the right fi t for the lng value chain....lng market outlook 2014/15’, bg group said that 122...

17
The right fit for the LNG value chain. LNGINDUSTRY | April 2015 www.lngindustry.com April 2015

Upload: others

Post on 07-Mar-2021

0 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

The right fi t for the LNG value chain.

LN

GIN

DU

ST

RY

| Ap

ril 2015 w

ww

.lngindustry.com

April 2015

Page 2: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

Make it faster. Make it smaller. Make it better.

Make it yours.

Bringing energy and the environment into harmony.®

Rotating equipment solutions that generate the results you want.When you have a challenge out there in the fi eld, you want your solution, not someone else’s. And that’s precisely what you get with Dresser-Rand. That’s because our experts will work hand in hand with your experts to create a solution that’s exclusively yours. One that not only makes sense, but makes a di� erence for your business. To see how we’ve helped some of the biggest names in the industry achieve their goals, visit dresser-rand.com/yours

82229_DR_WorkingTogether LNG Industry B- 216 mm x 303 mm T- 210 mm x 297 mm L- 190 mm x 277 mm 4C

Visit us atOTC 2015,Booth 8235

82229_DR_WorkingTogether__LNGI.indd 1 3/16/15 1:36 PM

Page 3: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

LNG Industry is audited by the Audit Bureau of Circulations (ABC). An audit certificate is available on request from our sales department.

CONTENTSISSN 1747-1826

ON THIS MONTH’S COVER

Copyright © Palladian Publications Ltd 2015. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying,

recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers

endorse any of the claims made in the articles or the advertisements. Printed in the UK.

APRIL 2015

21 Weathering the stormNick Prowse, Claire Wilby, Scott McCabe and Thomas E. Valentine, Norton Rose Fulbright, consider future LNG market trends in a world of lower oil prices.

24 Driving developments at Freeport LNGMario Bruno, Clayton Finney and Paola Rotondo, GE Oil & Gas and GE Power Conversion, outline the advantages of using an electric motor-driven compression system for the Freeport LNG Project.

33 Fit for exportGuy Dayvault, Veresen Inc., USA, examines why US West Coast LNG tolling facilities are fit for Asian markets.

37 Choosing a profitable pathMelania Charles and Andrew Jennings, Cosmodyne LLC, USA, consider the benefits of a multi-train strategy to building capacity in today’s LNG market.

41 Special requirementsMatthew Hobden, Atlas Copco Rental, Australia, explores a variety of specialised rental solutions required throughout the lifecycle of an LNG plant.

45 Avoiding the pinchRalph H. Weiland, Nate A. Hatcher and R. Scott Alvis, Optimized Gas Treating Inc., USA, examine how to improve deep CO2 removal with interstage cooling in LNG and syngas plants.

49 Coalescing mercury contaminantsHal Alper, MYCELX Technologies Corp., USA, shows that a significant portion of mercury in LNG is an aerosol that can be removed upstream using coalescer technology.

53 Out in the coldSally Zhou and Rick Lowery, Norplex-Micarta, USA, examine the effectiveness of glass-based insulation material in cryogenic applications.

56 Fire and iceMatt Collins, Advanced Insulation Ltd, UK, discusses how the increasing demand for floating LNG facilities has created a challenge to provide cost-effective cryogenic spill protection and subsequent passive fire protection.

62 The power behind the throneLes Elby, AVEVA, UK, takes a look at the powerful software tools that can make LNG one of the most efficient capital project industries.

67 A fuel for the agesSean Bond, ABS, USA, considers the importance of LNG as fuel today, as well as in the future.

71 Cornerstones of the futureJan Tellkamp and Henning Mohn, DNV GL, discuss the development and operation of global LNG bunkering facilities.

76 Play by the rulesCarlos Guerrero, Bureau Veritas, France, considers some of the challenges for LNG carrier certification.

03 Comment

05 LNG news

12 US LNG: shifting focusDavid Stokes, Olly Spinks and Howard Rogers, Timera Energy, UK, examine the role of US LNG in a world of falling prices.

Linde Process Plants, Inc. (LPP) is a member of the Linde Engineering division of The Linde

Group, a world leading gases and engineering

company. LPP, located in Tulsa, Oklahoma, US, is a single-source technology,

engineering, procurement and construction firm.

Areas of expertise include gas processing, refining,

LNG and deep cryogenics. For more information visit:

www.lppusa.com.

