LNG value chain challenges | 2018-11-25

LNG value chain challenges

25 November, 2018 12:00 AM printer

LNG value chain challenges

Demand of LNG is growing fast considering the safest and cleanest fuel compared to coal and others. Liquefied natural gas (LNG) is faced with several extraction, shipment and distribution challenges because it requires specially designed carriers to transport and infrastructure to store.

LNG is a liquid form of natural gas converted by cooling it below minus 163ºC (minus 261ºF). As a result of the cooling it occupies 600 times less space compared to its gaseous state, which facilitates easy transportation. LNG use spans across all sectors from power generation, industrial processes to commercial and domestic applications for heating and cooking.

Once natural gas is liquefied, it is easy to transport to end user points. However, there are challenges to shipping and transporting LNG because it requires special carriers. Also, once it reaches the consumption destination, additional facilities such as regasification and associated pipeline infrastructure are required because it is used in gaseous form by industry and domestic users. The first LNG carrier was launched in the Calcasieu River on the Louisiana Gulf Coast in January 1959. The world’s first ocean cargo of LNG sailed to deliver to the UK.

LNG Value Chain: The LNG value chain consists of four key areas. First, natural gas must be extracted from the earth. This process, known as exploration and production, is where gas reserves are first detected after detailed seismic analysis and a series of tests. Before full-fledged drilling for natural gas, test wells are drilled and once they are found viable, commercial drilling operations are undertaken.

Second, after the gas is extracted, it is filtered and purified. On completion, the gas is compressed to a liquid form so that it can be safely and easily transported in large volumes. A liquefaction plant is built to convert the gas into liquid. This plant is also referred to as a “liquefaction train” that reduces the volume of the gas by a factor of around 600 through a multi-stage refrigeration process. In other words, one cubic meter of LNG at -163°C has the same energy content as 600 cubic meters of natural gas at ambient temperature and atmospheric pressure.

Third, LNG is loaded onto specially designed ships built around insulated cargo tanks that keep the LNG in a liquid state throughout the voyage. The gas is then shipped to centers of demand.

The process of receiving and distributing begins at LNG gas terminals. The terminals consist of storage tanks and regasification facilities where the liquid gas is converted back into the gaseous state through a process of heating called vaporization. After that they are transported to end users through pipelines and trucks. The last two processes are described in more detail in the ensuing paragraphs.

LNG Vessels: LNG tankers are double-hulled ships specially designed and properly insulated to prevent hull leaks and ruptures in the event of an accident. A typical LNG carrier has four to six tanks located along the centerline of the vessel. Surrounding the tanks is a combination of ballast, cofferdams and voids giving the vessel a double-hull type design. These tanks can be broadly classified into three types based on their design, i.e., membrane tanks, spherical tanks and IHI prismatic tanks. Membrane tanks are built into the vessel and forms as a part and hold on to the hull with a series of insulations. The spherical and prismatic tanks are kept separately from the hull and are self-supporting structures.

The spherical and membrane tanks are accepted worldwide as cryogenic cargo containment systems. Membrane tanks dominate the world cargo capacity for LNG transport because they allow the construction of large capacity carriers of Q-flex (210,000 cu. m.) and Q-max (260,000 cu. m.) vessels.

The LNG is offloaded at the destination point in one of two ways. LNG is converted into its gaseous form on board the vessel and then offloaded to the storage at the destination; these kinds of vessels have regasification facilities on board. Alternatively, it can be delivered in liquid form to the storage area of the regasification plant at the destination.

Key Challenges in LNG Supply: Is it less expensive to transport LNG in liquid form?  However, the vessels needed to transport LNG must have adequate insulation, which entails huge costs. Hence, the daily tanker tariff is also very high. During peak market conditions, the estimated daily rate of a LNG cargo vessel is in the range of about USD $90,000 per day depending on the size and type of the vessel.

Despite the best insulation there is always some boil-off of liquid during transportation. The liquid gas evaporates and hence there is a loss of product in transit. This is another challenge faced by the LNG operators.

At the destination point, establishment of regasification facilities is an essential prerequisite to make LNG a consumable product. This requires additional investments in the infrastructure such as plant facilities, inbound pipelines, storage, outbound pipelines for distribution, etc. Also, during the process there is a handling loss (unaccounted for gas or UFG) of LNG that again adds to the financial loss.

From the distribution perspective, natural gas is consumed by industries and domestic end users. Therefore, multiple supply and distribution networks are established to ensure sustenance of the market. For domestic use, a piped gas network for houses must be built for easy and safe consumption while industrial customers require a massive pipeline network to receive and further process the natural gas. In some cases, such as supplies to vehicle gas stations, natural gas is distributed by trucks, which requires separate loading facilities at the regasification plant.

LNG requires exhaustive infrastructure to safely extract, ship and distribute the product. Also, the LNG industry is highly capital-intensive and fraught with high risks such as volatile markets, geo-political situations, a long project cycle and lengthy payback periods. Despite these challenges, LNG stands out as a gift of nature to the community in terms of cleaner and cheaper fuel.

 

Engineer Md. Shahin Alom, Deputy General Manager in MJL Bangladesh Limited, M.Sc. in Petroleum, B.Sc. in Mechanical Engineering


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