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March/April 2017

Class of 2017 New LNG projects bring 25 mta to market

Exclusive: the LNG shipping rich list Gastech 2017: Asia LNG Shipping supplement “By 2018 we are scheduling to manage LNG transport of some 10 mta by our own fleet” Yuji Kakimi, president JERA, page 11

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March/April 2017


(credit: INPEX Australia)

27 Comment 5 Asia is in the spotlight as global LNG players gather in Tokyo for Gastech 2017

Infographic 6 The LNG shipping rich list. LNG World Shipping and VesselsValue name the wealthiest, largest and fastest-growing LNG shipowners and nations 46 Exclusive: Mike Corkhill analyses the LNG-carrier tonnage fixed against Asia’s import and export projects, revealing a deluge of capacity about to hit the water

Profile 11 Japanese trading house JERA is the world’s largest importer of LNG. President Yuji Kakimi outlines the company’s fleet and investment ambitions 17 L andmark Capital-backed Saga LNG plans a fleet of mid-sized LNG carriers to serve new import destinations in Asia and overseas


Opinion 21 What are the prospects for LNG tonne-mile demand to 2020?

Projects 27 Class of 2017: what opportunities and challenges face the seven LNG ventures that will bring 25 million tonnes of new production to market this year? 28 Petronas acting vice-president LNG assets, development and production Adnan Zainal Abidin discusses the world’s first floating LNG (FLNG) project

Small-scale LNG 28

30 Japan’s far-flung island towns and rugged terrain have made it a first-mover in small-scale LNG. As Japan finalises its plans to invest in LNG bunker-supply infrastructure, Mike Corkhill examines how its small-scale networks will evolve

Innovation 33 Equipment failures in which marine loading arms’ emergency release systems (ERS) have been activated by accident have prompted SIGTTO to issue new guidance for safe practice 39 When Tokyo stages the 2020 Olympics, it wants to run the games’ vehicle fleet on hydrogen, reports Kawasaki Heavy Industries' Shohei Inatsu 43 Alpha Process Controls plans to sell its hose-transfer systems and emergency breakaway couplings to floating storage and regasification units (FSRUs) 44 Musasino executive director Naoki Sugiyama explains why the Japanese manufacturer is developing radar type level gauges for LNG and LPG cargo tanks

LNG World Shipping | March/April 2017

contents 48 Bernhard Schulte Shipmanagement director energy projects Angus Campbell introduces BSM’s new partnership with Babcock International

Offshore 51 Engie is working with Singapore-based Sembcorp Marine to develop Gravifloat-based offshore and near-shore LNG projects

Containment 55 In April, Japan Marine United (JMU) delivers the first conventional LNG carrier fitted with an SPB containment system. Mike Corkhill reports

Shipmanagement 59 K Line has launched the Kare human-resources programme to transform the Japanese carrier’s safety culture 63 Nakilat is taking management of 25 large LNG carriers back in-house

Ship orders and deliveries 64 Mike Corkhill reveals the ship orders and deliveries to end-February

Best of the web 66 The ten most-read stories so far this year, exclusive to

Viewpoint 71 Jose Ramon Arango of the Panama Canal Authority on LNG trades to Asia

Supplement 73 Asia LNG Shipping celebrates Gastech 2017 Front cover image (credit: INPEX Australia)

Next issue May–June 2017 issue of LNG World Shipping: Main features include: Small-scale LNG: our unique guide to the world’s LNGfuelled, non-LNG-carrier tonnage. Infographic: Things we’ve learned from this year’s GIIGNL report. Technical: containment systems. Operations: cargo handling and plant. Special report: deepsea LNG in northwest Europe.

March/April 2017 Editor: Karen Thomas t: +44 20 8370 1717 e: Consultant Editor: Mike Corkhill t: +44 1825 764 817 Commercial Portfolio Manager: Bill Cochrane t: +44 20 8370 1719 e: Sales Manager: Ian Pow t: +44 20 8370 7011 e: Production Manager: Richard Neighbour t: +44 20 8370 7013 e: Subscriptions: Sally Church t: +44 20 8370 7018 e: Korean Representative: Chang Hwa Park Far East Marketing Inc t: +82 2730 1234 e: Japanese Representative: Kazuhiko Tanaka Shinano Co., Ltd t: +81 335 894 667 e: Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Editorial Director: Steve Matthews Executive Editor: Paul Gunton Head of Production: Hamish Dickie Business Development Manager: Steve Edwards Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

Follow LNG World Shipping on Twitter, @LNGkaren Read the latest international LNG shipping news at ISSN 1746-0603 (Print) ISSN 2051-0616 (Online) ©2017 Riviera Maritime Media Ltd

Subscribe from just £299 Subscribe now and receive six issues of LNG World Shipping every year and get even more: • supplements: LNG Carrier Lifecycle Maintenance, Small-Scale LNG, Offshore LNG and Ballast Water Treatment Technology • access the latest issue content via your digital device • free industry yearplanner including key dates • access to and its searchable archive. Subscribe online:

LNG World Shipping | March/April 2017

Total average net circulation: 4,000 Period: January-December 2015

Disclaimer: Although every effort has been made to ensure that the information in this publication is correct, the Author and Publisher accept no liability to any party for any inaccuracies that may occur. Any third party material included with the publication is supplied in good faith and the Publisher accepts no liability in respect of content. All rights reserved. No part of this publication may be reproduced, reprinted or stored in any electronic medium or transmitted in any form or by any means without prior written permission of the copyright owner.

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TOKYO DRIFT I Karen Thomas, Editor

n the first week of April, LNG shipping players will converge on Chiba in Tokyo’s southeastern suburbs for the global gas and LNG networking fest that is Gastech. LNG World Shipping is official shipping publication at this year’s event and to mark the occasion, we include in this issue a brand new supplement, Asia LNG Shipping. Its highlights include a state-of-the-nation introduction by Society of International Gas Tanker and Terminal Operators (SIGTTO) secretary-general Andrew Clifton, who looks back at Japan’s LNG shipping milestones.

LNG World Shipping is an official shipping publication at Gastech 2017 in Tokyo

We then hand the baton to International Group of LNG Importers (GIIGNL) president Jean-Marie Dauger, who looks ahead to the opportunities and challenges facing Japanese LNG imports and at Asia’s emerging markets. We also interviewed senior officials from Japan’s Big Three LNG shipowners. Mitsui OSK, NYK and K Line face similar obstacles, as the market moves towards smaller volume, shorter-term LNG contracts. Despite their common ground, however, all three have come to very different conclusions about future priorities. The supplement includes an infographic that shows the LNG carriers fixed against

Asian imports and exports. Mike Corkhill’s fascinating research reveals how the region’s utility companies are extending control over these fleets – and the sheer scale of the newbuilding capacity fixed to Japanese and South Korean utilities.Our featured LNG project this issue is Malaysia-based Petronas, which is about to start commercial production on the world’s first floating LNG (FLNG) vessel. The main March-April magazine also focuses on innovation in gas shipping. As Japan aims to transform itself into a hydrogen-fuelled society, engineers will need to design a new class of ships to deliver this volatile commodity to market. Project leader Kawasaki Heavy Industries discusses the progress to date. The Society of International Gas Tanker and Terminal Operators (SIGTTO) looks at LNG emergency-release systems and at ways to operate them more safely and efficiently. We reveal why Bernhard Schulte Shipmanagement has joined forces with Babcock International to form a new bunker-supply joint venture and interview Musasino about its new LNG cargo tank radar level gauges. Last but not least, we are proud to present the second LNG World Shipping/ VesselsValue LNG shipping rich list. Our unique infographic lists the countries that control the largest LNG-carrier fleets, the ships on order and on the water and the world’s eleven richest LNG shipowners. We will be reporting live and tweeting from Tokyo during Gastech. As always, you can read all of that coverage online, on our daily news pages. Do join the discussion with other senior industry officials in our members-only networking group on LinkedIn and track the bits and bobs with us on our Twitter feed. Nihon de aimasho. Let’s meet in Japan. LNG

LNG World Shipping | March/April 2017

UNITED KINGDOM 38 5.7 US$5.0bn vessels capacity 3 million m NORWAY 4.6 31 US$4.0bn vessels capacity 3 million m SOUTH KOREA 5.3 37 US$3.5bn vessels capacity 3 million m CHINA 3.3 25 US$3.3bn vessels capacity 3 million m MALAYSIA 3.9 30 US$2.9bn vessels capacity million m3 UNITED STATES OF AMERICA 2.6 18 US$2.2bn vessels capacity 3 million m




capacity million m3


US$ billion


LIVE ships

455 68.6

vessels capacity million m3









572 87.5



vessels capacity million m3

vessels capacity million m3


capacity million m3




Source: VesselsValue, 1 January 2017 Additional research: Karen Thomas Infographic: Sasha Tan




capacity million m3


US$ billion






capacity million m3




US$ billion


capacity million m3


US$ billion









capacity million m





capacity million m





capacity million m




capacity million m


capacity million m3



US$0.3bn US$0.2bn US$0.6bn







US$5.95bn 33 vessels 7.8 million m3


32 vessels 5 million m3

US$3.7bn US$3.7bn 28 vessels 4.1 million m3

19 vessels 3.2 million m3

US$3.5bn 20 vessels 3.3 million m3

US$2.9bn 30 vessels 3.9 million m3


15 vessels 2.4 million m3

US$2bn 13 vessels 2.1 million m3














9 vessels 1.5 million m3

15 vessels 2.3 million m3
















Out of over 90 companies owning an LNG fleet, 50 per cent of the global LNG fleet, by value, is owned by just 11 companies. This data shows that the LNG sector is relatively fragmented, not dominated by a small number of owners.

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“New LNG projects are needed to prepare for tight supply and demand in the future” – Yuji Kakimi



‘We will invest aggressively in projects that change the Asian LNG market’


okyo-headquartered JERA is the world’s largest single importer of LNG. The trading company formed in spring 2015 as a 50-50 partnership between Japanese utilities Tokyo Electric Power (Tepco) and Chubu Electric, creating a vast LNG portfolio of nearly 40 million tonnes a year (mta). However, the market is changing. In 2016 Japan – which buys more LNG than any other country – took in a total 83.3 mta, down 2 per cent on-year. JERA has pledged to cut the volumes it buys under long-

term contract and to build up its LNG portfolio and the fleet under its control. LNG World Shipping editor Karen Thomas asked JERA president Yuji Kakimi to outline his plans.

What are JERA’s priorities in forming an LNG-procurement portfolio? Yuji Kakimi: We are aiming to form one that is appropriate. In terms of regions, we will diversify our procurement by a quarter each to North America, Australia, the Middle

East and others. In terms of price index, we will lower the proportion of oil-linked contracts that make up the bulk of the current contract, to around 50 per cent. And with contract terms, we will lower the proportion of long-term contract to around 50 per cent. A quarter will be formed by mid to short-term contracts and the rest will be procured on the spot market. However, in Japan, uncertainty surrounding LNG demand has increased, because of the number of and timing of recommissioned nuclear-

power plants, the amount of renewable energy introduced and the impact of deregulation [of the Japanese gas market]. Our priority is to respond flexibly to these uncertainties.

What volumes of LNG have you secured so far, with which suppliers and on what terms? Our offtake volume of LNG is approximately 35 mta, 80 to 90 per cent procured through term contracts. Recently, to enhance our flexibility, we have entered into agreements with EDF Trading and Centrica to

LNG World Shipping | March/April 2017


sell LNG in Europe. Also, on the buying side, we have entered into a non-binding agreement with the Jordan Cove LNG project and we are continuing our discussions.

What proportion of its total LNG volumes does JERA expect to sell on outside Japan? It all depends on demand from Tepco Fuel & Power and from Chubu Electric Power Co.

What are JERA’s plans for investing in new LNG production to secure future supply? New LNG projects are needed to prepare for tight supply and demand in the future. JERA is considering supporting projects that will change the Asian LNG market and innovate the LNG industry, introducing state-of-the-art technologies by securing long-term

contracts. Our target is to have 12 upstream projects in 2030, up from our current six.

How many vessels are contracted to JERA, who are the owners and how quickly will you expand the capacity that you control? Now, we have a fleet of six vessels. Ten additional vessels that we have secured will enter service by the end of 2018. Two of the 10 vessels we have secured will be delivered to JERA for the Gorgon LNG and Wheatstone LNG projects. Our vessels will number eight by the end of 2017.

What are JERA’s priorities for LNG shipping? We aim to realise stable and economic transport, based on delivering Tepco Fuel & Power and Chubu Electric Power FOB

LNG World Shipping | March/April 2017

contracts, participating in LNG transport through our subsidiary, LNG Marine Transport. We aim to expand earnings opportunities in the fuel value chain. And we are considering utilising our LNG fleet to realise sales to third parties inside and outside Japan, optimising the operation to expand our LNGtrading business.

JERA IN FIGURES Established April 2015 Key officials President Yuji Kakimi Chairman Hendrik Gordenker Paid-in capital ¥5 billion (US$43.7 million) Shareholders

Do you still plan to increase your fleet to 30 vessels by 2030 – and how will you achieve that growth?

Tokyo Electric Power Co (Tepco) Fuel & Power, 50% Chubu Electric Power, 50%

We will increase the number of vessels for FOB contracts and for tolling agreements that have yet to be concluded. By 2018, we aim to transport 10 mta using our own fleet. As we aim to procure 30-40 mta of LNG in 2030, the same volume as at present, we are scheduling to increase the number of vessels by acquiring equity LNG and by ›››

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››› increasing the proportion of FOB contracts that have no destination restrictions.

What are your plans for direct investments in new LNG tonnage or for shipowning partnerships? We have invested in 10 of the 16 vessels and we will consider the balance between direct investment and charter, watching the trends in shipbuilding and in the charter market.

What are JERA’s plans for downstream distribution of LNG? Although our LNG procurement is mainly for Tepco F&P and Chubu Electric, we are selling LNG through the spot market, taking into account supply and demand and market trends. We have agreements with Inpex and Shizuoka Gas to sell LNG in Japan. Looking overseas, we have entered highly flexible agreements with EDF Trading and Centrica to sell LNG in Europe.

What are JERA’s ambitions in LNG distribution and in small-scale LNG – which markets do you expect to target? Regarding LNG distribution, LNG demand in Japan may

fluctuate widely. However, it is very important for our bargaining power to maintain our position as the world’s biggest buyer of LNG. We will strengthen our LNG trading to maintain the procurement volume of LNG while responding flexibly to demand fluctuations. We are steadily implementing IT systems and organising the contracts that have no destination restrictions. As for small-scale LNG, we are considering ways to meet the needs of LNG buyers by being an aggregator of LNG procurement.

Do you have plans to invest in infrastructure, whether in smaller LNG ships or terminals, or to support growth in smallscale LNG shipping? JERA is involved in the entire value chain, from upstream through downstream to power generation. If a small-scale LNG project fits into our strategy, we will consider investing in it.

What projects and supply/distribution agreements has JERA concluded so far? Since it was established in 2015, JERA has entered into LNG sales agreements with Shizuoka Gas, EDF Trading and Centrica.

On the coal-trading side, we have entered into an agreement with EDF Trading for JERA Trading to acquire its coal and freight business. In domestic electricity generation, our generation capacity by fuel type for LNG is approximately 4,290 MW and for coal approximately 1,300 MW. Since concluding our memorandum of understanding with Pavilion Gas in October 2015, we have held wideranging discussions on plans that will benefit both of us.

JERA LNG-carrier fleet list, by date of joining the fleet

Finally, what role will JERA play in reshaping the global LNG landscape?

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We would like to lead the industry towards the change in the Asian LNG market. We will support projects that contribute to change in the Asian LNG market by long-term contract and/or upstream investment. We will introduce an Asian LNG index, not only for spot transactions but for term contracts. We plan to lower the proportion of long-term contracts and increase the proportion of short-term and spot transactions. Above all, we will strengthen our trading business to flexibly respond to fluctuations in demand. LNG


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JERA plans to source quarter of its LNG from North America, including Freeport LNG

LNG World Shipping | March/April 2017

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SAGA LNG SHIPPING STRIKES FOR THE MIDDLE GROUND Saga LNG Shipping plans to launch a fleet of up to 20 midsize LNG vessels, ranging from bunker vessels and coastal carriers to floating storage and regasification units. Founder David Wu and chief executive Truls Rosenberg talk gas-to-power opportunities and explain why LNT A-box will become a game-changer for containment systems


hen Landmark Capital boss David Wu travelled to China’s Jiangsu Province in January, he moved one step closer to creating his own fleet of midsize LNG carriers from scratch. In January, the Shanghaibased businessman attended the keel laying of the company’s first vessel at a ceremony at the China Merchants Heavy Industry (CMHI) shipyard at Haimen near Nantong, where chief executive of Landmark-owned, Norway-based Saga LNG Shipping Truls Rosenberg and officials from ABS joined him. CMHI will deliver the 45,000m³ newbuilding in first-quarter 2018. Now, Mr Wu and Mr Rosenberg are working to charter a vessel that they hope will lay the foundations for a sizeable fleet of mid-size LNG carriers. The small to midsize LNGcarrier segment is a tiny one, dominated by elderly tonnage. Data from VesselsValue

David Wu: Saga LNG Shipping will build up its fleet “stone by stone”

indicates a live fleet of 14 ships up to 29,000m³ and seven on order, and just 10 carriers on the water in the 30,000m³-90,000m³ size range, plus Saga LNG Shipping’s firm order and one option. However, Mr Wu feels there is a gap in the market. Landmark Capital – the Chinese-Norwegian boutique finance house he heads – plans to invest in up to 20 midsize LNG vessels, either as shuttle LNG service providers to deliver gas to remote communities or as storage vessels to support a new wave of gas-to-power projects. Saga LNG Shipping will build up its fleet “stone by stone”, Mr Wu says. His wishlist includes midsize vessels, to meet forecast demand in Asia alone for up to 50 regional and coastal carriers, but also mid-size floating storage and regasification units (FSRUs), floating storage units (FSUs) and floating regas units (FRUs). The mix reflects the company’s plan to become the

shipowner of choice for the emerging gas-to-power market. “We have talked to a lot of prospective gas-to-power clients, from Asia, Latin America and the Caribbean, where midsize LNG carriers are a hot topic for these kinds of projects, as they will need midsized LNG carriers or FSRUs – or both working in tandem,” Mr Wu says. “They are typically talking about units with capacities between 30,000m³ and 80,000m³. Several of the projects we are involved in will require an FSRU and one or more LNG carriers, acting as feederships.”

