Posted by Lars Petter Blikom May 4, 2012

Growing confidence in LNG as a future marine fuel

As part of a project to define the future design of container feeder ships for operation in the Baltic Sea, some of my colleagues have done a survey. They posed a set of questions to a range of ship operators in the Baltic Sea area, and some of the results are quite interesting from a LNG perspective. Other results may serve as weekend entertainment.

Some of the top ranking priorities are quite obvious. It would be strange if “operating costs” and “fuel efficiency” didn’t score rather high in a survey like this. Even in the shipping industry, which lives by its own set of economic indicators, this would be strange indeed.

If you are a reader from a different industry you may notice that not all items brought forward appear very futuristic, e.g. “optimal fuel consumption over wide speed range” may sound obvious, but actually most ships are optimised for easy construction, which gives a quite different output.

Not a popular finding among sailors I would guess, but “crew comfort” is among the lowest priorities. Perhaps this indicates that crew comfort is already at luxury level?

Next, the survey asks the ship operators what future solution they will be more willing to consider. Here it is very encouraging to see the high score for dual fuel engines. Actually, it is a bit surprising; I thought the operators were more sceptics. The study also indicates that they are much more comfortable with “dual fuel” than “pure LNG”. I guess the option to switch back to “normal” makes it easier to dive into the novel solutions. It will be interesting to see how this develops in later surveys when LNG has become more of a business as usual solution.

Container ships don’t want pods. We hear you, dear shipowners.

And we conclude with a small contribution to the frustrating task of forecasting future fuel sources: The respondents are quite confident that “LNG will become an important or dominant fuel type for the Baltic trade”. It is good to see that we here at DNV are in tune with our customers.

More information and analysis from the survey will be published next week. I’ll be sure to keep you posted.

Enjoy the weekend!

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Posted by Lars Petter Blikom April 24, 2012

LNG bunkering in Singapore

For the implementation of LNG as a marine fuel for deap sea vessels, Singapore appears to be the key location to get the ball rolling. Already for quite some time, many eyes have been watching the development of LNG bunkering at the SLNG terminal. I didn’t have the chance to attend the ongoing Bunkerspot conference myself, so I have to rely on Platts for their account of the discussions about the development of LNG bunkering. As usual I feel the need to clarify some issues.

“Participants polled at the Bunkerspot LNG Asia conference were skeptical of LNG bunkering gaining traction in Singapore in the next five years, but were more positive when given a longer time frame of 10 years”

This is human psychology, isnt it? A big change is happening in the industry – it is easy to assume it will take a while. Let’s kick the can down the road. Nobody can blame us for not taking action. Anyway, surely they have some arguments backing this expectation:

“”There are compelling reasons for LNG to become the future fuel for shipping…but there are also a good number of reasons why it may not become the future fuel for shipping for some time,” Nigel Draffin said, Chairman of the International Bunker Industry Association”

Well, for one thing, IBIA is biased in this matter as their existence relies on the use of oil. Secondly, let’s see what is really meant by “a good number of reasons…”:

Reason no 1:

 ”LNG terminals are designed to handle one vessel a week, not one per hour… LNG terminals should not be assumed to be hosts for bunker vessels…”

I completely agree, and this has also been acknowledged by all the industry projects that I have been involved in – none of them assume bunkering directly at the terminal premises. There needs to be a barge or other ways of transferring LNG to a bunkering station. This is also line with normal bunkering practices for oil, where the bunkers normal come to the ship, and not the other way around. Therefore reason no 1 is invalid, as no plans have been made for bunkering directly at terminal premises. 

Reason no 2:

“A huge new market for LNG [in terms of LNG bunkering] is emerging at a time when there is insufficient supply to cater to current LNG demand”

This is simply incorrect. Supply meets demand for LNG, as it always has and always will. What this really is, is only a discussion of price. Who is willing to pay more for the LNG? And that may very well be the ships. Which also makes sense from an environmental point of view; power on land can be produced by other sources, even renewables. For ship fuel, LNG is the cleanest option we have.

Reason no 3:

“In addition, Regan pointed out that one Achilles’ heel that Singapore faced was that the country had no LNG bunker barges to begin with”

Oh, come on. Is it really going to push the development down road for ten years because we cant build a few barges?

Reason no 4:

“there are challenges which are not only unique to Singapore in terms of LNG bunkering, which various speakers at the event brought up, including high costs of vessels and infrastructure…”

As I have pointed out before, the emphasis on CAPEX is highly exaggerated. Investment decisions should be made based on cash flow models for the entire life cycle. And in such calculations, cost of fuel will be the overshadowing parameter for any ship, while CAPEX will only contribute 10-20% of total daily costs.