LNG_April_2015_12-20.indd 12 31/03/2015 16:32

APRIL 2015 LNGINDUSTRY 13

In September 2014, spot and contract prices for Asian LNG were around US$15/million Btu, an attractive target for dozens of new US export project developments.

Fast-forward into 2015 and Asian LNG prices have collapsed to half that level. The LNG spot market is swamped with surplus cargoes and the decline in crude oil prices is dragging down long-term contract prices.

More than 100 million tpy of new liquefaction capacity is under construction and due to be commissioned by the end of 2019. This new capacity now threatens to tip the global gas market into a state of pronounced oversupply. The market conditions that are developing in 2015 are set to redefine the investment economics of US export projects and the role of US LNG in the global gas market.

David Stokes, Olly Spinks and Howard Rogers, Timera Energy, UK, examine the role of US LNG in a world of falling prices.

LNG_April_2015_12-20.indd 13 31/03/2015 16:32

12

The right fi t for the LNG value chain.

LN

GIN

DU

ST

RY

| Ap

ril 2015 w

ww

.lngindustry.com

April 2015

Page 4: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

Angola | Brazil | Kazakhstan | Malaysia | Republic of KoreaUnited Arab Emirates | United Kingdom | United Stateswww.aisplc.com

Advanced Insulation Advert LNG Industries 04.indd 1 31/03/2015 09:55:43

Page 5: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

COMMENTCALLUM O’REILLY EDITOR

CONTACT INFORMATION

Managing Editor James Little [email protected] Callum O’Reilly [email protected] Editorial Assistant Katie Woodward [email protected] Director Rod Hardy [email protected] Manager John Baughen [email protected] Stephen North [email protected] Manager Tom [email protected]

Editorial/Advertisement Offices, Palladian Publications Ltd, 15 South Street, Farnham, Surrey, GU9 7QU, ENGLAND, Tel: +44 (0) 1252 718 999 Fax: +44 (0) 1252 718 992 Website: www.lngindustry.com

Website Editor Callum O’Reilly [email protected]

Digital Editorial Assistant Joseph Green [email protected]

Circulation Manager Victoria McConnell [email protected]

Subscriptions Laura Cowell [email protected]

Office Administrator Jo Repton [email protected]

Publisher Nigel Hardy

LNG Industry Subscription rates:Annual subscription: £50 UK including postage£60/d85 overseas (postage airmail)US$ 95 USA/Canada (postage airmail). Two year discounted rate: £80 UK including postage£96/d136 overseas (postage airmail)US$ 152 USA/Canada (postage airmail).

Subscription claims:Claims for non receipt of issues must be made within 3 months of publication of the issue or they will not be honoured without charge.

Applicable only to USA & Canada.

LNG Industry (ISSN No: 1747-1826, USPS No: 006-760) is published ten times per year: January, February, March, April, May, June, August, Septemer, October and November, by Palladian Publications Ltd, GBR and distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ and additional mailing offices. POSTMASTER: send address changes to LNG Industry, 701C Ashland Ave, Folcroft PA 19032.Uncaptioned Images courtesy of www.bigstockphoto.com and www.shutterstock.com

Last month, some parts of the world were able to witness a spectacular solar eclipse. Unfortunately, heavy cloud cover in the south of England meant that the view from our

office was far from breathtaking, so our attention instead turned to energy concerns that spread across Europe in the build up to the celestial event.

Major users of solar power, especially Germany, braced themselves for a sudden dip in energy generation (as the moon slid across the sun), followed by a sharp surge in demand (as people resumed their normal activities). The European Network Transmission System Operators for Electricity (ENTSOE) described the eclipse as an “unprecedented challenge” for European transmission system operators, explaining that up to 35 000 MW of solar energy (the equivalent of approximately 80 gas-fired power stations) would gradually fade out of the system as the moon began to obscure the sun’s disc. Indeed, ENTSOE refused to rule out the possibility of power cuts.

Aside from rare cosmic coincidences, energy security has been a hot topic in Europe in recent times, on the back of the continent’s increasingly fragile relationship with Russia. At the height of the tensions in March 2014, following Russia’s annexation of Crimea, there were calls for the US to expedite LNG exports to help its vulnerable allies in Europe diversify their energy supplies. However, at that time, US LNG exporters were very much targeting Asian markets, where the spot price of LNG stood at record highs.