Gas-to-power projects Falling gas prices have brought new impetus to gas-to-power projects. Several have launched in the last year. Mr Wu believes gas-to-power opens a brand new market for midsize vessels. The optimum size for these new projects is in the 30,000m³-50,000m³ range, he says. And many projects – particularly those in island communities such as Indonesia and the Philippines – have shallow waters that are offlimits to deep-draft vessels. “We see the market developing in parallel,” Mr Wu says. “On the one hand, there are developers of power plants that will request dedicated units of a very specialist size and design spec. On the other, demand will grow for vessels

LNG World Shipping | March/April 2017


in the 30,000m³-80,000m³ size range for reloading of cargoes and regional distribution as part of hub-and-spoke infrastructure emerging to reach end-users where traditional gas infrastructure is not feasible. “Interest is particularly strong in Asia, the Caribbean and South America, but we’ve also had enquiries from Spain and from Italy. We are now in very advanced discussions with two or three prospective customers. Our concept features a feeder-sized vessel that also has a very shallow draft.”

Containment Landmark Capital’s decision to invest in midsize tonnage is not the only aspect of this project that breaks new ground. Saga LNG Shipping’s

mid-sized carrier will be the first vessel in service fitted with a brand new cargo containment system (CCS). The IMO Type A system’s design comes from Landmark-owned LNG New Technologies, based in Norway. Containment system market leader Gaztransport & Technigaz (GTT) has traditionally focused on the largest carriers. LNG New Technologies has developed the LNT A-box as a buildingfriendly, robust system for small to mid-scale projects for which cost-competitiveness is critical. Its CCS aims to bridge a gap in the market between the smallest ships, fitted with Type C tanks, and larger vessels that use membrane containment. The LNT A-box comprises an IMO independent Type A tank

installed inside an insulated hold space. LNT has registered the patents for its system globally in the past four to five years and secured approvals in principle from the class societies. “At its core, this technology features an uninsulated, selfsupporting A-tank placed in an insulated box, hence the name, A-box,” says Mr Rosenberg. “This makes for an accessible space between the primary and secondary containment barriers which is fully accessible for inspection. That makes it easier to check their condition and to carry out repairs, a design feature well received by class and unique to our product.” “Type A tanks have an internal structure that mitigates sloshing. The result is that the cargo tanks may be filled at any level and cargo sloshing during

transport will not be an issue. A solution where sloshing is acceptable gives full operational flexibility to carriers and floating units and is also ideally suited for LNG-bunkering vessels.” Saga LNG will not say how much its first midsize LNG carriers cost. Even so, it maintains that using the LNT A-box saves both time and money. “In cost terms, we estimate that our LNT A-box works out 20-30 per cent cheaper than existing containment systems,” Mr Rosenberg says. “The ability to construct LNGCs at any decent shipyard saves time in waiting for a build slot, which can be an issue when orderbooks are full at top tier LNG yards. We also build the tanks in parallel to the hull, offering further time savings.” Saga LNG Shipping also

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believes that the technology can adapt across a range of vessel sizes, from 3,000m³ bunker vessels to large-scale FSRUs. The company adds that the LNT A-box system is especially well suited to LNG fuel tanks for non-LNG tonnage, on which space is at a premium. “Space is money for shipowners looking at fuel-tank designs,” Mr Rosenberg says. “We believe that our A-box can offer a significant advantage as it can easily be integrated into conventional ships. To spur the development of the LNG bunkering industry, LNT has developed a concept to convert a platform-supply vessel into a 5,000m³ LNG bunker vessel using LNT A-box technology. It believes this will interest PSV owners facing underutilisation in the offshore market. “Everything depends on our first vessel. We need to prove, beyond a doubt, that the LNT A-box containment system is the most effective solution yet brought to market for these types of vessels.” Orders for conventionalsized LNG carriers slowed to a trickle last year, reflecting delays to projects and a subsequent glut of tonnage on the water. It’s anyone’s guess when shipowners will run back to the shipyards waving chequebooks – but when they do, there’s a chance they will be looking for smaller tonnage. Low gas prices have created a new wave of small importers. As demand slows from traditional import giants Japan and South Korea, analysts now predict that new buyers seeking less than 5 million tonnes a year (mta) of LNG will drive demand growth to 2030. Shipping companies, from LNG newcomer Stolt-Nielsen to Japanese deepsea LNG giant Mitsui OSK, are looking with new interest at the small to mid-size LNG carrier segment, to tap new-market growth. What is striking is

how slowly that interest is translating into orders. Meanwhile, many new import nations see FSRUs as the cheapest, fastest way to take delivery of their first cargoes. However, offshore LNG is not an easy market to enter. As BW LNG managing director Yngvil Asheim told LNG World Shipping last autumn,

three-quarters of recent FSRU contracts went to vessels ordered on spec. But in today’s tough shipfinance markets, few newcomers have the confidence or the resources to build FSRUs on spec. Mr Wu maintains that Saga LNG Shipping can break into the LNG-to-power segment if it offers the right logistics solution

and the right cost structure. “We understand, from looking at the small and mid-sized LNG segment geographically, that reaching stranded demand in developing markets will always be driven by optimisation and economics,” he says. “We are convinced that what we can offer will achieve that breakthrough.” LNG


What are the prospects for LNG-carrier tonne-mile demand to 2020? With more than 40 LNG carrier newbuildings due to leave the shipyards this year alone, we ask the experts how shipowners' earnings will hold up until the end of the decade


hipowners have delayed delivery dates for their newbuildings, as fears of oversupply have slowed start dates for new LNG-export projects. This year, 41 new LNG carriers are due for completion and the fleet is on course to hit the 500-ship landmark as early as April. Balancing LNG carrier demand against available cargoes is tricky in an oversupplied market. But will things get better this decade for tonne-mile demand?

Simpson Spence Young (SSY) Gas director Debbie Turner LNG carrier propulsion has moved from traditional steam-driven engines to gas injection, ME-GI or X-DF, and containment systems have become ever more economical. Vessel sizes have also increased, reducing the cost of transportation of LNG molecules. Production of LNG is also changing.

Simpson Spence Young (SSY) Gas director Debbie Turner

Historically the main sources of production were close to their markets; spot cargoes were only available when volumes exceeded contractual demand. This has altered, with more fluidity, driven by the new supply sources and end users’ desire for more flexible contracts. LNG production will grow, from around 222 million tonnes (mt) in 2010 to an estimated 420-430 mt in 2020. This is due to consistent volumes from the largest exporter, Qatar, and by additional volumes from Australia and the US. Many believe this dramatic increase in production could make moving these volumes more inter-regional, reducing – in theory – demand for tonne-miles. With production must come demand. One view is that this market will remain long in volume to 2020, although plants are unlikely to be mothballed, given their high capital investment. Therefore the LNG must be absorbed. Although many believed these volumes would hit home in 2016, a large part of the year was tight in product, hit by outages at plants coupled with increasing demand from new import areas. One of the main driving forces is the price of LNG. Competition from new volumes will be felt strongly across the market and we are now beginning to see more divergence from crude oil prices.  We have not yet felt the real impact of US shale gas volumes and Australian production continues to increase. Both will have a crucial effect on future pricing.  A breakdown at any significant product facility will affect regional pricing, particularly where contractual volumes are significant. This was evidenced at the end of 2016 when Far Eastern price rises due to outages

LNG World Shipping | March/April 2017


opened arbitrage play between west and east. This increased tonne-miles and freight rates as tonnage was pulled into more attractive markets. There are concerns, too, over whether some Far Eastern shale gas will head to its contracted markets or become trading plays in the Atlantic Basin, with volumes from Indian and western players. This throws some uncertainty into these markets towards the end of the decade that could affect the number of vessels ordered, reflected in today’s depressed orderbook, with few speculative orders beyond 2018. We will see this inter-basin product predominantly remain. But this is shipping. The opportunities to be had will be taken – oblivious to the tonne-miles – if the deal works!

GasLog chief executive Paul Wogan GasLog retains a bullish outlook for future LNG tonne-mile demand. Rising exports until 2020, particularly in the US, should drive tonne-mile expansion. New exporters are shipping LNG to new customers, expanding the number of LNG trade routes. The period 2016-2020 will see buildout of approximately 150 million tonnes a year (mta) of new LNG supply, driving a substantial increase in demand for gas. Recent cargoes from Cheniere’s Sabine Pass terminal have been shipped through the Panama Canal to China, Japan and Korea, 9,000-10,000 miles (14,50016,100km) in total. This is more than double the historical average trading

GasLog chief executive Paul Wogan

LNG World Shipping | March/April 2017

distance for LNG voyages, of around 4,000 miles (6,500km). Poten recently calculated, based on completed voyages from Sabine Pass, that every million tonnes of LNG will require about 1.7 ships, significantly more than historical averages. Of the first 60-plus Sabine Pass cargoes, others travelled some 10,000 miles (16,100km) to the Middle East and India, and South America, where a journey to Rio is about 5,000 miles (8,000km). Just three cargoes went into Europe. Increased tonne-miles are not the only driver of shipping demand. Speed and efficiency – or, more often, inefficiency – also matter. Commodity traders and gas “aggregators” are playing an important role in developing the growing LNG spot market. Often, these players’ focus is not shipping optimisation but profit maximisation through price arbitrage. Destination flexibility for new LNG supply and modern vessels’ more efficient cargo tanks enable ships to travel more slowly or take a less direct route, allowing greater optionality on where to sell the cargo. This increased tonne-time will also drive greater future vessel demand. Both China, with a 40 per cent increase in LNG demand last year, and India, with a 30 per cent increase, have set aggressive gas-consumption targets to diversify from coal and oil. Many countries also want to use LNG to diversify their gas supplies. Historically, this supply was often oilprice linked. The US offers a competitive alternative, with LNG often priced off Henry Hub and not oil. New LNG importers continue to emerge: in the last two years, these include Poland, Pakistan, Lithuania, Jordan, Egypt and Jamaica. Last year, seven floating storage and regasification units (FSRUs) were awarded, providing a cost-effective, quick-to-market solution. FSRUs continue to open new markets, creating more trade routes and fragmentation, which should drive increased tonne-mile demand. South Africa, Ivory Coast and Bangladesh are all looking to FSRUs to start to import LNG. With new trade routes and a developing LNG spot market leading to increased fragmentation, we remain very encouraged regarding future tonne-mile expansion.

Poten & Partners LNG and natural gas consultant Amokeye Adede LNG carrier tonne-mile demand is driven by LNG supply/demand volumes and trade patterns. LNG supply/demand has risen significantly, from just over 100 mta in 2000 to around 260 mta last year. The average LNG trade distance has also increased, from around 2,900 miles (4,700km) in 2000 to around 3,800 miles (6,100km) today. Therefore, LNG carrier tonne-mile demand increased from around 300 billion in 2000 to around 1 trillion in 2016. In 2000, there were around 120 LNG carriers, based primarily on long-term regional trades, committed shipping routes to efficiently use the fleet. Although a large portion of today’s LNG trade is regional, LNG is now a global business.  The LNG fleet expanded to 450 ships by year-end 2016. The relatively long shipping distances associated with Qatar/ the Middle East and other recent interregional trades have driven LNG ship demand growth. And increased short-term trade and diversion opportunities have driven ship-demand growth, putting more emphasis on fleet flexibility. Aside from the quantity of LNG transported and the distances shipped – ie tonne-mile demand – ship utilisation is also important. This takes time into account – idle time, canal transit time and so on. There is an increase in shipping requirement due to scheduling and utilisation inefficiencies, reflecting trade’s more dynamic, shorter-term nature. That makes the number of required vessels per million tonnes of transported LNG (vessels/mt) a useful metric. Current trading patterns indicate

Poten & Partners LNG and natural gas consultant Amokeye Adede



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a global average shipping requirement of 1.3 vessels/mt. LNG supply/demand is set to rise to around 350 mta by 2020 – 90 mta of new supply now under construction will come on stream by 2020. Based on an average of 1.3 vessels/mt, this indicates the need for almost 120 new ships. Growth will be driven mostly by new US exports – an additional 60 mta by 2020 – and by Australia and Russia’s Yamal LNG. The unique nature and location of US exports will make global trading patterns ever more complex. Today, ex-US trading patterns require 1.75 vessels/mt. However, US liquefaction projects may be delayed, or open with low utilisation, or global trading patterns may revert to being regional. New, longer routes such as Yamal to Asia, via Europe and the Suez Canal or the northern sea route would require more vessels per million tonnes. Clearly, increasing flexibility creates less certainty over future trade patterns. Many newer LNG contracts have shorter terms and destination flexibility. Growing interest in cargo swaps may also reduce overall LNG ship demand as fleet efficiency increases.

Drewry senior research analyst LNG Shresth Sharma LNG trade will get a big boost from new liquefaction trains, primarily in Australia and the US. However, what matters more for shipowners is the tonne-mile demand, which determines vessel demand. Drewry expects LNG tonne-mile growth to average 8 per cent annually in 2017-2020. This year, we expect tonne-

Drewry senior research analyst LNG Shresth Sharma

LNG World Shipping | March/April 2017

mile growth of 8 per cent – against trade growth at 7 per cent. Most liquefaction trains coming online this year will be in Australia, generating more Australia-Far East trade. Growth in trade and tonnemiles is in sync because of the short-haul distance involved. However, from next year, tonne-mile growth will surpass trade growth. In 2018 and 2019, tonne mile growth should average 9 per cent against a trade growth averaging 5 per cent, as most trains coming online will be in the US. These trains will increase trade on the US-Asia and US-Europe long-haul routes, which will boost tonne-mile trade. That tonne-mile demand is expanding despite the opening of the new Panama Canal. Without this, growth would have been even higher. Drewry is therefore maintaining a bullish outlook on long-term prospects for LNG shipping, expecting rates to improve from next year. Although trade and tonne-mile demand will grow this year too, fleet growth will surpass it, keeping pressure on rates. This year the LNG fleet will grow at its fastest pace in five years, at 13 per cent, keeping rates low.

MSI director Stuart Nicoll The coming years will transform LNG shipping, redrawing the trade map, which will impact vessel demand by reducing average voyage hauls. The industry will see a massive increase in trade, primarily from Australia and the US, and several new importers will emerge. MSI expects an additional 100mt of liquefaction capacity and 95mt in trade volume to 2020. This contrasts with minimal growth of 12mt during 2012-2016, heralding a return to the expansionary environment of the latter years of the last decade. The mechanics of trade are also likely to change substantially. Importers will be freed from the restrictive practices that were necessary in the industry’s early years to provide certainty for investors. These practices have no place in a diversified, global trading network and will be dismantled. These changes will accompany massive trade expansion, with a substantial increase in shipping demand that will erode today’s massive oversupply. However, the tonne-mile issue rears its head more negatively too. The increase in

vessel demand is likely to be much lower than it could have been, had the industry maintained the trading patterns of the first half of this decade. MSI estimates that the average number of annual voyages completed by a standard 170,000m³ vessel was close to 11.6 in 2013-2014, when a surge in Asian demand drew LNG from the Atlantic and the Middle East. Since then, the Atlantic surplus has stayed closer to home and new Australian and Papua New Guinea supplies make the shorter journey to northeast Asia. Most worrying is the idea that Indian importers will swap cargoes with other importers to minimise shipping costs and distances. This would be good for reducing the contribution to global carbon emissions, but bad for shipowner incomes. A major issue that the wider shipping industry must address is how to reduce CO2 emissions – for which network optimisation will be key. MSI estimates that trade growth to 2020, accompanied by shortening average hauls in our base case forecast, will add nearly 20 million m³ to ship demand, based on an increase in average voyages to 12.4/year. If trading patterns mirror those of the early part of this decade, which implies an inefficient arbitrage-driven trading environment with substantial balancing trade, this will boost demand by an additional 3 per cent by 2020, raising our projected earnings for a 170,000m³ duelfuel diesel-electric (DFDE) vessel by 21 per cent. LNG

MSI director Stuart Nicoll

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40,000 tonnes of chain will secure the Ichthys LNG project’s central processing facility and floating production and FPSO to the seabed. Credit: Ichthys Australia

LNG: Class of '17 T

his year, seven LNG projects are scheduled to start or expand their production, bringing an additional 24.9 million tonnes (mta) to market. The Class of 2017 includes the world’s first live floating LNG (FLNG) project, two project start-ups in Australia, the expansion of two existing projects, in the US and Australia, and a small, modular LNG project in Indonesia. Australia, in particular, is ramping up its output. Last year, the country exported 36.8 mt, an increase of more than a third. This year, the second and third trains at Gorgon LNG, the first train for the giant offshore Ichthys LNG project and the first train at Wheatstone LNG are due to bring an additional 18.7 mt to market. By the end of the decade, Australia is on course to become the world’s biggest exporter of LNG, displacing Qatar, exporting some 85 mta. However, with global LNG supply exceeding current demand, reports of project delays were gathering

momentum in the opening months of this year. In February, Ichthys backer Inpex issued a statement, pledging that it will start production by September, hitting back at reports that the project faces new delays. It suffered a setback in January when the engineering firm CIMIC pulled out of its contract to build Ichthys’ power station, citing the project’s rising costs. Gorgon announced last year that it would delay full production until this summer. It was unclear, at the time of writing, whether project backer Chevron plans to push the start date back further still. In February, India’s Petronet LNG received its first cargo from Gorgon, two years later than scheduled. Project delays are of particular concern in Australia, because the country’s second wave of seven world-scale LNG-export projects is the most expensive the world has ever seen, according to a study that LNG World Shipping carried out last year.

