NGV Transportation Magazine

NGV Transportation

VOL. 29 | JAN - MAR 2017 | USD 30

NGV

TRANSPORTATION MAGAZINE

SPECIAL REPORTS:

SPACE-FITTING PRISMATIC PRESSURE VESSEL FOR FUEL LNG STORAGE

GAS AS A MARINE FUEL

FEATURES:

LNG FOR HEAVY DUTY VEHICLES IN CENTRAL EUROPE:

BREAKING THE CHICKEN-AND-EGG PROBLEM

DESTINATION CLAUSES JAPAN GOT IT ALL MESSED UP -

EVENT CALENDAR

DATES

CITY

EVENT

13 – 14 FEB 2017

MANILA, PHILIPPINES

DECENTRALISED ENERGY & CO-GENERATION FORUM

13 – 15 MAR 2017

JAKARTA, INDONESIA

FSRU & SMALL LNG SHIPPING FORUM

13 – 15 MAR 2017

JAKARTA, INDONESIA

CNG-NGV INDONESIA FORUM

13 – 15 MAR 2017

JAKARTA, INDONESIA

BIOGAS INDONESIA FORUM

APR 2017

PORT OF SPAIN, TRINIDAD

CNG-NGV CARRIBEAN FORUM

18 – 19 APR 2017

TEHRAN, IRAN

IRAN METHANOL TRADE SUMMIT

18 – 19 MAY 2017

KUALA LUMPUR, MALAYSIA

BIOGAS ASIA PACIFIC FORUM

15 – 16 JUN 2017

YANGON, MYANMAR

LNG SUPPLY, TRANSPORT, STORAGE INDOCHINA

06 – 07 JUL 2017

NAIROBI, KENYA

BIOGAS AFRICA FORUM

11 – 12 JUL 2017

JOHANNESBURG, SOUTH AFRICA

CNG-NGV AFRICA FORUM

24 – 25 JUL 2017

HO CHI MINH, VIETNAM

CNG-NGV VIETNAM FORUM

03 – 04 AUG 2017

MANILA, PHILIPPINES

BIOGAS AND WASTE TO ENERGY PHILIPPINES FORUM

13 – 15 SEP 2017

BALI, INDONESIA

LNG TRANSPORT, STORAGE, HANDLING INDONESIA

17 – 18 OCT 2017

BANGKOK, THAILAND

BIOGAS AND WASTE TO ENERGY THAILAND FORUM

10 – 12 OCT 2017

KUALA LUMPUR, MALAYSIA

ASIA PACIFIC ROUNDTABLE ON SUSTAINABLE CONSUMPTION & PRODUCTION

25 – 27 OCT 2017

MANILA PHILIPPINES

LNG SUPPLY, TRANSPORT, STORAGE PHILIPPINES

25 – 27 OCT 2017

KUALA LUMPUR, MALAYSIA

WORLD METHANOL FORUM

22 – 23 NOV 2017

SINGAPORE

HYDROGEN ENERGY STORAGE FORUM

06 – 08 DEC 2017

JAKARTA, INDONESIA

GAS TO POWER

CLEAN ENERGY | SUSTAINABLE ENERGY

NATURAL GAS | LNG | CNG

METHANOL

For more information, please visit: www.alleventsgroup.com | www.cngngv.com | www.icesn.com www.lng-world.com | www.naturalgasglobal.com

ORGANIZED BY:

NGV TRANSPORTATION MAGAZINE

IN CONJUNCTION WITH:

LNG FORUM SERIES

ICESN

EDITOR’S TWO CENTS

Greetings all!

Glad to see you all back again for the new year. The market seems to still be noisy with all sorts of deals and discussions going on coming over from last year. The oversupply issue of LNG still remains a factor and it should be no surprise to us. So, the plan should be this year to realise just exactly what to do in this moment of oversupply and what plans to set into motion in this exciting time in the market.

The market has continued to buzz with activity in this oversupplied market and is filled with more development of new infrastructure and the emergence of new supporting supply vehicles to support this infrastructure all across the globe. No doubt there are some hiccups with certain mega-scale projects but it should not be a huge revelation as the problems with these projects were spotted some time ago and even discussed in our previous issues.

A more pertinent issue that is on the top of everyone’s mind however, is LNG for marine fuel and just what role LNG will play as IMO tightens up their emission standards for seaborne vessels. In light of this, we’ve provided you with a roundup of the facts on just what exactly is going and what are the options that vessel providers have to ensure that they adhere to these new regulations. Accompanying this, there’s an article on some new interesting tech that suggests that the solution for this problem that lies in a new type of pressure technology.

To add to this there’s also an article on destination clauses and why Japan might have the wrong idea about them and also another study on the potential for LNG vehicles in central Europe.

We would like to wish you all the best for the upcoming year ahead and remind you to keep focused on your business in 2017.

The market is continuously changing and we shall see to it that we keep you up-to-date with the latest developments in technology, discussion and ideas in the constantly evolving natural gas landscape.

NGV

TRANSPORTATION MAGAZINE Published by:

NATURAL GAS GLOBAL

Managing Director Vincent Choy vincent@naturalgaslobal.com Chief Editor Rizal Rahman

rizal.rahman@naturalgasglobal.com

Editor Ryan Pasupathy

ryan@naturalgasglobal.com

Business Development Samuel Tan

samuel.tan@naturalgasglobal.com

Marketing Manager Sheryl Chia

sheryl@naturalgasglobal.com

Graphic Designer Puspo Aurum puspo@olifen.co.id

Follow us on our social media platforms to receive the latest natural gas news from around the world! www.facebook.com/NGVTMag www.linkedin.com/company/ NGV-Transportation @NGVTmag

Our Address: Natural Gas Global 52 Foch Road, #02-02 Singapore 209274 PT Olifen Global Indonesia 20th Floor, Wisma KEIAI Jl. Jend. Surdirman Kav 3-4 Central Jakarta - Indonesia

Ryan Pasupathy Editor

All rights reserved. No portion of this publication covered by the copyright herein may be reproduced in any form or means – graphic, electronic, mechanical, photocopying, recording, taping, etc – without the written consent of the publisher. Opinions expressed by contributors and advertisers are not necessarily those of the publisher and editor.

1

Vol.29 Jan - Mar 2017 NGV Transportation

CONTENT

03 NEWS AROUND THE WORLD

EDITOR’S TWO CENTS ANALYSIS OF NATIONAL POLICIES AND ITS IMPACT ON NGV GROWTH IN ARGENTINA

01 39

15

FEATURES: DESTINATION CLAUSES JAPAN GOT IT ALL MESSED UP -

26

SPECIAL REPORTS: SPACE-FITTING PRISMATIC PRESSURE VESSEL FOR FUEL LNG STORAGE

FEATURE:

20

22 NGV Transportation Vol.29 Jan - Mar 2017

LNG FOR HEAVY DUTY VEHICLES IN CENTRAL EUROPE: BREAKING THE CHICKEN-END-EGG PROBLEM

SPECIAL REPORT:

GAS AS A MARINE FUEL 2

NEWS AROUND THE WORLD

EGYPT MOROCCO January 2017: Morocco Picks Financial and Legal Advisers for LNG Import Plan Moroccan state-owned power utility ONEE has picked HSBC Middle East Limited as financial adviser for its plan to boost its imports of LNG. It also chose the law firm Ashurst LLP as legal adviser for the same plan. The HSBC contract is worth $7 million while Ashurst will earn around $2 million.

The entire project which is worth up to $4.6 billion, includes the import of up to 7 billion cubic metres of gas by 2025, the construction of a jetty, terminal, pipelines and gas-fired power plants.

- Reuters

INDIA November 2016: LNG Importers Wanted to Join Hands for Equitable Deals

November 2016: Egypt Delays Third LNG Terminal Until Electricity Needs Determined Egypt will delay plans to rent a third LNG import terminal for one month, until the ministry of electricity determines its LNG needs, an official at state gas buyer EGAS has said.

“We decided to delay holding the tender for one month (until end of November) until an agreement is made with the ministry of electricity over its needs for LNG over the coming period,” said the official.

A third FSRU is expected to arrive at the end of June 2017 to handle a surge in LNG demand from new power plants coming online.

- Egypt Independent

PAPUA NEW GUINEA November 2016: Exxon Expects to Deliver 7.9 Million Tonnes from PNG LNG This Year Oil Minister Dhamendra Pradan has said that, “A number of large Asian LNG buyers including India could benefit by joining hands and thereby bringing in more equitable trade deals.”

