The technical and economical comparison between marine CNG and LNG transportation

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Warsaw University of Technology

“The Technical and Economical comparison between marine CNG and LNG Transportation”

Written by: Muhammad Akram (Doctoral Candidate)

Supervised by: Prof. Dr. Osiadacz Andrzej

(Professor of Gas Engineering Department)

1. Abstract

The worldwide consumption of Natural gas is rapidly increasing. However, Gas markets are normally far away from production fields. There are many possible technologies of transporting gas from production fields to consumers elsewhere as a fuel or as a chemical feedstock in a petrochemical plant, where gas is converted into valuable products. The methods for transportation of natural gas include Pipelines (PNG), Liquefied Natural Gas (LNG), Compressed Natural Gas (CNG), Gas to Hydrates (GTH), Gas to Liquids (GTL), Gas to Commodity (GTC) such as glass, cement or iron and Gas to Wire (GTW) i.e. electricity.

CNG transport is not new, nor is the technology being introduced to CNG transport, but what is new is the application of these technologies into a CNG marine based system and the increased volumes of CNG proposed to be transported. The competitive advantage of marine CNG routes over other non-pipeline gas transportation processes is that they require simple technology as well as not a huge investment. These could be the options for handling niche markets for gas reserves which are stranded, associated gas which cannot be flared or re-injected, or small reservoirs which cannot otherwise be economically exploited.

In this work, based on the technical and economical comparison between marine CNG and LNG transportation of natural gas, NPV calculation, CAPEX, OPEX, the Process Complexity; and Geopolitical sensitivity have been compared. The economic parameters for marine transportation of Gas from Eastern Med. to Europe (Lavrion, Greece) and far East (Japan), as a case of study, has been obtained. Also, these values have been compared with Pipelines and the results are shown in the form of different tables and graphs.

Keywords: CNG, LNG, Gas Transportation and Economics.

2. Introduction

Natural gas has long been considered an alternative fuel for the transportation sector. In fact, natural gas has been used to fuel vehicles since the 1930?s. According to the Natural Gas Vehicle Coalition, there are currently 18.9 million Natural Gas Vehicles (NGVs) on the road worldwide by 2014, led by Iran with 3.50 million, Pakistan 2.85 million, Argentina 2.28 million, Brazil 1.75 million, China 1.58 million and India 1.1 million. In recent years, technology has improved to allow for a proliferation of natural gas vehicles, particularly for fuel intensive vehicle fleets, such as taxicabs and public buses. However, virtually all types of natural gas vehicles are either in production today for sale to the public or in development, from passenger cars, trucks, buses, vans, and even heavy-duty utility vehicles. Despite these advances, a number of disadvantages of NGVs prevent their mass-production. Limited range, trunk space, higher initial cost, and lack of refueling infrastructure pose impediments to the future spread of natural gas vehicles.

The worldwide consumption of natural gas, as one of the most important alternative energy resources, is rapidly increasing. To respond to such a big demand of natural gas, the alternatives for bringing the natural gas to the markets should be investigated and compared to the popular methods of transportation such as pipelines.

Other than the use of Natural gas as fuel for vehicles, it is widely seen as a cooking and heating fuel in most US and worldwide households, natural gas has many other energy and raw material uses that are a surprise to most people who learn about them.

According to the data obtained in 2014, about 30% of the energy consumed across the US and many other countries of the world was obtained from natural gas. It was used to generate electricity, heat buildings, fuel vehicles, heat water, bake foods, power industrial furnaces, and even run air conditioners.

Below is a comprehensive comparison of two most popular methods of transportation of Natural Gas (i.e. marine CNG vs. LNG).

transportation natural gas marine

3. Compressed Natural Gas

CNG has a long history of safe transportation onshore. Gas pipelines transport compressed natural gas. The transportation of CNG by trucks also dates back to 30 years. Worldwide, more than 18 million vechicles are operated on CNG. Large-scale marine CNG transport is historically unrealized due to the limitations of small pressure vessels. While these days, a number of well-knowned gas transportation companies are engaged in increasing the vessels capacity and minimising the risks asosiated to them. E-g: Coselle system, VOTRANS, Flexible movable pipelines etc have improved the CNG transport to higher extent, while the practical implementation of any huge-scaled project has not yet been observed.