The average Australian project costs US$30.9 billion – three times more than the estimated cost of Canada-based startups, which have all been delayed due to cost concerns. Delays in Australia may also boost uptake for unfixed cargoes from Sabine Pass in the US, where train three was due to complete construction in April, well ahead of its June target. US-based analysts are now predicting that owner Cheniere Energy may also complete train four this year, ahead of its original 2018 schedule. Together, the two trains will add 9 mta of production capacity, doubling output from Sabine Pass. The next wave of US-based export projects is not due to start until next year. Indonesia is opening a new mid-scale LNG-export project this year. Energy World is on course to export its first 500,000 tonnes of LNG from its 2 mta start-up, Sengkang LNG. It is developing the project as a modular venture comprising individual 500,000 tonne

trains. Sengkang LNG will supply a regasification terminal and power plant that Energy World is building in the Philippines. The final project due to start this year is perhaps the most closely watched of all. Malaysia-based Petronas aims to start commercial production using the world’s first floating LNG (FLNG) vessel, PFLNG Satu, see overleaf. The 1.2 mta vessel was about to start commercial production at the time of going to press, after Petronas pushed back its original first-quarter 2017 launch date. Last year brought a wave of FLNG project cancellations, reflecting investor nervousness, amid low oil and gas prices and rising project costs. If the proof of the pudding is in the eating, the performance of PFLNG Satu will determine how quickly Petronas brings online its second FLNG vessel – and how quickly its competitors bring their own first FLNG projects to market. LNG

LNG World Shipping | March/April 2017


‘Our pioneering FLNG will change how gas fields integrate with an LNG complex’ On the eve of Petronas starting commercial production on the world's first floating LNG (FLNG) vessel, acting vice-president LNG assets, development and production Adnan Zainal Abidin offered LNG World Shipping a progress report on PFLNG Satu and other plans

Please can you update us on PFLNG Satu, Petronas' first floating LNG (FLNG) project AZA: Offshore commissioning of PFLNG Satu is 98 per cent complete with the successful production of its first LNG on 5 December. The floater is now moving towards full production, preparing for the plant performance test run and provisional acceptance of the facilities. PFLNG Satu is expecting to achieve commercial operation, lifting its first cargo early this year.

How many cargoes are planned and contracted this year, and who are the buyers? Adnan Zainal Abidin: mutually beneficial relationships have to be nurtured

Production volumes from our LNG facilities are largely committed to our long-term buyers. Remaining volumes are kept for short term and spot plays in response to changing LNG demand requirements. Petronas is exploring partnership opportunities with new buyers from emerging markets in Southeast Asia, China, India and the Middle East. We have since expanded our LNG market to include new buyers from the Far East with secure and reliable supply of LNG from our global portfolio of supply. Our company is in a unique position as a seller and buyer of LNG. With our integrated operations, we can add value to the resources and offer flexibility to the market. With a percentage of uncontracted capacity in our supply portfolio, we can respond to new market requirements and provide flexible partnerships to accommodate our buyers’ needs.

What stage have you reached with your second FLNG vessel? Petronas launched the hull for PFLNG2 in South Korea on 30 April 2016, tapping the experience

LNG World Shipping | March/April 2017

from PFLNG Satu to broaden our capabilities for deepwater operations. Construction of PFLNG2 is expected to be completed in 2020.

What stage has Petronas reached in its plans to secure LNG by investing in overseas production, in Canada and elsewhere? The proposed Pacific NorthWest LNG project received conditional approval from the government of Canada on 27 September 2016, following a rigorous regulatory process... Petronas, with its partners, is conducting a total review of the project, which includes all aspects of its environmental, economics, engineering, financing and design optimisation considerations, before deciding on the next steps forward.

Petronas has pledged to cut its costs; what progress have you made here? Lower-for-longer oil prices in the last couple of years have been extremely challenging for Petronas and the oil and gas industry. We were quick to respond and put in the necessary measures to counter the impact to ensure future growth. We introduced a new organisational structure designed to be flatter and leaner, for faster decision-making and improved operational efficiency. These measures put Petronas in a stronger position to accelerate growth once the industry is on an upturn. We maintain an integrated end-to-end global LNG portfolio, a mix of mature and new projects. Petronas’ legacy projects are virtually depreciated and continue to operate, generating significant cost savings to our integrated LNG portfolio, which balances costs from new projects.

PFLNG SATU – PROJECT MILESTONES March 2012 Final investment decision

Petronas also benefits from new expansion such as the (Bintulu) LNG Train 9 project, developed at marginal costing, able to optimise existing and shared infrastructure. We therefore have leeway to offer flexible and differentiated price terms and supply commitments, long term, mid-term or short term. Our pioneering effort in FLNG will change the landscape of how gas fields integrate with an LNG complex. The flexibility of a floater such as PFLNG Satu to be redeployed to multiple locations, lasting up to 20 years without dry-docking, provides an opportunity for further cost savings, creating value for resources in remote and smaller fields.

How will Petronas expand across the supply chain as the LNG landscape evolves? The integrated management of gas resources, with involvement at every major point in the value chain, is a proven business model replicated for our global operations such as Australia. As the energy landscape has evolved, Petronas has extended its value proposition beyond the traditional LNG value chain, offering integrated LNG solutions with opportunities to expand downstream. We have moved beyond focusing on pricing alone, putting equal emphasis on strengthening relationships with our customers. The memorandum of collaboration between Petronas and Tokyo Gas from October 2016 symbolises a partnership that will extend beyond the conventional buyer-seller relationship. Our successes also reflect collaboration with partners such as Mitsubishi and JX NOE in our Bintulu projects. Mutually beneficial relationships have to be nurtured, regardless of the market cycle

to ensure continuity and sustainability in LNG. Petronas’ successful venture into FLNG to deliver an innovative technology should change the LNG business landscape as it offers efficiency to first gas commercialisation. We have the capability to be involved in the entire value chain.

What prospects do you see for investing in import infrastructure – what are your priority regions and projects? As an integrated LNG solution provider, Petronas sees many investment opportunities in import infrastructure, which includes onshore and offshore receiving terminals, and in new and innovative solutions such as FLNG, breakbulk, floating storage and regasification units (FSRUs) and small-scale LNG. We see many opportunities in the new LNG markets, such as Southeast Asia, South Asia and the Middle East, that would benefit from a versatile, fit-for-purpose LNG business model, complementing partnerships down the supply chain. In current market conditions, downstream alliances may be one solution to penetrate new and growing LNG markets, especially for countries looking to develop new regasification terminals, floating storage and FSRUs or landbased terminals. If we extend further downstream, we could leverage the expertise of our existing LNG customers and partners, and through other business outfits within Petronas Group such as the gas, power and petrochemical units, which are ready to complement these efforts. Petronas is evaluating these possibilities in our efforts to provide an integrated LNG solution to our buyers. LNG

June 2012 Signing of engineering, procurement, construction, installation and commissioning contract with the Technip Daewoo consortium June 2013 Steel-cutting ceremony at Daewoo Shipbuilding & Marine Engineering (DSME) shipyard in Okpo, South Korea January 2014 Hull keel laying April 2014 Hull launch ceremony September 2014 First topside module lifting March 2016 Naming ceremony May 2016 Departure for and arrival at Kanowit gasfield, 3,400km away in Malaysia November 2016 Introduction of gas from KAKG-A central processing platform at Kanowit gas field, 180km off Sarawak December 2016 Successful production of first LNG

LNG World Shipping | March/April 2017




apan would have far fewer than 33 LNG import terminals if its terrain was less mountainous. Unable to lay down a nationwide gas pipeline grid, the country needs a dense network of receiving facilities and small-scale delivery systems to transport LNG beyond the busy coastal conurbations.

Natural gas meets a quarter of Japan’s energy needs, virtually all of it imported as LNG. Shipments commenced almost half a century ago and last year totalled 83.3 million tonnes, equivalent to 34 per cent of worldwide LNG movements. Most of these shipments are used by gas utilities and power companies, although industrial concerns such as steel manufacturers and oil refineries are also significant consumers. The country has established a network of 97 satellite LNG facilities to cater to users beyond the large coastal

LNG World Shipping | March/April 2017

receiving terminals. Pipeline deliveries are not feasible, due to the mountainous terrain and to the remoteness and small-scale needs of some customers. And so Japan has developed a range of transport systems – road tankers, ISO tank containers and coastal distribution tankers – to deliver LNG to the satellite stations. It uses road tankers for short-haul routes and ISO tanks, which offer multimodal options, for longer journeys that encompass transport by road, rail and sea.

Coastal fleet Japan’s coastal LNG carrier fleet comprises five ships of 2,500m3 and one, Akebono Maru, of 3,500m3. The first in service was Shinju Maru No 1 in 2003. The latest addition to the fleet, Kakayu Maru, entered service in 2013. These busy little ships, based on two round trips a week, can deliver up to 100,000 tonnes of LNG a year on these coastal runs. The six coastal terminals served by seagoing distribution tankers are the largest in the Japanese satellite network.


each ship are designed for a maximum pressure of 3.0 barg (4,000 kPa), based on a pressure build-up period of seven days for a single voyage, plus a two-day margin. The Kawasaki panel insulation system on the cargo tanks helps to minimise heat ingress.

State of flux

ABIOVE: Japan relies on coastal LNG distribution to deliver gas where it is needed

Several require onward deliveries by LNG road tanker to smaller satellite stations. Built by Kawasaki Heavy Industries, the six Japanese coastal LNG tankers feature a simple design, using a conventional diesel propulsion system. Because the delivery voyages are short, the Type C tanks can accommodate the slow pressure build-up caused by generating cargo boil-off gas (BOG). This obviates the need for a gas-burning engine or a reliquefaction plant. The two independent, aluminium cargo tanks on

Not surprisingly, given that Japan is the world’s largest import market by a wide margin, its LNG logistics is elaborate and in a state of constant flux. Many of the original road tanker and ISO tank deliveries brought the benefits of natural gas and LNG to locations that previously depended on town gas. On some routes, road tanker and tank container consignments have supported much greater use of natural gas, bolstering a case for building a pipeline. In several instances the coastal fleet has also supported expansion of the local markets, requiring terminals to accommodate conventional-size LNG carriers.  One example is Hokkaido Gas, which commissioned an LNG import terminal at Ishikari in late 2012 to cater for rising electricity demand on Japan's northernmost island. Ishikari, the first major LNG terminal on Hokkaido, has two large storage units and will add two more by 2020.  Hokkaido Gas has utilised the 2,500m3 North Pioneer to transport LNG from Tokyo Gas’ Sodegaura terminal in Tokyo Bay to the island’s small Hakodate Minato plant since the vessel's delivery in late 2005.  North Pioneer still serves Hakodate Minato but because Ishikari has a coastal tanker berth and a deepsea jetty, many of its voyages are limited solely to Hokkaido island.  Shikoku Gas, another user of coastal tankers, has similarly constructed a new large-scale import terminal.

Its Sakaide LNG facility, which opened in 2010, supports pipeline and road tanker deliveries to customers in the Takamatsu region of Shikoku, the smallest of Japan's four major islands. Nevertheless, Shikoku Gas, like Hokkaido Gas, continues to receive LNG by coastal tanker, in this case from its long-term suppliers Osaka Gas and Kitakyushu LNG.         Elsewhere, Japan Petroleum Exploration ( Japex) plans additional employment for Akebono Maru, the coastal tanker it charters. The company is constructing the Soma LNG import terminal at Shinchi in Fukushima Prefecture to rejuvenate a region devastated by the 2011 earthquake and tsunami. From next spring, Soma will supply gas to new local power plants and will load LNG on the vessel and on road tankers. Akebono Maru will ship its cargoes to Yufutsu on Hokkaido, where Japex operates a small-scale receiving terminal and a liquefaction plant for processing gas from one of the country's few domestic fields.

Yokohama bunkering Growing use of LNG as marine fuel will support the introduction of domestic LNG bunker vessels and will boost the activities of Japan’s coastal tanker fleet. The country’s first LNG-powered vessel to operate domestically, the tug Sakigake, came into service at the Tokyo Bay port of Yokohama in August. Sakigake takes its fuel from an LNG road tanker at Shinko Pier, receiving seven tonnes of liquefied gas supplied from the nearby Negishi terminal every fortnight. Three of Tokyo Bay’s five LNG import terminals have road-tanker loading bays. Yokohama is one of Japan’s leading ports, especially for container ships, cruise vessels

and car carriers. Japan has high expectations to turn it into an LNG bunkering hub. A port steering group recently completed a feasibility study that sets out a three-stage plan to realise Yokohama’s LNGfuelling ambitions. The Yokohama report concluded that bunkering small vessels using jettyside transfers from road tankers can grow straight away, given the LNG available in Tokyo Bay. All the port needs is a fleet of gasburning vessels that requires the fuel and dedicated jettyside bunkering locations to replace the temporary arrangement on Shinko Pier. Ship-to-ship (STS) transfers, from LNG bunker tankers or barges to large LNG-powered ships, are unlikely to figure prominently in Japan until 2020. This is when the 0.5 per cent global sulphur cap takes effect. Once introduced, however, LNG bunker vessels will be able to deliver the volumes needed to make gas-fuelled shipping more economically justifiable. The ability of Tokyo Bay's largest LNG import terminal Sodegaura to load small tankers at its dedicated coastal berth will enable much of the port’s forecast STS bunker requirement to be met.  Tokyo Gas’ new Hitachi LNG terminal to the north of Tokyo Bay can also load small LNG tankers. The Yokohama study group also considered the possibility of adding a small tanker jetty at the nearby Negishi import facility.  The masterplan also includes introducing LNG bunkering in other Japanese ports and coastal distribution to support it. Yokohama plans to work with shipowners and government agencies to speed up acceptance of LNG-fuelled domestic and international shipping, to offer incentives to switch from oil to gas bunkers. LNG

LNG World Shipping | March/April 2017


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SIGTTO PRESENTS BEST PRACTICE FOR LNG EMERGENCY-RELEASE SYSTEMS After several incidents of emergency-release system (ERS) malfunctions at LNG terminals, a working group was formed to address the issues, make recommendations and provide guidance to industry. David Ervin reports


Chevron’s David Ervin: investigating inadvertent activations of emergencyrelease systems

NG terminal designers, operators and maintenance personnel have a new guidance publication to aid them in their work. The Society of International Gas Tanker and Terminal Operators (SIGTTO) has published a document that provides the industry with the latest recommendations, guidelines and best practices for LNG emergency release systems (ERS). The publication aims to help project development teams, terminal operators and maintenance personnel. Vessel operators and crew will also find the document a valuable reference tool. The development of the modern ERS started in the 1960s, when quick connect/ disconnect (QC/DC) units were used with marine loading arms and hoses for ambient petrochemical-type fluids. This was adopted for use in the Shell Brunei LNG terminal with the addition of separately supplied self-closing check valves on either side of the QC/DC. This provided shut-off protection if the QC/DC was released. This solution was improved with the next generation of ERS, which incorporated an integral ball valve in the marine loading arm in place of the check valves. Some of these early ERS required dedicated compatible vessels for the systems to work in an integrated manner. Since then, through continuous improvements, the industry has developed the modern double ball valve with an integrated emergency-release coupler between the valves. These systems are independent of the vessel. They protect personnel and equipment by isolating the LNG carrier and

the shore via the double ball valves and activation of the emergency-release coupler. Valve closure and coupling release times are covered by guidelines from the International Organization for Standardization (ISO) and from SIGTTO. A more detailed description of the evolution and development of ERS is available in the second chapter of the SIGTTO working group document.

Purpose The primary purpose of the ERS is to safeguard life and equipment. The system is activated by position-monitoring sensors. When the sensor limits are reached, they send a control signal that starts a sequence of events that ends with the closure of the double ball valves and the separation of the powered emergency-release coupler (PERC). The arms will retract to a safe position, clear of the vessel. This protects the marine loading arms and the vessel manifold from mechanical damage if the vessel moves outside the safe operating limits while loading arms are connected. Shoreside terminal personnel can also initiate the process via a manual switch that leads to the double ball valve closure and PERC separation. This clears the marine loading arms in the event of an emergency or an emergency warning. Over the years, secondary uses of the ERS double ball valves have developed. These secondary uses have led to greater complexity via integration of a primary safety system into the facility's overall distributed control system for several reasons. This led to a number of incidents where the ERS malfunctioned by operating when it was not required. SIGTTO has been made aware of a number of these incidents over the years. In 2014, the society created a working group to develop guidelines and best practices for ERSs. The working group consisted of component and system manufacturers and terminal and vessel operators. It spent two years analysing the systems, how they were being used and how to develop a document to meet the society’s and industry’s needs.

LNG World Shipping | March/April 2017


Incidents The document contains an incident summary that categorises the number of incidents and their causes. The working group used the bowtie method to analyse the risk of inadvertent actuation and the failure to actuate when required. The bow-tie method qualifies risk by showing the relationship between hazards and top events, in other words events that could happen, threats, possible causes, barriers and consequences. Barriers are measures that prevent certain events happening. Barriers are either pro-active or reactive. Pro-active barriers prevent the top event happening; reactive barriers prevent the consequences. The bowtie analysis fed into development of the recommendations and the risk discussion. The two bowtie analyses are included in the document to serve as a template for project teams assessing the risk of their own projects or operating facilities. It was apparent to the members of the working group that added complexity and the use of the double-ball valve for secondary purposes increased the risk of an incident. The principal recommendation contained within the document is that the ERS should not be used for anything other than its primary purpose.

LNG World Shipping | March/April 2017

Although there are operational reasons for using the ERS for secondary purposes the society felt strongly that these are not to be recommended. If the ERS is to be used for secondary purposes, the society recommends that the risk is analysed using an established risk-assessment process. The bow-tie analyses the working group developed are included as examples for an organisation to use as templates for understanding secondary-purpose risks. The risks of specific secondary-purpose scenarios are discussed in the document so that those considering this can better understand the issues involved. Training and competency of terminal staff was also considered to be of fundamental importance. Operational errors were nearly equal to component failure as a cause of ERS incidents in the SIGTTO incident database.

