Cluster Liquefied Natural Gas: A New Paradigm for Small- and Medium-Scale LNG Business
Small- and medium-scale liquefied natural gas (LNG) is different from conventional LNG in trading distances, target markets, and application areas. Small- and medium-scale LNG may better coordinate needs between regional gas producers and consumers.
Small- and medium-scale liquefied natural gas (LNG) is different from conventional LNG in trading distances, target markets, and application areas. Small- and medium-scale LNG may better coordinate needs between regional gas producers and consumers. Cluster LNG is a new concept of LNG technology suitable for emerging market environments. High performance of cluster LNG originates from higher liquefaction temperature and the adoption of efficient refrigerants for the temperature ranges. The inherent high performance of cluster LNG enables low capital expenditure (CAPEX) and low operational expenditure (OPEX).
Small-scale LNG has so far constituted only a minor portion of global LNG production. However, there are many necessities of regional energy infrastructures and technologies that are different from those of traditional LNG. In Southeast Asian countries, natural gas and LNG sometimes compete with diesel oil rather than large-scale pipeline gas or large-scale LNG. At the same time, there are many small scattered gas sources remaining to be monetized for domestic markets in the region. Nevertheless, these domestic gas fields have not been developed properly so far because of small units of production and, as a result, high cost per unit. In this regard, new technologies suitable for small- and medium-scale LNG development may be necessary.
LNG for global exports and LNG intended for regional demands may need different approaches. Typical large-scale LNG aims to export at a radius up to 10 000 km; on the other hand, small- and medium-scale LNG may need only a 500- to 2 000-km radius.
Small- and Medium-Scale LNG Business
Tasks. Table 1 summarizes differences between conventional (large-scale) and small- and medium-scale LNG. Small-scale LNG has a higher unit production cost than conventional LNG, but it may have more freedom and variations in transportation distances and compatibility potential when compared with other LNG products.
A typical regional coverage of 500 to 1 000 km is a broad and feasible range for small- and medium-scale LNG business. Within this range, there would be several gas sources and consumers. Prioritization of gas supply to areas in the vicinity would make sense by reducing the transportation costs. For small- and medium-scale LNG, there would be little possibility of LNG export over long distances.
Though pipeline natural gas is ideal fuel for replacement of expensive diesel oil in industrial plants and other applications, it cannot be accessed in many remote areas because of economic and technical reasons involving pipeline installation. Therefore, as mentioned previously, small- and medium-scale LNG competes with diesel oil rather than pipeline gas in many cases. Small- and medium-scale LNG plants usually receive feed gas from the existing pipeline. The high price of diesel oil may justify the construction of small- and medium-scale LNG plants as long as the price difference between diesel oil and feed gas is more than USD 4–8 million/Btu.
In conventional LNG, a parcel size is typically 140 000 to 150 000 m3, whereas a parcel size in small-scale LNG is 40 to 10 000 m3. Customers for conventional LNG are usually large gas companies that own dedicated LNG receiving terminals and extensive distribution networks. In contrast, customers for small- and medium-scale LNG are end users who run industrial or small-scale diesel power plants. Target customers, LNG transportation, and applications are not the same for the two cases. The differences call for different technologies and business models.
Simplification of the Process. Simplification of the LNG plant would be important in the project economics. In most cases, heavy components of propane and butane have to be removed to comply with the calorific value of pipeline gas. Liquefied-petroleum-gas (LPG) extraction sometimes brings additional revenue. On the other hand, this adds complexity to a plant. Stringent gas-purity requirements of conventional LNG, especially nitrogen (N2) and carbon dioxide (CO2) contents, naturally mean higher plant costs. End-user boilers or gas engines would not have problems as long as pipeline-gas quality is met. Pipeline-gas quality requirements are much different from LNG quality requirements. Pipeline gas in most countries allows 2 to 3% CO2 and 3 to 4% N2 contents.
Because the LNG industry is capital- and technology-intensive, execution of LNG projects has been dominated by a limited number of companies. However, smaller project budgets and multiple options for choosing equipment vendors for small- and medium-scale LNG may expand local roles in equity, engineering, and construction.
Concept. Cluster LNG is a proprietary LNG-liquefaction and -storage system. The main characteristics of the cluster-LNG system are high liquefaction efficiency with higher-pressure liquefaction and integration of the entire LNG chains of liquefaction, transportation, and regasification. Providing gas-to-gas solutions to end users is the basis of the integrated-service work flow. Minimizing the final gas delivery price is achieved by optimizing all related segments and interfaces of LNG chains.
Contrary to conventional LNG, where each task of LNG production, transportation, and regasification is functionally segregated, a holistic approach to services to the customer is provided in cluster LNG. Therefore, end users may not have to concern themselves with difficult LNG technologies and related systems.
Cluster LNG has very high efficiency, with higher pressure and correspondingly higher liquefaction temperature, combined with efficient refrigerant application. Fig. 1 above shows a conceptual scheme of cluster-LNG technology. Because the fuel consumption for LNG production is low in cluster LNG, the equipment size (and, consequently, plant size) and CAPEX can be small compared with conventional-LNG systems. The low fuel consumption brings lower OPEX and lower CO2emission along with greater LNG output (less shrinkage from feed gas). Lower CAPEX and OPEX enable competitive business and project developments.