Just over a year later and, once again, much has changed in the LNG industry. Asian spot prices have collapsed on the back of mild weather, reduced economic growth in a number of key importers, and falling oil prices. Anticipation of a period of pronounced oversupply in the global gas market, led by a wave of new LNG from Australia, is compounding weaker spot prices. In its ‘Global LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating LNG (FLNG) units currently under significant construction.

All of these factors will drag down long-term contract prices and force US exporters to reconsider their options. As Timera Energy explains in this month’s regional report, starting on p. 12, “Oil-indexed Asian contract prices are set to fall below US$8/million Btu in the summer of 2015, as the lagged impact of the crude price fall feeds through into contract price formulas. This means that the structural Asian LNG price premium over European hubs has essentially disappeared.” The authors suggest that, given current pricing dynamics, “US LNG exports to Asia look at best marginal […] and could become unprofitable if spot LNG prices continue to decline in 2015. This opens up the prospect of large volumes of US exports flowing into European hubs.”

Experts at Norton Rose Fulbright seem to agree: “With reduced LNG prices in the Asia-Pacific basin, reports suggest that US LNG may be too expensive for the Asian market and that it may instead be diverted to Europe. Such a change could lead to a significant shift in the European energy market, potentially offering LNG as a viable economic alternative to European pipeline gas.”

Although the LNG industry faces significant challenges and fundamental changes in the short-term, particularly in the US, we should remember that the long-term outlook remains promising as buyers around the world seek a stable, reliable and environmentally friendly source of energy. In its aptly named article, ‘Weathering the storm’ (p. 21), Norton Rose Fulbright eloquently describes the durability of our industry: “The LNG business is a long-term business, based on an efficient supply and demand system, which has demonstrated its ability to respond to major structural changes in the market, such as the unprecedented development of shale gas in the US and the Japanese earthquake and tsunami in March 2011.”

Confidence in the LNG market remains. Perhaps we should consider the current challenges as but a minor moon, temporarily blocking the light to a glorious golden age for the LNG industry.

Page 6: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

Johnson Matthey offers a comprehensive range of high-performance absorbents for the removal of mercury and sulphur from hydrocarbon streams for gas processing and LNG.

By carefully co-ordinating the choice of absorbent for the duty, we enable our customers to maximize production and optimize their plant operations. Many of our customer relationships span several decades and we work in partnership with them to meet all of their purifi cation needs.

Our range of PURASPECJM fi xed bed technology provides:

∆ Impurity removal to a very low level

∆ Hg removal down to less than 10 ng/Nm3

∆ Effective low temperature operation

∆ Simple and fl exible operation

∆ Easy retrofi tting

∆ No hydrocarbon losses

∆ An environmentally friendly solution

∆ Plant optimization assistance

∆ Over 300 references worldwide

∆ PURACAREJM – a proven reprocessing route

mercury removal solutions

www.jmprotech.com

UK Tel +44 (0)1642 553601 Fax +44 (0)1642 522542

23784 JM LNG advert March 2015 A4.indd 1 12/03/2015 14:27

Page 7: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

LNGNEWS

APRIL 2015 LNGINDUSTRY 5

USA

US Coast Guard and Maritime Administration suspend review of Port Ambrose LNG

The US Coast Guard (USCG) and the US Maritime Administration (MARAD) have temporarily suspended

their review of the proposed Port Ambrose deepwater LNG import terminal.

The project, proposed by Liberty Natural Gas, will be located off the coasts of New Jersey and New York. The regulatory review period has been extended to account for the weight of public comment, amounting to over 10 000 statements.

The suspension has been implemented to allow the USCG and MARAD to complete their final Environmental Impact Statement (EIS) for the project and to allow Liberty to submit financial responsibility data.

In response to public request, MARAD extended the draft EIS public comment period from 45 days to 90 days, which concluded on 16 March 2015. However, in a letter addressed to Liberty Natural Gas, the USCG explained that it still lacks “information necessary to complete development of the final EIS and make a determination of financial responsibility.”

The volume of public comments, which include letters and petition signatories, is too large for the USCG and MARAD to respond to in the allotted 21-day period.

Australia

LNG Ltd extends lease for Fisherman’s Landing project

L iquefied Natural Gas Limited (LNG Ltd) has announced that its subsidiary, Gladstone LNG Pty Ltd, has

extended the Fisherman’s Landing LNG project (FLLNG) site lease to 31 March 2016.