While the global gas prices have cooled in line with oil rates in the last two years, Asian countries have been sometimes paid five or six times more for LNG than piped gas consumed in North America, where prices have plunged because of growing availability amid a boom in production from shale deposits.

India wants to turn an oversupply of LNG towards its favour as it seeks to increase its use of LNG in its energy mix to 15 percent from the current 6 percent in an attempt to reduce the dependence on crude oil imports.

- The Economic Times

ExxonMobil expects to deliver 7.9 million tonnes of LNG from Papua New Guinea this year which is 14 percent above its assumed capacity at its PNG LNG plant. PNG LNG’s managing director Andrew Barry has said that, “The benefits of the increased production are wide ranging and include additional revenues for the government of Papua New Guinea, landowners and provincial governments.”

- Reuters

3

Vol.29 Jan - Mar 2017 NGV Transportation

NEWS AROUND THE WORLD

JAMAICA

BANGLADESH

November 2016: Energy Minister Says Acquisition of LNG Significant

January 2017: Petronet Signs Pact to Set Up $950 Million LNG Project

Minister of Science, Energy and Technology, Dr Andrew Wheatley, says the acquisition of LNG as part of the energy option is a significant boost to the country’s diversification efforts and economic endeavours.

“The country is now seeing tremendous accomplishments in our energy endeavours. We have the largest wind and solar installations in the English speaking Caribbean. As energy minister, it is my vision for this sector to have a fit for purpose energy architecture that can be the cornerstone of a production platform for delivering the economic growth required by our people and country,” the minister said.

The Government’s drive to bring cheaper and cleaner energy to the people of Jamaica has been advanced with the arrival of LNG for the JPS power plant in Bogue, St James

India’s largest LNG importer Petronet has signed an agreement to set up a USD 950 million LNG import project in Bangldesh.

Petronet signed a MoU with Petrobangla to set up a 7.5 million tonnes a year project to receive and regasify LNG on Kutubdia Island in Cox’s Bazar and lay a 26-km pipline to connect it to the consumption markets.

“We intend to start marine survey work this month and are targeting 2020 for completion of the project,” Petronet LNG CEO and Managing Director Prabhat Singh said.

- Hindustan Times

- Jamaica Observer

Pakistan November 2016: Japanese Traders Among Those Eyeing Pakistan LNG tender

Pakistan has said that Japan’s biggest trading houses are among more than twenty companies that are eyeing its largest LNG purchase tender on record. Mitsubishi Corp.,

NGV Transportation Vol.29 Jan - Mar 2017

Mitsui & Co. and Marubeni Corp., have expressed interest in the LNG order, which was announced in November 2016.

According

to

4

M.

Adnan

Gilani, CEO at state-owned Pakistan LNG Ltd. The company is seeking bids for 60 cargoes over five years and separately 180 cargoes over 15 years, “Most of the large traders were interested — the reception was much above expectation,” Gilani said in an interview in Tokyo. “It is the largest tender that has ever been floated.”

Pakistan’s shift to LNG highlights the country’s efforts to tackle its energy crisis amid a growing population that faces hours-long blackouts and summer electricity deficits of as much as 5,000 MW. - Hellenic Shipping News

NEWS AROUND THE WORLD

UNITED STATES January 2017: AGDC Has Long and Costly To-Do List as It Takes Over LNG Project

Federal agencies have handed Alaska Gasline Development Corp., (AGDC) the state’s gas corporation, a long to-do list for final preparations of an application to the Federal Energy Regulatory Commission (FERC) to build the Alaska LNG Project. AGDC is in the process

of taking over Alaska LNG which was previously led by ExxonMobil Corp.

Some of the issues raised by the agencies, particularly the U.S. Pipeline and Hazardous Materials Safety Administration, or PHMSA, could require costly design changes in the project.

State agencies are also requesting more research on permafrost thawing and how that will affect integrity of the buried pipeline.

- Alaska Dispatch News

CHINA December 2016: CTG Switching Throws Lifeline to China LNG

December 2016: China’s LNG Buying Spree to Set Import Record in December

Chinese factories switching from coal to gas have emerged as a key driver of LNG demand in the country throwing LNG producers a lifeline in 2016 which has proved to be a challenging year for them.

Utilisation rates for LNG plants averaged 37.4% between November 2015 and November 2016, the lowest 12-month usage rate recorded, according to commodities data provider SCI International.

The figure would have been worse without coalto-gas switching, according to Shanghai LNG New Energy’s General Manager Wang Ye.

China’s state run oil and gas majors set import record levels of LNG in December 2016. Trade flows data on Reuters showed 7.33 million cubic metres of LNG, equivalent to 3.33 million tonnes were headed to China for delivery in December 2016. This included 10 cargoes from Qatar, an unusually high number even for the world’s largest LNG exporter.

The boost in shipments from the Middle East came as the pace from Australia slowed, during the two-week outage at Chevron Corp’s giant Gorgon export facility, likely to the benefit of Qatar.

- Interfax Global Energy

- Hellenic Shipping News

5

Vol.29 Jan - Mar 2017 NGV Transportation

NEWS AROUND THE WORLD

FINLAND

BAHRAIN

January 2017: Megastar of Tallink Receives First LNG Bunkering at Skangas Pori LNG Terminal

January 2017: Bahrain LNG to Start Construction of New Terminal

Tallink’s new LNG powered fast ferry M/S Megastar was bunkered with LNG for the first time at the newly opened Skangas Pori LNG terminal in Finalnd on January 4. Her maiden voyage was scheduled to take place from Tallinn to Helsinki in late January.

The ferry is fuelled with LNG and is compliant with the new, stricter emission regulations of Emission Control Areas (ECAs) such as the Baltic Sea. The hull with unequalled efficiency was designed exclusively for Megastar by Meyer Turku Shipyard.

M/S Megastar is 212 meters long and can accommodate 2,800 passengers. The fast ferry will operate between Helsinki and Tallinn at a service speed of 27 knots. The two stainless steel LNG tanks are located below deck 3 and have a total volume of 600 m3. The construction of the fast ferry began in summer 2015 and the launch took place in July 2016.

Bahrain LNG, developer and owner of the kingdom’s first receiving and regasification terminal for LNG, started the construction work on its new terminal in January 2017 and is to complete it by 2019, according to a posting on its website.

On completion, the terminal will have a capacity of 800 million standard cubic ft per day and be operated under a 20-year agreement. It will comprise a floating storage unit (FSU), an offshore LNG receiving jetty and breakwater, an adjacent regasification platform, subsea gas pipelines from the platform to shore, an onshore gas receiving facility, and an onshore nitrogen production facility.

The project was awarded to the Teekay LNGGIC-Samsung consortium by the National Oil & Gas Authority (NOGA) of Bahrain following an international competitive tendering process.

- ME Construction News

- Port News

BELGIUM Aug 2016: Government Eyes 200-MW LNG Plant for Power Reserve of LNG as bunker fuel.

“LNG is becoming increasingly important as a marine fuel because LNG has a much cleaner combustion than heavy fuel oil and stringent sulfur emission regulations are in force in the English Channel, the North Sea and the Baltic Sea,” said Fluxys.

Fluxys also said that, “With this in mind, shipping company UECC recently began operating its first LNG-powered car carrier in Zeebrugge, with a second to follow soon. The UECC ships will be refuelled with LNG by a purpose-built LNG bunkering vessel which will have Zeebrugge as its home port and in which parent company Fluxys is a partner along with ENGIE, Mitsubishi Corporation and NYK Line.”

Belgium-based Fluxys, alongside an announcement that the LNG-powered Coral Energy became the first LNG carrier to berth at the second jetty at Zeebrugge’s LNG terminal, suggested that the terminal’s newest jetty would support the growth

NGV Transportation Vol.29 Jan - Mar 2017

- Philstar.com

6

NEWS AROUND THE WORLD

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Vol.29 Jan - Mar 2017 NGV Transportation

NEWS AROUND THE WORLD

CANADA January 2017: Christy Clark Visits Remote First Nation Divided Over Pacific NorthWest LNG

B.C. Premier Christy Clark has travelled to Lax Kw’alaams for the first time, visiting the remote aboriginal community that is deeply divided over a controversial liquefied natural gas project.

Pacific NorthWest LNG is expected to make its final investment decision this summer

about whether to build an $11.4-billion export terminal on Lelu Island in the Port of Prince Rupert – after this May’s B.C. election.

She also said economic benefits could be on the horizon.

She announced provincial funding for finishing two

residential ventures, notably $2.6-million for a 10-unit building to house families and $2.1-million for a complex with eight rooms for seniors. Construction is slated for completion in 2018.