Reason no 5:

“… lack of international standards “

This is a lame excuse. Firstly, there are standardisation going on through several joint industry projects, and also an ISO committee. Secondly, the lack of international standards is not a show stopper. It normally just means that an extra risk analysis needs to be done, and some additional communication with flag and port states will be necessary.

Reason no 6:

“uncertainty about future pipeline gas and LNG prices”

Ok, what about the uncertainty about future oil prices? And especially prices of low sulphur fuel? It should be clear to everybody that fuel price uncertainty going forward will not only be about the absolute values of each fuel, it will also be about the relative difference between them.

To conclude, nothing of the reported discussions from the Bunkerspot conference shakes my confidence in LNG as a future marine fuel.

Singapore is already an important hub for shipping – LNG next?

Singapore, we trust you to stay on track in offering LNG bunkering

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Posted by Lars Petter Blikom April 18, 2012

Competition: What do these two ships have in common?

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Posted by Lars Petter Blikom April 10, 2012

Natural gas – the bridge to where?

If you havent already seen the TED speach by T. Boone Pickens, you should get to it. Mr Pickens is a bit more focused on US national security than I would be, but otherwise he delivers an excellent description of the current energy situation. Although his story is US centric, its main message is applicaple to any place in the world: We need to get off coal and oil! And the alternative is natural gas. It is abundant, it is low cost, and it is much cleaner. Clean enough? Well, that’s another question. And this question leads Pickens to admit that natural gas is just a “bridge” fuel, a bridge fuel to whatever comes next. Pickens doesnt know what that is, and he says at his age he doesnt need to worry about it – someone younger must figure it out.

Now, Mr Pickens is a smart man, so if he doesnt know what comes after natural gas, then probably nobody knows. If we take a closer look, the only alternatives that I can see in the long run is electricity or hydrogen, these two energy carriers could pontentially offer zero emissions and still meet world demand, provided that the energy needed to generate electricity or hydrogen are renewable, or at least offers zero emissions. And this is theoretically possible if we allow the use of nuclear power. Wind and solar can deliver a large amount of energy, but they are intermittent sources so nuclear will probably be needed to balance the system. Someone would probably bring up biostuff here, but the problem with bio is that it is not really scalable. At least none of the bioenergy sources I have seen have the potential of covering any significant share of world energy demand, unless we are willing to dedicate areas the size of continents to produce bio feedstock.

Based on currently available technology, and the outlook for technology development, it is very difficult to see what is on the other side of that bridge. So that leaves us with a sort of philosophical question; is it really a “bridge” fuel if we dont know where it lands?

For myself, I am very much result oriented as they call it in all the personality tests. And typical for result oriented people is a need to see at least the contours of a solution – we dont like to get going and make road as we move. So I need to find an answer I believe in – a draft version of sustainable future energy mix.

I’ll ask Twitter for help, follow my account to see how it goes.

What comes after natural gas?

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Posted by Lars Petter Blikom February 29, 2012

100 years of diesel ships

This month marks the 100th anniversary of MS Selandia, which embarked on its maiden voyage from Copenhagen to Bangkok on 22nd February 1912. She was a cargo ship dedicated for a route between Scandinavia, Genoa, and Bangkok. And as she was built in times when great glory was associated with shipping, she had luxurious cabins for 20 first class passengers.

What was special about MS Selandia was that she was the first diesel powered ship, being propelled by two eight-sylinder diesel engines and twin screw propellers. Compared to the coal fired steam plant the ships of her time used, the diesel engine offered huge benefits:
- Much longer sailing distance
- Much less soot and heavy emissions
- Much cleaner engine rooms and better working conditions for the crew
- Better economics (they say this, but I dont know the details of oil and coal prices of that time)

Looking back, it is hardly surprising that this superiour performance would motivate a transition of the entire shipping industry towards diesel. But shipping is slow to move and it took about 40 years before the last coal fired ship in international trade was scrapped. But there are some domestic areas in the world that hasnt seen much development in their shipping sectors, inland waterways in the US for example, and from what I hear there might actually still be one or two coal fired steam ships out there.

The steam turbines on the other hand, have certainly outlived the coal fired boilers, and have been in use to this day, particularly on gas tankers. Today, the steam turbines might see something of renaissance as they may offer high efficiency and much reduced maintenance when natural gas is used as fuel.