The site agreement for lease, which is with the Gladstone Ports Corp. (GPC), was extended for a cost of AUS$1 million. The company has also received an extension from the government for the completion of construction of the FLLNG project, to 31 December 2017.

The Queensland Department of Natural Resources and Mines extended the dates for completion of the project under Petroleum Facility Licence No. 18 (PFL 18) and Petroleum Pipeline Licence No. 161 (PPL 161).

LNG Ltd is still investigating opportunities for gas feed stock to FLLNG, and discussions with potential LNG buyers supplying the Asian market are ongoing.

The decision to continue progressing the project will not compromise the Magnolia LNG or Bear Head LNG projects.

The Netherlands

Gate terminal begins LNG break bulk construction project

Gate terminal has announced the start of construction activities on the new LNG break bulk infrastructure in

Rotterdam, the Netherlands.A new harbour basin and quay wall will be built by the

Port of Rotterdam Authority as part of the new facility, which will be located next to Gate terminal.

Gate will construct the LNG installations, including berthing and loading facilities dedicated to bunker ships and smaller tankers, enabling LNG bunker operations in the port of Rotterdam and further distribution of LNG in Northwest Europe. The new facilities are based on a multi-user service model, open to all interested parties, and will have a maximum capacity of 280 berthing slots per year. The finalisation of the construction, commissioning and first loading operations are planned towards the end of the first half of 2016.

Dick Meurs, Managing Director, Gate terminal, said: “Gasunie, Vopak and Gate have jointly developed an innovative LNG break bulk concept upgrading the LNG hub capabilities of Gate terminal and enabling our customers to supply LNG as cleaner fuel for transport, shipping and industrial applications.”

Page 8: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

LNGNEWS

6 LNGINDUSTRY APRIL 2015

NEWS HIGHLIGHTS

Canada

B.C. finalises LNG tax break measures

The Province of British Columbia (B.C.) has finalised the details of its Liquefied Natural Gas Income Tax Act,

providing clarity and confidence.Minister of Finance, Michael de Jong, said that the

introduction of Bill 26, the Liquefied Natural Gas Income Tax Amendment Act 2015, fulfils the government’s commitment to defining the remaining elements of a competitive LNG income tax framework.

The bill provides the industry with information about obligations and rights under the act, including the obligation to register, file returns and pay the tax, and the right to appeal. It also sets out the government’s powers to enforce the act.

The bill amends the Natural Gas Tax Credit under the British Columbia Income Tax Act to allow for the credit rate on the cost of natural gas to be adjusted above the existing 0.5% rate by regulation. This flexibility allows the Province to respond to the fluctuating cost of natural gas to maintain a competitive tax structure.

The Netherlands

Chart and Shell celebrate opening of LNG station

Chart joined in the celebrations as Shell opened its first LNG fuelling station in Rotterdam Waalhaven,

the Netherlands, for trucks operating in Europe.Earlier in March, members of the Chart-Ferox team

were invited to Rotterdam by Shell for the opening of the LNG fuelling station, which has the capacity to fuel 170 heavy duty vehicles per day. The LNG fuelling station has a capacity of 70 000 litres of LNG.

A statement from Chart said: “With more stations under construction and additional sites in the pipeline, it’s clear that, despite the recent fall in global oil prices, LNG continues to offer an attractive, cost competitive alternative to diesel, while proving to be a more environmentally friendly option as well.”

Chart-Ferox’s detailed scope of supply for the Rotterdam station includes engineering, fabrication, installation and commissioning of the LNG storage tank, off-loading, pump skids, control and safety system, interconnecting pipe work and the LNG dispensers.

.com

X Finland commits to expand LNG infrastructure

X Caribbean FLNG construction nears completion

X FERC approves Annova LNG pre-filing request

Get the free mobile app athttp:/ /gettag.mobi

Scan to visit the website

A World of SolutionsVisit www.CBI.com

Phot

o co

urte

sy o

f Cam

eron

LN

G.

All

Righ

ts R

eser

ved.

COMPLETE SOLUTIONS THROUGHOUT THE ENTIRE LNG LIFE CYCLEFrom FEED studies to commissioning and every step along the way, CB&I helps customers get their gas to market. Our expansive range of technology and EPC capabilities span the entire life cycle of a project — delivering consistent results anywhere in the world.

