LNG may once more arrive on Scottish shores [Global Gas Perspectives]
Scotland has a strong case to once more host its own LNG import terminal, the developer behind the project tells NGW, citing growing local gas demand, declining North Sea production and the need to reduce reliance on pipeline imports from Europe that are costly and have limited availability.
Crown LNG, a Norwegian company listed in the US, primarily focuses on developing LNG facilities mounted on fixed gravity-based structures (GBSs) in harsh weather conditions. For its project off Scotland’s industrial hub of Grangemouth, though, it is opting for a floating regasification and storage unit (FSRU) as a faster solution, targeting its launch by the end of 2027.
“These GBSs take at least five years from start of permitting through construction,” Crown LNG CEO Swapan Kataria tells NGW. “We got a nudge from Scottish authorities that they needed something sooner.”
Global demand for FSRUs have soared over the past couple of years, as many countries in Europe have scrambled to expand LNG imports and replace lost Russian pipeline gas. FSRUs are generally cheaper and faster to develop than onshore and other offshore options, as they can be converted from LNG carriers already in service. They are also mobile, meaning they can be relocated to other regions in response to shifts in demand.
Project rationale
The UK already has three LNG import terminals, all onshore. The largest of these is the Isle of Grain facility in southeast England, with a current regasification capacity of 19.5bn m3/year that is due to be expanded to 24.5bn m3/yr next year. Isle of Grain is complemented by two more terminals in Milford Haven in Wales, South Hook LNG and Dragon LNG, with capacities of 21bn m3/yr and 7.6bn m3/yr respectively.
These three facilities, taking into account Isle of Grain’s expansion, have combined capacity equivalent to more than four-fifths of the UK’s gas consumption of 63.5bn m3 in 2023, although demand that year was significantly subdued as a result of high prices. In contrast, demand reached nearly 77bn m3 in 2021, prior to the height of the energy crisis.
Scotland used to have a terminal in Lanarkshire, but that facility shut down in 2013. Since then, though, the energy landscape in the UK and globally has altered significantly. Having a fourth terminal would further strengthen the UK’s energy security, helping to ensure stable gas imports in the event of a disruption in supplies either to one of the other LNG facilities or via the pipelines from Norway and continental Europe, Kataria tells NGW.
The price of these supplies is another issue. Gas prices in Europe have subsided since record heights seen in mid-2022, although they are still much higher than historic norms. And there are concerns about how much supply from Norway or the continent will be available at times, given Europe’s own needs.
Another rationale is declining UK North Sea gas production. Output off the country’s shore dropped to 34.5bn m3 last year from 38.1bn m3 in 2022, and the North Sea Transition Authority (NSTA) predicted in March that production would nearly halve by 2029. The outlook could be even bleaker, in light of the new UK government’s plan to further increase the windfall tax the industry pays, including by limiting investment loopholes, which Wood Mackenzie has warned could cause the sector “irreversible damage.”
There is also greater need for reliable gas-fired power generation as a result of the UK retiring significant coal and nuclear power capacity in recent years, leaving the grid more dependent on intermittent renewables.
“There is growing awareness of the need for stable and on-demand power,” Kataria says. “If the wind power is not there, there has to be the gas that the system can fall back upon.”
Progress so far
The Grangemouth project is expected to have a capacity of at least 2mn tonnes/year and potentially as high as 5mn t/yr. It was initially conceived to supply a planned 2.4-GW gas-fired power plant in the area, locking in 2mn t/yr of LNG demand. However, Crown LNG has said there is sufficient demand even without the power station as a customer, with Kataria pointing to demand for gas in industry in the area.
In July, Crown LNG signed a contract with UK-based IKM Engineering & Consultants for pre-frontend engineering design (FEED) and FEED work, including project management and execution, describing the award as a “critical milestone.” The company hopes to receive government consent for the project by the middle of next year, after which point it will move ahead with a detailed environmental impact assessment (EIA). EIAs are a simpler process for FSRUs than for land-based LNG terminals, in part because of their lower emissions, Kataria says. The company will also start preliminary work on the project’s jetty.
After selecting an LNG carrier for conversion, the aim is to take a final investment decision (FID) in either the third or fourth quarter of 2025, and then commission the terminal by the end of 2027.
In addition to the Grangemouth project, there is also the prospect that commodities trader Trafigura could revive a delayed plan for an LNG terminal in Teesside in northeast England. Kataria sees Grangemouth as the better, lower cost option for the UK’s LNG expansion, but believes there can be room for both projects.
Prospects elsewhere
While an FSRU is the preferred option for Scotland, Crown LNG is centring its efforts on the deployment of GBS-based projects, particularly those that are integrated with power plants. There is less competition for these types of projects, creating higher margins and greater shareholder value, Kataria says.
The downside for FSRUs is that they need benign weather conditions to operate without interruptions – wave heights of under 1.5 metres for instance, according to Kataria. Some locations also do not have the minimum 20-draft to accommodate an FSRU, and the dredging to create the necessary water depth can be too costly. There is where GBSs can be fit for the purpose, while still cheaper than land-based terminals. The first LNG terminal to be built on a GBS was Adriatic LNG, completed in 2008.
Crown LNG’s GBS solution provides the “best-in-class” technologies and equipment, Kataria said. “We’ve also designed our facilities to be the most efficient from a carbon perspective,” he says. The construction time has also been shortened from four to five years to 30 months, in part through the use of modularisation, he adds.
Crown LNG is looking to develop a GBS-based LNG import terminal in Kakinada on India’s east coast. A FEED contract was awarded to Norway’s Aker Solutions in 2021, and an FID had been anticipated the following year. That decision is now expected by mid-2025, with the launch targeted for 2028, taking advantage of the expected boom in Indian LNG demand over the coming years.
The developer is also looking at opportunities in Vietnam, which joined the LNG import market in July this year. And it plans to start a US LNG export project in the Gulf of Mexico that could provide supply to the terminals in India and Scotland, Kataria told Bloomberg earlier this month.
Crown LNG is yet to choose a location for the proposed US plant or initiate permitting. Aspiring new US LNG projects are struggling to move forward following the Biden administration’s pause in January on approvals for exports to non-Free Trade Agreement (FTA) markets.