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New LNG terminal solutions can deliver the missing kilowatt-hour

Increasingly flexible infrastructure is opening up new LNG markets. But the fuel’s greatest benefit is often missed

No-one wants to overpay for energy, particularly in emerging markets. But a focus on the bottom-line cost of fuel can risk missing the cost difference between a missing kWh and the cost of an available one, Roland Fisher, founder of floating regasification unit (FRU) developer Gasfin, told Petroleum Economist’s LNG to Power Apac virtual forum in late October.

“Everyone is obsessed with whether a kWh costs 10¢, 20¢ or 30¢, but analysis suggests that, to an economy, a missing kWh probably costs somewhere in the region of $2.50,” says Fisher. “One of the roles of an FRU, or other solutions on a similar scale, is to minimise the number of missing kWhs.

Optionality

Gasfin’s USP is that its FRU solution separates the two parts of an LNG terminal’s activity—storage and regasification. It is “not an advantage in itself per se, but it gives optionality in how to procure the storage and the regasification elements”, says Fisher.

“One of the roles of an FRU, or other solutions on a similar scale, is to minimise the number of missing kWhs” Fisher, Gasfin

By way of example, in the current market, the oldest existing LNG carriers, which are now too inefficient for service as vessels, are available at very low cost and can thus provide a cheap storage option for a new terminal.

And, on the regasification side, an FRU barge without storage is significantly easier to customise, which is important for frontier markets with unconventional or difficult to calculate gas demands. A Gasfin FRU “can operate efficiently at a very low send-out”, says Fisher, but can also scale up if and when demand grows.

“In all cases, finding the solution that fits the market is the aim,” with any market where demand is below 1-2mn t/yr benefitting, in Fisher’s view, from some sort of customised solution. But infrastructure developers must also remember that demand requirements will likely evolve once gas is available.

 “No market that has ever started on gas has subsequently stopped consuming gas—although, of course, maybe that could come with the renewables wave,” says Fisher. An FRU can adapt to changes in volume but also, should a market outgrow its utility, it can be removed.

Onshore advantages

“There is no reason why an onshore terminal is not the end-game, even in new markets,” he continues. “But an onshore terminal traditionally has a very well-understood underlying market—the problem in a frontier market is how to get the LNG flowing initially.”

The pros of an onshore terminal should not be overlooked. For one thing, they offer excellent reliability.

“As a state-owned company that provides energy for the nation, Kogas’ terminals have to offer 100pc reliability,” says Beom-Seok Kim, senior manager in the plant business development department at the South Korean firm. Its plants can build in certain redundancies that allow them to keep running even while repairs are going on. And they are largely weather-proof, a potential risk to floating solutions.

Perhaps the greatest advantage for an onshore terminal is the greater scope of storage that a tank solution can offer. Kogas’ portfolio includes some 74 tanks and it can service its 30mn t/yr demand without receiving additional cargoes for 7-30 days, says Kim.

“As a state-owned company that provides energy for the nation, Kogas’ terminals have to offer 100pc reliability” Kim, Kogas

Increasing capacity and adding additional services—such as trucking, bunkering or, in the future, hydrogen imports—is also more easily achievable with onshore infrastructure, Kim continues.

There are advantages too, to integrated floating regasification and storage units (FSRUs), says Parth Jindal, Asia managing director at Norwegian terminal developer Hoegh LNG. FSRUs can begin production in just six months, as long as a jetty is available “for when you need the gas now and there is not enough time to build an onshore terminal”, he says.

An FSRU’s capex requirements are also significantly lower compared with an onshore terminal, sometimes needing only c.25-30pc of the cash. And, if an importer is going down the rental route, much of the reduced capex is borne by the FSRU owner.

“You can also smooth any changes in the timeline by using the FSRU as an LNG carrier instead,” says Jindal. Indeed, Hoegh LNG currently has ten FSRUs, six operating as regasification units but four as carriers.

Petroleum Economist's first virtual LNG to Power Forum took place last week with a focus on the opportunities and challenges across Apac. This virtual event included eight hours of high-quality content, with a focus on engaging and interactive live panel discussions. All content is now available on demand. Click here to access it. 

The next in the LNG to Power series is our Emea event, to register for this, click here. 

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