Authored by Pengfei Zhang*
Highlights of this Article
a. LNG as the alternative energy that can substitute crude oils to reduce carbon emissions.
b. Characteristics of LNG that are greener, flexible and cheaper compared to conventional fuels.
c. The market demand of LNG globally and in the United States that concludes the trends of modifications for LNG bunkering facilities in Northern America.
d. Regulations required by United States LNG bunkering facilities to operate the safest and efficient LNG transferring procedures.
Abstract
Following the good news of the Liquefied Natural Gas (LNG) market booming, the United States (US) is preparing its best to be the major and effective LNG supplier. Due to this demand, the LNG market is appealing not only to the US but to Australia as well since the country is also one of the largest LNG producers in the world [1]. According to the US Energy Information Administration (EIA), the demand has been growing globally as natural gas will become the gas of alternative energy. To fulfill this demand, the US economic interest becomes targeted on the Liquefied Natural Gas (LNG) import terminals installation specifically in the country’s northern region. In viewing the growing LNG market, LNG bunkering facilities in Northern America are preparing expenses to modify their terminals in smoothing the LNG transferring process. Thus, this paper explores the preparations of LNG bunkers in Northern America with some LNG facilities that are included to show the preparations of the US in becoming the major exporter of LNG globally.
Keywords: Liquefied natural gas (LNG); Bunkering; Facilities; United states
Introduction
In recent years, the energy demand has been satisfied largely by the consumption of fossil fuels like petroleum, natural gas and coal. These fossil fuels have coated the 87% of US energy demand during the last decade [2]. During the last century, the US has exported natural gas via pipeline to Canada and Mexico. The quantity of natural gas exported has been less than imported. The only LNG export terminal of domestic production that has been operating since 1969 is the Kenai LNG Plant situated in Alaska which still in use for exporting LNG primarily to Japan. By 2000, the US was committed to a consolidation method of supply the natural gas demand by importing LNG. Forecasting reports given in 1999 by the Energy Information Administration (EIA) stated that natural gas imports were progressing to growth from 12.9% to 15.5% from 1997 to 2020 [3]. Based on these reports, five new LNG import terminals were designed, and some other existing facilities went through growth modifications. However, the mass production of natural gas throughout the last decade has changed the economic interests of the American business. The natural gas surplus has been encouraged by the progress on drilling technologies like “fracking”, which have simplified the extraction method of this natural resource. As the result of the fast growth of domestic natural gas production, most of the prevailing import facilities became unproductive. According to the most recent forecast studies performed by the EIA, the US will be positioned in the third position of the largest liquefaction capacity by 2020 after Australia and Qatar [3]. Around 50 permit applications for the development of recent LNG export terminals, or for the modification of existing import terminals are received in January 2015. Four of the applications are approved and some already under construction which is aligned to integrate liquefaction facilities to the already existing import terminals, which are better-known as brownfield projects. Brownfield refers to land within the United States that was used before for an industrial or commercial purpose and potentially contains dangerous waste or pollution in the current times [4].
Methods
The research approach conducted in this thesis will work as a framework to analyse the preparations of LNG bunkering facilities in Northern American. Broadly, this dissertation will focus on three investigation areas where the first area of focus will be the quantitative aspect of LNG market by globally and in the US. While the second area will be using qualitative to see the planned facilities in US LNG bunkering and the regulations required to be followed by the facilities’ operators. Furthermore, quantitative researchers highlight the analysis and measurement of causal relationships between variables, not processes. The derived result of the quantitative analysis will provide an objective conclusion whether the source of natural gas in US may be viable or not in an economic sense. The result of using qualitative analysis is to examine the development planned by US government to expand the growth of US LNG bunkering from its facilities perspectives. In contrast to the investment made by well-known companies as stated in Chapter 4, this research will show some explanations for each project as it describes the procedures and expected productions of LNG. The information was collected from web sources about LNG facilities in Northern America for examples ABS, USCG and EIA. These web sources are the most used sites for the maritime industry in the US that provide important and knowledgeable information. EIA includes both qualitative and quantitative data and is used mainly in both descriptive and explanatory research [5] for the LNG market in the US. While ABS, the website provides qualitative data where it shows the research and projects of LNG bunkering facilities in Northern America. The qualitative data also retrieved from USCG where the web source prepared the regulations for the operators at LNG bunkering facilities. The limitations of this research are the study is only focused on LNG bunkering operations from storage stranded and vehicle fueling perspective but not including other facilities for the development of LNG bunker in Northern America. Moreover, analysis collected only covers infrastructure required of LNG bunker facility in Northern America and does not include any necessary infrastructure of LNG bunker facility in the whole United States.
LNG Characteristics and the Market Analysis
Characteristics of LNG
LNG is a natural gas that has been cooled to the point that it combines to be fluid, which happens at a temperature of approximately -162°C (Celsius) in atmospheric pressure. Natural gas is transformed into liquid form through liquefaction procedure to empower transportation over long distances particularly, where the distribution pipelines are most certainly not viable or different limitations exist. When petroleum gas is changed over to LNG, the volume is diminished by a factor of 610 and it allows transportation and storage in huge volumes [6] (Figure 1).
