Unconventional LNG To Assume Limited Role

June 2010 Vol. 237 No. 6

A P&GJ Staff Report

Unconventional LNG will play a limited role in the future of the liquefied natural gas (LNG) industry, comprising just 5% of total LNG supply in 2020, according to a consultant’s report.

In a video presentation to delegates at LNG16 in Oran last month, Frank Harris – head of LNG Consulting for Wood Mackenzie – reflected on the heightened interest in unconventional LNG supply projects, concluding that these projects will play a limited role in the future of the LNG industry – accounting for no more than 5% of total global LNG supply in 2020.

An LNG project can be unconventional in one or both of two ways, Harris said.

First, the feedstock can be unconventional gas: rather than being supplied from conventional gas reservoirs, the projects will be fed with gas produced from unconventional gas reservoirs, i.e., shales or coals, with multiple projects already proposed in Queensland (Australia), North America and Indonesia. Second, the location of the liquefaction plant is unconventional – it is offshore, in the form of a floating LNG facility, or a modified LNG tanker, he added.

“We fully expect unconventional gas feedstock to become a feature of the LNG supply industry, but its suitability as a feedstock for LNG appears limited and it will be geographically constrained – it is hard to see the next Queensland at the moment,” Harris said.

“However, there are some unconventional gas-rich areas where it doesn’t make sense to liquefy the gas. We believe that unconventional gas resources in China, Europe and India are unlikely to be suitable as LNG feedstock because of accessibility issues and/or the availability of more viable alternatives.

“In these cases, assuming that the resources can be developed economically, we expect it to be more viable to monetize the gas by supplying it via pipeline into local or regional markets rather than by monetizing it as LNG,” he said.

Referencing Wood Mackenzie’s presentation at LNG15, Harris said, “Three years ago we highlighted the challenge that the international oil companies (IOCs) faced in accessing gas reserves so it’s no surprise that since then they have increasingly looked at unconventional gas as a potential source of feedstock for LNG plants.”

Wood Mackenzie said unconventional gas is attractive to the LNG supply industry because of three factors: first, it is largely accessible and not controlled by the national oil companies; second, there are limited exploration risks; and finally the raft of unconventional projects under way is attracting significant investment which is enhancing project economics, through the experience curve.

Regarding the other element of unconventional LNG projects, Harris said, “Floating LNG solutions will be a niche play and will not become a major part of the industry’s supply mix.”

Responding to a question he posed in the title of his presentation ‘An Unconventional Future for LNG Supply?’ he said, “The future of LNG isn’t unconventional. In aggregate, unconventional LNG projects look set to play a limited role, accounting at most for 5% of total LNG supply in 2020, less than unconventional gas per se which our analysis shows will equal 15% of total global gas supply in 2020. Therefore, we see unconventional LNG being underweight.”

“While unconventional LNG does have an, albeit limited, role to play, the significant impact of unconventional gas on the LNG industry is more likely to be the reduction in LNG demand that it causes. We have certainly seen this in North America where shale gas has significantly impacted LNG demand,” Harris concluded.

Adriatic LNG Mega-Terminal Critical To Italy’s Energy Security
In a pioneering application for the global LNG industry, GE Oil & Gas technology is powering the world’s first gravity-based offshore LNG terminal located 17 kilometers offshore from the town of Rovigo, near Venice, on Italy’s north east coast.

Owned and operated by Adriatic LNG, the terminal is moored in waters 30 meters deep and is the world’s first use of an artificial island Gravity Based Structure (GBS) for offshore LNG. At the heart of the engineering solution is an enormous reinforced concrete box that rests on the sea floor and houses two LNG storage tanks. Overall, the facility is 375 meters long by 115 meters wide. In addition, the project also marks the first ever offshore deployment of a GE10-1 ‘dual fuel low emissions’ gas turbine system.