Apropos natural gas and LNG – is it just me? or do you see some parallells here? The first LNG fuelled ship, Glutra, was launched in 2001, and offers much the same benefits over diesel as diesel offered over coal a hundred years ago, except the longer sailing distance. In other words, we are already 11 years into the transition from diesel to LNG.

MS Selandia is being tributed with three floors of exhibition at the Diesel House in Copenhagen. We’ll see if the next 29 years won’t send another 60 000 diesel fuelled ships to the museums.

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Posted by Lars Petter Blikom February 27, 2012

LNG for small scale electricity generation

At DNV, we have recently finalized a study looking at various aspects of implementing LNG as the main fuel supply for distributed power generation and microgrid systems. The study covers key challenges, environmental and economical assessments, as well as a case study for Indonesia.

A new DNV study on LNG in small and micro size electricity generation

Over the past year or so we have gotten increasing amounts of questions related to using LNG for all sorts of small scale application. Just a few years ago, if you were building a small scale power plant either for an isolated island or for dedicated industry use, the default fuel supply would be heavy fuel oil or diesel products. If you have this need today, you are likely to search for other alternatives as oil based fuels are becoming very expensive. Very often, the most promising alternative is natural gas.

This study provides an  overview of all the components of the required supply chain and the key technical and logistical solutions. Technical challenges with implementing LNG fuelled power generation in microgrids are presented and assessed, and a framework for economical and environmental comparison of such power generation with conventional systems is provided.

A clear conclusion from the study is that by aggregating demand from small consumers that are off grid (industrial and communities on by micro grids), significant environmental benefits can be achieved in a way that in most scenarios also will save money.

The study was co-led by Dr. Sanjay Kuttan, Director at DNVs Clean Technology Center in Singapore. The full report can be downloaded here.

 

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Posted by Lars Petter Blikom February 21, 2012

LNG bunkering is materializing

Since the topic of LNG as a marine fuel really took off, I’d say some two years ago, the industry speakers have developed a few mantras; they always refer to the chicken and egg situation that we are facing. Everybody has heard it so many times now, that they all know what it means: the LNG bunkering availability can’t develop before there are enough ships asking for LNG, and LNG fuelled ships can’t be ordered before there are LNG bunkering available to them. You also hear quotes like “everybody is sitting on the fence, waiting for someone else to take the first step”.

Well, dear industry colleagues, it is time to stop recycling old powerpoint slides, look up from your keyboards, and get updated on all the things that are actually happening. Because the above statements about chicken and egg are simply not correct anymore.

Over the past year, we have seen these developments:

  • The worlds largest bunkering hub, Singapore, has communicated clear ambitions for supplying LNG in 2014 at the latest
  • Almost all large North European ports have communicated plans for LNG availability within 2013-2014: Rotterdam, Zeebrugge, Hamburg, and several more
  • All the ports, and their respective port authorities are demonstrating action – it is not just talk
  • One year ago the oil & gas majors were not interested. The volumes were too small they said. Since then they have clearly done the math, and more or less all of them now indicate quite significant interest in this growing market
  • Risk analysis and operational procedures are being developed for various places, and they will all be pulled together in a ISO standard for LNG bunkering to be published in draft format by the end of the year – that is probably a world record in fast development of an international standard
  • Various small players are lurking around looking for their angle in the LNG supply and bunkering business
  • The first speculative order for a LNG bunker barge will probably be placed soon (my prediction)

What more can you ask for? This is developing like a wild fire in most corners of the world! So please stop referring to the chicken and egg situation and how much it slows down progress.

At least this hen came before this egg, but if that is the general rule I don't know.

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Posted by Lars Petter Blikom January 24, 2012

Can floating LNG imitate development of FPSOs?

The first attempts on drilling submerged wells started already before 1900, but this was just some rigs on piles in shallow lakes. The development slowly picked up speed in the US and Canada, and in 1947 the first well out of sight of land was drilled. This marked the beginning of a period with exponentially increasing offshore activity, but all the installations and rigs were still standing firm on the seabed in shallow waters. Soon, it also became a necessity to develop fields in deeper waters, and as a consequence the first semi-submersible drilling rig was launched in 1963. The first floating, storage, and offloading (FPSO) unit, was launched in 1977 and was named Shell Castellon.

Don’t worry, I don’t go around remembering all this stuff, it is from Wikipedia.

Anyway, in 2016, the world will take delivery of its 331st FPSO, which means an average of 8,5 units delivered per year. If current expectations to floating LNG units materializes we will see the 50th floating LNG unit delivered in 2020 – this includes liquefaction plants, FSRU important terminals and SRV re-gas vessels. And as the graph below indicates, that means the development has gotten off to faster start than oil FPSOs did. I’ll let you do your own speculation about what will happen after 2020.