Natural gas is a blend of different hydrocarbon gas known in scientific names for examples propane, methane, butane and ethane. Based on Figure 1 above, more than 80% of natural gas is shaped by methane which is the main element. To increase as much as the use, natural gas must be extracted. The particles can be separated from the gas via the natural gas processes at the gas partition plants. Each of the particles has a broad variety of uses [7]. With every other particle that exists, LNG has characteristics that make it special. These characteristics also relying on its area or region. The usual characteristics for LNG are:
1. Colorless;
2. Odorless;
3. Non-toxic but can cause asphyxiation in unventilated areas;
4. Non-corrosive cryogenic liquid at atmospheric conditions;
5. The density is in the range of 430-470 kg/m3 (Kilogram per Cubic Meter), depending on its composition;
6. LNG is normally kept at the atmospheric pressure less than 5 PSI gauge and
7. It has a boiling point of -162°C (Source: Mokhatab et al. [18]).
LNG prices
The supply chain and reserve of LNG make the cost competitive [9]. In Europe, the supply of gas by pipeline gives more competitive costs compared with imports by vessels while the LNG supply facilities are ending up more liberalized (IMO 2016). Fuel costs is a factor that can radically influence the LNG prices [10]. Fuel costs is an unstable market, and the difference in prices has a huge effect on profits that are made by bunkering firms. This will decide the payback time for the investments made by the bunkering organizations [11]. Currently, there is no regular international pricing tools for natural gas and as a result, regional gas prices differ globally as shown in Figure 2 below. However, there are tools that are utilized to provide competitive market, regulated and oillinked pricing. Oil-linked pricing connects natural gas in trading to long-term oil prices with the regulated prices established by governments and specific discount. While for the competitive pricing, it provides trading points to be used by consumers and suppliers to decide the value [12] (Figure 2).
Based on Figure 2 above, the utilization of different price mechanisms globally produces problems and conducts to improving international trade to use arbitrage opportunities. This forces on suppliers and customers to adjust their costs with traded markets. Even though there is vulnerability to the future price system that will continue, both World Energy Council (WEC) and USEIA predict that the competitive natural gas market will ultimately control the market [12]. In addition, these organizations also observed that natural gas prices have separated from petroleum fuels which it might not affect the LNG price. Different areas of Europe and Northern America are focusing on progress towards competitive approach. Moreover, it is predicted that Asia also likewise to acquire the similar approach [13].
LNG market in the united states
Based on Figure 3 above, the USEIA estimates that the total US technically retrievable dry natural gas capacity is 2,277tcf (Trillion Cubic Feet). EIA has calculated the integrated progressive US domestic utilization and LNG exports from 2015 to 2040 indicate less than 40 % of this resource. Moreover, EIA has estimated the accessible resource is stable [14]. Industry calculates that the US natural gas resources at the base are usually higher. US has sufficient natural gas to provide each local utilization and LNG exports into longer term without any problems. The ICF International estimated of 4,234tcf which means 85% bigger [3]. Moreover, US also provided natural gas without vulnerable by LNG export quantities are projected into EIA’s Annual Energy Outlook (AEO) 2016 Reference Case Study.
The benefits of the united states lng exports
(Figure 4) Exporting natural gas creates a variety of advantages to the United States. Based on Figure 4 above, it shows that under a several of export situations, most of the growth in LNG exports are supported by increased domestic output instead of reductions in domestic demand. Growing natural gas production supports thousands of extra jobs. An IHS report predicts that for every 1 BCF/D (Billion Cubic Feet per Day) of shale gas production, the economy is supported by some 32,000 total jobs (IHS Report 2013). In addition, LNG exports may contribute the maximum amount as $10 billion to $31 billion per state to the economies of natural gasproducing states [15]. Moreover, non-natural gas producing states also can take the benefits in growing demand for cement, steel, equipment and other product. Generally, varied studies have found that higher levels of LNG exports can provide economic gains for the United States [14]. Exports can give advantages to the US in the manufacturing sector. Expanding in natural gas production brings up in LNG that can be used as organic petrochemical feedstocks. ICF International analysed the effects of LNG exports and found out that NGL volumes will increase between 138,000 and 555,000 BPD (Barrels Per Day) by 2035 [3]. According to ICF, an expanding in LNG supply will provide in preserving the reasonable LNG prices and this edges the domestic manufacturing industries [16]. US LNG exports also provide a reliable and alternative energy supply to the world marketplace, offering international buyers with a better alternative or an option, serving to limit the utilization of energy as a political weapon. Environmentally, US energy-related carbon dioxide emissions in 2015 were 12% below 2005 levels due to high utilization of natural gas by power generators. In addition, exporting LNG can decrease the global greenhouse gas emissions (GHG) [17]. ICF predicts that exported LNG can have GHG emissions in between of 43% to 52% which is much lower than the emissions of traditional oils. Moreover, Energy Department concludes that US’s natural gas used in Asia or Europe has lower life cycle of GHG emissions compared to the power generates by regional coal [14] (Figure 5).
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