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Off the Scale: BRG’s Joanna Martin Ziegenfuss On the Current State of Small Scale LNG

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According to TechSci Research, the Global small scale (Liquefied Natural Gas) LNG market is expected to reach over $47 billion by 2021, and infrastructure specialist Seth Adjei Boye has written in “Small Scale LNG Projects” that “There are at least a dozen projects ranging from one million to one-hundred million cubic feet per day (7,000 to 700,000 metric tons per year) under development around the world”. I sat down with an expert in small scale LNG market analysis, Joanna Martin Ziegenfuss, Associate Director of Berkeley Research group, to find out more about the current status of Global small scale LNG projects.

KNect365 Energy:  Where in the world are the most well-known small scale LNG projects, can you name a few?

Joanna Ziegenfuss: Small scale LNG (SSLNG) is a very broad term that encompasses liquefaction, regassification, LNG conversion, and distribution projects, with a widely ranging scale of LNG volume output or throughput between them.

Notable projects include the Gaz Metro liquefaction plant in Quebec. The plant recently tripled its output, leveraging its strategic position, to serve several regional growing demand sectors. These include remote communities in northern Quebec, regional mine sites, trucking and LNG bunkering sectors.

Another North American project of note is the Eagle LNG plant in Florida. It will be one of the first US SSLNG terminal to supply LNG bunkering to ships sailing to the Caribbean in 2017. It will also supply LNG to the trucking and rail industry.

In Europe, the Gate Terminal in Rotterdam has become the first port in the world to offer LNG break bulking which has already served small scale off-takers in Sweden and Germany, and LNG bunkering services.

In other parts of the world, Indonesia’s received its first small scale Floating Regassification Unit (FRU) last year, which will supply 40 million standard cubic feet per day to a small 200 MW power plant in Bali. This unit is likely to be the first of many for Indonesia as the government seeks to increase the nation’s electrification to 100% by 2019. The archipelago geography of the country and scattered small demand means that natural gas to power the new and converted power plants will need to be transported by SSLNG ships from an LNG hub to Floating Regassification and Storage Units (FSRU) or Floating Regassification Units (FRU). This hub and spoke model to support remote power plants is also being considered in the Caribbean and Greece.

KNect365 Energy: Are small scale LNG projects typically in emerging markets and off-grid sectors? Are there many exceptions?

Joanna Ziegenfuss: SSLNG liquefaction and regassification projects will be developed where there is sufficient market demand and the economics justify the business case. Projects are happening in different sectors worldwide. Besides remote power and off-grid sectors (e.g. bunkering, trucking, mine sites, oil and gas), SSLNG has become particularly attractive to emerging markets which have small LNG demands that are not sufficient to justify the economics of a typical import plant. And hence the growing interest by emerging countries in FSRUs.

KNect365 Energy: Do you think the number of small scale LNG projects will increase in the next decade? Why?

Joanna Ziegenfuss: Yes, I think they will increase, mostly on the demand side. LNG supply is there, increased liquidity is driving favorable pricing, the technology is proven (in most cases), and the infrastructure is being constructed. There is also growing collaboration between supply chain stakeholders to reduce risks and costs to capture the opportunity.

KNect365 Energy: Last year you wrote in that “Small-scale LNG providers are now superseding the super-majors in the development of new LNG plants. Smaller plants are being constructed in response to the growing market demand for smaller cargoes, which are both easier to finance and also allow the buyer the option to diversify its supply.”

Who are some of these small-scale LNG providers? And is it the goal of these “LNG startups” (such as Russia’s LNG Gorskaya) to be bought up by larger companies?

Joanna Ziegenfuss: These are mostly in the US and include among others: Prometheus Energy, Stabilis Energy, Ferus, and Applied LNG. Super-majors with a SSLNG strategy might buy them in the future, once those companies have established strong sustainable returns. However, right now, the SSLNG market is still in immature, and super majors are generally still focusing on what they do best: exploring, producing and distributing large volumes of oil, gas, and LNG.

This past month Hellenic Shipping News wrote: “To date, the wide-scale adoption of LNG, often promoted as a cheap, abundant and clean source of energy, has been hindered by costly investment in infrastructure.” Perhaps small scale LNG can be the solution. Join Joanna Martin Ziegenfuss, Tony Teo and NDRC’s Liu Xiaoli on a panel to discuss just that: “Are small scale projects the right fit to meet the growing LNG demand?” at our LNGgc Americas event in Houston this May 31.



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