The stern message coming across at the recent LNG 11 conference was that development costs must be cut if liquefied natural gas is to remain competitive with other fuels.
Researchers at Shell International Gas Ltd. (SIG) say it is significant that no grassroots LNG project has been commissioned since 1989. They published their study on potential cost savings to coincide with the conference this month in Birmingham, U.K.
"Is the industry, after so many decades of development, now so mature that no further advances can be expected within the confines of the laws of thermodynamics?"
That was the question asked by SIG's Peter Tijm, head of processing and conversion technology, Ed Stanton, technical/commercial manager, and Rob Klein Nagelvoort, manager of LNG/NGL processing, storage and loading.
Their answer was "no," although they expect no more dramatic leaps in LNG technology.
SAVINGS PROSPECTS
Although developments in liquefaction technology will continue, they said, more significant cost savings lie in project execution and construction, shipping, and storage.
A critical review of current construction methods could help cut expenses: "LNG plants operate with relatively clean processes and employ high quality alloy materials. Therefore, standard design techniques, maintenance, and inspection frequencies may be relaxed without compromising safety and life cycle costs."
In this way, the team reckons savings of $45/metric ton/year are possible in LNG production, equal to 6% of total project costs. Also, LNG plants are typically designed for 20 years life, although extension to 40 years is said to be possible with little extra cost.
In shipping, estimated to account for 40% of a typical LNG export project's capital outlay, the researchers said the best potential for cost saving lies in using bigger tankers to improve economy of scale.
"This move has not yet been made by industry," wrote Tijm, Stanton, and Nagelvoort, "although reputable LNG shipbuilders have designs for up to 200,000 cu m capacity available and shipyard facilities are not a bottleneck."
SHIPPING SAVINGS
A move to 165,000 cu m carriers is expected first, with a move upward from 125,000 cu m LNG capacity expected to yield 10% savings in transportation costs.
"By targeting 15% savings in capital expenditure on shipping, another $35/metric ton/year of production, or 5% on the capital expenditure of a total project, can be saved."
In storage, the researchers reckon a 20% cost savings is possible by using single containment tanks made with 9% nickel steel, rather than double containment tanks as typically specified.
Despite these potential cost savings and anticipated growth in LNG demand, the SIG team concluded new grassroots export projects will be viable only if end users are prepared to pay a premium in comparison with other fuels.
Yet Shell remains convinced there is a future for LNG: "Negotiators must continue to be innovative ... In an uncertain overall energy price environment, new routes to delivered LNG price structures may be possible."
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