Small scale but mighty

Karthik Sathyamoorthy, President, AG&P LNG Terminals & Logistics, analyses how small scale LNG technologies and transportation models are shaping the future of natural gas, whilst providing emerging countries with an uninterrupted supply of clean energy.

Natural gas is one of the most promising energy fuels due to its environmental qualities and economic viability. The global gas supply industry is shifting, with the spotlight on decarbonisation goals and the availability of alternative resources. Companies need to amend their business models to pivot to a carbon-neutral world and realise that innovations and technology are crucial to delivering valuable changes.

The LNG industry is becoming increasingly diverse and dynamic. Despite price volatility, the recent increase in demand trends suggested that developing nations, such as the Philippines, Bangladesh, and Pakistan, will play a significant role in LNG growth compared to historically well-known buyers, such as Japan, South Korea, and Taiwan. This means that small scale, modular, and floating technologies are shaping the future of the LNG market – one that is flexible, scaleable, and accessible.

The adoption of small scale LNG through small scale carriers and ISO containers is significantly increasing, with China and Europe as major users of these types of infrastructure. The industry is also developing in emerging countries such as India and Thailand, which seek to provide uninterrupted and clean energy in the form of natural gas to thousands of citizens in their domestic market right to their doorstep, even in the most landlocked areas.

City gas distribution processes

To take India as an example, the Ministry of Petroleum and Natural Gas has laid a plan to expand the city gas distribution (CGD) networks across the country for gas access to at least 70% of the population, covering over 407 districts. The CGD companies in India are expected to invest up to Rs 120 000 crore (approximately US$14 billion) over the next 10 years.

AG&P, developer, owner, and operator of downstream LNG/natural gas ecosystem, captured the opportunities that carrying out gas distribution in India has to offer – to bring LNG in affordable and smaller volumes to minor markets, which are the non-traditional, more dispersed off-grid customers.

Today, over 200 compressed natural gas (CNG) stations are being commissioned across five states of India for the automobile industry’s fast-fill and time-fill, ensuring a limited emission of pollutants in the air. Over 200 000 households benefit from stable and reliable power supplies through the last-mile infrastructure, which includes laying more than 1000 km of pipelines to each end-user. AG&P employs a hybrid methodology in serving its customers effectively, covering the last mile delivery by utilising robust customer-specific solutions and varied modes of gas transportation, such as trucking services that transport LNG to factories and central depots where gas is transferred into local, regional pipe networks, and smaller trucks to supply cascades to disparate smaller pockets of commercial customers with limited pipeline access.

Over the next 10 years, more than 28 districts and approximately 80 million people in India will benefit from the clean, affordable, and safe

Figure 1. AG&P is readying its 5 million tpy Philippines LNG for commissioning to supply gas to one of the largest power producers in the country.

fuel with the development of 1500 CNG stations to serve vehicles to transition and operate on clean fuel seamlessly and 17 000 km of pipeline connecting over 10 million households.

Plug and play

Another key feature of small scale projects is their decentralised nature. Due to its scaleability and flexibility of delivery methods, gas has development prospects in almost any region, urban or rural. To determine the feasibility and effectiveness of small scale LNG projects, it is reasonable to consider existing supply systems, regulatory policies, individual market intricacies and preferences.

Small scale LNG is suitable for economies with smaller and unpredictable demand, scattered demand centres, lack of delivery infrastructure, short implementation timelines, and/or financial constraints. Infrastructure requirements for these projects can be fulfilled through options such as FSUs with regasification equipment, FSRUs, small scale vessels, ISO tanks/ISO containers and others.

Case study: Senegal

This is the case with Senegal, which converted a Moss LNG carriers to the world’s first modular (M-FSRU) to accelerate the launch of a gas-based economy in order to cater to a growing population and a goal to phase out heavy fuel oil by 2025. Gas Entec, a subsidiary of AG&P, completed the conversion of the 125 000 m3 LNG carriers for KARMOL, a joint venture between Turkey’s Karpowership and Japan’s Mitsui OSK Lines.

The vessel was equipped with two units of a combined regasification capacity of 84 million ft3/d. It was connected to Karadeniz Powership Aysegul Sultan in Dakar, which enabled the 114 MW floating power plant to scale gas up and down (from 15 million ft3/d to 300 million ft3/d), depending on the fluctuating demand of the region. The M-FSRU will also serve smaller shore-based grids in Senegal.

Case study: the Philippines

In the Philippines, AG&P is commissioning the first hybrid onshore and offshore terminal at Batangas Bay that will come into operation at the end of 1Q23 with an initial capacity of 5 million tpy.

The Philippines is facing a gas supply crisis with domestic production from Malampaya (the country’s sole gas field) declining rapidly, resulting in the necessity for LNG import capacity for energy security in the coming years.

The 5 million tpy terminal comprises two onshore 60 000 m3 onshore tanks and a 137 000 m3 FSU. It will reach full capacity operation in 2025. It will operate on a tolling basis with one of the largest power producers in the country as its first anchor tenant. The terminal’s initial capacity will supply the power producer to meet LNG requirements from transport, industrial, and residential sectors in Luzon, the most populated island in the Philippines.

In addition to ensuring energy security, the terminal is built with a unique hybrid design to accommodate redundancies and ensure that disruption is mitigated from frequent typhoons for seamless gas supply to the domestic market.

Figure 2. AG&P’s LNG-by-truck delivery service providing immediate gas supply access to customers not connected to existing gas infrastructure.

Expanded services

Natural gas can also be transferred from large gas carriers to smaller vessels to distribute gas to smaller ports with a shallow draft, limiting the size of ships it can harbour. The use of small gas tankers for distribution to remote areas has great potential to contribute to emerging gas markets with limited port conditions. Many countries, such as the Philippines and Indonesia, are using smaller vessels for gas distribution across these archipelagos that lack available infrastructure and access to the shore.

As the next step, AG&P plans to commission small scale vessels to reach these locations, which aligns with its aim of ensuring that uninterrupted clean energy is distributed to the most inaccessible places.

AG&P is also working on expanding into the Philippines’ CGD network and is in conversation with various government bodies for the transmission, distribution, and supply of natural gas in landlocked areas, which will eventually serve natural gas to the whole of the Philippines.

The takeaway

The small scale LNG sector is small but promising, with a broad potential to be profitable and scaleable. Natural gas demand is likely to multiply, pushed by strict environmental regulations and the industry’s capabilities to unravel new consumers. The challenge is penetrating untapped markets to ensure that clean natural gas reaches each industry or household efficiently. Companies, such as AG&P, benefit from the right strategy, business model, and affiliations across the natural gas value chains in select markets. Through unique technical and commercial solutions and a remarkable safety record, AG&P has established itself as a company fully capable of efficiently delivering natural gas to nascent economies.

More comprehensive research, innovation, and infrastructure development are currently available to promote small scale LNG ecosystems with cost-effective solutions supporting the last mile deliveries while maintaining safety standards.

As the world transitions into a cleaner tomorrow, more stakeholders involved in developing innovative natural gas ecosystems will enable economies to meet their environmental objectives faster, address their energy security concerns and improve millions of lives by providing access to cleaner energy.