LNG Industry Challenges & Solutions
The United States is now the leading natural gas producer in the world. The shale revolution has created opportunity to export US natural gas. This potential will grow in the future. The first shipment of U.S. LNG from the lower 48 states left in February 2016 and since then the U.S. has shipped LNG to Europe, Asia and South America.
Most likely a robust natural gas export policy will enhance US energy global leadership and strengthen US economy and protect environment. Permitting and licensing new terminals open gradually exporting capabilities. LNG exports will need to find new markets.
Current challenges are circulating around: gas exchangeability, gas quality adjustment to different client specifications, long term-take or pay contracts, shipping issues (short-term chartering, protocols, documentation, tarifs), LNG Standard compatibility and testing (Cargo Assurance.
Issues such as interchangeability can be addressed through the application of technology and also through the efforts of regulatory bodies that are making efforts to consider the harmonization of gas specifications and equipment – particularly in the EU. LNG-X is involved in a dialog around “FREE LNG-X” dialog platform for regulatory issues with the participants from he LNG industry including: producers, terminals, shippers, traders and customers.
Gas Exchangeability. Interchangeability is defined by ISO13686 as ‘A measure of the degree to which characteristics of one gas resemble those of another gas. Two gases are said to be interchangeable when one gas may be substituted for the other without affecting the operation of gas burning appliances or equipment’. Quality adjustment at a liquefaction plant or regasification terminal is possible but requires additional equipment and technology to either extract or inject NGLs or balance with nitrogen. In the case of NGL extraction this could create an additional revenue stream for regasification plant but easly could add cost to the buyer. Solution for this issue could be future standardization on LNG quality and terminals design standardization allowing to adjust quality of the gas after regasification.
Long Term Contracts. The length of term of a supply or purchase contract – spot, short (1 to 2 years), medium (approximately 5 years) or long (20 years+) mostly depends on the commercial strategy of the project. Suppliers want to relocate the risk and the high capital investment of a liquefaction plant to long term contract keeping some flexibility to take advantage of higher prices on the spot markets. Solution for short term Spot LNG trading should be standard terms and conditions plus standardized shipping contract with delivery terms and transportation tariffs depending on the distance and a vessel carrier. To avoid chances of failure on deliveries LNG-X platform offers trading between verified and financially sound members.
Shipping Issues. With the growth of LNG spot and short term trade more LNG carriers are being constructed that are not committed to a specific project. Constructing ships that are not dedicated to a specific project, i.e. the route between liquefaction plant A and terminal B raises an interesting challenge. Not only size of the vessel matters. Almost all terminals can accommodate ships of 138,000 m3 and most will handle 155,000 to 160,000 m3 . LNG-X platform allows you to determine all of important factors to be considered before the particular cargo for the transaction is chosen. most of these compatibility issues must be worked on long in advance of any trade so that as much flexibility as possible exists when cargoes are available for trade. The merchant’s charterer’s role is to ensure that this happens.
LNG Standard Compatibility and Testing. Historically LNG trading grew from project to project and almost no standardization was in place at that time. Numerous standards exist for design of sample points, sampling methods, analysis methods – both online and offline – and calculation of LNG quality and properties. The role of Cargo Assurance is to ensure that samples and analysis performed at both the load port and delivery terminal are as representative and accurate as possible. LNG-X Standard shipping and condition terms will address all related issues. Sampling and analysis procedures, ports compatibility, differences between the final delivered quality and the weathering models and monitoring the independent surveyors will be defined. up as shown in the diagram.