Experiences My own experiences during investigations of ERS incidents early in my shoreside career led to my continuing interest in ERS. I was involved in an investigation that concluded that a lack of terminal control room

ABOVE: Modern ERS systems were first developed in the 1960s

The use of the ERS and associated PERCs for secondary purposes is not recommended

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RIGHT: SIGTTO does not recommend using the ERS for secondary purposes

Designs, equipment and material selections made in the project phase should be aimed at eliminating the need to use the ERS valves for secondary uses

operator competency resulted in an inadvertent activation of the ERS. Fortunately, this incident occurred during the arm cooldown period prior to bulk cargo transfer operations. Another incident involved incorrectly written maintenance procedures that resulted in an ERS activation during cargo operations. To address the competency issues, the working group developed suggested competencies and training levels, based on connection/ disconnection, cargo transfer and maintenance operations. They are further defined by position, managers, maintenance technicians and operations personnel. They use the standard awareness, knowledge and skill levels of competence in describing the suggested competency levels for these positions. The best practices of some LNG terminal operators were captured and included for guidance for those purchasing the document. They include a range of solutions, from colourcoding key items on the jetty to examples of computer-based simulator training. For instance, a coloured light system is used at one terminal in order for jetty and vessel personnel to readily assess the operational status of the marine loading arms. The document contains more than 20 images, drawings and

diagrams to help the reader to understand the various configurations, the history, terminology and best practices. Â

Key messages Key messages are highlighted in red call-out boxes to enhance the visibility of principle recommendations, key warnings and cautions. The document targets standard onshore LNG terminals and the LNG vessels and crew that call at those terminals. Although it does not target the LPG or LNG ship-to-shore (STS) transfer segments of the industry, the information contained within the document may be used as a guide to these operations. The working group hopes that the industry finds this document of value and useful in assessing operational and projects that are in development. LNG David Ervin is senior LNG marine operations adviser at Chevron Shipping Company LLC. He chaired the working group of the Society of International Gas Tanker and Terminal Operators (SIGTTO) that produced the recommendations, guidelines and best practices for LNG Emergency Release Systems

LNG World Shipping | March/April 2017




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Kawasaki ship designs support Japan’s hydrogen-society plans When Tokyo hosts the 2020 Olympic Games, it plans to run the extravaganza using a shiny new fleet of vehicles that run on cleaner-burning hydrogen fuel. Karen Thomas reports


Shohei Inatsu: designing a liquefied-hydrogen carrier for mass maritime transport of hydrogen

hinzo Abe’s government wants Japan to evolve into a hydrogen society, with some 40,000 hydrogenpowered cars by 2020 and 800,000 by 2030. The country’s carmakers see the Olympics as the perfect opportunity to present this new technology to a global audience. Toyota and Honda are both developing hydrogen-fuelled cars for 2020. Japan is investing some US$100 million to convert Tokyo city taxis and to run the entire Olympic vehicle fleet using hydrogen. Japanese interests are planning to build and manage a production plant in Victoria, Australia to liquefy the gas, then ship it to Japan-based customers. Kawasaki Heavy Industries (KHI), the Japanese conglomerate whose roots lie in shipbuilding, is a front-runner in hydrogen technology. KHI plans to provide the elements that make up the hydrogen supply chain. Shipping liquid hydrogen will require a new type of gas carrier to carry this volatile cargo safely and efficiently. And so KHI is also leading the drive to design and build the world’s first hydrogen carriers. LNG World Shipping asked KHI Ship & Offshore Structure's naval architect and senior manager Shohei Inatsu for a progress report.

What has driven KHI to study designs for liquid hydrogen carriers?

Who are your project partners?

We must find ways to source carbon dioxide-free hydrogen, inexpensively and reliably to integrate hydrogen energy into society. In June 2014, the Ministry of Economy, Trade and Industry (METI) released its Strategic Road Map for Hydrogen and Fuel Cells, which called for a carbon dioxide-free hydrogen supply chain to be established. And so, KHI decided to collaborate with project partners to develop a demonstration project. In June 2015, the New Energy and Industrial Technology Development Organisation (NEDO) accepted our demonstration project for establishing a supply chain for mass marine transportation of hydrogen and gasification of brown coal. NEDO supports the technology and social demonstration. A second body, the technical research association HySTRA, will be the operating body responsible for the production, handling and transport of hydrogen. We then developed our design for a liquefied-hydrogen carrier to demonstrate the technologies for the mass maritime transportation of the liquefied gas.

In February last year, KHI joined forces with Iwatani, Electric Power Development ( J-Power) and Shell Japan to form the CO2-free Hydrogen Energy SupplyChain Technology Research Association (HySTRA). HySTRA aims to create a commercial liquefied hydrogen supply chain from overseas, see figure one. The project has two parts. One is creating technology for gasification of brown coal, the other covers technology for long-range mass transport and handling of liquefied hydrogen. J-Power is developing an integrated coal gasification combined-cycle system. It will use the gasification technology it has accumulated to demonstrate technology for gasifying brown coal. KHI, Iwatani and Shell Japan are working together to demonstrate technology for long-range mass transportation and cargo handling of liquefied hydrogen. Iwatani is Japan’s only producer and supplier of liquefied hydrogen. KHI supplies cryogenic equipment and has built LNG storage tanks and receiving terminals and equipment for the rocket launch complex in Tanegashima in Japan. Shell Japan is a subsidiary of Royal Dutch Shell, which has

LNG World Shipping | March/April 2017


experience with LNG supply chains and carrier operation. The four companies will bring their strengths to HySTRA to advance research, development and demonstration.

What milestones has the project reached so far? We have finished basic designs for the pilot project’s ship and start work this year on more detailed design and construction.

Who will produce the hydrogen, where and for whom – are the ships designed for deepsea or for coastal trades? The commercial hydrogen supply chain being considered is based on hydrogen produced in Australia. The hydrogen will be transported by sea to powergeneration companies and others in Japan. There is a large quantity of brown coal in Australia. Most is unused because it can ignite spontaneously once dried, making it difficult to transport. However, brown coal can produce inexpensive hydrogen and our estimates indicate a very competitive price against rival carbon dioxide-free sources of energy,such as wind and solar power. The ship we are developing in our pilot project is an oceangoing vessel, designed to sail between Japan and Australia.

What challenges does transporting liquid hydrogen present, from the point of view of safety and efficiency? We are co-operating with the governments of Japan and Australia, which are examining safety standards for marine transportation of liquid hydrogen. In November, the IMO adopted as a provisional safety standard the result of that review. In January, Japan’s Ministry of Land, Infrastructure, Transport and Tourism

KHI will deliver the pilot project ship to HySTRA for demonstration tests in 2020

(MLIT) and the Australian Maritime Safety Authority (AMSA) agreed to apply this safety standard to the construction of the ship for the pilot project. In developing the world’s first liquid hydrogen carrier, we conducted the risk assessment with Class NK and project partners to secure high levels of safety.

What demand do you see for shipping hydrogen – how many vessels would such demand require, for Japan and for other countries? We are certain that the use of hydrogen will spread, not only in Japan but all over the world, to meet growing demand for carbon dioxide-free energy. We believe there is demand for specialist ships for the widescale transport of hydrogen. Our estimates suggest that if 20 per cent of Japan's total electricity generation shifted to producing power from hydrogen in 2050, it would need around 80 large hydrogen (LH2) carriers. In addition to these carriers, we also expect demand to grow for vessels that

LNG World Shipping | March/April 2017

use hydrogen as fuel – and for hydrogen bunker-supply vessels to deliver the fuel.

How soon will the first liquid hydrogen carrier be built; for which owner? The pilot project ship will be delivered to HySTRA for demonstration tests in 2020.

What containment systems have you developed to carry liquid hydrogen? The cargo containment system is designed in accordance with the IGC Code’s Type C concept. It can accumulate boil-off gas for up to 21 days at sea. As the temperature of liquefied hydrogen is even lower – minus 253°C – than that of LNG and it is easier to vaporise, we adopted vacuum insulation to minimise heat transfer into the cargo.

What is the ship design spec and its key features – to what range can the design be scaled up or down? The carrier is about 116m long and can accommodate two cargo containment

systems of 1,250m³. Hydrogen is not to be used for propulsion. The main propulsion system features electric motors. These receive power from generators driven by diesel engines. We will study largescale carriers, aiming to develop a large carrier of 160,000m³. However, we will need to develop additional technology based on the results of this project.

Any other developments? KHI is working across the hydrogen supply chain. We are also developing ways to produce liquefied hydrogen from hydrogen gas, loadingarm systems and hydrogen gas turbines for power generation. We have already developed compressed gaseous hydrogen trailers and liquid hydrogen containers for transport on land. LNG Shohei Inatsu is senior manager and naval architect, initial design department, engineering division, in KHI’s Ship and Offshore Structure company

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ALPHA PROCESS CONTROLS TAILORS LNG PRODUCTS TO TARGET FSRUS Floating imports open new opportunities across the LNG supply chain. UK-based manufacturer Alpha Process Controls is tailoring its LNG product range to meet growing import demand Karen Thomas reports


eterlee-head quartered Alpha Process Controls (APC) sees an opportunity in floating storage and regasification units (FSRUs) for its hose-transfer systems and emergency breakaway couplings, having developed products for a range of vessel sizes. APC has 40 years’ experience producing fluid-transfer systems. It also has experience in marine in LPG shipping. It developed breakaway coupling systems for ship-to-shore transfers in international regions, notably in Gujarat, India. Now, the company sees LNG – and particularly offshore imports – as a niche to tap. It moved into LNG three years ago, developing breakaway coupling units for emergency shipto-ship and small-scale transfers. It also makes valves for industrial gases, supplying cryogenic units to Air Liquide, and small-scale LNG loading arms. APC's package for ship-to-ship transfers features emergency-release collar (ERC) couplings, manifold reducers, hose saddles and a flexible LNG-transfer hose, supplied by Gutterling, and an arrestor system. Market leaders MIB of Italy and UK-based KLAW sell hydraulically actuated systems. APC's mechanically actuated systems are designed to operate during total power shutdowns. Late last year, APC won its first major marine LNG deal with GNL Quintero in central Chile to supply a complete ERC and breakaway coupling system. The 8in ERC features a two-stage cable

system that shuts down the internal valves before the couplings separate. “This is our first deal for our large-scale LNG couplings, says APC managing director John Lamb. “We have carried out a lot of research into future demand for these systems, particularly in regions that are known for earthquakes, such as Japan. We are targeting the country’s receiving terminals, talking to utility companies including Osaka Gas. “However, we see potential for global demand – and in particular from FSRUs. In the first few weeks of this year, we’ve offered quotes worth a total £9.5 million (US$12 million) to prospective FSRU projects – conversions and newbuildings.” Discussions with half a dozen shipowners include FSRU heavy hitters Höegh LNG and BW LNG and Greek and other European shipowners new to the FSRU market. “Our product will operate day in, day out, passing liquid through normal operations,” Mr Lamb says. “But it will make a name for itself the day it’s fired off in anger.” Mr Lamb will spend a lot of time in Asia, presenting the product to prospective regional buyers this year. APC is visiting South Korea’s Big Three shipyards, seeking to establish its systems on the vendor list. It will also have a large presence at Gastech. APC has appointed an agent in Japan, a subsidiary of the giant Sojitz conglomerate that has recently announced its own FSRUbased venture in Java in Indonesia, in partnership with Marubeni and Pertamina. The APC LNG-product range has type approval from Japan’s ClassNK. Owned until last summer by northeast UK businessman Geoff Turnbull, APC is now part of Germany’s €6 billion (US$6.5 billion), Munich-based Knorr-Bremse group. The new management is firmly behind APC’s ambition to expand its product range and to target marine LNG. Having developed cryogenic couplings, APC sees an opportunity to modify the product to meet the needs of regasification units, operating at higher pressures of 45-100 bar (4,500-10,000 kPA). LNG

John Lamb: selling large-scale LNG couplings to FSRUs

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LNG World Shipping | March/April 2017


Musasino markets its LNG cargo tank radar level gauge

Naoki Sugiyama: we will focus on Japan first, then on South Korean and Chinese newbuildings

Musasino has developed a radar-type level gauge for LNG cargo tanks and hopes to start contracting orders next year


ive years into development, Musasino is in the final phase of bringing its radar-type level gauge for LNG cargo tanks to market. Japan-based Musasino hopes to land its first orders next year and our marketing push at Gastech underpins that strategy. Founded in 1965, Musasino made its name producing magnetic float-type level gauges. In 1998, it developed a radar-type level gauge and measurement system that has been installed on more than 600 ships. But as competition has intensified between the world’s top level gauge makers, the company sought to differentiate itself. It decided to focus on LNG. Musasino will be the first company to make critical radar level gauging equipment for LNG tankers in Japan, the world’s top LNG consumer, competing against international market leaders. LNG level gauges do not simply measure and display cargo levels. Accurate readings are critical because LNG is a customscertified product and cargo measurement is the commercial basis for calculating tariffs. Musasino has developed and patented a method to estimate dielectric constant to measure LNG cargoes. The dielectric constant of LNG depends on where it is from. This can affect the liquid level reading in the cargo tank. As the LNG spot market expands, more producers will bring cargoes to market with more varied dielectric constants. The dielectric constant estimation method aims to offer more accurate, stable measurements. With engineering support from Gaz Transport & Technigaz (GTT), Musasino used a sloshing model to simulate the effects of LNG on the guide pipe and thermos wells inside the tanks to design a robust structure and maintainability. This showed they can stand more than 40 years in a harsh environment. The system integrates separate modules for level, temperature and pressure into one deck stand. This allows maintenance and replacement of parts without having to open the tank. The output of each module is integrated in a digital signal at the deck stand, connecting the cable modem termination system with one cable.


Last spring, Musasino started verification on board an LPG carrier. Tests start on an LNG carrier this autumn. The technology can be applied to LNG fuel tanks and to domestic LPG carrier cargo tanks that now typically use float-type level gauges. Demand for LNG fuel tank level gauges should increase as the global maritime industry rushes to comply with IMO regulations to curb emissions of NOX and SOX. A couple of international manufacturers dominate the market for level gauges. Musasino wants to offer shipowners another option. LNG is integral to the world’s energy mix – and particularly to that of Japan. New production and export/import facilities are coming online every year. This means that the LNG carrier fleet will also need to grow. We anticipate that 30 to 40 vessels will join the fleet every year through 2025. We cannot enter this market easily or with haste. Musasino is attending Gastech to meet shipowners and shipbuilders. The construction cycle for LNG carriers means we must start now, presenting our custody-transfer measurement system and explaining its benefits. Being based in Japan, with long and close relationships with Japanese shipowners and shipbuilders, we will focus primarily on newbuildings in Japan at first, then on the South Korean and Chinese newbuilding markets. Here, we have been making significant inroads in tankers. In Japan, many owners still use float-type gauges for smaller LPG vessels, which may open an opportunity to introduce radartype versions. And, as LNG-powered vessels become more prevalent, we expect demand to grow for fuel tank level gauges that use the same radar technology and measurement method. LNG

Musasino will be the first company to make radar level gauging equipment for LNG tankers in Japan

LNG World Shipping | March/April 2017

Naoki Sugiyama is executive director of Musasino


Boosting the use of LNG, CORE LNGas hive project

The CORE LNGas hive project, co-financed by the European Commission, is coordinated by the Spanish company Enagás with the leadership of Puertos del Estado (Spanish State Ports). The project has the aim of developing a safe, efficient and integrated logistic chain for the supply of LNG as a fuel for transport, especially within the maritime sector in the Iberian Peninsula. It will foster the use of this alternative fuel not only in vessels but also in the port environment. All in all it involves 42 partners from Spain and Portugal: 8 state-owned institutions; 13 port authorities and 21 industrial companies, such as ship owners, LNG operators and suppliers of different services in the value chain. The total budget is 33.3M€ and its execution is foreseen until 2020.

25 studies: 14 transversal studies and 11 studies with integrated pilots

14 studies, the “software” of the project that will allow identifying the standards needed for an adequate development of LNG as a fuel, defining training programmes required, accreditation processes and the National Policy Framework. 11 studies with integrated pilots, known as the “hardware” of the project. They will test real parts of the LNG logistic chain needed to supply bunker services of LNG. They include the adaptation of LNG Terminals to offer bunker and small-scale services, the development of logistic equipment (as bunker barges or multimodal transport), and the use of LNG within the port environment.

LNG is a down-to-earth alternative fuel in the maritime transportation sector

In accordance with EU Directive 2014/94 on the deployment of alternative fuels infrastructure (Clean Power for Transport), the project will assist in developing the infrastructure needed to supply LNG as fuel to the maritime sector in the Iberian Peninsula. LNG is the most environmentally friendly fuel. It helps the decarbonisation process of the European economy and allows for the reduction of our dependence on oil. Moreover, it

reduces emissions of sulphur oxides (SOx), particulate matter (PM) and nitrogen oxides (NOx), which will facilitate complying with increasingly tight environmental regulations in the maritime sector. With 8 LNG terminals, the Iberian Peninsula possesses LNG logistics know-how of more than 45 years, key to the development of the project and the consolidation of the region’s leadership in this field. On the other hand, due to its geostrategical position as a very relevant cross point in global shipping routes, the Iberian Peninsula must address the maritime necessities in terms of sustainability, efficiency and operation. All these efforts are in line with the International Maritime Organization (IMO) endeavours, that has set 1 January 2020 as the implementation date for a reduction in the maximum sulphur content of the fuel used, setting the cap on 0.5% m/m.

The CORE LNGas hive project achieved the main items of the Grant Agreement up to date

The project management team of Enagás, with the collaboration of Puertos del Estado and the rest of beneficiaries, following the stabilized plan of the Consortium Agreement signed by all, conducted the first year of execution achieving the main items established in the schedule of the project. The management aspects of the project based on the Consortium Agreement, where the implementation and the quality assurance plan are defined in order to guarantee the optimal management of the project, as well as ensuring a proper coordination among the activities. According to this, the deliverables and milestones of the project up to date have been achieved. One of the most important items of the year was the execution of four Working Groups, three Steering Committees and a General Assembly. Thanks to these meetings the level of coordination needed between all the studies and pilots has been achieved. Moreover, the communication of the project has been fulfilled according to the Communication and Dissemination Plan designed to focus on and fine-tune the activities. In this way, a public website was set up (, and

all dissemination materials foreseen and needed have been produced. Finally, there has been an institutional presentation of the project at the headquarters of the EU institutions in Madrid, Spain.

Some of the deliverables already accomplished are:

• The proposal for the National Policy Framework The sub-activity ET0 “Study on National Policy Framework” has fulfilled its aim at drafting the National Policy Framework (NPF) in the section of LNG bunker infrastructure, as provided in the Directive 2014/94/UE on the deployment of alternative fuels infrastructure. This sub-activity was led by Puertos del Estado. The results have been integrated as a part of the “National Policy Framework of Alternative Energies for Transport”, which is the complete document that Spain as a Member State had to produce in order to comply with Directive 2014/94. The study was developed with the collaboration of the so-called “Policy Advisory Group”, formed by relevant stakeholders in the field of LNG bunker. As an external body, this Group is an important component of the management structure of the project, since it allowed producing an, as much as possible, consensual proposal of the NPF. Every member state had to notify its NPF to the European Commission by 18 November 2016. • Conclusions of the LNG demand and supply chain analysis for the Mediterranean, Atlantic, Gibraltar Strait & peripheral island corridors As planned in ET2, 3&4 sub-activities LNG demand studies and a preliminary supply chain analysis by corridor have been carried out with the support of DNV-GL. The results of these studies aimed at, in a first phase to know the demand in the main corridors and peripheral island ports and in a second phase to develop a safe and efficient, integrated logistics and supply chain for LNG as fuel for maritime transport of the Iberian Peninsula. Furthermore, they are the basis of the roll-out plan for future commercial deployment along the Mediterranean and Atlantic corridors in the Iberian Peninsula.




