The state of the liquified natural gas (LNG) industry was a major theme of the 27th World Gas Conference in Washington DC this past summer. One of the most exciting developments discussed by attendees was the increasing number of companies that are exploring opportunities for smaller, short-term LNG contracts. This would have been unheard of less than a decade ago, when only the largest utility providers could afford the more expensive long-term contracts that were necessary to make LNG a profitable investment.
The advantages that LNG can offer are well-understood across the globe. There are the environmental implications—natural gas burns cleaner than most fossil fuels—as well as a wide range of financial perks. The raw material costs of natural gas are cheaper than traditional fuels, and more importantly, much more stable from a macroeconomic perspective. Unlike the rollercoaster nature of oil prices, which have risen and dropped unpredictably over the years, natural gas prices have remained steady.
The combination of benefits would seemingly make LNG advantageous for companies looking to diversify their fuel resources. However, the main challenge that has driven smaller companies and markets away from LNG has been the high cost of transporting the fuel.
In years past, LNG could only be shipped via specialized ocean vessels that housed the cryogenic tanks necessary to keep natural gas in a liquid form. Ports needed significant infrastructure to accommodate these supertankers and vaporize the LNG back into a gaseous form so it could be piped to its final destination.
Today, technology advancements have enabled the containerization of LNG, which significantly reduces the logistical expenses of transporting the fuel. By shipping LNG in intermodal containers, companies have more flexibility as to how they transport the fuel. In addition to increasing the range of sea vessels that can carry the cargo, containerization facilitates transportation via roadways to truck the fuel to its final location after it reaches a port.
The arrangements that most companies are exploring for transporting and storing LNG typically fall into one of two categories.
Regasification and Storage Terminals
One approach open to gas companies and electrical utilities is complementing the conventional diesel and HFO-fired systems with dedicated regasification and storage terminals for LNG. This does not necessarily mean that entire power plants have to be replaced with new equipment.
This setup enables dual-fuel power plants the flexibility to operate on either diesel or LNG and in some cases blend the two. By transitioning to LNG, electrical utility companies are able to benefit from lower-cost kWhs and also by having the flexibility to operate on multiple fuel sources can see higher levels of power plant availability, especially in the event of unforeseen fuel supply interruptions. In many cases, OEMs of gas turbine and reciprocating engine generators offer equipment retrofits allowing customers to upgrade existing infrastructure for operation on gas fuel.
Modular Storage Units
The alternative to building entire land-based regasification and storage terminals is to leverage a modular approach. Many companies, such as our own team at APR Energy, are exploring the potential of more accelerated development of LNG regasification and storage solutions. This enables a sort of “plug-and-play,” avoiding the challenges of building new permanent infrastructure. This type of solution could be deployed quickly and potentially provide greater accessibility to LNG.
As the technology behind LNG transportation, regasification, and storage advances, the question for the distributed energy industry will be how it can support the continued growth of LNG production and distribution. As companies explore the possibilities of standalone terminals and modular systems, it will be imperative for gas companies, electrical utilities, and logistics professionals to continue collaborating on the most cost-effective ways to bring LNG to market.
Paul Marcroft is Vice President of APR Energy.