- Globe and Mail

INDONESIA January 2017: Launch of Jayanti Baruna: World’s First CNG Carrier

January 2017: Masela Spat Delays Indonesian Mega-Project

On January 25th, the world’s first Compressed Natural Gas carrier, the Jayanti Baruna, was launched.

The ship is expected to transport natural gas from Indonesian fields in East Java to communities on the island of Lombok, benefiting relatively remote communities that are not economically feasible to supply by pipeline. The CNG carrier is classed by ABS using the Guide for Vessels Intended to Carry Compressed Natural Gases in Bulk.

Development of the gas-rich Masela Block off Indonesia remains stalled, despite a senior Indonesian minister telling the press that a deal had been made with Inpex, the block’s operator.

The government and the Japanese company are understood to be negotiating mutually acceptable contract terms. Sources close to the project told Interfax Natural Gas Daily that Inpex and Shell, which are developing Masela as a joint venture, want approval for a 9.5 mtpa LNG plant – larger than Inpex’s 8.9 mtpa Ichthys project in Australia, which cost $34 billion.

- Hellenic Shipping News

- Interfax Energy

9

Vol.29 Jan - Mar 2017 NGV Transportation

NEWS AROUND THE WORLD

PHILIPPINES January 2017: Quezon to Host Offshore Natural Gas Hub

Proving its apparent seriousness in providing clean alternative energy, the Energy World Corporation (EWC) showed to the media its own LNG carrier ship - Ocean Quest, a tanker dedicated to EWC’s LNG hub terminal, a first in the Philippines which is located in Barangay Ibabang Polo in Quezon.

Stewart Elliot, managing director and CEO of EWC, said the tanker to be based in this town is capable of storing up to 128,000 cubic meters of LNG, making it a floating storage with regasification and processing equipment on-board required to provide re-gasified LNG directly to the power station.

The ship, sailing under the

Norwegian flag and coming from Malta before heading to the Philippines, is staying for a time in Pagbilao and will set sail for Singapore where it will be on standby when the LNG station here becomes operational.

- Manila Times

TANZANIA

SINGAPORE

January 2017: Tanzania Hopes for LNG Plant Agreement with Oil Majors by 2018

January 2017: Singapore Exchange to Open LNG Index

Tanzania hopes to reach an agreement with international oil companies in 2018 paving the way for the construction of a liquefied natural gas (LNG) plant, part of a bigger plan for a new export terminal.

The planned new infrastructure will enable Tanzania to export some of the huge offshore gas reserves discovered in recent years in a region that has turned into a hydrocarbon exploration hotspot.

BG Group - recently acquired by Shell -, together with Statoil, Exxon Mobil and Ophir Energy, plan to build a $30 billion onshore LNG export terminal in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC).

But a final investment decision has been held up by government delays in finalising issues relating to the acquisition of land at the site and establishing a legal framework for the nascent hydrocarbon industry.

The Singapore Exchange is set to start up an index that will track the price of LNG in the Middle East and Indian markets, the latest move by exchanges looking to establish a benchmark for this rapidly growing source of energy.

The exchange has already launched a spot price index for Asian LNG, known as Singapore SLInG. It has also signed a memorandum of understanding with Japan’s Tokyo Commodity Exchange (TOCOM) to explore potential cooperation on derivative products.

The latest move is in collaboration with brokerage Tullett Prebon, for LNG delivered to ports in Dubai, Kuwait and India.

- Market Watch

- Daily Mail Online NGV Transportation Vol.29 Jan - Mar 2017

10

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FEATURE ARTICLE

LNG FOR HEAVY DUTY VEHICLES IN CENTRAL EUROPE: BREAKING THE CHICKEN-AND-EGG PROBLEM

L

iquefied natural gas (LNG) has become a very promising alternative fuel technology for long-distance transports in the last years as it causes 20% less CO2, 80-90% less NOx and almost zero PM and SOx emissions compared to diesel.

Many fleet operators in North America, China and parts of Europe are already successfully demonstrating the viability of the technology. However, large areas of Central Europe are still lacking the infrastructure which would be necessary to stimulate the widespread application of LNG in this region. Only recently, the very first LNG refueling station has been opened in Germany in June 2016. In countries like Austria, the Czech Republic, Slovakia or Hungary there is still no infrastructure available.

The situation can be characterized as a chicken-andegg problem where the necessary infrastructure is not provided because there is no demand for LNG signaled, but on the other

hand potential users can not indicate their demand since the infrastructure for using LNG is missing. Consequently, there are two approaches to break this chicken-and-egg problem: first to establish the reliable supply of LNG in Central Europe so as to encourage pioneer users to introduce LNG as an alternative fuel for their fleet. And second to prove interest and willingness

15

of potential customers to test LNG technology in order to demonstrate the feasibility of constructing LNG infrastructure in Central Europe. According to this, the following article will give an overview of possibilities how to provide Central Europe with LNG and thereafter describe potential users’ attitude towards introducing LNG in Central Europe.

Vol.29 Jan - Mar 2017 NGV Transportation

FEATURE ARTICLE been emphasized recently.

These projects comprise of small liquefaction plants, whereby a capacity of less than 0.68 Mtoe per year is considered to be small scale [2]. Furthermore, LNG gets transshipped from large tankers to smaller vessels and trucks, which is also called breaking bulk. The storage of LNG as well proceeds insmaller units which are called satellite stations. The small scale market is quite new and still in a stage of development [3].

Supply of landlocked countries as a barrier One reason why Central Europe is lagging behind the current small scale LNG developments is that LNG supply is quite complex for landlocked countries. Most of the coastal countries have easy access to LNG due to the presence of large LNG import terminals.

Consequently, these are also the countries where a number of LNG refueling stations are already in operation, e.g. in the United Kingdom, Spain, Sweden and the Netherlands.

At the moment, there are about 50 LNG fueling stations in operation in Europe as well as about 35 L-CNG stations (socalled liquefied-to-compressednatural-gas stations which use LNG to produce CNG) [1].

In case of using LNG as a fuel for heavy duty vehicles, it will not be regasified and fed into the local pipelines after being shipped to the import terminals, but it will rather be kept in its liquid state to distribute

it to the filling stations in the hinterland. This is practical for the aforementioned countries where there are already LNG stations since the distances to the import terminals are not too long. Nevertheless, the situation is quite challenging for the landlocked countries in Central Europe like Austria. The nearest LNG terminals for Austria are the Gate terminal in Rotterdam/ the Netherlands and the Fluxys terminal in Zeebrugge/Belgium, but the distance to both terminals is about 1,000 km from central Austria.

A development which facilitates solving this issue is the trend towards small scale applications. Previously, only the large scale section of the LNG value chain has been focused on which includes large liquefying facilities in export countries and the transport of LNG in huge ocean-going tankers and subsequently the regasification of LNG at the place of destination.

In contrast to this, so called small scale LNG projects have

Ways to provide Central Europe with LNG Landlocked countries can benefit from this advancement of small scale projects because the distributed LNG volumes become smaller which makes it practical to distribute limited amounts of LNG to remote customers like fleet owners in Austria. For example, a truck can be chartered to carry several tons of LNG to a refueling station in a landlocked area. This is especially important because it can be assumed that in these new markets for LNG the initial demand will be rather low and the required amounts of LNG will be smaller at the beginning.

It has to be mentioned that there is also the possibility to produce a countries’ own LNG by liquefying pipeline gas, howeverthis requires a very high investment and the liquefier is also the most complicated part of the supply chain. For this reason it will be a better idea for newcomers in the LNG business to arrange the transport of LNG from an import terminal to the hinterland in order to establish oneself in LNG application.

[1] NGVA Europe (2016): Directory of NG filling stations. Available online: https://www.ngva.eu/directory-of-ng-fillingstations.

[2] Maynitskiy, Igor (2012): The Evolution of Small-Scale LNG Markets. The View from Gazprom Export. Small Scale LNG Forum. Gazprom. Fleming Europe. Istanbul, 2012.

[3] PwC (2013): The economic impact of small scale LNG. Study.

[4] Gas Infrastructure Europe (2015): Small scale LNG map. Version May 2015.

[5] Iveco (2016): Iveco launches the New Stralis NP: a revolutionary gas truck for sustainable long-haul transport. Press release, 6/16/2016.

NGV Transportation Vol.29 Jan - Mar 2017

16

FEATURE ARTICLE LNG from the import terminals will most likely come from the largest countries exporting LNG which are are Qatar, Malaysia and Australia. For Europe, Algeria and Nigeria are also very important supplying countries.

Basically there are three possible means of transport to distribute LNG to landlocked regions, namely by truck, by train or by inland waterway vessel.

