Markets: Midsize and Floating LNG Starts Stepping on CNG Crew’s Toes

Butting heads over rival ideas for exploiting stranded gas

Marine compressed natural gas (CNG) has yet to see a commercial project come to fruition but now the sector is facing a new rival in the shape of floating or midsize LNG production.

The link is that both types of project are chasing stranded gas. There are, however, important differences.

Land-based midsize LNG solutions or offshore production projects require a shore or ship-based liquefaction unit and must factor in the cost of LNG carriers or hulls upwards of at least 75,000-cbm if project economics are to make any sense.

A marine CNG project would need to cost in the compressor units to handle the gas and reception facilities, but here it is the fleet of pipe-carrying vessels that are expected to make up around 80% of the bill.

Ships would be designed to suit projects but would likely be much smaller than their LNG cousins, able to transport gas over distances between 500 and 3000 nautical miles in contrast to the mainly long-haul business for LNG carriers.

Proponents of CNG, currently numbering around six, say these midsize LNG projects are not a threat. However, at this week’s annual CNG Forum in St John’s they were admitting it is causing a few hold-ups.

“We’ve seen a couple of projects where they want to wait and see how mini LNG evolves,” TransCanada’s CNG business development director Gary Stephen said.

“LNG is the sexy word in the industry right now. Everyone wants it but very few can afford it and there is no supply.”

Stephen said LNG developers are moving down into the 200 million to 500 million cubic feet per day gas production range.

He added companies looking for oil discover gas and start thinking that all these small fields could add up to an LNG project, so they hang on to see what develops. However, they risk losing out since the economics of transporting the gas are actually pretty good at present, he said.

Stephen and other would-be CNG developers also question the real cost of some of the midsize LNG projects, pointing out that such schemes are still going to need large quantities of stainless steel, which currently costs around $4000 per tonne. Robert Dick of Sea NG said there is no doubt the midsize LNG developers are aggressively pushing their projects and moving into that space traditionally seen as being occupied by CNG.

He said at the moment it is not really understood where the boundary line should be drawn.

Enersea Transport managing director Paul Britton highlighted the delay effect on CNG from the other end of the supply chain.

He said companies like Excelerate Energy and other shipowners that offer on-board regasification vessels as import solutions have been successfully convincing the governments of small markets, such as Singapore and some South American countries, to investigate services where LNG can be imported via a $50 million buoy system.

Britton said it is often governments who are evaluating these projects for security of supply purposes and not necessarily independent power producers, which are unlikely to want to pay up for the spot cargoes that would be imported through them.

Despite their differences, midsize and floating LNG production and CNG both have one key thing in common: both have still to see a project get off the blocks.