessels existed, and these were serving other LNG ships that were already in operation. Carnival’s Senior Vice President of Maritime Affairs Tom Strang pointed out the hurdle faced by his company when he said: “The challenge for us is getting fuel to where it is needed.”
In the meantime, China has well over 80,000 miles of highways and is the largest user of LNG as a long-haul trucking fuel. It too faces the same hurdle, making sure LNG filling stations are strategically placed along the way for the trucks. For developers of power plants that are in off-the-grid areas, fuel delivery and infrastructure are again the common issues.
LNG Fueling Station Locator Map:
source: https://afdc.energy.gov/stations#/find/nearest?fuel=LNG
Wholesalers are overcoming the supply hurdle by integrating supply and distribution so that customers have a painless experience in acquiring the fuel they need. It is somewhat analogous to the traditional gas utility model only now the supplies, distributors, and customers are often in far-flung corners of the world. For example, to fuel its future LNG fleet, Carnival signed a contract with Shell Western LNG. Shell is now tasked with integrating supply and distribution so that Carnival will have LNG for all of its ships as they come on line during the next few years. Shell also must deal with the regulatory red tape in the various countries where Carnival will place the ships.
On the plant side of the equation, companies such as General Electric are building modular facilities that can be quickly assembled and finished on site or completely built and tested at their own facility before being disassembled for shipping. While not quite turn-key, the plug-and-play plants are fully designed, engineered, built, and tested with minimal additional testing needed once they are rebuilt on customer sites. Together with an integrated supply deal, remote areas around the world that do not possess natural gas infrastructure can now consider building power plants that run on LNG.
So, what will drive growth? The cost of oil, diesel fuel, and other alternative fuels will play a role in how quickly SSLNG is adopted. However, environmental issues are also driving the move away from dirtier fuels to LNG. For example, new, strict environmental maritime laws spurred the development of LNG ships. Concerns about air pollution drove the development of LNG for long-haul trucking. For the LNG industry, increased development of SSLNG will bring continued growth. In the U.S., this means potential increased exports of LNG. Large wholesale companies have already entered the arena to help facilitate the growth. Now it’s time to watch how quickly they and the major industries that can utilize SSLNG are able to build reliable supply chains and infrastructure.
Want to learn more about the evolving LNG business? Enerdynamics' seminar Global LNG Industry Basics and Market Impacts gives participants an understanding of how the LNG business works and how it impacts natural gas markets in North America and elsewhere in the world. Email info@enerdynamics.com or call 866-765-5432 ext. 700 for more information.