Truck transports are environmentally and economically feasible only for limited distances. Anyway, It is currently the easiest and most viable possibility to transport LNG. Almost any transport service provider offers shipping LNG by truck. Road transport is very convenient because the trucks can be directly loaded at the respective LNG terminal aand be driven straight away to their destination. Either tank trucks or specific ISO containers with tractor units can be used for this. The service of truck loading is possible at many European LNG terminals.

Secondly it is, it is also possible to transport LNG by rail. In Japan, this economic and ecological mode of transport regarding LNG is already very common, much more than in Europe. For large volumes, this is certainly the better solution compared to trucks.

However, the supply chain becomes more complex in this case, because there is no LNG terminal in Europe offering rail loading at present [4]. For this reason, LNG has to be transported by truck first and then reloaded to the train. Of course, the extra transshipment to allow transportation by rail is inconvenient and costly.

Hence, rail loading will only pay off if a block train and not just single wagons are used. Like with truck loading, either tank wagons or ISO containers could be theoretically employed, an

appropriate rail tank car has recently been developed by VTG and Chart Ferox.

Finally, there is also the option to transport LNG on inland waterways. This is certainly the most sustainable way of moving LNG. The RhineMain-Danube-axis connects the landlocked countries of Central Europe with the North Sea on one hand and the Black Sea on the other hand. For the purpose of shipping LNG on vessels, the LNG terminals need to offer reloading or transshipment.

Transshipment is the direct transfer of LNG from one vessel into another. A lot of terminals currently offer or consider reloading LNG into vessels but only two terminals, Montoir de Bretagne (France) and Cartagena (Spain), offer transshipment presently [4]. Unfortunately, transport service providers are actually restricted in offering this solution because of legal issues. The European Agreement concerning the International Carriage of Dangerous Goods

by Inland Waterways (ADN) forbids the transport of LNG via inland waterway tankers at this time. Furthermore, European law prohibits LNG as a fuel for inland vessels at present because it has a flashpoint lower than 55 °C (the flashpoint of LNG is just about -187 °C). Nevertheless, there are some barges operating successfully with a certification of exemption between Rotterdam and Basel. Moreover, several freight forwarders announced that they would offer inland waterway transports in the future when the regulatory issues would be clarified.

Interest in LNG present but depending on profitability There are already several studies which examined the demand for LNG in various regions of Europe. One of them is the LNG Masterplan, a project

17

running from 2013-2015 which delivered a set of feasibility studies, technical concepts and pilot deployments of terminals and vessels. Part of this initiative was also to assess the market potentials of LNG as a fuel for inland vessels and road vehicles and as an alternative energy source for industries in the Danube region. Potential LNG customers were identified and interviewed regarding their requirements. The results showed that above all LNG demand is heavily dependent on the price gap to conventional fuels and to overall profitability of using the technology. Fleet operators are indeed openminded and interested in trying LNG but only if the investments pay off on the whole. At present, investment costs for LNG technology are significantly more expensive than diesel for example. This higher capital expenditures need to amortize to make LNG an applicable option.

Since the profit margins in the logistics sector are very narrow, fleet operators have to calculate precisely and decide thoroughly if an investment should be made. It can be concluded that subsidies will be necessary to ensure certainty of investment for the first pioneer customers.

After some time, when the production volumes of LNG trucks etc. are probably rising, this problem will not be as severe anymore.

The reliability of LNG supply is another factor influencing the demand for LNG significantly.

Some fleet owners would not use LNG fueled vehicles because of the insufficient network of filling stations. Although the number of stations in Europe is constantly rising, logistics companies have to plan their route carefully when they need to ensure LNG provision for their trucks. The range of LNG fueled trucks becomes

Vol.29 Jan - Mar 2017 NGV Transportation

quite competitive compared to their diesel equivalents, so that longer distances can be covered. The Spanish forwarder Transordizia was the first one to navigate an LNG truck straight across Europe from Madrid to Hamburg. They used the new Iveco Stralis NP (‘Natural Power’) which was released in 2016 and offers a range of 1,500

km [5]. This leads us to another relevant prerequisite for fleet owners introducing LNG: The technology must be available and mature. Trucking companies want to use well-engineered and field-tested equipment. Some of them fear risks related to boiloff gas when storing LNG, or other safety hazards. The past few years however yielded an

SARAH PFOSER Sarah Pfoser obtained her Master’s degree in Management and Applied Economics at the Johannes Kepler University in Linz, Austria.

Since 2013, she is a research associate at the University of Applied Sciences in Upper Austria. She has been working on the topic of Liquefied Natural Gas for more than three years and has already conducted several market studies. She wants to promote the implementation of LNG in Austria with her research. sarah.pfoser@fh-steyr.at

LAURA SIMMER Laura Simmer obtained her M.Sc. degree in Environment and Bio-Resources Management at the University of Natural Resources and Life Science in Vienna, Austria. She is currently a research associate at the University of Applied Sciences in Upper Austria. Her research interest focuses on sustainable transport systems, in particular on LNG and the Physical Internet paradigm. laura.simmer@fh-steyr.at

OLIVER SCHAUER Oliver Schauer obtained his Diploma and his Doctorate in Law at the Faculty of Law, Johannes Kepler University, Linz. In 2005 he finished his Executive Master of Business Administration (MBA) at LIMAK Johannes Kepler University Business School, Linz. He has been working as Lecturer (Secondary Profession) at the Johannes Kepler University, Linz and at the University of Applied Sciences Upper Austria. He has also been Head of Personnel, Legal & Risk Management Department and Member of the Executive Management at Schachinger Holding Transport & Logistik GmbH. Since 2012 he is Professor in Transport Logistics and Mobility at the University of Applied Sciences Upper Austria. oliver.schauer@fh-steyr.at

increasing number of successful pilot applications demonstrating the viability of the technology.

Public engagement crucial for comprehensive implementation As discussed above, the economic and political framework is decisive for the introduction of LNG. A rise in diesel price or tax benefits for users of LNG can facilitate the use of this alternative fuel. Also other privileges like access to restricted areas of town centers could be incentives to switch to LNG. There are already countries where these kind of mechanisms work (e.g. the Netherlands or China).

In the transport fuel market interest for LNG is generally good but missing infrastructure and high supply chain costs are crucial obstacles for the current start-up phase especially in the landlocked countries of Central Europe. In many cases the shippers are the ones driving innovation, for example large corporations like Unilever or IKEA focus closely on green logistics and push their trucking companies to switch to LNG. A stronger engagement of the public authorities comparable to north-west Europe is needed to support these initiatives and create favorable framework conditions to tap the potentials of the alternative fuel LNG. This way, the chicken-and-eggproblem could be solved in the near future.

Acknowledgement: This work has been partially funded by the Austrian Federal Ministry for Transport, Innovation and Technology (bmvit) in the “Mobilitaet der Zukunft” programme under grant number 850299 (Study ‘LiquID’).

NTM

By Sarah Pfoser, Laura Simmer, Oliver Schauer

IV Annual Congress and Exhibition

15–17 March, Moscow Organised by:

Among speakers 2017:

Kirill Molodtsov, Deputy Minister of Energy of Russia

Evgeniy Kot, General Director, Yamal LNG

Sergey Gustov, General Director, Gazprom LNG Saint Petersburg

Mark Jetway, CFO, Deputy Chairman of the Board and Member of Board of Directors, Novatek

Sergey Solovyov, General Director, Arctic LNG-2

David Gaidt, General Director, Gazprom transgaz Yekaterinburg

• 50 project presentations by decision makers from the leading companies, such as Yamal LNG, Novatek, Gazprom, Shell, ExxonMobil, Gazprom Export, Danube LNG, Gazprom Gazenergoset, Gazprom gas motor fuel, Gazprom Transgaz Ekaterniburg and many others • 40 delegates from OJSC “Gazprom” and its subsidiaries (Gazprom Project Design, Gazprom Promgaz, Gazprom LNG St Petersburg, VNIPIgazdobycha, etc.)

www.lngrussiacongress.com

• 15 presentations on LNG technologies by the industry leaders: Technip, KBR, Siemens, GTT, Red Box Group and others

+44 207 394 30 90

• Large-scale LNG projects delegations – Yamal LNG, Pechora LNG, Gazprom LNG St Petersburg, Arctic LNG 2, Gazprom LNG Vladivostok • Regional gas supply small-scale projects presentations – the Zabaikalye Territory, Perm Krai and the Saratov Region

Partners and Sponsors:

events@vostockcapital.com +7 (499) 505 1 505

Senior Vice President (Gas & Power) CAMAC International Corporation

Fisoye Delano

Commander, Detachment Chief US Coast Guard Liquefied Gas Carrier National Center of Expertise