7ships Pelindo Energi 23,000m3 capacity


Pertamina 534,000m3 capacity Tangguh LNG 1.1 million m3 capacity


11 ships

3 Malaysia


Petronas 3.1 million m3 capacity


450,000m3 capacity


Papua New Guinea PNG LNG 698,000m3 capacity


4 ships Russia

Research: Mike Corkhill Graphic: Richard Neighbour Credit: Source: LNG World Shipping, February 2017

50 3


5 ships

Sakhalin Energy 741,000m3 capacity



Sinopec 672,000m3 capacity


696,000m3 capacity

15 ships


Hiroshima Gas 38,000m3 capacity Inpex 337,000m3 capacity JERA 1.5 million m3 capacity 1.03 million m3 capacity


Kansai Electric 467,000m3 capacity 155,000m3 capacity

55 ships

Mitsui & Co 1,5 million m3 capacity


Mitsubishi Corp 495,000m3 capacity


Osaka Gas 1.05 million m capacity 3

Tokyo Gas 1.2 million m3 capacity 660,000m3 capacity

69 37

Kogas 2.9 million m3 capacity 1.04 million m3 capacity SK E&S 360,000m3 capacity

Pavilion Gas 462,000m3 capacity


South Korea


29 ships Singapore




Chinese Petroleum 580,0000m3 capacity








Angus Campbell: studying demand for future joint LNG-supply projects

The veteran shipowner and manager and the engineering services specialist have come together to develop LNG bunker-supply projects, in the Baltic, in Scotland and – in future – all over the world. Karen Thomas reports


ernhard Schulte Shipmanagement (BSM) and Babcock International are forming a joint venture, Babcock Schulte Energy (BSE), to support their first LNG bunker-supply ship project and to develop other ventures together. The two companies have ordered their first LNG bunker-supply ship for charter to Blue LNG, the joint venture between the restructured Linde Group and Klaipedos Nafta to be based at the Port of Klaipeda, sourcing LNG from the floating storage and regasification unit (FSRU) Independence. BSE is a 50-50 partnership between BSM and Babcock. Together, they have ordered the 7,500m³ gas-supply vessel (GSV) from South Korea-based Hyundai Mipo in Ulsan for delivery in September next year. The vessel is the sixth purpose-built LNG bunker-supply ship booked to date. It will be the first to feature Babcock’s FGDV0 technology. This will enable the GSV to supply

LNG World Shipping | March/April 2017

LNG to the receiving vessel “with zero emissions to the environment during normal operations, greatly minimising [the] environmental impact” of ship-toship transfers. The Hyundai Mipo ship order comes with one option. And Babcock and BSM are also part of a second partnership that could deliver the first UK-based LNG bunker-supply ship. The two companies are partners, with ExxonMobil, Calor Gas and Orkney Islands Council, in the Caledonia LNG project, which launched in November to explore LNG demand in Scotland. Caledonia LNG is looking to develop Orkney as an LNG-supply hub. BSM director energy projects Angus Campbell says that the Caledonia LNG project will look at demand for ship-based supplies of LNG to industrial and marine customers, notably cruise ships and ferries serving the Scottish isles. Last year, 127 cruise ships called into Orkney and more are booked this year.

Orkney Islands Council manages 29 piers and harbours, including Scapa Flow oil terminal, which has a track record in shipto-ship LNG transfers. Caledonia LNG has launched frontend engineering design (FEED) studies to calculate the business case for an LNG hub in Orkney to serve a hinterland spanning Scotland, the North Sea and the Irish Sea. It is looking to develop Hatston Ferry Terminal, three miles outside Kirkwall, as the base. LNG as marine fuel is just part of a wider plan to supply gas to off-grid customers, developing a client list of maritime and industrial customers to build volume demand. It is the size of that prospective demand that will determine the strength or weakness of the partners’ business case. Talks are underway with the Scottish government, to see how the planned Orkney hub will fit in with the Lowcarbon Scotland initiative. In January, the government announced it plans to cut Scotland’s total emissions by 66 per cent within 15 years. Although renewables figure prominently in Scotland’s plans, Caledonian LNG partners say the government has welcomed the proposed LNG project. Studies are now underway to weigh up the costs against the likely demand for a Scottish LNG hub. LNG

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Engie pursues floating LNG opportunities with Sembmarine partnership E

ngie is on a mission to lead the energy transition towards cleaner-burning fuels. The company, which is investing in renewables too, has put LNG at the heart of that mission. Its goal is to extend its presence along the entire length of the LNG supply chain. With a glut of supply depressing prices and investor appetite to back new production projects, new importers are rushing to take advantage of cheaper, more plentiful LNG. That trend has driven a flurry of orders for floating storage and regasification units (FSRUs), with six ordered or confirmed last year. FSRUs make it quicker and cheaper to take delivery of first cargoes, and can offer a fast-track solution to buyers seeking their first volumes or a way to increase their existing offtake. Within its fleet of 12 LNG carriers, Engie charters two FSRUs. Neptune took position in Turkey at the end of last year, as the first floating LNG import terminal in the country. ETKI LNG is expected to deliver up to 5.2 billion cubic metres per year.  Engie also charters GDF Suez Cape Ann. However, the company is now moving further down stream. Last autumn, it signed a memorandum of understanding with Singaporebased shipyard Sembcorp Marine to develop new offshore and near-shore terminals to support LNG-to-power projects using a new design concept, Gravifloat. Gravifloat is a steel, modular floating structure fixed to the seabed on site. It can be scaled up or down to suit different sizes of project and configured to suit a range of shore-based plants and equipment types. The owner can refloat the unit and have it towed or delivered via heavylift ship to a new location once the contract expires. Power plans Engie and Sembcorp Marine Rigs & Floaters plan to develop the Sembmarine concept for small LNG power schemes, in the range

French energy giant Engie is pursuing new opportunities in offshore and near-shore LNG. Small-scale bosses Christophe Renier and Frédéric Deybach outline their priorities

of 10-300MW. Engie is driving the project through its key programme for small-scale LNG, part of the Gas Chain Métier, led by director Christophe Renier and manager Frédéric Deybach. “Engie is considering this solution in part because there are issues around land acquisition for many prospective projects,” Mr Deybach told LNG World Shipping. “When we consider developing a floating solution, we have to take into account the material conditions of the project. “We need a solution that is adaptable to offshore or nearshore, that does not require land but that is robust enough when facing a hurricane or a tsunami. That’s what drew us to explore the opportunity to use a gravity-based structure. Despite its name, a Gravifloat is floating only for a very short window within the project lifetime.” “Most of the time, the unit is firmly anchored to the seabed,” Mr Renier adds. “If we need to move it – because the location no longer needs the unit or needs something bigger, with more power or more storage, we can refloat the top unit and replace it. The technology is versatile – we believe that it has many advantages.” Gravifloat can support a liquefaction plant, a regas plant or a power plant. Engie is particularly interested in the latter option. “Our plan is to position ourselves to serve a market that is changing,” Mr Renier says. “We are seeing particular growth in demand for smaller electricity-producing installations and for solutions that can be delivered within a short period. This is why we are exploring integrated LNG-to-power solutions.” Separately, Engie has signed a memorandum of understanding with Wärtsilä to develop small-scale solutions and services for LNG shipping. Together, they plan to develop LNG for ships, LNG distribution to remote areas, LNG-to-power and small-scale LNG and bioliquefaction. That partnership complements the Gravifloat partnership.

LNG World Shipping | March/April 2017


Savings Building floating systems and the powergeneration equipment simultaneously can cut both time to market and cost. “We can achieve synergies by doing this,” says Mr Deybach. “Demand for power is driving this kind of integrated solution. The Gravifloat partnership is a partnership with a shipyard – this allows us to bring together all these elements. “Everything is built in the shipyard. When it comes to an integrated approach, this is the ideal solution. It gives us access to a very controlled environment for building engines, or gas turbines, or combined-cycle power systems, as well as the tank, in whatever size we need. That means we can work quite quickly to deliver our solutions – everything is assembled and tested before reaching the project site.” The question, of course, is how quickly. “For certain projects, it is often the quicker the better, as they depend on new power generation to avoid electricity shortages,” Mr Renier says. “Everything depends on the solution, on the environment. A combinedcycle gas turbine takes longer to build than an engine, for example. And custom-made solutions will also take longer than simply assembling off-the-shelf solutions.” That difference explains why Engie is reluctant to build units on spec. Gravifloat has been linked to two proposed LNG projects. One is a Chineseled production venture to tap gas reserves in Ethiopia’s Ogaden Basin, off Djibouti, in which the Gravifloat base will be fitted with a liquefaction topside. Sembmarine has also been linked to a Gravifloat-based regasification project in shallow

waters off Bangladesh, where the authorities are considering multiple LNG-import proposals for the port city of Chittagong. Neither is an Engie project. The partnership with Sembmarine does not give Engie the exclusive right to develop Gravifloat technology. Engie says its target markets for Gravifloat-based solutions include the AsiaPacific region, particularly island states such as the Philippines and Indonesia, as well as Africa and the Caribbean. “We are looking at island nations and at areas that have challenging environmental conditions that would benefit from this kind of solution,” Mr Deybach says. “To have either of these projects move forward would tick a couple of boxes. There are always questions when it comes to new technology. At the same time, these projects have not started, so will not be able to feed back experience based on years of service. “We see benefit from our co-operation with Sembmarine. At the same time, that co-operation is not exclusive on either side.” Engie’s small-scale LNG development strategy includes buying into projects that show promise, Mr Renier says. “Our plan with these projects is to take an equity stake with our partners and to operate the projects.” The challenge is to devise the right solution for the project in question. Engie’s small-scale team shares potential leads with colleagues developing conventional LNG shipping and FSRUs to come up with the most suitable offering. “It’s about having access to a range of possible solutions,” Mr Renier concludes. And so, Engie continues its search for its first Gravifloat-based venture. LNG

“Demand for power is driving this kind of integrated solution” Frédéric Deybach

”The technology is versatile – we believe that it has many advantages“ Christophe Renier

Engie does not hold the exclusive right to develop Sembmarine's Gravifloat technology

LNG World Shipping | March/April 2017


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Ad-Rรถchling-LNG world shipping-2017-01 Freitag, 17. Februar 2017 15:47:36



Japan Marine United Corp (JMU) shipyard is scheduled to deliver the world’s first conventional size LNG carrier fitted with an SPB containment system in April


apan Marine United Corp ( JMU) shipyard is scheduled to deliver the world’s first conventional size LNG carrier fitted with an SPB containment system in April. The ship is the first in a series of four 165,000m³ LNGCs that JMU is constructing for Tokyo Gas to lift cargoes from the new Cove Point LNG export project on the US east coast. JMU was established in 2013 when Universal Shipbuilding joined forces with IHI Marine United. But the technology is not new.  IHI Marine, formerly Ishikawajima-Harima Heavy Industries, developed its self-supporting, prismatic-shape IMO Type B (SPB) design as a liquefied gas cargo containment system, including for LPG and LNG, 30 years ago.  The only LNG carriers fitted with SPB containment systems to date were the 89,900m³ pair Arctic Sun and Polar Eagle, which IHI built at Aichi in 1993, and the 1,500m³ prototype LNG/ ethylene carrier Kayoh Maru, constructed in 1988.  The SPB system is a comparatively pricey alternative to the established Moss spherical and GazTransport & Technigaz (GTT) membrane tank systems.

However, IHI’s concept offers some notable advantages supporting its use as an LNGC cargo containment system (CCS), for floating LNG production and regasification vessels and as an LNG-bunker tank in large gas-powered ships.

Tank attributes Large SPB tanks are subdivided into four spaces by a centreline, liquid-tight bulkhead and a transverse swash bulkhead. This subdivision, with the stiffened plate structure of both the shell and the internal supporting elements, strengthens the SPB system to obviate the risk of cargo sloshing damage at all fill levels. In addition, like all liquefied gas tanks designed to the IMO Type B standard, SPB units require only a partial secondary barrier. Robust Type B tanks comply with the leakbefore-failure principle, so that if a fatigue crack occurs, it will propagate slowly, buying time to take remedial measures.  Another advantage is the prismatic shape. SPB tanks are the most space-efficient containment systems in use. They can be constructed to accommodate specific hull lines

by Mike Corkhill

LNG World Shipping | March/April 2017


to optimise the space available. SPB tanks can be constructed from aluminium, stainless steel or 9 per cent nickel steel. Aluminium tanks are the lightest option and have been chosen for all the liquefied gas vessel applications to date. Each of the four 165,000m³ JMU ships will have four aluminium IHI-SPB tanks and will be powered by tri-fuel diesel-electric (TFDE) propulsion systems. To optimise the vessels’ cargo-carrying capacity, JMU has developed a tank design with an octagonal, transverse section profile, in contrast to the rectangular section of the tanks on Arctic Sun and Polar Eagle. The tank configuration provides the JMU ships with a trunk deck.    JMU has also utilised structural analysis tools to optimise the tank structure and the tank support arrangement and shape on the new ships. The initiatives have helped to improve tank and vessel structural reliability and to reduce the boiloff gas (BOG) rate to 0.08 per cent of the cargo per day, among the lowest levels ever achieved on an LNGC. The shipbuilder has installed an automated aluminium fabrication facility and gantry crane at its Aichi works to streamline the construction and handling of SPB tanks. Each prefabricated tank on the 165,000m³ LNGCs, complete with its prefabricated rigid polyurethane foam (PUF) insulation panels, weighs more than 1,000 tonnes. 

Offshore attractions Varying fill levels characterise floating LNG production (FLNG) vessels and floating storage and regasification units (FSRUs). The SPB system’s immunity from sloshing is a key consideration when choosing an offshore containment system. However, the prismatic shape of the tank, enabling vessels to be built with a flush main deck surface for positioning topside-processing equipment also favours the SPB approach. The SPB system has been chosen for two of the relatively few offshore LPG vessels in service. They are the 1997-built, 54,000m³ Escravos floating storage and offloading (FSO) unit and the 135,000m³ Sanha floating production storage and offloading (FPSO) vessel commissioned in 2005.  More recently, in June 2014, Exmar specified two SPB tanks, each of 12,500m³, for the small, non-propelled FSRU it has ordered from the Wison yard in China. The tanks were fabricated at Aichi for transfer to Wison’s Shanghai yard, which hosted the keel-laying ceremony in October 2015. There will be other offshore opportunities for the design. In August, DNV GL issued an approval in principle for a combined FSRU/power plant (FLPS) concept vessel that stores LNG in two SPB tanks. The vessel is designed to supply gas-generated

LNG World Shipping | March/April 2017


power to the onshore electricity grid by highvoltage subsea power cables. JMU is also developing the Combi floater. This vessel, which can be an FLNG or an FSRU, would have an SPB tank positioned forward, where sloshing loads are likely to be greatest, with the remaining tanks constructed to one of GTT’s two membrane designs.

Bunker tanks The SPB advantages of optimised space utilisation and zero sloshing damage risk have attracted the attention of shipowners considering large gas-powered vessels, including container ships, and their bunker tank options. Most LNG-fuelled ships ordered to date use IMO Type C bunker tanks. However, most are relatively small and Type C tanks will have drawbacks, in terms of weight and space efficiency, for the larger newbuildings being ordered. IHI reports that for a 2,000m³, under-deck bunker tank proposed in an early container ship newbuilding project study, an aluminium SPB tank would weigh only 16-20 per cent of a stainless steel Type C tank of equivalent capacity. United Arab Shipping Co (UASC) has chosen the SPB concept for the bunker tanks that will be installed on the large LNG-ready container ships recently completed by Hyundai Heavy Industries (HHI). The newbuilding complement comprises 11 14,000 teu and six 18,000 teu vessels. UASC will retrofit the SPB tanks and the associated HHI-designed fuel gas supply system on the vessels when UASC deems suitable LNG bunkering infrastructure to be available.  The owner expects to switch the ships to LNG fuel within the next three years and the conversion work, installing the bunker tanks in the cargo hold directly forward of the engineroom, is set to be a streamlined process.     The new vessels are the first large container ships serving the Asia-Europe trade route to be designed for use with LNG fuel, and the volume of gas required for storage onboard will be by far the greatest of any LNG-powered vessel to date. The LNG bunker-tank capacity on the UASC ships will be at least three or four times greater than the 2,000m³ tank reviewed in IHI’s earlier box ship study. JMU is confident that the attributes of the SPB system will help it to secure growing numbers of contracts in the conventional LNG, offshore LNG and LNG bunker tank sectors in the years ahead.  Increased orders will support improved production efficiencies which, in turn, will help to reduce the containment system’s capital cost premium. The Japanese yard estimates that, compared to a membrane tank, that premium has already been reduced from 15 per cent to 10 per cent this decade. LNG

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K Line is rolling out the Kare project across its UK-managed fleet



Line is rolling out a shipmanagement initiative for its Europe-managed fleet to improve service quality and safety performance and to promote openness within the company, on shore and on land. The KARE project aims to encourage staff at all levels to speak out and speak up, to benefit safety and service quality. Japanese shipping conglomerate K Line has two in-house LNG shipmanagement units. Japan-based K Line Shipmanagement (KLSM) Tokyo manages five ships on the water; three on long-term charter to BP-led Tangguh LNG and two to Qatargas I. It will also manage four ships delivered this year, for Chubu Electric and now fixed to JERA, for Inpex and for Australia’s Ichthys LNG project. K Line LNG Shipping UK (KLNG) manages eight LNG carriers on the water. It will take over three newbuildings booked against US exports, chartered to BP for Freeport LNG and to Mitsui for Cameron LNG, delivered in 2018-2020. KLNG launched the KARE Project two years ago. It chose seven seafarers to lead the project and held a two-day workshop in Windsor to identify the stakeholders, business goals and living values and to agree the issues to be tackled, ship and shore. Part of the KLNG 2020 business plan, the project seeks to change the company’s culture, to help stakeholders to carry LNG safely and to energise those involved.

