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The challenges and opportunities of small scale LNG

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LNG Industry,

In the build up to CWC's LNG Fuels Summit, CWC conducted an interview with Lauran Wetemans, GM Downstream LNG, Shell Downstream Services International.

Shell is currently being extremely proactive in developing infrastructure in small scale LNG for bunkers and road transport - where does this fit in Shell's global strategy?

At Shell we believe natural gas, a lower carbon fuel, will play an increasingly important role in the global energy mix.

Shell is a pioneer and a leader in the LNG industry. We helped design and build the first commercial onshore LNG plant in 1964 - and have been designing and building such plants ever since - and over the past few years we have been using this expertise to extend into the transport sector.

Our roads and ports are becoming increasingly busy as the global population grows and more of us live in cities. To meet growing global demand for transport, we believe a range of different vehicles, ships, and fuel options will be required.

LNG is emerging as a cost competitive and cleaner burning fuel vs heavy fuel oil and diesel for shipping, heavy duty road transport, and industrial applications. In the future, we expect it also be used for rail and mining.

How does the fall in oil price and the narrowing of the oil/gas spread impact on the growth for LNG for bunkers and road transport?

On a long-term basis we believe LNG offers operating cost benefits to many types of vessels compared to existing fuel options. Demand for LNG as a fuel in the shipping industry is increasing, in part due to emissions reduction requirements, which came into force in January 2015. Marine customers are facing increasing regulations on sulfur and nitrogen oxide emissions as part of the Emission Control Areas (ECAs), located in North America and the North Sea/Baltic region.

LNG can help the industry comply with current and future regulations as it can reduce sulfur emissions, particulates and nitrogen oxides, and can help reduce well-to-wheel greenhouse gas emissions vs heavy fuel oil.

Where do you believe the biggest challenges lie currently for end users (marine and road transportation) with regards to converting/investing in LNG fuelled vehicles/ships?

LNG's development as a successful fuel option will depend on many areas: it requires infrastructure, the right regulatory framework to foster growth, and a good business case for customers to invest in new vehicle technology, engines and/or modifications to their existing fleets and vessels.

The key to unlock the demand is bringing together all the parties that can make this transition happen in order to de-risk the investment and coordinate the activities. We actively participate in various collaborative partnerships with the aim to grow the LNG fuel demand.

How important, in your view, is regulation in growing the small scale LNG business?

The right policy and regulatory framework is critical to foster growth in the LNG fuel business. To facilitate increased LNG deployment in transport, policy tools are needed to build momentum, address market barriers and to ensure that the industries providing the fuels and technologies become competitive over the long term.

Do we have sufficient infrastructure in place for road transport expansion in Europe? What more can be done to develop this area?

We believe there is a considerable opportunity for LNG as a transport fuel in Europe. According to NGVA Europe there are already about 1500 heavy duty trucks running on LNG and approximately 70 operational LNG refuelling stations in Europe.

Shell decided to be the first customer of a new, dedicated LNG for transport infrastructure at the Gas Access To Europe (Gate) terminal at the Port of Rotterdam in the Netherlands. This has enabled investment in the terminal expansion for break-bulk loading services. For road customers, the existing truck-loading station at the Gate terminal is being used to distribute LNG fuel to an initial Shell network of LNG truck refuelling stations in the Netherlands. We now offer a growing network of truck refuelling stations in the Netherlands. The first four of these Shell truck refuelling stations are open for business in Rotterdam, Waalwijk, Pijnacker and Amsterdam.

Shell is confident that initiatives to get trucks and ships to use LNG as a fuel will help diversify energy sources in Europe and provide a source of cleaner and affordable energy for powering ships and heavy duty trucks.

ECA areas are key to the growth of LNG for bunkers - currently in North-West Europe and North America - what other ECA areas do you expect to see in the future?

In Europe and North America, environmental regulations require shipping operators to reduce local emissions. LNG, which is virtually free of sulfur and particulates, can help them meet these requirements.

As far as future expectations, global maritime emission regulations are on the horizon. Supply and growth for LNG as a fuel is evolving. Many terminals already have truck loading capabilities or have plans to install these facilities. Together with small break bulk access for ships, this will allow distribution beyond the terminal and offer supply positions across Europe to help meet future regulatory requirements.

Interview conducted by CWC Group. Edited by

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