Jason Smith

Chairman and CEO NextDecade

Kathleen Eisbrenner

Wim Groenendijk President Gas LNG Europe

Vice President, LNG Business JERA Energy America

Masato Otaki

Mohan Sharma

Aziz Bamik

General Manager GTT

Quality Manager - Major Capital Project Chevron

Senior Vice President - Global LNG and FLNG WorleyParsons Group

Paul Sullivan

Among the Speakers

Director, Strategy & Analysis Cheniere

Oliver Tuckerman

UNITED STATES

LNG SUMMIT

Joint Integrity Leader-Americas Hydratight

Neil A. Ferguson

Account Director Gas Natural Fenosa

Mariana Ortiz

Senior Vice President of Operations Excelerate Energy

Captain Mark Lane

HOUSTON, TEXAS 2017

FEBRUARY 23-24

P51500NGV

SPECIAL REPORT

GAS

AS A

MARINE FUEL

T

here has been rising concern over the effects of human activities on our environment and one particular point of interest as the years go by has been the impact on our maritime activities. As such, the move towards using natural gas as a means for seafaring vessels has been reinforced by national and international regulation which has been championed by the IMO through its establishment of ECAs (Emission Control Areas).

Natural gas seems to be the one fuel that fits in to comply with the increasingly strict regulations coming out from the IMO. The IMO has implemented NOx, SOx and carbon limits at various ECAs throughout shipping routes.

NGV Transportation Vol.29 Jan - Mar 2017

Natural gas looks like it could be the best bet to comply with these rules in the most cost effective manner.

As natural gas gains headway as the new fuel for the seas and becomes the prime energy source for ships, the maritime industry could proceed very quickly to significantly reduce our carbon footprint here on the planet.

New Regulations IMO controls and regulates many aspects of the global shipping industry through MARPOL. SOx, NOx, and PM are targeted to be reduced globally by 2025 and the regulatory body has said that the actual timeline depends on how quickly global refining capacity becomes. The current aim is to reduce SOx content in fuels from

22

3.5% to 0.5% as well as limiting NOx emissions. NOx emissions however will depend on the size and type of the vessel engine and not be the same across the board. The limits in place are based on their guidelines which were implemented in 2011.

Under the new global cap, ships must use fuel oil on board with a sulphur content of no more than 0.50% m/m, against the current limit of 3.50%, which has been in effect since 1 January 2012. The interpretation of “fuel oil used on board� includes use in main and auxiliary engines and boilers. Exemptions have been provided for situations involving the safety of the ship or saving life at sea, or if a ship or its equipment is damaged.

Emission Control Areas Emission control areas are areas

SPECIAL REPORT in which emission limits for SOx and NOx have been set by the IMO. The aim is to reduce the impact of emissions on the environment. ECA’s require a minimum Sulphur content for each ship to be 0.1% by mass. NOx are set differently depending on the engine maximum operating speed and range from 3.4g/kWh - 1.96g/kWh. There are various areas which have been deemed ECAs. The map below shows the current ECAs in effect.

The IMO has made each country the regulator of the ECAs that fall within its jurisdiction and that they must enforce the law through national procedures. The penalties vary depending on the regulator and range from large fines, prison sentences, and even to vessels not being allowed to leave the port. The ECA regulations do not however, dictate how exactly these new emissions standards are achieved, so there are options for vessel operators to choose from.

Emission Compliance Options There are a few different options to meet the emission control requirements set out in these ECAs by the IMO. The first being using MGO, MDO, ULSHFO which are variants of typically used fuels that can be fed into current ship engine setups that have traditionally run on HFO. Other fuel options exist besides natural gas – the most prominent one being hydrogen. Hydrogen is the long-term fuel of the future and there have been significant amounts of research put into it for propulsion mechanisms of seafaring vessels. Methanol is another option that has also been gaining some popularity in more recent times as it is widely available predominantly as feedstock for the manufacturing of petrochemical products.

One problem with methanol however, is that it is extremely toxic and it mixes easily with water. The upside here is that methanol is very much cheaper than regular fuels.

Besides use of alternative fuels, there is scrubbing. Ships that are using HFO may treat their exhaust gases to reduce SOx and NOx emissions to meet the new standards. Scrubbers can be fit into exhaust systems for this to be done. The problem here is that there is a significant cost of installing these systems and that there are space requirements and weight of newly installed equipment that needs to be considered. Not all ships have the room available for this without extensive redesign of the space. Scrubbers are also only able to remove SOx. NOx removal will require other equipment to be installed which adds more on to the cost of installing this technology.

There are various issues that are being contended now with most of the alternative options for complying with the updated IMO requirements in ECAs. Out of all of them LNG seems to be the most favorable option. Far from being a new and untested technology, LNG engines have superior trial and testing over

23

Hydrogen fuel cells and have also seen the largest growth in numbers of seafaring vessels in the past 2 years. This trend has been consistent across the globe. Initial forecasts have put numbers at 1000 LNG fueled ships by 2020 and 3000 by 2030.

Rise in LNG Bunkering Numerous countries across the globe have seen that LNG can be made available through bunkering along LNG road tanker infrastructure. Countries such as China, Denmark, US and Norway have developed small bunkering terminals that primarily service dedicated vessel fleets consisting mainly of ferries and offshore support vessels [1].

At the end of 2015, LNG bunkering had taken place in 35 separate locations worldwide.

Most of these were in Europe including Belgium, Denmark, Finland, Netherlands, Spain, Sweden, Turkey and the UK (25 Sites), with other countries such as Argentina, Canada, China, India, japan, South Korea and the USA (10 sites) establishing their own facilities [1]. These ports can offer LNG to vessels that are compatible with LNG loading infrastructure. The EU have also set a policy that deems each

Vol.29 Jan - Mar 2017 NGV Transportation

SPECIAL REPORT

member state have at least one LNG bunkering port. Currently there are 3 bunkering facilities that are under construction in Finland, France and Sweden with another 30 projects that are under consideration [1].

There are also several projects in the US that are underway, with most of these being in the Gulf of Mexico.

South Korea and China are also offering such facilities at some of their ports with many

other countries in Asia such as Singapore, Japan, Oman, Sri Lanka and the UAE who are considering or already have established small-scale LNG bunkering facilities [1].

Safety for Gas as A Marine Fuel To help facilitate this move towards LNG for use as a Marine Fuel, SGMF (Safety for Gas as a Marine Fuel) been established as an organization that will be

able to assist and establish a framework for companies to turn to. The society has said that its end goal is to develop and produce definitive guidelines so that the process of using gas as a marine fuel can be undertaken safely all over the globe. It is felt that in this way, the entire gas value supply chain will be able to realize the myriad of benefits of its use on the sea. The society is the definitive information resource for the industry and is a membership based NGO with representation from all sectors and localities. Through its members, the society facilitates the development and production of definitive guidelines so that the process of using gas as a marine fuel can be undertaken safely, consistently and sustainably worldwide. The society has various guidelines publications that are available for purchase on their website at www.sgmf.info.

[1] http://www.sgmf.info/assets/docs/ sgmf-guide.pdf

NTM

NGV Transportation Vol.29 Jan - Mar 2017

24

By Ryan Pasupathy

FEATURE ARTICLE

DESTINATION CLAUSES JAPAN GOT IT ALL MESSED UP

A

nyone who has touched and follows the the current flurry of activity in the Asian LNG marketplace must be startled. The casual LNG observer might have the impression that it’s just some contractual clauses that are at the heart of the problem and that their modification - or even better their removal solves all ills of the world. That’s an almost fraudulent misrepresentation of how things really stand - and those who entertain it either don’t have a clue of the inner workings of LNG and even energy markets, or they are vicious fraudsters.

NGV Transportation Vol.29 Jan - Mar 2017

Let’s pull one thing straight first: Japan currently conducts an investigation into destination clauses. Did anyone expect such an investigation 3 years ago?

Certainly not as Japan wanted all LNG they could possibly lay their hands on in their terminals. The world was still in undersupply.

But now we are in oversupply and those destination clauses that had assured them of their supply when they needed it suddenly become an economic burden.

Have those Japanese negotiators not known that whatever constitutes a contractual advantage may just as easily turn into a contractual

26

liability? It always only depends on the state of the market. Plenty of LNG and you want to be able to fend some of the contracted LNG off into the wider world.

Scarcity of LNG and you want to be sure you can force the supplier to come to your place and not some place that pays better than you are willing to.

