Too little, too late?

To parody a well-known phrase “… Corrosion and events wait for no man! …” King Canute may have sought to command the sea to obey his commands to illustrate this point, but he certainly did not have the rotten impact of ‘corrosion’ in mind. The phrase does, however, provide an appropriate illustration when reflecting on the pace of development in today’s LNG industry and its concerning impact on the management of the integrity and safety of LNG production, operations, and transport.

Volatility and uncertainty in a ‘strong LNG market’

There appears to be a paradox at play in the LNG market. On the one hand, the long-term fundamental drivers of demand for LNG remain in place. The global market outlook for LNG remains strong as natural gas becomes a leading energy source, and provides a key energy source in the energy transition, which is increasingly traded globally. North America is set to lead the acceleration despite geopolitical challenges and its relationship with China. The US plans to increase liquefaction capacity by a staggering 10-fold over this decade, as an example. The Ukraine conflict has forced countries and regions to re-evaluate their energy policies, one consequence of which has been the impressive build-up of FSRU LNG import facilities.

On the other hand, there is uncertainty, albeit short-term in nature, and driven principally by financial and market volatility. Fluctuations in global natural gas prices, regional demand variability, and geopolitical tension have combined to present investors with worries over the profitability and long-term viability of LNG projects. The centrality of North America in the LNG market has been impacted by the US’ banking crisis with long delays imposed on multi-billion-dollar projects, which as recently as six months ago were seen to be absolute certainties. This has forced investment parameters higher so that projects increasingly need to demonstrate stronger numbers: more fully contracted capacity and less dependence on developer’s equity. The latter to force more long-term contracts to offset volatile gas-price risk.

In a nutshell, the demand for LNG is strong and growing, yet there is uncertainty driven by arguably short-sighted financial concern. The net impact is uncertainty in investment decisions and delay; yet in the meantime, vital LNG operating assets continue to corrode. This has clear significance for safety, operational efficiency, and financial performance – especially where the asset is an ‘ageing asset’ or subject to a life extension programme. It is this latter area that carries the burden of risk for the LNG industry, and should provide the focus for corrosion management.

How market uncertainty might add serious safety risk on LNG assets

Those with rose-tinted glasses might comment that much of the LNG industry’s corrosion challenge is limited by the degree to which operating atmospheres are cryo-genic or ‘exotic’ in nature. But, outside of these ‘exotic’ atmospheres, protective coatings continue to break down over time impacting hull integrity and the integrity of ballast tanks; and corrosion under insulation (CUI) on non-cryogenic lines remains an omnipresent threat. The degree to which pipes corrode is dependent on a number of factors that include the performance of the metal used in the pipe, the operating pressures and temperatures, and the corrosivity of the material flowing through it. As an example, a 6 in. Schedule 80 carbon steel carrying crude oil may have a measured corrosion rate of 2 mm/y and a wall thickness of 11 mm thus, unless measures to reduce the risk are put in place, might experience a perforation and leak within 5.5 years; possibly earlier, where the pipe requires wall thickness for structural integrity as well as pressure containment.

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Read the article online at: https://www.lngindustry.com/special-reports/31102023/too-little-too-late/