Marine CNG always remains the gas during the transportation process. It is chilled neither liquified nor converted to any other material like electricity etc. which enables it to provide the capability of a pipeline. The loading is far simple than any other processes involved in transportation of gas. Initially, the raw gas is dehydrated and then compressed up to 2000-3000 psi. During loading both onshore as well offshore terminals (bouy/platform) can be used. The simple shuttle ships with relatively huge capacity are used to transport the gas. While the technology at the receiving port is as simple as the loading one. The gas is received from the CNG shuttle ships, decompressed and supplied to the consumers. The brief summary is illustrated in the following diagram:

Figure 2 Life-cycle of marine CNG

4. Liquefied Natural Gas

This method of transportation includes the liquefaction of gas. For this purpose, the raw gas undergoes several stages of treatments and then liquefied under a very low temperature. The liquefied gas needs to be stored in a special storage. This stored gas is then loaded to sophisticated and efficient ships through terminals either from onshore in harbor or from off-shore liquefaction. While at the receiving terminal the liquid gas is initially stored at the special storages where the process of regasification takes place. The gas is then compressed and finally supplied to the consumers. A short summary about the technology involved in LNG projects is shown below:

Figure 3 Life-cycle of LNG

5. NPV calculations for CNG and LNG projects

To access the economic merit of project, the net present value (NPV) is calculated for the project over the definite period of time. The below is the standard form of NPV calculation:

NPV=PV _{Gas sales} - CAPEX ₍₁₎

Where CAPEX refers, to project related capital expenditure; and PV refers to the present value (PV) of net cash from gas sales over a time period of N years, which can be calculated as follows:

(2)

Where, ACF _{after taxes}, k is annual cash flow after taxes in year k; i is discounting interest rate; and DCF is the discounted cash flow.

Total CAPEX is assumed to be incurred instantly at zero time, and to comprise expenditures on Terminals and on the Gas transportation fleet, i.e.

CAPEX = CAPEX terminals (q) + CAPEX fleet (G fleet (L, q)) (3)

Where CAPEX terminals (q) depends on the Natural Gas Transportation rate that meets the consumption rate, q and CAPEX fleet (G _fleet) depends on the natural gas carrying capacity of the fleet of natural gas transportation vessels, G _fleet, which in turn depends on q and the transportation distance,L, from natural gas source to delivery destination.

Now let's discuss CAPEX and OPEX separately for CNG and LNG.

6. CAPEX calculation

Let's assume that, transported gas is consumed at uniform rate, q. It means that total CAPEX is the sum of CAPEX at the terminals which include the cost of compression/decompression and CAPEX for the transportation. So, the formula to calculate the CAPEX will be as follows:

CAPEX = CAPEX terminals x q + CAPEX fleet x L x q;

7. OPEX calcultaions

The annual operational expenditures (OPEX) is also the sum of two terms; OPEX for gas volumes change (compression/decompression for CNG) and the OPEX for the gas transportation (voyages costs). So, the formula to calculate the OPEX will be as follows:

OPEX = C _transport x L x q + C _{volume change} x q.

8. Processing Complexity

Figure 4 CNG-LNG properties

- LNG (600:1) vs. CNG (300:1)

- As shown above, that maximum density does not always maximize economics

- Compression costs much less than liquefaction, especially off-shore.

9. Comparison of Offshore Gas production using Floating CNG ships (F-CNG) vs. Floating LNG ships (F-LNG)

During offshore gas production, the production vessel or platform is much convenient and instead of compressing gas into a pipeline, reservoir gas is compressed into CNG ships on a continuous basis.