This story of looking into Destination Clauses right now smacks a lot of Japan wanting to have its sandwich and eat it at the same time. You might say fair enough. In the recent past, sellers were outrageous in their behavior and their demands too.

Still, that does not make Japan a moral authority in LNG now.

However, their urge to game

FEATURE ARTICLE the market better is at least commercially understandable.

Most Japanese buyers had over-contracted on long-term LNG for the years up to 2014 as there was a feeling that there will never be quite enough of the stuff so it’s better to get what you can lay your hands on.

They fixed themselves quite an expensive sandwich in the process. While LNG prices globally were on the extremely high side, this did not matter much. When everyone is in the same boat, one does bite the bullet and eat humble pie. But now that the world is basking in cheaper (not really cheap) energy, those same utilities that binged on expensive longterm LNG - now get their butts kicked.

And yes, destination clauses have become some sort of an oddity since the EU has eradicated them from contracts bringing LNG (and of course pipeline gas) into the common market. Is the stance of Japan towards Destination Clauses comparable with what the EU did 10 years ago?

In the EU, it was the consequence of the general liberalization of the internal EU gas market which was - at that time - well underway for many years and the removal of Destination Clauses was only one aspect of this general drive.

Besides, the world at the time was on the cusp of a seller’s market so it was not market pressure that dictated those moves but rather a general desire to end restrictive practices. They wanted to force the old boys to break up their cozy structures and those old players were not uniformly happy with those liberalizing tendencies at the time.

In Japan, there is no generalized market to speak of and it’s very strange that this investigation happens just at

the moment when Japanese utilities are buckling under the weight of the old contracts. And sellers cry foul because they fear for their Project Financing arrangements that have come under assault with lower prices.

Pushing this a little further one might be justified in thinking that sellers want to ensure every single drop of LNG contracted to Japan actually goes there so the utilities ease their coal binge a little and hence would not diminish the LNG market in the process.

But I digress.

How could we help hardpressed Japanese utilities without breaking the bank then?

Most term LNG going to Japan is Delivered Ex Ship (DES) which means that the seller controls the transport link and hence passes ownership of the LNG at the flange of the receiving terminal.

In such a case, the Destination Clauses don’t matter that much - one must have the contractual right to order the vessel to divert away which is hard if you don’t

27

own vessel or title of the LNG. Strictly speaking, it’s the sellers LNG until terminal flange and Take or Pay (ToP) ensures that you have to take it if he shows up at your terminal at the agreed slot. He must show up and you must take it.

Of course, there is a problem if the buyer cannot take it as tanks are full. He would have to pay for the cargo regardless. The seller is then stuck with a vessel that he cannot unload but which he needs empty for the next cargo. Perfect stalemate then.

What the buyer really needs is less or no ToP which the seller can impossibly accept as this breaks his Project Financing which rests on the assumption that the buyer will always pay the agreed price - completely.

Opening this is a can of worms.

What is sorely needed is cooperation between the seller and the buyer. And this is what this drive for the removal of Destination Clauses is really about. Japanese utilities want to be able to force sellers to

Vol.29 Jan - Mar 2017 NGV Transportation

FEATURE ARTICLE redirect their vessels to other destinations if the buyer tells them so.

Many of them have established trading divisions in order to sell the excess LNG off into other markets, sometimes as far away as Europe. This activity is in itself a huge drain of resources to them. Right now, diverting cargos away from Japan involves landing them there first, having them unloaded in a Japanese terminal, having them reloaded into a new ship in order to comply with the Destination Clause and then having the new ship go wherever it must go.

This is obviously very expensive plus it puts a huge strain in their planning departments as those Japanese terminals are not built for this kind of thing.

Having the (theoretical) possibility to divert the cargo while it’s on the way to Japan or even better, to remarket it before it is even loaded at the producers terminal would make things a terrible lot easier and cheaper.

Destination Clauses prevent that and the only effective and safe (for the buyers) way to deal with that is if the Japanese government declares them

unlawful. A bit like the EU did many years ago.

The utility buyers cannot break the news on this to their suppliers without problems they must save face. It’s much easier if they are able to pretend that it’s not them but the public authorities that want this and they are merely complying with what the regulator, government or whatever other authority asks them to. This little stratagem allows the utilities to tell their suppliers that this is some sort of Force Majeure that they must comply with so please let’s take out the Destination Clause. It lets them save face while saving a buck. And it also lets the sellers save face while they wrestle with their lenders.

This is - of course - just a theory of mine as nobody in Japan will ever admit this but it makes a hell of a lot of sense and I would do it would I be in their place.

Besides, to the sellers it should not matter much to take the Destination Clauses out. As long as the buyers are happy to pay the pre-agreed price formula it should not matter to them where the cargo goes.

The times when suppliers could

RUDOLF HUBER

Rudolf is an entrepreneur and consultant active in the “methane based fuels and energy” industry. He is the founder of countless initiatives all with the aim to promote a methane based economy and affordable environmental protection.

He is a professional business developer and negotiator who is involved in all aspects of the LNG business. He is also very actively promoting green technologies that work well with methane based technologies.

Rudolf has helped secure first Regasification capacity for his former employer EconGas at the GATE terminal in 2007 and holds a Masters degree in Commercial and Taxation law from the Jean Monnet faculty in Paris. He also runs a number of blogs, among them www.lng.guru and www.lng.jetzt.

manage the world market are over but some suppliers have spot marketing arms that whey fear will be outcompeted by those Japanese utilities. Those utilities are willing to undercut spot prices just in order to get rid of the cargo which is of course toxic to spot sellers anywhere.

Besides, Japan is currently rejigging its power production portfolio away from LNG and oil towards more coal which means that LNG use is going down.

Breaking the Destination Clause would help them a lot to drive this change.

Suppliers are in oversupply pains anyhow so they fear even more LNG on the world market from a Japan that uses less of it. Japan keeps the pressure on prices intact by their actions which is good for them as a buyer.

Yes, I think that this time it’s serious but I also think that Japan uses this to apply pressure on suppliers not only to break the Destination Clause but also to lower price levels (again, that can never be said in the open by them) and this is much harder to acquiesce to by sellers as it threatens the fixed on the European sink as it will provide balance to the market.

And considering how jagged the LNG marketplace is going to be for the next decade or so, balance providers will be priceless.

What are we learning from all this? Despite all the banter, efforts, hype and strongarming by other wannabe LNG hubs, it’s not the smart contracts that make a hub but rather the physical ability to swallow LNG and spew it back into the market that really whips the cream. And none of the

NTM

NGV Transportation Vol.29 Jan - Mar 2017

28

By Rudolf Huber

SPECIAL REPORT

SPACE-FITTING PRISMATIC PRESSURE VESSEL for Fuel LNG Storage Approaches to marine environmental regulations At its 70th session in London in October 2016, the Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) decided that the implementation date for the 0.5% global sulphur cap is set for 2020. This decision came as no surprise

NGV Transportation Vol.29 Jan - Mar 2017

since public opinion and global collaboration have been growing stronger with respect to reducing the marine pollutants such as SOx, NOx, particulate matters, and even green-house gases emitted by ships. Without doubt, this will present formidable globalscale challenges on shipping and energy industries. Far before 2020, ship owners must reconsider their strategy

30

regarding what fuel to use for new builds and possibly also for ship conversions, and should choose one among alternative solutions: lowsulphur fuel, scrubbers, and LNG fuel.

Each alternative has own advantages and disadvantages.

To use the low-sulphur fuel is advantageous in that it can minimize the initial investment. However, the

SPECIAL REPORT power consumption, and waste handling. For example, some ports or countries prevent ships from discharging the waste water from the scrubber into their seas.

fuel price is directly linked to the crude price that is subject to a substantial uncertainty and prospects for significant increase. Considering that the fuel price is the most dominant cost factor for the total ownership cost, most ship owners do not regard the first alternative as a long-term solution.

The scrubber option may

look attractive in that it can use conventional heavy fuel oil with high sulphur contents with relatively low initial investment. Sulphur pollutants from the engine exhaust can be removed by spraying seawater containing special chemicals. On the dark side of this option are bulky installation space, chemical management, high operating

31

Challenges for LNG solution The LNG solution has clearly the best environmental performance since this cryogenic fuel is free from sulphur and particulate matters; it is a low carbon fuel that reduces CO2 emissions to a very large extent. It may look almost like a “silver bullet” to kill the emission problem for ships. However, this clean fuel brings with it some noticeable challenges, most of which are directly related to LNG fuel storage: • Volume efficiency and space fitness: The fuel LNG tank should take as small as possible space and should preferably be using the least valuable space within the ship. This is particularly demanding for to-be-converted ships which have been designed without consideration for a fuel LNG tank.

