Small Scale: Big Opportunities for LNG
Oil and gas players usually have big plans for developing their business: projects that encompass a massive scale. But in the LNG sector, there are some significant new opportunities for gas through something small.
Speaking on the “Global LNG Day” of the European Gas Conference in Vienna, Austria, Wim Groenendijk, VP International and Public Affairs at Gasunie and speaking on behalf of GLE (Gas LNG Europe, the European association of LNG terminal operators), said he was excited about the potential of small-scale LNG. In his view, small-scale LNG offers great opportunities for the LNG business and the gas business in general, and also for improving the quality of our environment.
He explained that membership in GLE comprises 14 member companies (LNG terminal operators) from nine countries.
Mr. Groenendijk said there were two sides of small-scale LNG: the first, “breaking bulk” - large vessels are unloaded at the large LNG terminals, and subsequently reloaded into smaller vessels. “These are then used to supply the LNG to small markets or markets that have limited pipeline access. This can greatly improve the connectedness of the EU market and improve market functioning and security of supply.”
The second opportunity regarding small-scale LNG, he said, was the use of LNG as a fuel for heavy transport, shipping, heavy trucks, rail, and busses.
A key advantage of LNG according to him was that compared to conventional transport fuels the use of LNG as a fuel either completely eliminated or greatly reduces sulfur, NOx, fine particles and CO2 emissions.
“LNG is a proven, safe technology” he noted. “The LNG industry has an excellent safety record. Small scale LNG has been proven in many regions of the world, and is already being applied in various areas.”
He expected to see a rapid development of small-scale LNG, certainly around Europe.
One of the key drivers for such rapid development, he said, were the regulations on sulfur emissions which were getting more and more stringent. “Due to the introduction of more stringent regulation in the SECAS zones (Sulfur Emission Controlled Areas for Ships), after 2015 ferries in the North Sea and Baltic Sea will not be able to run on heavy fuel oil,” said Groenendijk. “The environmental performance of LNG is superior compared to other bunker fuels. Many terminals are working into that direction, equipping to facilitate bunker fuel retail.”
Trucks running on diesel were another opportunity for LNG. He explained: “Apart from the lower emissions, if you run them on LNG it’s also actually a much quieter operation. Think about noisy garbage trucks early in the morning - running them on LNG is definitely a benefit.”
Groenendijk said small-scale LNG was making its way onto the agenda of policy makers and businesses, and that there were many tangible examples around the world.
“We can make a big step and can make it now. This should appeal to policymakers,” he commented.
In terms of its commercial viability, he said LNG had a much higher energy density compared to compressed natural gas; and LNG prices were becoming more competitive compared to conventional bunker fuels, opening up potential demand as a bunker fuel.
In terms of the environmental benefits, Mr. Groenendijk noted that the development of the legislative and regulatory framework was lagging behind this new development.
“Small-scale LNG is relatively new for Europe. For example, the current fiscal treatment doesn’t take into account the superior environmental benefits,” he said, adding there was also a need for (harmonized) safety regulations at the distribution side.
“But there’s a lot of good will all around. The EC supports very strongly green shipping and development of adequate green infrastructure.”
To comply with the 2011 Roadmap to a Single European Transport Area, for the heavy transport sector he suggested small scale LNG could be an effective solution.
“This is an opportunity for improving our environmental footprint, and it’s very difficult to find alternatives, especially in the heavy transport area. In addition, an adequate small scale infrastructure can help to improve market functioning and security of supply in different areas of the EU. It needs a regulatory framework that can recognize these benefits.”
Groenendijk concluded by saying his organization GLE would support its further development.
One delegate from the audience queried how long it would be until there was some criticality in volume in Europe.
“In terms of volumes, it’s anyone’s guess,” replied Mr. Groenendijk. “Many terminals around Europe are studying opportunities and are excited to pick it up. This will certainly lead to increased volumes in the future. It’s hard to say when it could reach really substantial levels – the infrastructure needs to be developed in step with the market needs.
“More stringent regulation of emissions will kick in fairly rapidly and will be a major driver. Ship owners have to start looking to alternatives before 2015 when there will be more stringent regulations. Realistically, it may take a few years, perhaps up to 2020 before such operations are completed.”
Someone else had a question about safety of small-scale LNG, arguing that one incident with one LNG truck could ruin its reputation.
Groenendijk replied: “Safety regulations will help but they can never guarantee completely that an incident will never happen. The transport of LNG is in principle safer than LPG, so it is quite a safe fuel; also the LNG business has an excellent safety track record. However, in particular safety regulations of local distribution and retail will need to be in place.”