CO2- and N2-Tolerant Characteristics. Cluster LNG is very tolerant for CO2 and N2 contents in the feed gas. Fig. 2 shows typical CO2-solubility and frost-formation (freezing) characteristics in pure liquid methane (CH4). In higher-temperature and -pressure LNG, CO2 solubility can be increased to a percentage level in place of the traditional 50–100 ppm. The CO2-tolerant characteristics of cluster LNG simplify traditional acid-gas-removal units.
In LNG liquefaction, N2 higher than 1% should be removed from feed gas to prevent excessive N2 content in boiloff gas because the boiling temperature of N2is far lower than that of CH4. Removing N2 during the LNG liquefaction process requires additional refrigeration load and distillation-column process. The complexity of the system and the required energy are unfavorable for plant economics. Though high N2 content in conventional LNG is unacceptable in most cases, high N2 content in cluster LNG does not create problems in actual operation because of higher-pressure LNG storage. Therefore, separate N2-removing systems may not be necessary up to approximately 3% N2 content in the feed gas.
Simplification and Specific Application. Each country has its own natural-gas calorific-value standards. The heating-value requirement of pipeline gas is very lean compared with untreated natural-gas conditions. For that reason, heavier components, such as propane and butane, have to be removed from the feed gas to meet the calorific value. Heavy-hydrocarbon-component removal (HHR) requires complicated distillation columns and separate cooling and storage systems. Even though the extracted propane and natural-gas liquid may be sold to different markets for larger-capacity LNG plants, the additional system required is burdensome in terms of LNG-production cost for small- and medium-scale LNG. In cluster LNG, because the integrated system can be designed for end-user requirements, no separate HHR system may be necessary unless specific requirements are imposed.
Economics and Application
Power-Plant Application. As a case study of the comparison between conventional- and cluster-LNG systems, a gas-engine diesel power plant has been selected. Overall economics from feed gas, LNG liquefaction, transportation, and power generation have been evaluated in this study.
In a conceptual scheme for LNG production and power generation, the feed gas is obtained from the existing pipeline. The pipeline gas is usually more expensive than the gas sourced directly from production gas fields. On the other hand, the pipeline gas has the advantages of gas quality and access to a stable supply of the feed gas. In the comparison of the two systems, the difference between feed-gas and LNG sales prices is more important than the difference between absolute prices. The feed gas is liquefied at an LNG plant, and the produced LNG is stored in the storage tanks. In the case of cluster LNG, a liquefaction technology is applied that differs from that used in conventional LNG. The liquefaction cost difference between the systems virtually determines the overall economics.
The produced LNG is transported by shuttle LNG carriers. The shuttle-LNG-carrier capacity for this project is small, approximately 8 000 to 12 000 m3. Because the capacity is small, the LNG carrier may be deployed by installing multiple International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk Type C LNG storage vessels in a small bulk carrier or container ship instead of by dedicated-LNG-carrier construction. Cluster-LNG systems need higher-pressure tanks for produced-LNG storage, which would increase the LNG-storage and -transportation costs somewhat.
Buffer LNG storage tanks are necessary in power-plant areas. The LNG is regasified by ambient air-type or seawater-type vaporizers and supplied to multiple gas/diesel engines. The power-plant system is standard, so there are no special power-generation-cost differences between conventional- and cluster-LNG systems, except the delivered LNG prices.
Fig. 3 shows conceptual cost composition for a gas-fired diesel-engine power plant. In this case, an integrated project combining feed gas, LNG production, supply to power plant, and electricity generation has been considered. The main cost contributors are feed-gas and LNG-production costs. Considering that the power-generation CAPEX, efficiency, and feed-gas price are not much different from plant to plant, the LNG-production cost including LNG storage and transportation is the governing factor in the economics. Noting that LNG-production cost is highly dependent upon applied technologies, whereas feed-gas price is determined by external factors, the LNG-production cost virtually decides the power-generation cost. For this reason, keeping LNG-production costs competitive by means of efficient liquefaction technology is important for project success.
LNG-production costs comprise costs of LNG liquefaction, storage, transportation, and regasification. Liquefaction cost is dependent on the LNG-plant cost, feed-gas price, fuel consumption for LNG production, and other operational expenses. As described earlier, there are distinct performance gaps between conventional- and cluster-LNG systems. Because larger-capacity equipment is required for a conventional-LNG plant, the increased cost from larger CAPEX is burdensome. In addition, because conventional LNG consumes far more fuel for LNG production, the OPEX of conventional LNG is very high.
Cluster-LNG systems need higher-pressure LNG-storage tanks. Therefore, their CAPEX for storage tanks is higher than that of conventional-LNG systems. However, because the distance from the LNG-production site to the power plant is relatively short in this case, the CAPEX increase from the special storage tank is not so significant.
Regasification processes for the two systems are almost the same, so the regas-operation cost difference between the systems is very small. Further comparison of the two systems is provided in the complete paper.
This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper SPE 171510, “Cluster Liquefied Natural Gas: New Paradigm for Small and Medium Liquefied-Natural-Gas Business,” by JungHan Lee, LNG Solutions, prepared for the 2014 SPE Asia Pacific Oil and Gas Conference and Exhibition, Adelaide, Australia, 14–16 October. The paper has not been peer reviewed.