With recent awards and on-going projects in the U.S. Gulf Coast, Australia and China, CB&I continues to build on its legacy of leading in the LNG marketplace. Contact CB&I to learn how our complete solutions can benefit your next LNG project.

ONSHORE BASELOAD LIQUEFACTIONOFFSHORE LNG LIQUEFACTIONONSHORE LNG REGASIFICATIONONSHORE LNG PEAK SHAVINGLNG STORAGE

cbi_lng_industry_ad_apr_2015.indd 1 3/11/2015 10:42:34 AM

Page 9: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

A World of SolutionsVisit www.CBI.com

Phot

o co

urte

sy o

f Cam

eron

LN

G.

All

Righ

ts R

eser

ved.

COMPLETE SOLUTIONS THROUGHOUT THE ENTIRE LNG LIFE CYCLEFrom FEED studies to commissioning and every step along the way, CB&I helps customers get their gas to market. Our expansive range of technology and EPC capabilities span the entire life cycle of a project — delivering consistent results anywhere in the world.

With recent awards and on-going projects in the U.S. Gulf Coast, Australia and China, CB&I continues to build on its legacy of leading in the LNG marketplace. Contact CB&I to learn how our complete solutions can benefit your next LNG project.

ONSHORE BASELOAD LIQUEFACTIONOFFSHORE LNG LIQUEFACTIONONSHORE LNG REGASIFICATIONONSHORE LNG PEAK SHAVINGLNG STORAGE

cbi_lng_industry_ad_apr_2015.indd 1 3/11/2015 10:42:34 AM

Page 10: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

LNGNEWS

8 LNGINDUSTRY APRIL 2015

DIARY DATES

USA

Zachry awarded Freeport LNG contract

Zachry Industrial, together with joint venture partners CB&I and Chiyoda International Corp., has

been awarded a contract to build the third train of the Freeport LNG (FLNG) liquefaction and export facility, located on Quintana Island, near Freeport, Texas, US.

The contract is valued in excess of US$2 billion. The engineering, procurement and construction (EPC) scope of work includes a double-walled, full-containment 165 000 m3 LNG storage tank, which will be supplied by CB&I. Upon completion, the three train facility will have a total export capacity in excess of 13.9 million tpy of LNG.

Zachry constructed the original Freeport regasification terminal, which was completed in 2008. Freeport LNG awarded contracts in 2013 to the joint venture between Zachry and CB&I, supported by Chiyoda, to perform project development and EPC services for the first two trains of the liquefaction project.

Following regulatory approval, construction of trains one and two began in November 2014.

Malaysia

Yokogawa Kontrol wins PFLNG2 contract

Yokogawa Kontrol (Malaysia) has received an order from a consortium comprising JGC Corp. and

Samsung Heavy Industries to supply control systems and safety instrumented systems for Petronas’ second floating LNG (FLNG) facility (PFLNG2).

Yokogawa Kontrol (Malaysia), an affiliate of Yokogawa Electric Corp., will deliver an integrated control and safety system (ICSS) for the monitoring and control of the liquefaction facilities and storage tanks on PFLNG2. The ICSS will consist of a Yokogawa CENTUM® VP integrated production control system, a ProSafe®-RS safety instrumented system, a Plant Resource Manager (PRM®) package, a plant information management system, and other components. Yokogawa Kontrol will also be responsible for engineering, and the support of installation, commissioning, and training.

Petronas’ second FLNG facility is designed to produce 1.5 million tpy of LNG. It is expected to start production in 2018.

12 - 15 May 2015World LNG Series: Americas SummitAustin, Texas, USAlngamericas.cwclng.com

28 - 29 May 2015Tekna Small Scale LNG 2015Bergen, Norwaywww.tekna.no

01 - 03 June 2015ILTAHouston, Texas, USAwww.ilta.org

01 - 05 June 2015World Gas ConferenceParis, Francewww.wgc2015.org

08 - 11 June 2015FLNG 2015London, UKwww.icbi-events.com/event/flng-conference

23 - 25 June 2015CWC’s Small-Mid Scale LNG SummitAmsterdam, the Netherlandssmall-mid-lng.com

Page 11: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

For more information about UOP adsorbents, visit www.uop.com/adsorbents.© 2015 Honeywell International, Inc. All rights reserved

difference maker

Don’t refuse to reuse — extend the life of molecular sieves with UOP regenerative technology.