Below is the summary of technical comparison between CNG and LNG:

Table 1

Cost comparison of CNG and LNG

Regional Netbacks CNG vs. LNG vs. FLNG vs. Pipeline:

Eastern Med. to European Regional Market (Lavrion, Greece)

Shipping Distance: 1100Km

Table 3

Cost comparison of CNG, LNG and FLNG

Global Netbacks to LNG and FLNG:

Eastern Med to Far East Markets (Japan)

Shipping Distance: 15,000 km

Table 4

Cost comparison of LNG and FLNG

Notes:

1. Europe 2014, Natural Gas Price US $ 10.88/MMBtu. Further drop in prices since then - use $ 10/MMBTU (http://ycharts.com/indicators/europe_natural_gas_price)

2. STL Buoy Loading and offloading for CNG (deep water >300m).

3. Gas consumed as fuel valued as shrinkage

4. Gas composition typical of eastern Med.

5. LNG Plant with two trains. Source of Cost: Credit Suisse Global Equity Research

6. FLNG based on Petronas deep water PFLNG2 (Capex of $2.6 billion and production of 1.5 mtpa)

7. Pipeline Capex of $ 5 million/km for deep water. Opex included and assumed at 2% of capex/a.

10. Difference between LNG and CNG capital cost allocation

Generally, during an LNG project the loading process comprises almost 60% of the total expenses. In the same manner, unloading also costs too much which is almost 30% of the total expense. Transportation utilizes the 10 % of overall project expenses. While on the other hand, only 20% and 5% of total amount is consumed in loading and unloading process respectively due its very simple technology. The transportation comprises the major part of a CNG project. The graphical summary of the difference LNG and CNG capital cost allocation is given below:

Figure 5 CNG-LNG projects classification

11. Pipeline vs. Marine CNG transport cost comparison

Pipeline alternative:

- CAPEX assumption: 5 million/km

- Project Term: 15 years

- IRR: 13% simple PMT calculation (no construction period interest calculated)

- NO OPEX included

Marine CNG alternative:

- Continuous loading and offloading

- Uses same ship type for each of the capacity sensitivities:

a) Fleet for a 220km distance: 3-5 x C48

b) Fleet for 550km distance: 3-5 C112

- Project term 15 years @ 13% project IRR

- OPEX for ships and land facilities is included

Transportation cost comparison between pipeline and Marine CNG - 220 km

Figure 6 marine CNG- pipeline tariff comparison

Transportation cost comparison between pipeline and marine CNG - 550 km

Figure 7 marine CNG- pipeline tariff comparison II

Pipeline vs. Marine CNG

Table 4

CNG and pipeline project comparison

12. Concluding Remarks

a) Pipelines and Marine CNG produce superior net-backs in regional markets as compared to LNG/FLNG

b) While Marine CNG is a simple, safe, reliable and flexible solution delivering higher net-backs in regional markets as compared to pipeline or LNG/FLNG for shorter distances up to 2500- 3000 km. While, if the distance is greater than the one mentioned above, LNG will be the best choice.

The other priorities of marine CNG over LNG are as follows:

c) Marine CNG has fast implementation (due to its medium sized projects)

d) Marine CNG is scalable and flexible to customer requirements

e) Marine CNG has multiple loading/unloading options

f) Marine CNG creates fewer Environmental and Community issues

g) Marine CNG provides greater certainty of capital cost (ships approximately70% of CAPEX)

h) Marine CNG has protection for geopolitical risks in politically sensitive regions

i) Marine CNG needs smaller land “footprint” at loading and unloading sites.

Keeping in view the above mentioned facts and figures, it is obvious that Marine CNG offers highest net-backs along with its fewer environmental issues if the gas markets are within the range of 2000 nautical miles.

References

1. Paul S. Britton & John P. Dunlop 2007, ?SS: CNG and Other LNG Alternatives--CNG Marine Gas Transport.

2. Solution: Tested and Ready?, Offshore Technology Conference, Houston, Texas, U.S.A., OTC 18702, pp 1-7.

3. Economides, M, Sun, K & Subero, G 2006, `Compressed Natural Gas (CNG): An Alternative to Liquefied Natural Gas (LNG)', SPE Production & Operations, vol. 21, no. 2, pp. 318-324.

4. CNG Compressed Natural Gas CNG Marine Transport. EnerSea, 2013 Yehya Mohamed Ismail Nassar 2010, ?Comparisons and Advantages of Marine CNG Transportation?, SPE Projects,Facilities & Construction, December, pp. 225-229.

5. Guthire K.M., “Capital Cost Estimating”, Chem. Eng. 76, 114, 1969.

6. Gudmundsson J. S and A. Borrehang, “Natural Gas Hydrate: an alternative to Liquified Natural Gas”, www.ipt.uint.no/`jsp/forskning/hydrater.

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