Japan’s third-largest LNG shipowner is rolling out an innovative human resources programme that aims to transform its safety culture. K Line’s radical KARE programme takes a bottom-up approach to empower and engage crew and shore-based staff. Karen Thomas reports


Eighteen months ago, the 145,200m³, Mitsui-chartered Trinity Glory hosted the first on-board safety culture workshop. Next came the RasGas-chartered trio, 210,157m³ Umm Al Amad, 145,702m³ Al Thakhira, 210,198m³ Al Oraiq, and the BP-chartered 147,608m³ Celestine River. KLNG will now roll out the programme across its remaining three live ships. Because human error contributes to 80-90 per cent of unwanted incidents on board ship, the safety culture initiative works from the

LNG World Shipping | March/April 2017


ground up. Workshops feature white boards and brain-storming sessions. But there is time, too, for ice-breaking games, for singing, role-play and encouraging everyone to speak from the heart. Success means everyone on board gaining the confidence to speak at the ship’s daily morning meeting, whether to discuss problems or to suggest new ideas. KARE aims to promote engagement – making crew feel listened to and heard, contributing to more than just the daily task ahead. It encourages all crew to discuss and agree courses of action and give open, honest feedback on progress. “The human element in our shipmanagement business is a soft, fluffy, abstract theme but we’ve managed to turn this into specific behaviours and agreed actions that lead to a mature safety culture,” says KLNG managing director Yuzuru Goto. “It’s about changing the behaviours of our people to help others, from master to mess boy, and thus the culture of the whole organisation. It’s also about breaking down any barriers between ship and shore and developing trust.”

Success means everyone on board gaining the confidence to speak at the ship’s daily morning meeting, whether to discuss problems or to suggest new ideas

LNG World Shipping | March/April 2017

The maturity level of your safety culture is strongly linked to the number of major accidents – there’s a strong correlation between these two things


Measuring the impact of the KARE Project is a work in progress. Oslo-based consultancy Propel is gathering the qualitative and quantitative data, to compare the maturity of KLNG’s safety culture before and after. However, there are early signs that it is already delivering change. In the K Line Kourier, the chart that lists the KLNG managers features photos and first names only. The goal is to eliminate accidents altogether. But the impact will be measured in many ways, Mr Goto concludes, from staff-retention rates and off-hire statistics to organisation performance. “It’s about treating everyone equally, so that everyone feels that their voice is heard – everyone feeling inspired to start work every day,” he says. “People have great ideas. And we need to tap into that. The maturity level of your safety culture is strongly linked to the number of major accidents – there’s a strong correlation between these two things. If you can measure it, you can work on it.” LNG



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Nakilat brings its LNG fleet management in-house Qatar-based shipowner Nakilat is taking over the management of 25 large LNG carriers from Shell International Trading & Shipping Co (STASCo)


n February, the 2009built, 266,366m³ Al Dafna became the fifth Q-max LNG carrier taken into management by Nakilat Shipping Qatar (NSQL). That delivery brought the total NSQL-managed fleet to 13 gas ships – nine LNG carriers and four LPG carriers. Nakilat and STASCo formed their strategic alliance in 2006. The two companies agreed then that the Qatari shipowner needed time to build up its internal resources, capacity and expertise to become an independent shipping organisation. Nakilat has launched a phased transition to ease the takeover. The company is positioning itself to become a global leader in energy transport and maritime services. Centralising shipmanagement will also allow it to develop its skills base, to cut costs and to improve efficiency.

planned transition, factoring in its organisational structure and resources. NSQL has a track record managing Nakilat’s jointly owned fleet of LNG and LPG carriers. It has 30 shore-based staff, many with experience working for oil and gas majors, or for other shipowners, operators and managers. NSQL staff worked with STASCo to build up their shipmanagement skills, including fleet operations, SHEQ systems, contracts and

procurement, IT systems and business controls and systems. Seagoing staff are trained to Society of International Gas Tanker and Terminal Operators (SIGTTO) guidelines. “An important factor throughout this transition process is that the crew will remain unchanged, thus ensuring continuity of service onboard the vessels,” Nakilat told LNG World Shipping. “This is essential as our sea going staff already have good shipboard familiarisation with the existing safety management systems, operating philosophies and processes.” Taking its shipmanagement role inhouse, Nakilat aims to shore up Qatar’s LNG supply chain, delivering the country’s exports to global markets and investing in marine services at home. The group’s interests include the Erhama bin Jaber al


Nakilat’s first step was to launch an independent review by reputable shipmanagement technical advisors, to gauge the competency and capacity of NSQL to undertake the

Nakilat is taking over management of 25 large LNG carriers from STASCo

Jalahma shipyard, and shipping agency and towage services. It plans to develop these services to support the vision of an integrated maritime industry set out in Qatar’s National Vision 2030 strategy.


What is not clear, yet, is whether Nakilat sees scope to expand its fleet. The company owns some of the largest LNG carriers on the water – with 14 Q-maxes and 31 Q-flex vessels. Partnerships – notably with Greece-based Maran Gas – supported its fleet growth in the past. The question is whether it needs more of the same, or whether it can and should diversify into new ship types to tap growth in smallervolume import markets. “Historically, our development was based on Qatari projects and our strong connections with our JV partners,” a spokesperson says. “But with Qatari volumes stabilised and with the optimisation of the trade routes, we see little room for expansion in this specific market… “Nakilat is open to diversification in other areas of the LNG supply chain. While we are confident in the long-term future of LNG shipping, our growth strategy is measured and balanced… “We constantly evaluate business opportunities but any growth will need to be sustainable and supported by firm commitments.” LNG

LNG World Shipping | March/April 2017


LNG approaches 500-ship milestone Since the end of last year, nine LNG carrier newbuildings have been delivered and five new floating storage and regasification units (FSRUs) have been ordered

BELOW: The in-service LNG carrier fleet was set to reach the 500-ship mark in April. Isle of Grain

LNG World Shipping | March/April 2017


he fifth contracted FSRU, a mammoth, record-breaking 330,000m³ FSRU for Fox Petroleum at Hyundai Heavy Industries (HHI), has yet to receive a hull number, and the shipyard has yet to confirm it. Fox intends to position the vessel at the port of Karwar on India’s southwestern coast between Mumbai and Kochi. Of the nine deliveries, six are conventional-size LNG carriers and three are small-scale vessels. Although the latter all have Type C cargo tanks and dual-fuel propulsion, each is unique and heralds its own technological breakthrough for LNG shipping. The largest, JS Ineos Innovation, is

the fifth of eight 27,500m³ multipurpose gas carriers being built for Evergas and chartered to Ineos. All eight will initially transport US ethane to Europe for Ineos but Evergas plans to introduce to the fleet as replacements at least four Ineos Max 32,000m³ ethane carriers from early 2018, allowing half of the 27,500m³ ships to come off charter and enter the smallscale LNG trades. The middle vessel, size-wise, is the 14,000m³ Hua Xiang 8, built by the Qidong Fengshun yard for Zhejiang Huaxiang. It is the world’s first LNG carrier powered by a two-stroke, dual-fuel engine operating at low pressure, in this case a Wärtsilä 5RT-flex50DF unit developed


Dynagas forecasts that FSRUs will handle 16.6 per cent of LNG imports worldwide by 2020

by Winterthur Gas & Diesel. Hua Xiang 8 is set for domestic service in China, distributing LNG along the coast and to the new bunkering stations in the country’s major river estuaries. A major player in the Chinese LPG market, Zhejiang Huaxiang aspires to build up a fleet of coastal LNG carriers of various sizes, including for use in Southeast Asia. The smallest ship is the 5,000m³ Engie Zeebrugge, the first purpose-built LNG bunkering vessel. The ship was built by Hanjin Heavy Industries & Construction (HHIC) for Engie, Fluxys, Mitsubishi and NYK Line and will be based at the Belgian port of Zeebrugge, where it will load at the Fluxys LNG import terminal. Engie Zeebrugge is the first of a new breed of LNG vessel, of which several are under construction and nearing completion, that will boost the nascent fleet of gas-powered ships. Ship-to-ship (STS) fuelling with gas tankers of the Engie Zeebrugge type will allow many more vessels to bunker with LNG economically and efficiently than truck-toship and shore-to-ship transfers allow. Engie, Mitsubishi and NYK plan to lead this new ship service sector and have established Gas4Sea to market their joint expertise in the STS transfer of LNG as marine fuel. Gas4Sea plans to build additional LNG bunker tankers for service where need arises.

500 ships in sight These completions and new orders have increased the in-service fleet of LNG carriers to 493 vessels and the orderbook to 124. This year, 41 additional LNG carriers are set for completion. The in-service fleet looks set to reach the 500-ship mark in April, when five newbuildings are scheduled for completion. It would be appropriate – given the popularity today of floating LNG-import terminals – if the landmark 500th vessel turned out to be an FSRU. Alas, no FSRUs are scheduled for delivery in April. However, five FSRUs are due for delivery this year, all for different owners. The Höegh, BW Group and Golar LNG completions will boost these three owners’ existing regas fleets. The Mitsui OSK Line and Gazprom newbuildings mark these two companies’ first foray into FSRUs. In November, Dynagas LNG Partners reported 19 FSRU-based LNG import projects in operation and 10 more, with an aggregate regasification capacity of 30 million tonnes per annum (mta) of LNG, due to come on stream by 2018. Meanwhile, almost 50 additional FSRU

proposals are under discussion. Last year, LNG imports using FSRUs commenced in Colombia, Abu Dhabi and Turkey and this year Ghana and Puerto Rico will inaugurate regas vessel operations and Pakistan will get a second FSRU. Uruguay, Chile, Bangladesh and Russia are poised to join the FSRU-based importers club next year. Dynagas forecasts that FSRUs will account for 16.6 per cent of LNG imports worldwide by 2020, up from 8.6 per cent in 2010. Based on the ordering of the opening weeks of 2017 – Excelerate's seven-FSRU letter of intent with Daewoo Shipbuilding & Marine Engineering (DSME), the three options attached to Hoegh's recent two FSRU orders and the GasLog purchase of a 20  per cent stake in Gastrade's Alexandroupolis FSRU project in Greece – that percentage could well be higher. Last year, 31 LNG carriers were completed and eight were ordered. Maran Gas was the notable player over the period, having taken delivery of 10 LNG ships and having ordered two since the start of last year. The new contracts include its first FSRU. Since taking delivery of its first gas tanker, the 145,700m³ Maran Gas Asclepius, in August 2005, Maran Gas has built its LNG fleet up to 26 ships with a further seven on order. The tally places the Angelicoussis Group company among the world’s leading LNGC owners.

Ship orders in 2017 Last February, your consultant editor predicted, in a column similar to this one, that by late 2019/early 2020 the LNG industry would require approximately 35-40 conventional LNGC newbuildings over and above the then current orderbook to meet its shipping needs. This additional tonnage is needed to

transport the full nameplate output of the export terminals under construction. Most of the required vessels will be utilised in lifting cargoes from the US, where five projects aggregating 14 trains and an output capacity of 64.7 mta are due on stream by 2020. Although a good deal of the tonnage for these projects is already on the orderbooks, not all the ships required to transport the 26.7 mta from the last six US trains to be commissioned, at Freeport, Corpus Christi and Sabine Pass in the US Gulf between 2019 and early 2020, have been contracted yet. Thirteen new LNG carriers, including seven FSRUs, have been ordered since we published that column. As all but one of the FSRUs are specified against dedicated regasification projects, that leaves a gap of about 30 conventional newbuildings to plug. The level of new ship orders last year was the lowest since 2009, the year after the collapse of global financial services firm Lehman Brothers and the worldwide economic meltdown. In contrast, more than 200 ships were ordered between 2011 and 2014. The recent nosedive in LNGC contracting reflects the high number of newbuilding deliveries at a time when the demand for cargo is weak. Although the current slack market has prompted shipowners to delay delivery times for some of their newbuildings, the specialist LNGC yards can complete a ship within 30 months of a contract being signed. Bearing in mind ship construction lead times and the fact that it takes, on average, six to nine months for a newly commissioned LNG train to build up to full production, most of the 30 additional newbuildings required for the Freeport, Corpus Christi and Sabine Pass projects will need to be ordered this year. LNG

LNG World Shipping | March/April 2017


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Wanted in Argentina – one very large FSRU Argentina’s Enarsa wants to charter the country’s third floating storage and regasification unit (FSRU) to support the Puerto Rosales project near Bahia Blanca, south of Buenos Aires. Enarsa is said to need a Q-max or Q-flex size FSRU, to process 17 million m³/day. It was planning to reach a final investment decision (FID) on the Puerta Rosales project and to choose an FSRU provider by April, to receive its first cargoes in summer 2018. Excelerate Energy, Golar LNG, Höegh LNG and BW Gas are in the frame, with FSRU newcomers GasLog and Marubeni.

Three LNG projects will reach FID this year, predicts Wood Mackenzie Small LNG projects will be the big winners in 2017, predicts analyst Wood Mackenzie, which expects just three LNG-export proposals to reach a final investment decision (FID) this year. None will produce their first cargoes before 2020. Wood Mackenzie’s tips for 2017 FID are: • Mozambique’s Coral floating LNG

(FLNG) project • Equatorial Guinea’s Fortuna FLNG project • Woodfibre LNG in Canada.

The rise of trading houses in the LNG world The LNG market has evolved in terms of complexity and sophistication in a decade, writes Loukas Ziomas. It has doubled in size and moved from being dominated by long-term trade with strict destination clauses to one influenced by spot sales, tenders, and gas benchmark-linked trade, amid an increase in re-trades and destination swaps. New types of stakeholders have emerged as intermediaries between resource holders and end users. The intermediaries include portfolio players, dedicated liquefiers, and, more recently, trading houses. While some trading houses have successfully entered the LNG market even in a constrained environment, but their footprint accounts for just 3-5 per cent of the traded volume in 2015. The role of those established traders, however, has the potential to increase remarkably

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LNG World Shipping | March/April 2017

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2017 brings new momentum to LNG shipping Although 2018 is touted as the year when the benefits of a recovering LNG market will be felt, 2017 will not be short on good news, writes Mike Corkhill. Momentum is building for a return to a healthy, balanced industry and will gain strength in the coming year. Volumes of LNG shipped by sea are expected to grow by 11 per cent in 2017, pushing global trade above 300 million tonnes per annum (mta) for the first time. This follows an 8 per cent expansion in trade in 2016, an advance that reduced the number of idle LNG carriers from 40 to 20 during the year.

considered a 170,000m³ FSRU, in tandem with a regasification barge and a floating storage unit (FSU) and are considering whether to charter an FSRU long term or to form an additional joint venture to own the vessel or vessels.

Skaugen lands Africa LNGto-power deal for small-scale multigas carriers

In January, vessel-tracking reports spotted the first of the 15 ice-class LNG carriers built to deliver cargoes from Russia’s Yamal LNG project making its ballast voyage towards Zeebrugge. The 2016-built, 172,000m³ Christophe de Margerie complies with the Polar Code, which took effect on January 1. The first icebreaking LNG carrier built for the Yamal LNG project will operate year-round in Arctic waters. The 12th ice-class LNG carrier to enter service, the azipod-propelled Christophe de Margerie is billed as “the most powerful LNG carrier on the water”.

Norway-based IM Skaugen has signed a long-term contract to charter three multigas carriers to an unnamed small-scale LNG venture in Africa that needs gas for power generation. Skaugen will not confirm yet where in Africa the project is based or to whom the vessels are chartered. Chief financial officer Bente Flø told LNG World Shipping that the vessels will switch from the Nordic LPG trades, taking position off Africa this spring. The news moves Skaugen closer to its ambition to focus on LNG through its Norgas business unit. The three vessels will operate a shuttle service to deliver gas to the plant. The contract was due to start by early April. Skaugen said the time-charter deal represents “a proof of concept for our small-scale LNG logistics solutions (SSLNG), providing natural gas for power generation”. It added: “The revenues under these SSLNG will be about US$42 million annualised, thus about US$420 million for 10 years.”

Marubeni partnership lands Indonesia FSRU deal

Excelerate eyes seven-FSRU order from DSME

Japan-based Marubeni has moved closer to realising its first floating storage and regasification unit (FSRU) venture, agreeing a power-purchase agreement in Indonesia for the Jawa 1 gas-fired project. Marubeni has formed a specialpurpose company to drive the Jawa 1 project with Sojitz and with Indonesia’s PT Pertamina (Persero). Jawa Satu Power ( JSP) will build, own and manage a 1,760MW gas-fired power plant, importing LNG using an FSRU. Sources say the partners have

Texas-based shipowner Excelerate Energy has signed a letter of intent with South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME) to take delivery of up to seven floating storage and regasification units (FSRUs). The agreement enables Excelerate to order one FSRU in the second quarter of this year. The company, the largest owner of FSRUs, announced a week ago that it is seeking to position a second vessel off Port Qasim in Pakistan, in “a fast-track” deal with its partners Engro, Fatima and

The world’s most powerful LNG carrier sails for Zeebrugge

Shell. Excelerate has a live fleet of nine FSRUs and one LNG carrier.

Bernhard Schulte and Babcock form Babcock Schulte Energy to drive LNG projects Bernhard Schulte Shipmanagement (BSM) and Babcock International are forming a joint venture, Babcock Schulte Energy (BSE), to support their first LNG bunker-supply ship project and to develop other ventures together. The two companies have ordered their first LNG bunker-supply ship for charter to Blue LNG, the joint venture between the restructured Linde Group and Klaipedos Nafta to be based at the Port of Klaipeda, sourcing LNG from the floating storage and regasification unit Independence. BSE is a 50-50 partnership between BSM and Babcock. Together, they have ordered the 7,500m³ gas-supply vessel (GSV ) from South Korea-based Hyundai Mipo in Ulsan for delivery in September next year. The vessel is the sixth purpose-built LNG bunker-supply ship booked to date and the first to feature Babcock’s FGDV0 technology.

Malta joins the LNG-importers’ club Malta has taken delivery of its first LNG shipment with the arrival in Marsaxlokk Bay of Shell’s 2002-built, 138,000m³ vessel Galea to transfer a commissioning cargo to the floating storage unit (FSU) Armada LNG Mediterrana. Bumi Armada converted Mitsui OSK’s 1985-built, 125,000m³ LNG carrier Wakabu Maru into an FSU. The vessel will supply LNG to a 200MW gas-fired power station at Delimara. Maltese minister without portfolio Konrad Mizzi said: “Three or four years ago, we set a vision to reduce energy tariffs. I am pleased to say that in a few years we will have managed to eliminate heavy fuel oil completely. Heavy fuel oil will soon become history.”

