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The rise of LNG in Asia

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LNG Industry,


Abhilesh Gupta, AG&P, India, outlines how the company is seeking to address Asia’s unmet gas demand with standardised modular supply chain solutions.

AG&P’s perspective on the current LNG market in Asia

The LNG industry is still fragmented, particularly in Asia’s emerging economies, leaving the end-customer with the burden of piecing together an LNG supply solution. The market is struggling to meet demand growth from smaller and dispersed power and industrial customers that require a simple technical and commercial solution covering the entire supply chain, so gas becomes as easy to access as oil.


AG&P has developed an approach to LNG import and distribution to serve off-grid customers that are currently without access to gas supply.

AG&P is seeking to address Asia’s unmet gas demand with standardised modular supply chain solutions. AG&P singularly provides a fully integrated solution from LNG sourcing to last-mile delivery, simplifying and making the decision to switch energy sources commercially compelling for its customers.

The changing market in Asia

With demand for LNG predicted to continue its upward trend well into 2030, the time is right to establish well-functioning LNG supply chains in the fast-growing gas markets – notably India, Bangladesh, Sri Lanka, and the archipelago countries in Southeast Asia (Indonesia and the Philippines). The new supply chains must be nimble enough to cater to smaller, more cost-focused customers that want flexibility in the quantity and lock-in periods for the LNG they buy; but robust enough to grow in line with rising demand.

The availability of strategically located, appropriately sized LNG terminals integrated with an efficient delivery network will enable both distributed power generation and a variety of industrial applications in various manufacturing and processing facilities in these energy-hungry markets.

A key part of developing Asia’s LNG market includes reducing the size of the current equipment traditionally used in the baseload market. Building highly cost-efficient receiving terminals and break-bulk facilities, as well as having smaller carrier vessels operating from these terminals to serve distant demand centres with smaller customers, is important.


AG&P has experience in modular construction of complex LNG process modules at its manufacturing facilities in Philippines, which are amongst the largest in Asia.

AG&P has developed an approach for efficient LNG import and distribution to customers that are ‘off-grid’ and without access to gas supply. AG&P’s solutions are standardised, modular, and scalable to match demand, which significantly reduces the upfront capital required, making it cost-effective.

This built-in flexibility also enables LNG supply and distribution to respond to demand growth, allowing for pragmatic investment decisions.

Most of Asia’s energy-hungry markets share the common problem of having stranded, remote demand centres scattered along vast coastlines that are disconnected from the gas pipeline network. In these locations, infrastructure solutions need to be configured from the customer’s perspective, using scalable, modular designs that can grow in a manageable, demand-specific timeframe and within budgetary parameters.


AG&P’s LNG import terminal will provide wider gas accessibility to industrial customers in Puducherry and Tamil Nadu in southeast India.

In response, AG&P has designed a standardised 125 million ft3 per day LNG import and regasification terminal, which utilises fan ambient air vaporisation or water-glycol shell and tube vaporisation technologies, enabling it to be used onshore or offshore. This infrastructure will form a key part of the LNG import terminal AG&P is developing on India’s east coast, at Karaikal Port.

Case Study: Karaikal Port, LNG Import Terminal, India

Location

Karaikal Port is a deep-water facility located in Puducherry on the southeast coast of India. Over the past nine years it has handled over 46 million t of multi-cargo and received more than 1400 commercial vessels. It is operated by Karaikal Port Pvt. Ltd. (KPPL).

AG&P’s LNG import terminal will be located within the port’s existing breakwater providing all-weather operations, 99% availability and night navigation. Environmental Approval (EA) for the terminal was received in May 2017.

LNG terminal design

The innovative approach for the LNG terminal combines offshore and onshore infrastructure with AG&P’s 125 million ft3 per day standardised onshore regasification module and modularised designs for other components being used to drive down costs and significantly accelerate schedule.

Initial capacity of the terminal will be 1 million tpy, which is expected to double to 2 million tpy almost immediately. The projected capacity is 3 million tpy.

To deliver the engineering requirements for the project, 35 in-house engineers have been hired at AG&P Engineering in Houston and a new engineering unit has been opened in Manila, Philippines to undertake detailed engineering, with 20 engineers to be hired.


The terminal will serve the gas-fired power industry in the Tamil Nadu/Puducherry region, including PPN Power’s six power stations.

Project progress

FEED is on track to be completed in Q2 of 2018, which will be followed by FID.

Thivahar Bethune, Assistant Vice President, Gas/LNG Marketing, has been appointed as project Manager. Thivahar is based in India.

A two-month data collection study has been completed identifying potential customers within a 300 km radius of the terminal. An LNG marketing team has also been appointed in Chennai to aggregate this customer demand.

Once operational, the terminal will provide access to gas for both gas-fired power plants and major manufacturing clusters in Puducherry and Tamil Nadu including fertilizer, cement, steel, textile, leather, sugar, and garment industries.

The project remains on track to be commissioned by mid-2019.

The speed of development is possible because construction for the terminal will happen simultaneously onsite in Karaikal and in AG&P’s heavy fabrication yards in the Philippines where the regasification modules will be built.

The role of demand aggregators in opening up the LNG market

There is a need for financially viable solution providers for the LNG market to succeed. This has given rise to LNG portfolio players, or demand aggregators, who will play an increasing role in connecting LNG supply with smaller demand centres that are typically too small to be viably served on a standalone basis. Many factors favour the growth of small scale setups to serve these customers using an aggregator model:

  • Scalable: Operators can easily add capacity to serve increased demand while gaining supply chain synergies.
  • Flexible: Can address off-grid power generation for industrial and residential needs in remote locations.
  • Faster ROI: In contrast to large scale LNG projects, small scale operations offer investors more immediate and potentially attractive returns in the medium-term.
  • Lower CAPEX: Proven technology allows projects to offer ‘plug and play’ service with lower investment requirements and accelerated commissioning schedules.
  • Reduced risk exposure: Turnkey solutions reduce uncertainty on project execution timing.
  • Efficient: Small scale meets short-term fluctuations in demand with supply and inventory optimisation, and managing LNG storage.

Demand aggregators can optimise their supply and infrastructure to provide LNG to end-users and participants in short and medium-term markets. They can also ensure supply reliability and provide a platform for gas buyers to exercise their gas supply flexibility through nominations 24/7, as well as providing a link between cargo scheduling by the supplier and the terminal operator.

In an oversupplied market, aggregators can develop more liquid short-term and spot markets and aggregate demand from both big players, and small, price sensitive players. Furthermore, they can connect and enable ‘disaggregated’ investment opportunities providing the confidence to invest and the reassurance that value will be maintained.

Conclusion

Asia’s emerging economies need pragmatic energy solutions that will help cut the long waiting time for affordable and cleaner fuel sources to reach and connect scattered regions to the supply grid. AG&P’s approach will allow project owners to choose the infrastructure configuration they need according to the site and current demand. Economically speaking, the benefits are threefold: Capital cost is reduced; the infrastructure is right-sized to match demand eliminating unwanted surplus; and the speed of development means a project is up and running sooner, delivering faster returns to investors. These factors will enhance power affordability, reliability, and access.

Read the article online at: https://www.lngindustry.com/floating-lng/10042018/the-rise-of-lng-in-asia/

 

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