September 2017, Vol. 244, No. 9
Features
Natural Gas and LNG: Future of Electricity
The International Energy Agency (IEA) reports that 1.2 billion people, or 17% of the world’s population, has no access to electricity. About 38% or 2.7 billion lack clean cooking facilities. “More than 95% of these people are either in sub-Saharan Africa or developing Asia, and around 80% are in rural areas,” according to the IEA.
This can radically change with the increased use of pipelined and liquefied natural gas (LNG).
So, is natural gas “the new fuel?” Hardly. History shows that natural gas was used by the ancient Chinese perhaps as early as 1000 B.C. Gas was seeping out of the ground and was transported with bamboo pipes. The world’s first industrial extraction of natural gas began in Fredonia, NY in 1825. While there are different types of gases, today natural gas is the preferred fuel for power generation.
The U.S. Energy Information Administration (EIA) estimates about 30% of U.S. electricity is produced by burning coal; about 34% is generated with natural gas. With new extraction technologies such as fracking, natural gas as a power source has become ever more plentiful and desirable and will continue to be so.
The International Energy Agency (IEA) said “Natural gas is seen as a good source of electricity supplies for a number of economic, operational and environmental reasons: it is low risk (technically and financially) and lower-carbon relative to other fossil fuels, plus gas plants can be built relatively quickly in about two years unlike nuclear facilities which can take longer.” The agency asserts that natural gas will continue to increase its share of global energy mix, growing 2% annually through 2020.
Gas Pipelines
Viewing aerial maps of industrial countries, one sees a seemingly intricate net of oil, gas and even water pipelines crisscrossing various landscapes. Nearly all of them are designed to deliver various gases or liquids to meet the requirements of industries and large population centers. Most likely they serve similar regions and populations as do the electrical systems. Energy-poor or sparsely populated regions of the planet basically lack access to natural gas and electricity.
New extraction technologies have led to discoveries of crude oil and natural gas resources that are several oceans or thousands of miles away from the continents where natural gas is used.
Bridging LNG Gap
Australia, the U.S., Qatar and other gulf states are major producers with an excess supply of natural gas. Deep-sea pipeline construction from these regions to Japan, South Korea, or Europe requires ocean crossing that would not only be treacherous, but prohibitively expensive.
LNG carriers or tank ships, are designed to take LNG over long distances. They actually substitute for natural gas pipelines as they transport LNG from onshore or offshore processing plants to regasification facilities mainly in East Asia and Western Europe.
By 2003, 204 tank ships were built. The fleet of LNG carriers has continued to grow significantly. As of January 2015, the fleet numbered 410 vessels worldwide. Lloyd’s Listing Intelligence reports that as of January 2017 the LNG fleet stood at 451 with 113 units on order.
Included in the supply chain are floating liquefied natural gas (FLNG) platforms employing advanced technologies to process LNG at offshore facilities. For example, the Prelude LNG is a monumental vessel, 1,601 feet (488 meters) ( n length and cost about $12 billion. The processing facility will operate about 120 miles off the Australian coast where it is expected to stay moored for 25 years. The ability to produce and offload LNG to large carriers offshore is an important, cost-saving innovation. Clearly, offshore LNG operations are more efficient than land-based facilities that usually require permitting, additional pipelines and processing facilities.
Small-Scale Regasification
Economic conditions in certain energy sectors have forced many producers to explore new markets. As advanced technologies uncovered new sources, crude oil and gas supplies have grown. These increased supplies are providing engineering firms with opportunities to modify the designs to construct facilities that would allow natural gas suppliers to serve energy-poor regions.
The small-scale floating regasification and storage units, i.e., smaller FRU or FSU, may serve such functions. A 2015 article in LNG World Shipping was headlined “Small-Scale LNG supplement: A new era of floating small-scale regasification begins.”
The article cites the Indonesian island of Bali as an example because it has a commissioned LNG receiving terminal. The $500 million project involves small-scale FRU and FSU facilities. The processed natural gas will be transported by pipeline to a diesel and gas-fired power plant.