LNG World Shipping | March/April 2017

72 | GASTECH Advertorial



he Paris Climate agreements have set out a wide range of measures which will require countries to rethink their energy consumption habits and promote changes across the board pertaining to the types of fuels in the energy mix. The Paris Climate agreements have set out a wide range of measures which will require countries to rethink their energy consumption habits and promote changes across the board pertaining to the types of fuels in the energy mix. For Japan the Paris agreements could mean that, by 2030, energy consumption will drop by 10% thanks to energy efficiency savings and clean technology. Despite this, LNG will play a key role in contributing to the country’s energy mix as a means of maintaining Japan’s energy security in an uncertain world. Japan is the world’s largest consumer of LNG, and is therefore a key market for companies at all stages of the supply chain. The country is surrounded by up and coming LNG production sites, especially important is its access to Australia which has seen a range of new LNG projects such as the Ichthys project spearheaded by INPEX. In January, Jera, Japan’s largest LNG importer, made its first purchase of LNG from the United States, a move which signals a new era for trans-pacific trade. A cold winter in Japan meant that prices rose by up to 60%, also the increased flexibility of offload points meant that ton-mile demand went up. Whilst it is too early to say for certain, the strength of the Japanese market points to a recovery in 2017 which will come as welcomed news to those companies in the Asian LNG supply chain. LNG shipping firms appear to be optimistic in the current trading climate. The total number of ships in the LNG fleet

LNG World Shipping | March/April 2017

is pushing 500 and new routes are being introduced all the time. At the beginning of March it was announced that the USA would receive its first shipment of shale gas from Canada –with Cheniere energy being the firm transporting the cargo. The Canadian shale fields are becoming increasingly important as an LNG source and the west coast of the country is seeing increasing interest in the construction of LNG port facilities. New liquefaction trains are also giving LNG a boost in 2017 as new locations in Australia and the USA drive growth and improve connectivity in the Asia-Pacific region. In 2017, 41 new LNG ships are scheduled for construction, bucking the trend as the general cargo shipping market struggles. Of these vessels 5 are FSRU which, as predicted by Dynagas, will make up 16.6 per cent of LNG imports by 2020. The new ship orders come off the back of a poor year last year which was the worst for orders since the financial crisis.

New terminals mean that new tonnage will be required to transport this new export volume. The bulk of this new export will come from the USA as 5 new terminals come online by 2020. The hubs of this new export capacity will be located around the Louisiana coast. The Gastech 2017 event taking place in Japan in April will discuss these topics by bringing together some of the largest players in global LNG. The conference has been organised in collaboration with the ten largest energy companies in Japan – Jera, Mitsubishi, Mitsui & Co, Tokyo Gas, INPEX, Itochu, Japan Petroleum Exploration Co., JX Group, Marubeni and Sumitomo Corporation, all of whom will be looking to prospect new opportunities during the event. The event will allow delegates to hear from thought-leaders in the LNG world give their insights on the future of the industry. The unique Global Meeting Service will allow attendees to pre-book meetings, with those meetings facilitated during the event. LNG

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• FLNG to Subsea – Are you Following Me? KBR

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• The Best Remedy to Prolong the Lifetime of LNG Storage Tanks, KOGAS • The Future of LNG Carriers - Probability of Further Upsizing & Fuel-Efficiency Improvements, Mitsui O.S.K Lines Ltd • A New High Pressure Emergency Release System for Gas Transfer Arms, Royal Dutch Shell




Expanded Panama Canal opens a new LNG route Last year’s opening of the expanded Panama Canal welcomed LNG to the waterway for the first time in 102 years. It also signalled a new era for the segment

T Jose Arango: Panama aims to improve its logistics offering to LNG carriers

he increase in the canal's capacity provides LNG producers access to new markets, presents shippers with better options and introduces cleaner fuel alternatives to the maritime industry and the broader economy. Since 1914, the Panama Canal all-water route has offered a safe, reliable and efficient service that shortens the distance between cargo and consumer. Building on this legacy, the expanded canal introduces new segments and cost efficiencies and time savings for shippers. Today, LNG producers in the Americas, including new and existing plants in the US, Trinidad andTobago, and Peru, can ship natural gas to large, energy-consuming countries in Asia and Europe that were previously out of reach. Shippers have seized that opportunity. Soon after opening in July, the canal began to welcome an average of five LNG transits a month. These figures were consistent with expectations, based on the shift in US policy to allow LNG exports, set against the fact that the only project to start to export so far is Sabine Pass, which launched its first two liquefaction trains last year. Projects in Trinidad and Peru were also expected to generate limited cargoes. In October, LNG traffic picked up, a trend that continued through December, driven by an uptick in winter purchases of gas for heating in northern Asia, the shutdown at Australia’s Gorgon LNG export facility, rising oil prices, and arbitrage opportunities for US and Trinidadian spot LNG cargoes. The average number of monthly LNG transits through the canal increased from five to 14.


So, can we expect this trend to continue? It’s too early to tell. It will be important to watch

how the maritime LNG transport industry adapts to improving LNG charter rates, to new players moving cargo from Sabine Pass, and the challenges of the low oil and LNG price environment. Still, the practice of moving LNG through the canal holds promise. For one, markets in Asia are expected to increase their reliance on energy imports as domestic oil production slows, especially in China. Analysts expect substantial demand for LNG this year in Europe, too. Further, as world economies take steps to meet their commitments under the Paris climate agreement, the market for LNG as a clean fuel alternative will grow. LNG releases 25 per cent fewer pollutants than other fuels in thermal electricity generation and using it helps to reduce overall carbon emissions. Greater access to LNG comes at a crucial time for the shipping industry as it also seeks ways to reduce its carbon footprint. The IMO sees LNG as an energy-efficient alternative to existing marine fuels, with their high sulphur counts. LNG as fuel will cut greenhouse gas emissions from international shipping and help shippers to meet new IMO regulations. SEA\ LNG predicts that orders for LNG-fuelled ships excluding LNG carriers will more than double the fleet now operating worldwide. Regardless of these trends, one thing remains clear: the Panama Canal will continue to innovate and to find new ways to provide value for shippers, delivering the same safe and reliable service customers have come to respect. And, amid new projects to expand the canal’s logistics offerings, which include studies into LNG-import terminals and other infrastructure, we are witnessing a new era begin. LNG Jose Ramon Arango is a senior liquid bulk specialist at the Panama Canal Authority (ACP)

LNG World Shipping | March/April 2017

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2017 • A supplement to LNG World Shipping

Japan’s Big Three shipowners adjust to changing markets Infographic: the LNG carriers fixed to Asia’s imports and exports

“Japanese-held long-term supply contracts for some 44 million tonnes a year (mta) of LNG will expire by 2025” Jean-Marie Dauger, president International Group of LNG Importers (GIIGNL), see page 6

contents Introduction

March/April 2017

3 As Japan approaches its 50-year LNG landmark, Society of International Gas Tanker and Terminal Operators (SIGTTO) secretary-general Andrew Clifton lists the country’s shipping milestones

Editor: Karen Thomas t: +44 20 8370 1717 e:


Consultant Editor: Mike Corkhill t: +44 1825 764 817

4 Asian LNG imports at a crossroads. International Group of LNG Importers (GIIGNL) president Jean-Marie Dauger looks at the opportunities and challenges ahead


6 GIIGNL data highlights Asia's existing and planned LNG-import capacity 10 Mike Corkhill’s research reveals the LNG carriers fixed against Asia’s LNG import and export projects and highlights regional utilities’ growing control over that fleet


12 LNG World Shipping talks to Japan’s Big Three shipowners – Mitsui OSK, NYK and K Line – about their distinctive fleet-growth plans


Commercial Portfolio Manager: Bill Cochrane t: +44 20 8370 1719 e: Sales Manager: Ian Pow t: +44 20 8370 7011 e: Production Manager: Richard Neighbour t: +44 20 8370 7013 e: Subscriptions: Sally Church t: +44 20 8370 7018 e: Korean Representative: Chang Hwa Park Far East Marketing Inc t: +82 2730 1234 e: Japanese Representative: Kazuhiko Tanaka Shinano Co., Ltd t: +81 335 894 667 e: Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Editorial Director: Steve Matthews Executive Editor: Paul Gunton Head of Production: Hamish Dickie Business Development Manager: Steve Edwards

Takeshi Hashimoto: Mitsui OSK sees opportunity in midsize LNG carriers


15 A round-up of some of the products and services being launched at Gastech this year in Tokyo Front cover image: © EXMAR

Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK ISSN 1746-0603 (Print) ISSN 2051-0616 (Online) ©2017 Riviera Maritime Media Ltd Total average net circulation: 4,000 Period: January-December 2015

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LNG World Shipping | March/April 2017

Asia LNG Supplement


Gastech 2017: Japan approaches its 50-year LNG landmark Society of International Gas Tanker and Terminal Operators (SIGTTO) general manager Andrew Clifton looks back at the first five decades of LNG in Japan

terminal near Yokohama, Japan on 4 November and completed its cargodischarge operations on 11 November, following an initial cool-down.

Landmark shipment


iquefied gases have been safely carried at sea for many decades. In 1959, the 103m, 5,500m³ Methane Pioneer carried the very first cargo of LNG across the Atlantic Ocean, from Lake Charles in the US to Canvey Island in the UK. And in October 2014, LNG shipping celebrated 50 years since its first commercial deliveries began. By 1964 the first purpose-built LNG carriers were in service under long-term gaspurchase agreements. In two years' time, Japan will celebrate its own 50th LNG anniversary, as 2019 marks the half century since the country imported its first cargo of chilled gas. By the early 1960s, Japan was developing a keen interest in the use of

LNG as the source of a cleaner-burning fuel. Air pollution in Japan had led to environmental regulations, which fired the country’s interest in importing LNG. Japanese power companies realised they could substantially reduce emissions by adopting LNG for power generation. And so, in March 1967, Phillips and Marathon signed a 15-year agreement with Tokyo Electric Power (Tepco) and Tokyo Gas to take delivery of 1 million tonnes per annum (mta) of LNG. The 243m, 71,500m³ Polar Alaska arrived at the new Nikiski plant on the Kenai peninsula in southern Alaska on 15 October 1969 and, after initial cooldown, testing and loading, departed for Japan on 26 October. The ship tied up at the Negishi

The shipment was the first export of LNG from the US to Japan, as well as the first import of LNG into Asia. Polar Alaska’s sistership Arctic Tokyo completed discharge of its first cargo at Negishi on 11 March 1970. In 1970, Tokyo Electric Power, Tokyo Gas and Osaka Gas signed LNG sales and purchase agreements (SPAs) with Shell, Mitsubishi and the Brunei government to initiate the Brunei LNG project. This was the first LNG project in which Japanese entities participated in exports – Mitsubishi has a 45 per cent interest in the project – and in imports. The project delivered its first cargo to Osaka Gas in December 1972. In December 1973, Indonesia’s Pertamina signed an LNG SPA for 8.2 mta with Chubu Electric, Kansai Electric, Osaka Gas, Kyushu Electric and Nippon Steel. Today Japan has 34 LNG terminals and

LNG World Shipping | March/April 2017


Asia LNG Supplement

Japan plans to develop Yokohama as an LNG-bunkering hub. Credit: MookE

Japanese companies own or operate more than a quarter of the world’s LNG-carrier fleet. Japan has 25 SIGTTO members – more than any other country – or more than 10 per cent of our total number. SIGTTO has four Japanese directors and seven Japanese General Purposes Committee members. In November, we held our first ever regional forum in Tokyo. The event was very well attended, bringing together some 60 SIGTTO members. Also in November, we held our 2016 board and annual general meetings in Nagoya, hosted by Chubu. SIGTTO also met the commandant of the Japan Coast Guard, vice-admiral Satoshi Nakajima, opening an opportunity to foster closer relations between our two organisations. Japanese shipyards have built many LNG vessels. The first was the 1980-built, 129,000m³ Golar Spirit. The country’s shipyards have traditionally concentrated on vessels using steam propulsion and Moss-type containment systems. However, in more recent years Japanese shipbuilders have also successfully delivered vessels with membrane containment systems and those that use other means of propulsion.

SIGTTO’s Andrew Clifton meets Japan Coast Guard commandant Satoshi Nakajima

Looking forward This year has already brought exciting new developments for Japan’s LNG imports. In January, Teekay LNG’s 173,000m³, ME-GI powered LNG carrier Oak Spirit delivered the first commercial cargo produced in the US’ Lower 48 states to Japan. The cargo, loaded at Cheniere’s Sabine Pass LNG terminal arrived at Chubu Electric’s Joetsu LNG terminal on January 6. And Japan has unveiled an ambitious plan to turn the port of Yokohama into a regional LNG-bunkering hub. A Port

LNG World Shipping | March/April 2017

Our industry recognises Japan’s place in history as the world’s principal importer and a player that has made a great contribution to LNGshipping safety

of Yokohama feasibility study has set a deadline to carry out Japan’s first ship-toship bunkering operations in 2020. Today, Japan has imported more LNG than any other nation. A large percentage of the 87,000 cargoes delivered globally by LNG carriers by year-end 2016 went to Japan. The country is home to almost a third of the world’s import terminals. Japan’s rich history also gives the public great confidence in transportation of LNG as these cargoes have been safely delivered and handled, in busy waters and through challenging winter weather, for almost 50 years. Educating the public is extremely important for liquefied gas shipping. The non-professional needs to be made aware that gas carriers are not floating bombs. Perceptions amoung laypeople is often that a huge explosion will follow an incident on a gas carrier and may harm humans and damage property. However, these vessels are robust, soundly designed and constructed, and well equipped with safety and emergency systems. Catastrophic events caused by hydrocarbon gases in the liquid phase are few. Refrigerated liquefied gas tanks are highly unlikely to explode, instead burning until the fuel is consumed. Japan was ahead of its time in recognising the benefits of LNG. Our industry recognises the country’s place in history as the world’s principal importer and a player that has made a great contribution to LNG-shipping safety. It is all the more fitting, then, that we will gather in Tokyo for Gastech 2017. SIGTTO members will mark the occasion by holding our 75th general purposes committee meeting in conjunction with this year’s event. LNG










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Asia LNG Supplement

Gastech 2017: Asian LNG imports at a crossroads International Group of LNG Importers (GIIGNL) president Jean-Marie Dauger examines the impact of new markets in Asia as demand slows among the region’s largest importers


Jean-Marie Dauger: promoting the development of LNG in Asia

LNG World Shipping | March/April 2017

lthough they account for around three-quarters of global LNG demand, Asian LNG markets are now at a crossroads. The traditional markets of Northeast Asia – Japan, South Korea and Taiwan – could be entering a new normal in terms of demand growth, whereas China and India look set to increase their LNG imports. The need for a transition to a less carbon-intensive economy and to reduce dependence on coal should enhance the role of LNG imports in both China and India, as long as supplies are adequately priced and if there is sufficient downstream gas infrastructure. In the meantime, South and Southeast Asian countries also show a strong appetite for LNG imports. Five countries – Indonesia, Malaysia, Pakistan, Singapore and Thailand – have joined the ranks of importers since 2011. For island nations, where developing pipeline networks may be costly and difficult, it will be fascinating to follow the development of small-scale LNG and of breakbulk demand. However, in the mature markets of Japan, Korea and Taiwan, LNG demand growth may be experiencing a structural slow-down. This reflects weaker than expected economic growth, rising energy efficiency and increased competition from other fuels for power generation. In all three countries, the level of future LNG imports will reflect the role given to nuclear power generation.

Mature markets

In Japan, several additional factors will drive the market. These include the deregulation of gas and electricity and the advent of significant flexible LNG volumes from the US contracted by Japanese buyers. These factors may ultimately impact LNG import rules and the procurement habits of gas and electricity players. As over-committed traditional Japanese buyers seek new outlets for their LNG portfolio, alternative models have already emerged, notably the 2015 launch of JERA as the procurement and trading arm of Chubu Electric and Tokyo Electric Power (Tepco). Other alliances may also be observed in Japan. To respond to market changes and given the uncertainty over future supply and demand, LNG-contracting strategies are paramount. Buyers will pay particular attention to two criteria: price competitiveness and flexibility. In particular, flexibility is critical to allow for international expansion. It is also a way to offset any domestic surplus. Some buyers are pushing to remove destination clauses that restrict the resale of LNG by diverting or re-exporting cargoes procured under their existing contracts. Given the country’s lack of underground storage, Japan’s smallscale LNG trade and the nation’s use of its existing storage capacity give it some flexibility. In 2015, Japan received some 350

Asia LNG Supplement

small-scale deliveries on vessels smaller than 30,000m³. Around 80 cargoes came from abroad, specifically from Indonesia, Malaysia and Russia. Most of the others corresponded to reloads from large-scale terminals to satellite terminals using small coastal vessels. Estimates suggest that Japaneseheld long-term supply contracts for some 44 million tonnes a year (mta) of LNG will expire by 2025. In an oversupplied market, some players may move away from long-term contracts, increasing the share of spot or short-term volumes in their portfolios. In South Korea and Taiwan, the level of LNG imports will depend mostly on economic growth and energy policy. In South Korea, gas demand for power generation looks set to decline a little, due to the robust increments of baseload generation from nuclear and coal. Nevertheless, city-gas demand is expected to increase and using LNG as marine fuel could provide momentum for expanding the existing infrastructure. In December 2016, South Korean utility Kogas announced that it will build LNGbunkering infrastructure at Tongyeong in the southern part of the country by 2019. In Taiwan, government calls for a nuclear-free homeland by 2030 may make gas a fuel of choice, paving the way for a bright LNG future. Expanding the Taichung LNG terminal will increase the terminal’s capacity from 4.5 mta to 5 mta by 2018. State energy firm CPC plans to build a third LNG terminal, of 3 mta, by 2023. By 2030, CPC could also double this planned facility’s capacity, which will increase the country’s national receiving capacity to 20 mta.

Rising stars

In contrast to the mature importers, China and India both demonstrate great potential for LNG-import growth. In China, increased competition has created an opportunity to expand the country’s import infrastructure. Sinopec launched its Beihai, Guangxi LNG terminal last year and the company announced that it will build a new terminal in the Zhejiang region, where China National Offshore Oil Corp (CNOOC) already operates one. Last year, CNOOC completed two additional terminals in Guangdong province: a 2 mta terminal at Yuedong and


Pakistan is ramping up its LNG imports through Port Qasim

a 3 mta terminal at Shenzhen – although it has delayed their commissioning until this year. Meanwhile, independent players are also trying to break into the LNG sector and a couple – notably Jovo and ENN – have succeeded. ENN is building the first privately owned large-scale LNG terminal in Zhoushan, expected to receive its first cargoes next year. India is set to increase its LNG consumption again this year. The country has four import terminals, giving it a total capacity of 30 mta. Dahej had a utilisation rate of more than 100 per cent last year. It only recently expanded its capacity from 10 mta to 15 mta and is on course to grow again. Phase III B will enable Dahej to handle an additional 2.5 mta, increasing its total capacity to 17.5 mta. So far, India’s import terminals are all along the west coast. However, two projects are being built on the east coast. Kakinada LNG is a 2.5 mta, floating storage and regasification unit (FSRU)based project led by Engie, Gail and Shell. Ennore LNG is a 5 mta onshore project led by Indian Oil. Back on India’s northwest coast in Gujarat, GSPC LNG is building a 5 mta import terminal at Mundra.