• Need for measures against potential leakage: Unpressurized tanks must be equipped with a secondary barrier against potential leakage of cryogenic inventory.

This requirement is accompanied with complicated thermal insulation, gas detection, drip trays, and hull protection for the overflow from the trays; all this increases required space and results in more complicated operations.

• High vapor pressure of bunkered LNG: During fueling the tank should be able to receive the normally

Vol.29 Jan - Mar 2017 NGV Transportation

SPECIAL REPORT available LNG which typically has vapor pressure of 3 barg or higher. As LNG bunkering infrastructure develops, LNG with lower vapor pressure will become available; however, it will still be difficult only to be able to receive LNG at the low vapor pressure due to the boil-off problem.

• BOG (boil-off gas) return during the bunkering operation: The trickiest problem during bunkering operations is not to supply LNG to the tank, but rather to treat the BOG surge from the tank, fueling lines, and equipment for the operation. If the BOG is to be returned to the bunkering vessel or to port facility, this will prolong the bunkering operation.

In the end the bunkering facility may have to burn the returned BOG. • BOG removal during the normal operation: Due to heat ingress into cryogenic tanks (always at

boiling temperature) new BOG will continuously be formed. There are only two ways of dealing with this: to remove the BOG or to let the internal pressure of the tank increase. The BOG removal may be no problem with most ships in normal voyage operation when the BOG can be used for fuel gas for boilers or generator engines.

However, the removed BOG may have to be burned when the ship is in port or slow steaming with low demand for power.

• Methods to supply fuel LNG from tanks: Cryogenic pumps represent first option for discharging the LNG from inside large tanks. However, pumps tend to fail with relatively high failure rate, followed by long and complicated maintenance work. The solution to this problem is to install stand-by pumps or to use a pressure buildup (PBU) unit that is much more reliable. However, the PBU requires the tank to be

pressurized and cannot be used for non-pressure tanks.

Several types of tanks are available for fuel LNG storage as shown in Table 1 where disadvantage features are in italic letters. Pressurized cylindrical tanks have so far been used for most LNG-fueled ships due to their advantages with no need of measures against potential leakage, no requirement for BOG return or removal, and choice of PBU for discharge. However, they have the serious disadvantage of low volume efficiency and inability to fit a given space within the ship. Several cylinders can be installed within the available space; however, this will typically still give a very poor volume efficiency of less than 50 %.

Very often the ship designer is compelled to utilize some of most valuable space onboard the ship.

Due to the poor volume efficiency of cylinders it may be natural to consider prismatic, non-pressured

Tank

Cylindrical tank

Prismatic Non-pressure Tank

Membrane Tank

Lattice pressure vessel (LPV)

IMO type

Type C

Type B

Membrane

Type C equivalent

Operating pressure

Up to 10 barg

0.2 barg or less

0.2 barg or less

Up to 10 barg

Volume efficiency and space fitness

Low

Higher

High

Higher

Need for measures against potential leakage

No

Yes

Yes

No

High vapor pressure of bunkered LNG

Acceptable

Unacceptable

Unacceptable

Acceptable

BOG return during bunkering operation

Not required

Required

Required

Not required

BOG removal during normal operation

Not required

Required

Required

Not required

Methods to discharge LNG from the tank

Pump, PBU

Pump only

Pump only

Pump, PBU

Table 1. Comparison of fuel LNG storage tanks (disadvantages in italic)

NGV Transportation Vol.29 Jan - Mar 2017

32

SPECIAL REPORT

Figure 1. Cut view of an LPV

Figure 2. Various shapes and sizes of LPVs

tanks or membrane tanks. Traditionally, such alternative solutions create other problems. An underlying design principle for unpressurized tanks is to account for partial leakage of the cryogenic inventory, requiring installment of a secondary leakage barrier. The inability to take pressure load results in that complex BOGrelated operations must be provided for. For example, the BOG should be returned during the bunkering operation.

Further, the BOG must also be removed from the tanks during normal operation. The PBU (pressure build-up unit) cannot be used to discharge LNG from these tanks. For these reasons, many experts are very skeptical about using

prismatic, non-pressurized LNG fuel tanks.

Lattice pressure vessel as prismatic pressure vessel Recognizing the advantages and disadvantages of the conventional cryogenic tanks, it seems clear that the industry will needs a new type of tank solution that simultaneously can satisfy all the challenges mentioned above; this will clearly have to be a prismatic pressure vessel that can fit into any suitable space. To this end KAIST and LATTICE Technology have developed an entirely new pressure vessel technology termed “lattice pressure vessel� (LPV). The essence of the LPV is an internal, modular structure that carries load by balancing

33

pressure on opposite walls.

The concept is fully scalable in all three spatial dimensions.

Figure 1 shows an example of such an internal structure.

The shape of the LPV can be modified to suit the given installation space, as shown in Figure 2. The feasibility and flexibility of this technology been successfully demonstrated by building and testing four proto-type tanks and securing approval from DNVGL, LR, ABS, BV, KR, and NK, as well as ASME U2 stamp from ABS Consulting.

Due to the modular design principle, the LPV has significant advantages over conventional, shell type pressure vessels; in fact, the thickness of the structural parts including the outer shell remains independent of tank size for a given design pressure.

Furthermore, fluid-induced dynamic loads become insignificant due to the internal load bearing structure; this in turn leads to long fatigue life and strong resistance to crack propagation. The internal structural redundancy with force redistribution capabilities makes it very unlikely for the tank to fail; this of course means excellent safety performance.

These properties were duly considered when the LPV was approved as Type C or Type C equivalent by the classification societies.

Figure 3 shows a case study comparing two Type C solutions, one using multiple cylinders and the other a single LPV. The first solution comprises 6 cylinders with 51 m 3 storage capacity each while the second case has only one rounded LPV. The total storage capacity is nearly doubled for the LPV solution. In addition to the

Vol.29 Jan - Mar 2017 NGV Transportation

SPECIAL REPORT

Category

Item

Cylinders (C)

LPV (L)

L/C

Installation space

20.0 x 18.0 x 2.5

Ditto

1.0

1.0(R) x 17.0 (L)

18.6(L) x 17(B) x 2.0(H)

Tank dimension (m)

6.0

6.0

1.0

Design pressure (barg)

51

562

11

Volume of unit tank (m3/tank)

6

1

1/6

No. of tanks

45

146

3.2

Weight of tanks (ton)

0.15

0.26

1.7

Specific weight of tanks (ton/m3)

6

1

1/6

Instrument and piping

306

562

1.84

Total capacity (m3/all tanks)

34

63

1.84

(L x B x H, m)

Fuel Tanks

Othe comparison Measure

Volume efficiency (%) Figure 3. A case study to compare two Type C solutions: Cylinders vs. LPV

improved volume efficiency, the LPV single tank solution provides significant saving for instruments, equipment, and piping, as well as much simplified tank operation. The overall surface to volume ratio is much reduced by the single tank solution meaning savings for insulation and less boiloff.

In addition, Figure 4 contrasts two LNG bunkering shuttles, one with bi-lobe tanks and the other with Round-wall LPVs (RW-LPVs). Note that all the dimensions for the two ships are the same. However, the total weight of the tanks increases by 9% from the first case to the second while the total volume is increased by 20 %. This means that the specific weight per volume is lighter for the RW-LPV than for the

NGV Transportation Vol.29 Jan - Mar 2017

bi-lobes. As mentioned, the LPV has very efficient loadbearing internal structure, leading to better weight efficiency (material weight per unit volume) for the RW-LPVs compared with conventional cylindrical pressure vessels.

A final comment to this case is that a LPV can easily be designed for what is considered an optimal ship geometry whereas the bi-lobe design introduces a given ratio between tank width and height for the ship beam. In other words; the LPV can be designed for the ship rather than the other way around.

The LPV technology has been developed and tested for a period of five years.

