The rise of small scale LNG

In Spain, up to 45 000 trucks per year have been loaded with natural gas. The country also exports LNG to France, Italy, Sweden and Macedonia by trucks and ISO containers. Ultimately, LNG trucking has demonstrated similar levels of security of supply, safety and cost as pipelines, so it is a viable alternative for the supply of natural gas.

So why are small scale logistical LNG solutions suddenly growing in popularity, despite the fact that they have been in existence for decades?

The growing popularity of small scale LNG

Firstly, finding an alternative to oil in the transportation sector is a necessity. In order to achieve a more sustainable system, a diversified energy supply is required, emissions should be reduced, and costs must be maintained or even reduced. The maritime sector has been significantly affected by stricter environmental regulations, taking into account climate change and air quality parameters. The International Maritime Organization (IMO) and the EU are defining the necessity to achieve a reduction in SOX, NOX and particulate matter. Important decisions are now being taken by ship owners in order to comply with such regulations, but economics are, of course, also important. Among the alternatives to oil, LNG has the most promising future, because it fulfils the environmental restrictions on emissions, and offers attractive economic benefits to end users.

In order to establish which fuel should be used for the future, it is necessary to compare the alternative fuels from different perspectives: GHG emissions; air quality emissions; supply availability; technology readiness; economic feasibility, etc.

Whilst LNG is by no means a newcomer, it is undergoing a small revolution. Cryogenic manufacturers are offering smaller equipment, reducing costs and improving technical specifications. This allows LNG logistics companies to widen their services and offer precise solutions.

The LNG industry can now be viewed as a competitor to the pipeline market. LNG offers flexibility along the entire logistic chain, from production to consumption, which is attractive to end users. In some cases, LNG supply is even reducing investment costs. The final price of LNG is also attractive to end users, who may even require LNG as a fuel for their engines.

Furthermore, statistics of the LNG transport sector show that the ratio of accidents is lower than that for vehicles carrying dangerous substances.1 Over certain distances, LNG transportation by road and rail is also more profitable than the traditional supply pipeline. Enagás also promotes the use of LNG as fuel in the rail and aeronautical sectors.

Logistic chain

It is important to develop an adequate logistic chain downwards from the LNG terminals to ensure that LNG is supplied where required and in just the right quantity.

Within this context, it is important to mention that the unused LNG capacity currently existing in Europe could be incremented with the addition of new logistical and technical solutions to meet the demand regarding multimodal logistic solutions with ISO containers, tank wagons, rail corridors, small scale LNG distribution and local production of bioLNG to pipeline networks.

The small scale logistic chain must be developed whilst maintaining similar safety, security, efficiency and robustness rates as in the traditional large scale concept. The distribution of LNG must be planned at every level: regulatory; standardisation; adequate training programmes; information to society; investments, etc. Countries such as Spain and Japan have proved that this is possible.

Among the new LNG customers, the supply to the marine transportation sector is perhaps the most challenging and relevant. The requirements of the maritime sector, the involvement of different stakeholders, and the quantities to be supplied, all warrant special attention.

CORE LNGas hive project

Enagás is performing different measures to foster the use of LNG as a marine fuel in Southwest Europe. The most important measure is the CORE LNGas hive project. This initiative is coordinated by Enagás and co-financed by the European Commission through the 2014 Connecting Europe Facility (CEF) Transport Call. It aims to develop the entire logistic chain (software and hardware) for the supply of LNG as a marine fuel and small scale services in the Iberian Peninsula.

It also aims to boost the production of adequate LNG bunkering standards and regulations; to propose the National Policy Frameworks according to Directive 2014/94/EU; to develop a robust, efficient and integrated logistic chain for the supply of LNG; and to enable the Iberian Peninsula to offer holistic solutions for the new requirements in the shipping sector.

The CORE LNGas hive project will also develop a manual outlining how to implement and utilise small scale solutions in the maritime sector.

The initiative involves 42 partners from Spain and Portugal, consisting of the following: eight state-owned institutions; 13 port authorities; and 21 industrial companies, such as ship owners, LNG operators and suppliers of different services in the value chain. The total budget is €33.3 million and its execution is planned to last until 2020.

The project is developing 14 studies, including the following:

• The proposal of the National Policy Frameworks for the infrastructure needed to supply LNG as a marine fuel, according to Directive 2014/94/EU on the deployment of alternative fuels infrastructure. This study will identify the main barriers in the development of demand, and will define global measures and incentives to boost the use of LNG.
• A prediction on the demand for LNG as a marine fuel in Portugal and Spain, including a special study for the Gibraltar Strait. This study generates input for the National Policy Frameworks, and will help define the most adequate infrastructure and provide information about the main barriers identified. The study will perform two different approaches: a bottom-up study (based on surveys) and a top-down analysis (supported by macroeconomics).
• The development of safety, environmental and technical national standards in order to ensure an adequate framework for LNG bunkering operations, supported by the experience of Enagás and the Spanish LNG industry. Taking into account the regulations that are being developed by global organisations, CORE LNGas hive will go further, providing input to define detailed regulations and standards to the national regulators.
• The deployment of actions aimed at improving society’s perception of LNG. In order to avoid opposition to LNG based on a lack of awareness, the project will deploy a number of measures, such as conferences and practical demonstrations, as well as a bus that will travel along the Iberian Peninsula outlining the benefits of LNG.
• The identification of training requirements throughout the entire logistic chain, and the definition of training actions and accreditation processes. This study is an important part of the project. Training is vital to ensure safety and security in operations. An entire training structure needs to be defined, and CORE LNGas hive will help the national regulators to construct it.

Moreover, the project will test real parts of the LNG logistic chain through 11 pilot tests, including the following:

• Adaptation of Enagás’ LNG terminals to offer both bunker and small scale services. This will include different pilots in the LNG terminals in Barcelona, Sagunto, Cartagena, Huelva and Bilbao.
• Development of the logistic chain, including the retrofitting of two bunker barges in order to supply LNG as a marine fuel. Moreover, the project will develop a pilot to test the multimodal transportation of LNG, by means of an ISO container.
• The use of LNG within the port environment. For example, the retrofitting of a straddle carrier or the construction of a tugboat powered by LNG.

In addition to the pilot testing, the project will include a real well-to-wheel analysis, which will confirm LNG’s excellent position compared to other alternative fuels.

With presence in six LNG terminals in the Iberian Peninsula, Enagás possesses an LNG logistic know-how of more than 45 years, which is key to the development of the project and the consolidation of the region’s leadership in this field. On the other hand, due to its geostrategic position as a very relevant crosspoint in global shipping routes, the Iberian Peninsula must address the maritime necessities in terms of sustainability, efficiency and operation.

Reference

1. Report from TIPs for SEDIGAS (Spanish Gas Association, 2016).

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