Goodbye waste. Hello improved performance. UOP adsorbents have been

proven time and time again to remove harmful and costly contaminants from

oil and gas processing operations to protect your equipment, personnel and

the environment. UOP’s vast portfolio of regenerative molecular sieves and

high-performance activated alumina adsorbents lets you reduce hazardous

waste generation by up to 90 percent. UOP has been at the forefront of

contaminant removal for more than 60 years. Join the hundreds of customers

worldwide who trust UOP preventative adsorbent solutions.

SPM-UOP-58 New Adsorbents Ad_A4_v2.indd 1 3/19/15 5:03 PM

Page 12: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

LNGNEWS

10 LNGINDUSTRY APRIL 2015

USA

Dominion celebrates Cove Point LNG construction

Dominion, together with its business partners and the Maryland community, has celebrated the construction of

the Dominion Cove Point LNG Liquefaction project.Kenichiro Sasae, the Japanese ambassador to the US, and

Maryland Governor Larry Hogan joined Dominion Chairman Thomas F. Farrell II at the ceremony.

“Cove Point will supply critical American allies in India and Japan with much-needed natural gas that will help reduce global greenhouse gas emissions,” said Farrell. “Although the doubters said it could not be done, in late 2017 our liquefier will be online, and ships will begin receiving LNG for export.”

The Cove Point project is a US$3.4 billion – US$3.8 billion project that will create thousands of skilled construction jobs, 75 permanent jobs and an additional US$40 million in annual tax revenue to Calvert County. Construction-related activities started in October 2014 and operations are projected to begin in late 2017.

Dominion has fully subscribed the capacity of the project with 20-year service agreements with ST Cove Point LLC, a joint venture of Sumitomo Corp. and Tokyo Gas Co. Ltd; and GAIL Global (USA) LNG LLC, a wholly owned subsidiary of GAIL (India) Ltd.

South Korea

Teekay celebrates MEGI vessel keel laying

Teekay has marked the keel laying ceremony of the Creole Spirit LNG carrier, the first of nine vessels powered

with M-type, Electronically Controlled, Gas Injection (MEGI) twin engines

The newbuildings are currently under construction by Daewoo Shipbuilding & Marine Engineering (DSME) and are due for delivery in 2016, on a charter contract with Cheniere.

The project is taking shape and approximately 60 000 insulation blocks per ship were installed temporarily for the assembly of the cargo containment system. Shortly after the keel laying ceremony, the MEGI engine was installed

on the Creole Spirit. Teekay is the first ship owner to order a MEGI-propelled LNG carrier, which are designed to be more fuel-efficient and have low emission levels.

The MEGI engine consists of the Burckhardt Compressor and the Partial Reliquefaction System. The compressor will take the boil-off gas from the cargo tanks and compress it to 300 bar for direct injection into the MEGI engine. The Partial Reliquefaction will take any of the excess gas not used by the engine and return it to a liquid state to put back into the cargo tank by dropping the excess gas pressure from 300 bar to 3 bar in a pair of Joule Thomson Valves.

Australia

Chevron sells interest in Caltex Australia

Chevron Global Energy Inc. has entered into an underwriting agreement for the sale of its 50% interest

in Caltex Australia Ltd (CAL).Commenting on the move, Michael Wirth, Executive VP,

Downstream and Chemicals, said: “This transaction reflects Chevron’s commitment to regularly review our portfolio and generate cash to support our long-term priorities. It is aligned with our previously announced asset sales commitment.

“We appreciate the strong performance of Caltex Australia over the many years we’ve been a shareholder, and look forward to a mutually beneficial supply and brand relationship for many years to come.”

Mark Nelson, President, International Products, Downstream and Chemicals, added: “Asia-Pacific is a core strategic focus for Chevron’s Downstream business and we remain focused on ensuring our operations, portfolio and investments are well-positioned to meet the region’s growing demand for energy.”

This announcement does not alter Chevron’s focus on moving the Gorgon and Wheatstone LNG projects towards start-up.