For a large part of this period the development

34

has been supported by the steel manufacturer POSCO that has regarded the LPV as a very promising route for introducing their new cryogenic material, highmanganese steel, to the commercial market. LATTICE Technology has signed license agreement with two major tank producers to make its patented technology broadly available for use for ships as well as a being offered as a key component for the development of the global LNG infrastructure. The company is also cooperating with ship yards, fuel system suppliers, engine manufacturers, and local agents to provide total system solutions in which the LPV is clearly a key component. Notably, the LPV

SPECIAL REPORT

Category

Ship

Cargo tank

LNG BS With Bi-lobe tanks

LNG BS With RW-LPV

Length (m)

100.0

Ditto

Breadth (m)

20.0

Ditto

IMO Type

Type C

Ditto

Design pressure (barg)

3.4

Ditto

5,000

6,000 (

Item

Volume of two tanks (m3)

Weight of two tanks (ton) 330

360 (

Specific weight of tanks 0.066 (ton/m3)

20%) 9%)

0.060 (

10%)

Figure 4. LNG bunkering shuttle (LNG BS) with bi-lobe tanks and RW-LPV

can be utilized for a great variety of applications: cargo tanks for LNG, LPG, and other liquefied gases, fuel tanks for

liquid hydrogen, storage tanks for CNG, and so forth. All of this means that the future potential for this technology is

PĂ…L BERGAN

very extensive.

NTM

By Pal Bergan & Daejun Chang

DAEJUN CHANG

Dr. Bergan has MSc in structural engineering from Norway and PhD in computational mechanics form University of California, Berkeley. He was professor at NTNU Trondheim for 15 years before becoming director of research in DNV (DNVGL).

During more than 20 years he worked with a wide range of new technologies and applications. He has lectured and cooperated extensively with universities and research institutions all over the world. In 2009 Bergan was invited visiting professor at KAIST in Korea where he taught innovation to graduate students. Realization of own ideas in cooperation with professor Chang formed the basis for starting LATTICE Technology in 2012.

Dr. Chang started his professional career in 1997 with Hyundai Heavy Industries where he served as the leader of R&D projects to develop systems for ships, land-based plants, and offshore installations.

Currently, Dr. Daejun Chang is an associated professor in the department of mechanical engineering, Korea Advanced Institute of Science and Technology (KAIST) and the technical supervisor of LATTICE Technology. Collaborating with Dr. Bergan, Professor Chang has developed technologies that are in line with the mega-trends of energy industries and filed tens of patents, including the lattice pressure vessel (LPV) that is the world’s first scalable prismatic pressure vessel.

35

Vol.29 Jan - Mar 2017 NGV Transportation

Advancing Indonesia’s Gas & LNG Industry Day 1 Tuesday 17 January 2017 OPENING PLENARY Day 2 Wednesday 18 January 2017 COMMERCIAL Day 2 Wednesday 18 January 2017 TECHNICAL Day 3 Thursday 19 January 2017 CLOSING PANEL

Key stakeholders represented at GIS 2017 include:

EARLY BIRD RATE ENDS SOON !

PT Pertamina (Persero), Perusahaan Gas Negara (PGN) & PetroRaya Resource will be discussing on the map of opportunities for the gas & LNG value chain Indonesia Infrastructure Finance, PwC Consulting Indonesia, PT Pertagas Niaga, Poten & Partners Australia Pty Ltd & Société Générale will touch on developing LNG infrastructure in Indonesia, what are the investment opportunities Perusahaan Listrik Negara (PLN) & Wood Mackenzie will give market updates on PLN’s 35,000MW Program SKK Migas, The Energy Contract Company Ltd & Singapore Exchange (SGX) will share what’s driving Indonesia’s push to transition to gas as an energy resource – gas pricing and gas aggregator update Osaka Gas Singapore Pte. Ltd. & K&L Gates LLP will deliberate on aligning key stakeholders to support gas sector growth Sampe L. Purba Vice President of Gas Commercialization SKK Migas

Didik Sasongko Vice President LNG Pertamina (Persero), PT

Kusdi Widodo General Manager LNG PT Pertagas Niaga (Subsidary of Pertamina)

Adi Munandir Division Head, Strategic Management Perusahaan Gas Negara

Rama Panjaitan Vice President, Investment Indonesia Infrastructure Finance

Chairani Rachmatullah Head of Oil & Gas Division Perusahaan Listrik Negara (PLN), PT

Yales Vivadinar, Managing Director, PetroRaya Resources

Edi Saputra Senior Expert – Gas & Power Wood Mackenzie

To register as a conference delegate, please contact Spica Gaite at info@gasindosummit.com, call +65 6422 1476 or visit www.gasindosummit.com/ngvtransportation_1

Hear from Outstanding Speakers & Leadership Panels The world’s strongest speaker line-up in 2017 arrives in Japan:

Patrick Pouyanne Chairman & Chief Executive Officer Total

Ryan M. Lance Chairman & Chief Executive Officer ConocoPhillips

Peter Coleman Chief Executive Officer & Managing Director Woodside Energy

Maarten Wetselaar Integrated Gas & New Energies Director Royal Dutch Shell

Michael K. Wirth Executive Vice President Midstream & Development Chevron

Robert S. Franklin President Gas & Power Marketing ExxonMobil

Khalid bin Khalifa Al-Thani Chief Executive Officer Qatargas

Charif Souki Chairman Tellurian Investments Inc.

Shogo Shibuya President & Chief Executive Officer Chiyoda Corporation

Jack A. Fusco President & Chief Executive Cheniere Energy Inc.

Mary Hemmingsen Global Head of LNG KPMG

Nobuo Tanaka Chairman Japan Gastech Consortium former Executive Director International Energy Agency

Organised by:

An unmissable opportunity to hear thought-leading perspectives on the global gas and LNG value chain.

Find out more on www.gastechevent.com/ngvtransportation3

ANALYSIS OF NATIONAL POLICIES AND ITS IMPACTS ON

NGV GROWTH IN ARGENTINA Introduction The country that predominantly occupies most of the southern end of South America has held its head high in pride when talking about its NGV fleet. Argentina is a pioneer in the NGV industry having established their first CNG station way back in 1984 in their capital, Buenos Aeries.

The country has come very far since then and has been leading the global numbers on NGVs up only until the last 10 years or so where it has since fallen behind countries like Pakistan and Iran. The country’s superb NGV success can be directly linked to some very intelligent moves by the Government at the time.

Superior Price Differential The country made adoption of CNG extremely relevant to its people through creating an artificially low natural gas price which made gasoline look like the obvious poor choice.

The government offered no subsidies and let the price differential alone drive the demand. The price differential accompanied with low NGV conversion prices of roughly $1000 USD at the time with short pay back periods of just a few months created the perfect environment for a feeding frenzy of NGV conversions.

This was especially prominent among the taxi industry who reveled in these optimum conditions for their business.

39

This did create the potential for huge problems for the industry however. The glut of taxis and conversions was going to lead to the number of vehicles outpacing refueling infrastructure.

This meant that the taxis would have difficulty refueling and were going to have to deal with long queues at stations (A problem we’ve seen elsewhere around the world). The problem in Argentina was dealt with quite swiftly though, with people catching on to dual fuel conversions instead. The flexibility of being able to switch to gasoline when CNG was unavailable gave drivers total freedom from restriction to just one fuel. This allowed

Vol.29 Jan - Mar 2017 NGV Transportation

Figure 1: Evolution of Number of NGVs from 2000 (IEA)

for investments to flow in to fill the much-needed infrastructure gap.

As CNG infrastructure grew across the country, it led to the support of long-haul vehicles travelling to the outskirts and smaller towns outside Buenos Aries, and not just for taxis operating within the capital.

With long and mid-haul transportation being a huge industry in its own right, this not only added to the already growing fleet but slowly began to represent a significant portion of it as well.

Smart Moves Though the price differential was what drove the NGV industry in Argentina, the government did ensure that they set up a few policies prior to rolling out the entire CNG program. These were policies that were implemented under the New National Fuel Policy in 1983 which included

NGV Transportation Vol.29 Jan - Mar 2017

the National Liquid Fuel Substitution Program, the creation of the Government Technical Group, adoption of fixed technical standards and starting up initial investment into equipment and marketing for the NGV industry.

These smart policies by the government helped lay a great foundation for the industry to take off and accompanied by the fact that Argentina had already much experience with the use of natural gas in other industries made it easy for the public to accept this transition from conventional fuels to CNG for the vehicles.

Conclusion The success of Argentina’s intelligent policies can be seen in their current NGV fleet such that 20% of all personal vehicles in the country run on exclusively CNG. The trend has been consistent in Argentina and in 2014, the

40

country was still converting an average of 14,829 regular vehicles to NGVs each month.

In Argentina, the movement was primarily spurred on by price differential which has been a key factor in many other countries as well. The fact that the government made the decision to put the first foot forward and be actively involved in the establishment of CNG as a vehicular fuel and that the public was already aware and comfortable with the use of CNG ensured quick and easy acceptance. Also, by maintaining the support of the industry 30 years on, it has secured the industry’s future there. Argentina has proven that a careful concoction of support, awareness and price differential can lead to a prosperous and long-lived NGV industry.

NTM

By Ryan Pasupathy

NGV

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