How popular will floating LNG units become?

 
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Posted by Lars Petter Blikom January 16, 2012

Natural gas demand is pushing LNG production offshore

Finally, some will say, we can apply learning and technology developed over many years. The first idea for a floating unit for liquefaction of natural gas was developed in the late 1970’s for the Snøhvit field in Northern Norway. The environment was harsh, with cold winters and big waves, and the reservoir was offshore and remote. DNV was part of the development and issued class rules for “barge-mounted liquefaction plants” already in 1978. 34 years later, such a unit has still not been built, but this does not mean that the industry has been idle. Great progress has been made in resolving many of the key technological challenges.

One key challenge that was brought forward early on was sloshing, waves inside the cargo tanks slamming into the tank walls. Over the years, this has been continuously addressed with calculations, simulations, and full scale measurements. Several tank designs have been designed, tested, operated, and improved. Today, sloshing is still a key challenge when designing floating LNG units, but the decision basis is very good – we know what works and what doesn’t.

Another challenge has been transfer of LNG in offshore locations. The traditional system with loading arms is robust and reliable for LNG transfer to shore in sheltered waters. In offshore locations, with large movements, the demand for flexibility in the transfer systems is much higher. Several solutions, both rigid pipe installations and flexible hoses, have been developed. Many have been through extensive technology qualification procedures, so today there should be several options available for developers of offshore LNG units.

Floating units for liquefaction of LNG are among the most complex and capital intensive projects you can imagine, and we could go on and on about challenges; how to fit all the processing equipment on such small deck space, how to arrange for emergency disconnection, how to ensure vessel motions does not impact process performance, how to do maintenance on the cargo tanks in offshore location. In DNV we have compiled some knowledge from the past decades on all these challenges in an “Offshore Technical Guidance” document we issued last year.

If we turn to an outlook for natural gas, this time with the IEAs Golden Age of Gas Scenario as our source, the global liquefaction capacity will increase from 380 billion cubic meters in 2011 to 540 billion cubic meters in 2020. This is probably not possible to achieve without floating units for some of these projects, which is also already materializing. The Prelude field in Australia will probably be the first floating liquefaction plant in operation in 2014. Next may be more fields in Australia, Malaysia, Papua New Guinea, and Brazil. And as the technology matures and operational experience is gathered, it can be expected that many more projects will be launched. It is an exciting development to watch.

You shouldn’t trust me any more than any other energy analyst out there, but I do believe IEA’s Golden Age of Gas is a fairly good description of the future – except of course they have underestimated demand, which is sort of a recurring theme here at DNVs LNG Blog.

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Posted by Lars Petter Blikom January 4, 2012

2011 in review: The year the world turned towards LNG

I want to start todays post with a Happy New Year to all readers! I hope the celebration stood in good relation to the great year for LNG in 2011. In a few weeks here in China, we will move from the year of the rabbit to the year of the dragon – sounds like a pretty good change if you ask me.

First and foremost, 2011 was the year when the LNG industry got to demonstrate that it has grown into a large industry with flexibility to adapt as the market changes. When the nuclear power plants in Japan shut down following the devastating earth quake, most of the energy shortage was covered by increased LNG imports. Throughout the year, natural gas prices outside of US continued to increase, creating more confidence in future liquefaction projects in Australia and various parts of Asia and Africa. This growing price disparity between US and the rest of the world also was fuel to the proposals for LNG export projects based on US shale gas supply. I feel confident that LNG trade will continue to grow in 2012. And I feel confident that analysts will continue to debate whether or not LNG is a commodity yet.

Even if the growing volumes of LNG trade has a big impact on global energy markets, it is probably the downstream developments that ensure that “LNG” is suddenly a term known to the masses. The implementation of LNG in the transportation and industrial generator sectors has opened the door for this industry to a whole new set of people. And this development has brought about the need for blog posts like “What is LNG?”. Judging the amount of interest we see, particularly for the maritime applications of LNG as a fuel, there should be absolutely no doubt that this topic will become even hotter in 2012.

I will not make projections for 2012, other than to say that I believe China will continue to have a big impact. The year of the dragon symbolizes some characteristics like ambition and power, but also self-sufficiency. So you can use it to argue either strong continued growth in LNG imports or quick developments of domestic shale gas. In a later blog post we may investigate whether Chinese horoscopes or energy analysts have the better track record.

May 2012 bring more strong developments for LNG! But also some suprises, please!

As China enters the year of the dragon, its appetite for natural gas will continue to increase.

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