Most of the small power plants are spread throughout the islands of eastern Indonesia and use diesel fuel. Indonesian official believe that transporting LNG by sea to various receiving terminals would enable them to substitute natural gas for diesel.
Much of the Indonesian archipelago consists of small and sparsely populated islands where natural gas demand is low, so pipelines and large-scale LNG terminals are not feasible. There are several areas in the world that would be well-suited and able to benefit from small-scale LNG storage and regasification projects such as Caribbean island nations.
Floating Barges
On Jan. 25, LNG Industries reported that Wison Offshore & Marine claimed the “world’s first barge-based floating storage and regasification unit” had successfully undocked from the company’s dry dock in Nantong, China. EXMAR Offshore cooperated with Wison to build its second facility since the Caribbean FLNG.
Wison stated that the hull and the topside modules of the FSRU were fabricated simultaneously, adding that it has developed its own cargo-containment and handling systems for the tanks.
On its website, Wärtsilä notes that it developed “a new LNG storage and regasification concept: An all-in-one barge that receives and regasifies LNG for power generation and distribution (250 MW).” This type of barge was developed for challenging locations where pipelines and large-scale LNG-receiving terminals are not feasible. It is well-suited for shallow water areas where access for larger vessels is not possible without major jetty constructions or dredging operations.
Interfax reported Jan. 30 that Transgaz, a subsidiary of Gazprom, started exporting LNG by truck from the Ural Mountains to Kazakhstan. The technology that was developed in the Sverdlovsk region makes it possible to ship or transport LNG without expensive pipelines. In addition to shipping the first tons of LNG, Gazprom announced that it “began a major program to develop small-scale production and infrastructure facilities.”
Other innovations in the transportation and delivery of LNG have been discussed between the Russian Federation and South Korea. The discussions involved transporting LNG by gas pipeline, rail, ferry and trucks by 2018. Apparently, South Korea urged regional Gazprom producers to develop small-scale processing and infrastructure facilities. Difficulties have arisen due to the lack of rail links between Russia and the Korean peninsula.
Alaska First?
Alaskan News Dispatch reported Sept. 9, 2016 that Alaska might be the first state to transport LNG by rail as the Alaskan Railroad received the first permit from the Federal Railroad Administration (FRA) to transport LNG. The permit was extended on an experimental basis and expires in two years. On March 7, 2017, Sightline, an online publication, reported that “Alaska Railroad hauled its first LNG cargo in September 2016 as both an LNG tank car demonstration and a cost experiment.”
Critics have questioned the FRA decision and ask whether LNG-by-rail will repeat the mistakes of oil trains. Clearly, there are safety concerns in allowing LNG to be transported by rail in the much more densely populated areas of the Lower 48. However, the fact that Japan, the largest importer of LNG, has transporting liquid gas by rail for 30 years without a serious incident, may work in the railroads’ favor.
Conclusion
New technologies accessing and extracting difficult-to-harness oil and natural gas require creativity and innovations to bring these supplies to markets. Changes in the transportation of LNG should have a positive effect in substituting natural gas for other fuels, making it possible to provide electricity in regions that have been difficult to reach.
The fleet of large-scale LNG carriers will likely grow beyond current estimated levels. Companies and many countries appear to be betting on a bright future for LNG. On another level, competitive pressures will compel companies to invest in small-scale LNG storage and regasification units to serve markets where demand for natural gas was previously deemed low. Barge-based facilities to generate electricity may in many instances be the least-cost option.
However, the lack of access to energy in rural areas of Sub-Saharan Africa and Asia is typically more inland, far from ocean fronts and even river banks. Overland transportation of LNG by trucks, rail and other types of carriers would increase access to energy to those with neither natural gas nor electricity. Eventually, with the availability of natural gas and electricity, the living standards of these populations would dramatically increase.
Author: Hubert Reineberg holds a master’s degree in economics from Arizona State University. His focus includes the broader energy sectors of gas, oil, LNG and pipelines. His interests also include geopolitical issues concerning the Russian Federation, Eastern Europe and Central Asia. Reineberg gained experience in the electric utility industry while working at Salt River Project (SRP). As a consultant, he has worked with the Energy Group at the Institute of International Education in Washington, D.C.
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