Tony Mercer, Project Manager, Aker Kvaerner said: “The challenge was to deliver a fully modularized gas turbine power generation system that will help us to save significant time during the construction and commissioning stages of the Adriatic LNG project. Meeting our tight production schedule was instrumental in overcoming many challenges.”

Claudi Santiago, President and CEO of GE Oil & Gas said: “Adriatic LNG and its Qatar Petroleum, ExxonMobil and Edison owners have made the strategic vision of offshore LNG a here-and-now reality. I’m also proud that GE equipment is supporting the project on the supply side through the import of LNG from the RasGas Train-6 in Qatar”.

The new gas mega-terminal will increase Italy’s regasification capacity by 200%, is larger than two soccer fields, as high as a 10-story building and has two LNG tanks with a combined annual capacity of 8 billion cubic meters – representing around 10% of Italy’s yearly gas demand.

The Adriatic LNG operated terminal receives LNG shipments from Qatar (80%), Egypt and Trinidad (remainder) twice a week. The LNG is regasified at the terminal and then transported to an onshore metering station, before it enters Italy’s gas network.

The LNG mega-terminal’s operations are powered by three GE10 low-emission gas turbines – two (2) GE10-1 single gas modules and one (1) GE10-1 dual fuel gas turbine, providing a total power output of 30 megawatts to provide optimum energy efficiency.

In addition, all three units feature GE’s advanced Dry Low NOx (DLN) combustion system that achieves NOx emissions below 15 parts per million – enabling the mega-terminal to meet the stringent emissions reduction and environmental regulations prescribed by the Italian regulator.

GE Oil & Gas supplied the units to Aker Kvaerner Contracting International, Adriatic LNG’s primary contractor on the mega-terminal project. GE will maintain the terminal’s power plant equipment through an 18-year contract service agreement. The gas turbine modules were assembled and full-load tested at GE’s Avenza Yard, located near the company’s components testing site in Massa, Italy.

Adriatic LNG is a joint venture between Qatar Terminal Limited (45%), a 100% owned Qatar Petroleum subsidiary, ExxonMobil Italiana Gas (45%) and Edison SpA (10%).

FLNG Sector Showing Rapid Growth
Meanwhile, a report by Research and Markets entitled “The World FLNG Market Report 2010-2016” notes that in recent years the floating liquefied natural gas (FLNG) business has rapidly grown and is now at the forefront of offshore industry focus.

The business is poised for substantial growth, particularly within the liquefaction sector, and is forecast to be worth $7.4 billion by 2016.
The IEA forecasts annual growth in natural gas supply will average 1.6% from 2006-2030.

By 2030, natural gas will account for 23% of total worldwide primary energy supply. The difficulties in progressing onshore projects in LNG has driven the adoption of FLNG which now offers an increasingly important method of bringing gas from stranded reserves to the market

Research and Markets also released a study entitled “Oil and Gas Supply – Deep Waters (A 10-year projection and review of oil and gas production and consumption)”.

The report notes that historically, global economic recessions have led to declining energy demand, but the resultant lower prices have soon led to a recovery in demand and then prices, especially as OPEC has acted to rein in output to tighten supply. This trend has already been reflected in the oil markets to some degree, the report says. In the gas sector, supplies will be available only if investment in infrastructure, above all long-distance pipelines and LNG conversion and receiving plants, is well advanced.

Brazil pioneered deepwater development with the discovery of the Albacora field in 1984 in 350-750 meters of water. It came on-stream in 1987 in the Campos basin. A series of fields along the shelf edge have since been put into production, including the giant Marlim field in 1991, Marlim Sul (1,255 meters) in 1994 and Roncador (1,290-1,795 meters) in 1999.

The first discovery in deepwaters, previously defined in the U.S. at 305 meters, was the Pardner field (347 meters) in 1968, which finally came on-stream in 2003. The first real significant discovery, however, was Cognac (312 meters) in 1975, which was also the first on-stream in 1979.

Find articles with similar topics