Emerging markets

Momentum for a new wave of imports into Asia started in 2011, when Thailand took its first cargoes. Since then, there has been significant demand growth, there

and in Indonesia, Malaysia, Pakistan and Singapore. Now, several other countries – Bangladesh, Myanmar, the Philippines and Vietnam – plan to import their first cargoes. Seven large-scale import terminals have already been developed in South and Southeast Asia, with a total capacity of around 27 mta and an additional 16.5 mta capacity under construction at the end of 2016. That new infrastructure includes FSRUs, new onshore terminals and conversion of former export terminals, such as Arun in Indonesia. By 2025, the region could develop up to around 60 mta of new LNG regasification infrastructure (see GIIGNL infographic overleaf). Having imported its first cargoes, Thailand now plans to expand the Map Ta Phut on-shore terminal. It plans to double capacity here to 10 mta this year, adding two 160,000m³ tanks and a second large-scale jetty. In May 2016, PTT won authorisation to expand Map Ta Phut by another 1.5 mta by 2019. PTT LNG has launched a study on providing LNG bunkering and cool-down services at Map Ta Phut. The company has also secured approval to build and operate a second Thai import terminal in Rayong province with regasification capacity for 5-7.5 mta from 2022. Indonesia opened its first regasification terminal in 2012 in West Java. Today, the country’s three import terminals receive home-made LNG, but this may change as its demand grows but production declines.

LNG World Shipping | March/April 2017


Asia LNG Supplement

Thailand is planning to increase its imports through Map Ta Phut

State-owned gas firm PT Pertamina plans to use Arun as an LNG hub, offering storage, reloading and breakbulk services. Last year, the terminal added truck loading. Meanwhile, small-scale LNG is at the centre of Indonesian government strategy to increase synergies between state-owned firms. Last year, the country commissioned a floating import solution using a floating regasification unit (FRU) and a floating storage unit (FSU) to ship LNG from Bontang to Bali using a smallscale vessel. Since 2015, Indonesia has also supplied LNG using ISO containers to East Kalimantan for use in mining, transport and commerce. Malaysia launched LNG imports in 2013 to supply gas to the Malacca region, using two LNG carriers as FSUs, moored next to jetty-based regasification units at the Melaka offshore terminal. State-owned Petronas imported LNG sourced from nine other countries in 2015. Now, Malaysia is building a second onshore terminal, part of a larger refinery and petrochemical complex in the south of the country. The third phase of the Singapore LNG (SLNG) expansion project includes a

LNG World Shipping | March/April 2017

fourth tank to store 260,000m³. This will increase Singapore’s process capability to 11 mta and makes the send-out gas leaner by blending in nitrogen. The expanded process capacity and nitrogen blending capability launches this year and the fourth tank will operate from next year. To kick-start small-scale distribution, SLNG has built a small pilot truck/ container loading facility. This will offer small-scale LNG bunkering and supply LNG to home-grown industries.

The next wave

The combination of new FSRU and FSU solutions and growing demand for gas for power generation is likely to persuade several other Southeast Asian countries to import their first cargoes, including Myanmar, the Philippines and Vietnam. In the Philippines, EWC is said to be nearing completion of a one-tank onshore import terminal in Pagbilao and an FSRU project has been proposed in Batangas. In Vietnam, two projects are being developed, in Thi Vai and Son My. Since our industry was created, it has relied on cross-border technical and commercial co-operation and on

importers sharing their knowhow to make new projects emerge. So Osaka Gas provided technical and operational support for PTT LNG’s Map Ta Phut terminal and the two companies have established a joint venture. France’s Elengy has provided advisory services and technical support to PGN for Indonesia’s Lampung FSRU terminal. Tokyo Gas signed an agreement with Pertamina in 2015 to consider collaboration in a wide range of areas throughout the LNG and natural gas value chain. And in Vietnam in 2016, Tokyo Gas has established a joint venture company with PetroVietnam Gas, aiming to conduct business activities such as LNG procurement, LNG sales and LNG receiving terminal construction and operation. At the beginning of this year, Petronet signed a memorandum of understanding, aiming to build a 7.5 mta onshore terminal in Bangladesh. GIIGNL is determined to promote the development of LNG in Asia, strengthening connections between LNG players and sharing commercial and technical best practice, paving the way for new importers to receive LNG safely and efficiently. LNG



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EXISTING IMPORTERS by current and proposed import terminal capacity (million tonnes a year) Ind on es ia


nd a l

M a l a y sia

Th ai



16.5 e por a ng Si

12.3 istan Pak

11 COUNTRY Indonesia





Nusantara FSRU




Lampung FSRU








Benoa, Bali FSU/FRU




Cilacap FSRU




Cilamaya Jawa 1 FSRU






Melaka FSRU






Under construction




Port Qasim FSRU




Port Qasim FSRU







Port Qasim FSRU



Jurong Island




Jurong Island exp I





under construction


Jurong Island exp 2



Map Ta Phut




Map Ta Phut exp 1 Map Ta Phut exp 2 Rayong

5 1.5 5

under construction proposed proposed

2017 2019 2022

Source: GIIGNL January 2017, Additional research: Karen Thomas, Infographic: Richard Neighbour

LNG IMPORTS IN SOUTH AND SOUTHEAST ASIA PROSPECTIVE IMPORTERS proposed import terminal capacity (million tonnes a year)

sh lade g n Ba

tnam Vie


ar anm My



s pine ilip Ph

5.5 COUNTRY Bangladesh






Moheshkhali FSRU













6 6






Batangas FSRU






Son My




Thi Vai





Takeshi Hashimoto: Mitsui OSK sees opportunity in midsize LNG carriers

Asia LNG Supplement

Hiroaki Nishiyama: NYK is a pioneer in LNG bunker-supply ships

Yuzuru Goto: K Line is looking for the right investment opportunity



hen it comes to LNG carrier fleet growth, Japan is the most exciting shipowning nation to watch. Ties of ownership make it tricky to determine the size of the Japan-owned fleet, however. The Big Three shipowners, Mitsui OSK (MOL), NYK and K Line, hold joint stakes in several live vessels and newbuildings. The total number of vessels that each shipowner claims represents all tonnage in which each holds an equity stake. It does not factor in the overlap. Clarksons says the Japan-owned live fleet stood at 50 vessels with a combined capacity of 7.3 million m3 at year-end 2016. Together, it says, the three major shipowners also hold an orderbook of 19 LNG carriers, not including the MOL floating storage and regasification unit (FSRU) built for Uruguay's GNL del Plata project. These 19 ships have a combined capacity of 3.03 million m3. All three shipowners have traditionally booked new vessels to fulfil long-term supply contracts fixed by

LNG World Shipping | March/April 2017

Japan’s big importers; Tokyo Gas and Chubu Electric, which now operate as the world’s single-biggest LNG importer JERA, as well as Osaka Gas, Kansai Electric, Mitsui & Co, Hiroshima Gas, Inpex and, from 2018, Mitsubishi. However, the LNG shipping landscape is changing. Japanese LNG demand is slowing. Market-watchers suspect that it may have peaked. Many of the company’s utilities find themselves over-contracted, tied in to LNG cargoes whose delivery terms they must renegotiate to sell on that surplus to other buyers, in Asia and further afield. As new export projects offer more flexible terms, as buyers negotiate down LNG prices, a shift has started away from 25 and 30-year contracts. That creates much less certainty for shipowners – particularly for those in Japan, which are conservative – against which to order new ships. LNG World Shipping interviewed senior managers from all three shipowners, ahead of the Gastech exhibition and conference in

Tokyo. All three shipowners outlined their fleet-growth strategies, each distinct from the others. MOL is the biggest player, with a 92-ship LNG fleet comprising 75 ships on the water and 17 on order. All 17 newbuildings are fixed against confirmed projects. The company has slowed its plan to create a 120-ship LNG fleet by 2020, reflecting delays to project approvals and the glut in ship capacity that this has created. It sees Mozambique as its next opportunity to order conventional-size LNG carriers. However, MOL is looking at a new shipping segment – at midscale LNG carriers in the 10,000m³-30,000m³ size range. Investing in midsize carriers will enable MOL to tap emerging-market demand, particularly in Asia and Latin America, according to board member for LNG and offshore Takeshi Hashimoto. MOL owns three vintage small-scale LNG carriers. It is looking to upgrade and expand that fleet, to support coastal LNG

Asia LNG Supplement


Japan’s Big Three LNG shipowners have very different strategies in adapting to a shipping and trading landscape that is changing fast. Karen Thomas compares their plans

shipping in new markets such as India, Indonesia and China. It also plans to order LNG bunker-supply ships. Mr Hashimoto has urged Japan’s shipyards to find ways to build more keenly priced smaller ships. MOL is also the only Japanese owner – so far – to invest in a floating storage and regasification unit (FSRU). It is looking for a temporary taker for its giant 263,000m³, 4 million tonnes a year (mta) newbuilding as it waits for Uruguay to reach FID on the Gas Sayago project. Like MOL, Japan’s second-largest LNG shipowner NYK is conservative when it comes to ordering LNGC newbuildings. However, NYK is reinventing itself as a pioneer in supplying LNG as marine fuel. NYK has a fleet of 82 vessels, 71 on the water and 11 on order. It, too, has slowed its fleet-expansion plans. The 11 newbuildings will be delivered by 2019. With no outstanding options, NYK will not now have 100 vessels by then. The company has been linked to talks about additional ice-class tonnage for an expanded Yamal LNG. It expects Mozambique to create demand for “at least 10” LNG newbuildings. But NYK’s London-based management team is adamant that the company will order no new tonnage on spec. The same policy applies to offshore assets and small LNG carriers. However, NYK is a first-mover in LNG bunker-supply ships. As a partner in Gas4Sea with Mitsubishi and Engie, NYK will take delivery of its first supply ship this year, a 7,500m³ newbuilding to be based at Zeebrugge, in which Fluxys also has a stake. NYK is the front runner to book and operate a similar ship at Yokohama in Japan. However, it expects to place its second LNG bunker-supply ship in Europe, according to NYK Energy Transport Atlantic (NETA) managing director Hiroaki Nishiyama and deputy general manager Yusuke Niizuma. NYK is looking with particular interest at opportunities in the Adriatic and Mediterranean. Last – and never least – K Line has a

Japan-held LNG fleet Live fleet

50 vessels Combined capacity live fleet

7.3 million m3 Orderbook

19 vessels Combined capacity,

3.03 million m3 Orderbook as % live fleet

capacity 4.15% Source: Clarksons, January 2017

49-ship LNG fleet, 42 on the water and seven on order. It has slowed its fleetgrowth plans from a target of 61 by 2019. It is no more likely than its compatriots to speculate on new tonnage. However, K Line now sees “anything from seven years” as a reasonable charter term – as long as the customer is credible. K Line LNG Shipping managing director Yuzuru Goto says the LNG group’s strategy is to seek partners – shipowners from shipping segments more used to uncertainty – with which to share the risk. K Line’s final two confirmed newbuildings are booked against an FOB charter to BP for Freeport LNG cargoes. K Line bid for the contract in partnership with Greek shipowner Chandris. Fleet growth will focus on so-called “unconventional LNG shipping”, which could mean redeploying older tonnage as floating storage, converting or building FSRUs, or moving into coastal carriers or supply infrastructure. The company singed its fingertips as an early mover in floating LNG (FLNG), having briefly held an interest in Flex LNG. It will proceed with caution. It has set up a business unit in Tokyo to identify the strongest opportunities. K Line has set its heart on diversifying and is looking for the right investment opportunity – the question is, where and how soon? Last year, the Big Three shipowner parent companies shocked the global shipping industry when they merged their container businesses. Could they do the same with their LNG interests? MOL’s Mr Hashimoto is sceptical: “I honestly don’t think so,” he says. “Ten or 20 years ahead, no one knows what will happen. But the container integration was an emergency that required the carriers to merge to survive in a difficult market. “Today, all Japan’s Big Three are concerned to invest in LNG and want to develop their own portfolios by themselves. And we are happy about that. Merger of our LNG businesses does not seem a good solution for us – at least not today.” LNG

LNG World Shipping | March/April 2017









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Asia LNG Supplement

NEWS | 15

GASTECH PRODUCT LAUNCHES AND NEWS The 2017 exhibition and conference is a showcase for solutions, software and equipment that will help the LNG shipping industry to improve efficiency and to cut its costs. Here are some of the products and services that will feature this year

Samson has developed new mooring equipment to suit FSRUs

Samson launches first mooring line for FSRUs

Moorings manufacturer Samson is to introduce its newest innovation in fibre rope at Gastech, having designed a mooring line to meet the needs of floating storage and regasification units (FSRUs) and other semi-permanent mooring applications. The product aims to offer a superior alternative to wire rope, providing the advantages of high-modulus polyethylene (HMPE) to perform well for long-term quayside mooring requirements. The product is lightweight and offers improved resistance to fatigue caused by tension, bending and abrasion. It enhances workforce safety and requires no relubing.

Samson says: “Utilising Dyneema DM20 fibre provides dimensional stability and high-quality performance over long periods of continuous loading. Its 12-strand construction enables thorough inspection and line cropping to allow for effective longterm maintenance.   “Samson’s proprietary coating technology results in minimised internal and external abrasion and enhanced UV resistance. The rope’s bi-colour stranding allows for easy twist identification. All this results in a more efficient and ultimately more reliable mooring arrangement.” The company provides a full-service offering to its customers: history tracking, monitoring and life modelling. It says that the combination of improved rope

technology and service makes long-term rope behaviour more predictable, offering a direct benefit to FSRUs.

KLAW teams up with Houlder

Marine engineering firms Houlder and KLAW have signed a memorandum of understanding to develop LNG bunker and transfer solutions for the small to midscale LNG markets. The two companies will design hybrid LNG-transfer solutions for ship-to-ship and shore-to-ship operations. The systems feature motion-compensating handling equipment and components to deliver LNG through flexible hoses, creating an alternative to large, rigid, fixed-arm solutions. KLAW parent Signum Technology

KLAW developed an LNG-transfer system for Engie Zeebrugge

LNG World Shipping | March/April 2017

16 | NEWS

and Houlder will work together to supply equipment and to work with buyers to install and integrate their systems, providing onsite assistance and the training of crews. They will present their offering at the product showcase at Gastech. Houlder has designed and engineered services and equipment for marine, oil and gas firms for more than 25 years and has moved more recently into LNG distribution and offshore renewables. Its clients include Shell Trading & Shipping, E.ON, Technip and Siemens. KLAW designs and manufactures LNGtransfer systems for ship-to-ship, ship-toshore and LNG-bunkering systems. These have been used for more than a thousand ship-to-ship transfers. The company is part of the Signum Technology group. KLAW will launch three new solutions at this year’s Gastech. KLAW and Houlder are developing new hybrid hose and loading arm LNG transfer and emergency-release systems that integrate motion-compensation handling equipment with proven components to deliver LNG through flexible hoses. The system is a safe, efficient alternative to rigid and fixed arms. It is also presenting its new, cryogenic quick-connect couplings, now available in diameters of 2-6in for fast, safe connection and disconnection of hose LNG-transfer systems. KLAW is also presenting the first 5,100m³ LNG-transfer system, developed for Engie Zeebrugge, the world’s first purpose-built LNG bunker-supply vessel, owned by Gas4Sea partners NYK, Mitsubishi and Engie. The vessel was delivered to Zeebrugge’s Fluxys terminal in February. The system has a 6in diameter to support the vessel’s 600m³/hr LNG-transfer rate.

InterDam finalises fire and blast tests

InterDam, which supplies fire and blast doors, walls and windows to oil and gas firms, is finalising its tests on Generation V, a new, pre-fabricated fire and blast-resistant panel. The company previously launched a fire-resistant sandwich wall system, Generation IV, as a prefabricated system to fit modular and standardised designs. For Generation V, InterDam realigned the layers of fibres that make up the

LNG World Shipping | March/April 2017

Asia LNG Supplement

To meet new IMO requirements for emission control areas, shipping companies must modify their existing fleets or design suitable new ships. Röchling says two points are important: ships must be modified quickly to cut outage times that lose revenue, and new LNG engines must be both reliable and powerful. That also means that insulation for ships’ LNG fuel tanks must be reliable, Röchling says.

InterDam has subjected Generation V to fire and blast testing

panels’ insulation material and improved the support structure to absorb more energy. It carried out field tests in November, subjecting samples to test explosions. Testing the panels to breaking point revealed that they are gas-tight after a blast pressure of 0.8 bar (80 kPa). It also plans to subject a 0.25 bar (25 kPa) blast-tested sample in a hydrocarbon fire to determine the wall’s post-blast fire resistance. “There are no regulations for this yet, but analysis of offshore accidents indicates a combination of a blast and a fire in over 50 per cent of cases and InterDam is committed to pushing for industry best practices in this area,” the company said.

Röchling develops cryogenic insulation for LNG engines

Germany-based Röchling is promoting Lignostone cryogenic, a laminated, densified wood product that aims to improve cryogenic insulation for LNG and LPG tanks, offering high temperature resistance, from -196°C to 90°C, and mechanical strength. Röchling says Lignostone cryogenic is ideal for insulating LNG fuel tanks on LNG carriers and other carriers. Japan Marine United (JMU) and IHI have used Lignostone for cryogenic insulation in the four 165,000m³ LNG carriers that they are building for longterm charter to Tokyo LNG Tanker. Hull numbers 5070, 5071, 5072 and 5073 will be fitted with Type B cargocontainment systems.

Lignostone cryogenic is a laminated, densified wood product

Gooding joins Cortec as international businessdevelopment director

Scott Gooding has joined Houston, Texas-based Cortec as director of international business development, having previously worked as vicepresident business and product development for Houston-based NOV. He brings more than 30 years’ worth of oil and gas business development experience to the US manufacturer of API valves and manifolds. Cortec produces valves and flow-line equipment for production, drilling and service applications in the global oil and gas industry. The company has two manufacturing divisions: Cortec Fluid Control and Cortec Manifold Systems. Cortec vicepresident marketing and business development Stephen Corte said: “Scott possesses a wealth of industry knowledge and has proved he will be an asset to our team.” LNG

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LNG World Shipping March/April 2017 - Asia Supplement  

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