VANCOUVER: The liquefied natural gas market is growing every year, but the terminals that ship and receive the fuel are shrinking.

The booming sector’s next-generation infrastructure is being designed for the emerging-market buyers that want smaller volumes on shorter, more flexible contracts.

LNG export terminals, where the gas is liquefied and put on vessels for shipping, have traditionally been massive, custom-built facilities that cost tens of billions of dollars. And so to justify the investment, they have typically required equally massive, long-term supply deals, often lasting a decade or more.

Numerous terminal projects on the horizon, by contrast, are new modular-style designs built to snap together like Legos, allowing for small to mid-scale liquefaction or regasification plants that can be expanded if and when demand grows.

The first next-generation liquefaction plant is under construction in the US state of Georgia and is expected to begin operating mid-year.

These facilities, with far smaller liquefaction units — known as trains — are “more consistent with market conditions,” said John Baguley, chief operating officer of Australia-based LNG Ltd, which has proposed mid-scale LNG plants in the United States and Canada.

The new designs reflect a maturing market with a more diverse base of customers that will drive future growth.

In 2008, the average contract was for 18 years and more than 2 million tonnes per annum (Mtpa). By 2016, it had dropped to less than eight years and less than 1 Mtpa, with new buyers in emerging markets like China, India and Pakistan seeking flexibility due to market uncertainty.

These new buyers are fueling small utilities and industrial users such as fertiliser plants and factories, said Alfred Moujaes, Houston President for Atlantic, Gulf and Pacific Company. The firm is building small, modular plants for LNG buyers, who need to convert the liquefied fuel back to a gas form after shipping.

Typically, such markets will be small at first, but the hope is that demand will grow as additional customers convert to LNG, Moujaes said. The modular plants allow terminals to grow with the market.

Demand for liquefied natural gas, or LNG, has taken off in recent years as it is a cleaner fuel than oil or coal, and abundant supply has driven its price sharply lower.

Overall global consumption of LNG rose to 33.1bn cubic feet per day in 2016, about 10 per cent of total natural gas usage; it is expected to grow by 75pc by 2027, according to the US Energy Information Administration.

The United States, with its abundant supply of pipeline gas and well-developed energy hubs such as the US Gulf Coast, is emerging as a dominant global producer.

US export capacity has shot up from less than 2 million tonnes per annum (Mtpa) in 2015 to 18 Mtpa in 2017, and is projected to top 77 Mtpa by 2022, transforming the United States into the world’s No. 2 exporter behind Australia.

In 2005, just 15 countries imported LNG; now there are 39, with another eight expected to hit the market by 2022, according to the International Energy Agency.

Tiny Trains

The new style of North American liquefaction projects will be built in Asia before being shipped to the United States for assembly. At the heart of these new terminals are modular trains which produce just a fraction of the LNG of a traditional train.

LNG Ltd has proposed four 2-Mtpa trains at its Magnolia project in Louisiana, while Tellurian Inc is planning up to 20 1.38-Mtpa trains at its Driftwood project, also in Louisiana.

That compares to Cheniere Energy’s four 4.5-Mtpa trains now operating at its 18-Mtpa terminal in Sabine Pass.

With modular trains, companies hope to avoid the delays and cost overruns that have dogged custom mega-projects like Chevron Corp’s Wheatstone and Gorgon projects in Australia.

Another large terminal, Sempra Energy’s Cameron LNG project in Louisiana with three 4.5-Mtpa trains, has been delayed to 2019 after originally targeting a launch this year.

While modular designs allow more flexibility, some experts question whether they will ultimately cost less to build and be as easy to expand as promised, noting the technology is unproven.

“The issue that everybody is wrestling with is, does that really save you money?” said Jason Feer, head of business intelligence at shipbroker Poten and Partners.

Published in Dawn, February 6th, 2018

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.