Page 13: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

OIL-FREE . MAX MTBO

LABY®UNIQUE SOLUTION FOR YOUR BOIL-OFF GAS APPLICATION

Best for LNG, LPG, LEG and other hydrocarbon gases

The ultimate contactless labyrinth sealing technology – no piston rings – no wear

Flexible compression of boil-off gas such as LNG at suction temperatures down to –170 °C (–250 °F)

Gas-tight design for zero emissions

For immediate start-ups without pre-cooling of the compressor

Highly reliable design and com-pressor components for highest availability of your compressor

Count on our experience: Thousands of compressors in operation, hundreds of long-term customers

→ www.recip.com/laby

YOUR BENEFIT: LOWEST LIFE CYCLE COSTS

Page 14: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating
Page 15: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

APRIL 2015 LNGINDUSTRY 13

In September 2014, spot and contract prices for Asian LNG were around US$15/million Btu, an attractive target for dozens of new US export project developments.

Fast-forward into 2015 and Asian LNG prices have collapsed to half that level. The LNG spot market is swamped with surplus cargoes and the decline in crude oil prices is dragging down long-term contract prices.

More than 100 million tpy of new liquefaction capacity is under construction and due to be commissioned by the end of 2019. This new capacity now threatens to tip the global gas market into a state of pronounced oversupply. The market conditions that are developing in 2015 are set to redefine the investment economics of US export projects and the role of US LNG in the global gas market.

David Stokes, Olly Spinks and Howard Rogers, Timera Energy, UK, examine the role of US LNG in a world of falling prices.

Page 16: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

14 LNGINDUSTRY APRIL 2015

Global gas price shockIn order to understand the emerging role of US LNG exports, it is useful to take a step back and view current global gas market conditions in the context of the recent past. There have been several distinct phases of global gas pricing over the last decade, as outlined in this article, and illustrated in Figure 1.

2006 – 2008: commodity super cycleThe gas market was dragged along in a highly correlated boom/bust cycle in global commodity markets. However, regional price convergence remained relatively strong, as did the linkage between spot and oil-indexed contract prices as a result of optimisation of contract flexibility.

2009 – 2010: gas supply glutGrowth in US shale production, new LNG liquefaction capacity and the global financial crisis combined to rapidly push the global gas market into a phase of oversupply. The surge in domestic production moved the US into a position of gas self-sufficiency.

2011 – 2014: Fukushima tightnessA more than 20% y/y increase in Japanese LNG demand precipitated a phase of tight and volatile spot LNG markets. This induced substantial volumes of European LNG supply to be diverted to higher priced markets, with US Henry Hub prices disconnecting from the rest of the global market. A surge in US export project applications was driven by the premium of Asian prices over Henry Hub and the expectation that this would continue for the foreseeable future. In addition, projects were supported by the level of European hub prices which would, if necessary, represent a viable ‘secondary

market’ for US LNG in excess of Asian market volume requirements.

2014: entering a new phaseThe second quarter of 2014 marked the start of a new phase in global gas pricing. As a warning sign, Asian spot LNG prices halved across the first half of 2014, from US$20 to US$10/million Btu. This was exacerbated by a lack of underground gas storage and limited LNG tank storage in Asian LNG importing countries.

European hub prices slumped in response. This was driven partly by surplus LNG flowing back into Europe, but also by high European storage inventories given the loss of 57 billion m3/yr of demand (y/y) as a result of a mild 2013/2014 winter. LNG spot prices made a brief recovery in 3Q14 in anticipation of the winter months. However, as confirmation that a structural transition was taking place, spot prices continued their decline into the winter of 2014 – 2015, with the crude price slump and a surplus of spot LNG cargoes adding to downward price pressure.

Price declines have not been limited to the spot market. Oil-indexed Asian contract prices are set to fall below US$8/million Btu in the summer of 2015, as the lagged impact of the crude price fall feeds through into contract price formulas. This means that the structural Asian LNG price premium over European hubs has essentially disappeared.

The global market looks to be entering a new phase of lower and more convergent regional gas prices, an environment that is not particularly friendly for US exports. Indeed, prices below US$8/million Btu preclude investment in most, if not all, new LNG projects on a full cycle basis, as well as the majority of conventional gas supplying Europe and Asia at current cost base norms.

Figure 1. Evolution of global gas prices. Source: Timera Energy.

Page 17: The right fi t for the LNG value chain....LNG Market Outlook 2014/15’, BG Group said that 122 million tpy of new supply capacity is expected by 2020, with 26 trains and four floating

THAT WAS A SAMPLE OF

For more information about LNG Industry, please contact us:

www.lngindustry.com E: [email protected]

T: +44 (0)1252 718999

APRIL ISSUE

DON’T WANT TO MISS OUT?You will need to register to read the full edition.

Please log in to www.lngindustry.com or alternatively click here to register for free!