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Riding the LNG Wave

1076_1As the cleanest fossil fuel, natural gas is becoming increasingly important as an environmentally friendly energy source. Demand is spiralling up: it rose 10% to 285 million tonnes in 2017, with a further 10% increase expected this year.

Much of the growth is coming from Asia. While North Asia has been the main source of demand for the past decade – with Japan, China and South Korea being the top three LNG importers – requirements from South and Southeast Asia are also strengthening.

India is starting a gas development programme that could match China‘s, planning to add 11 LNG import terminals to an existing four. Thailand expects its LNG imports to climb nearly sevenfold, to 35 million tonnes a year by 2036, and Indonesia, the world’s fifth-biggest LNG exporter, is expected to become a net importer as domestic production stalls.

As for Singapore, its aim is to be Asia’s LNG trading hub, leveraging on its strategic location and strong reputation as a global trading hub for commodities. To support this ambition, it has ramped up its storage capacity. With additional regasification equipment and a fourth tank, state-owned Singapore LNG Corporation (SLNG) now has a storage capacity of 6 million tonnes a year, from 3.5 million tonnes in 2013, increasing its ability to support storage, reloading and break-bulking of LNG for the region.

SLNG is currently modifying its secondary jetty – initially designed for vessels from 60,000 to 265,000 cubic metres in size – to accommodate smaller ships of 2,000 to 10,000 cubic metres, to support the growth of small-scale LNG.

Singapore is also developing its LNG sector. LNG will soon be a part of the bunkering fuel mix in its drive to provide a broad range of fuel solutions to meet the energy needs of the global shipping industry. The Maritime and Port Authority (MPA) is co-funding the construction of LNG-fueled vessels, capped at S$3 million per vessel.

These developments augur well for the M&OE industry. With its illustrious history in ship repair, conversion and construction, Singapore is well-placed to capture this growth.

Forte in Shiprepair and Conversion
In shiprepair, Singapore is the world’s capital for LNG carrier repair as industry leaders Keppel Offshore & Marine (Keppel O&M) and Sembcorp Marine have honed their skills and raised their capabilities to undertake highly exacting requirements. Being high-value assets, LNG carriers are repaired and modified only in select yards with proven track records.

Sembcorp Marine alone repaired and upgraded 34 LNG carriers in 2017, making it the top repairer for the fifth time. At its annual results briefing in February 2018, Sembcorp Marine President and CEO Mr Wong Weng Sun said, “We have continuously enhanced and broadened our LNG engineering solutions, repair and upgrade capabilities and facilities to provide holistic solutions to LNG owners and managers. We continue to make steady progress in the development of projects for our proprietary Gravifloat technologies for a range of near-shore gas infrastructure solutions, including liquefaction, regasification, storage and power generation. We are hopeful that our advanced discussions with several potential customers will translate to initial orders.”

Singapore is also involved in the conversion of LNG carriers to FLNGVs and FSRUs. While both are floating assets which enable greater flexibility in the deployment and reuse, they play distinct roles in the value chain.

FLNGV is a specialised floating unit designed for the production and processing of natural gas offshore. Through the use of onboard cooling systems, extracted natural gas is cooled and condensed to LNG at -162°C while moored above the offshore gas field. LNG is then stored in specialised tanks in the hull of the unit, before being offloaded to LNG carriers.

FSRU is used in the regasification process, where LNG offloaded from a LNG carrier is converted back to its gaseous form, before being transported via pipelines to end users. So while the FLNGV makes possible production of LNG at previously unviable fields the FSRU offers the flexibility in provision of natural gas to serve demand.

Keppel O&M undertook the ground-breaking conversions of both the FLNGV and FSRU for industry leader Golar LNG. In 2017, its subsidiary Keppel Shipyard delivered the world’s first FLNGV to Golar Hilli Corporation, a subsidiary of Golar LNG. Converted from a 1975-built Moss LNG carrier over a three-year period, the Hilli Episeyo has a storage capacity of 125,000 cubic metres. Sponsons were added on both sides of the hull to house the topside equipment comprising of pre-treatment systems, four PRICO single-mixed refrigerant liquefaction trains, and boil-off gas compression and offloading equipment. Deployed in Kribi off Cameroon for Société Nationale des Hydrocarbures and Perenco Cameroon, it has a liquefaction capacity of about 2.4 million tonnes of LNG per annum.

Mr Chris Ong, CEO of Keppel O&M, said, “Compared to newbuilds, converted FLNGVs are significantly more cost-effective and faster to market, without compromising safety and processing capabilities. With the experience gained from this first FLNGV conversion project, we are in a unique position to provide customers with reliable end-to-end solutions for the EPC and commissioning of FLNGV as well as FSRU conversions.”

Keppel Shipyard has also been entrusted by Golar to convert the Golar Spirit, a membrane LNG carrier into the world’s first FSRU. With a LNG storage capacity of 129,000 cubic metres and a regasification capacity of 2.5 billion cubic metres a year, the vessel was chartered to Brazilian state-owned Petrobras SA in 2007 for ten years with options for up to a further five years.

Construction of Newbuildings
Spurred on by environmental concerns and statutory requirements, LNG-fueled ships are on the increase. Worldwide, the in-service and on-order fleet of LNG-powered sea-going ships has breached the 200 mark. Though small in number relative to the global sea-going fleet, it is gaining in strong double digits as new contracts are placed.

Singapore received its first contract in 2016 when Keppel Smit and Maju Maritime placed orders with Keppel Singmarine for two dual-fuel harbour tugs which can run on both LNG and diesel fuel. Since then it has secured another contract from Stolt-Nielsen Gas B.V., a subsidiary of Stolt-Nielsen.

Under the contract signed in May 2017, Keppel Singmarine will build two small-scale LNG carriers with options for another three similar units. Costing S$103 million, the 7,500-cubic-metre vessels will be equipped with engines that can run on both diesel and LNG. Expected to be completed in the second and the third quarter of 2019 respectively, the vessels will have class notations for bunkering.

In September, Sembcorp Marine’s subsidiary Sembcorp Marine Specialised Shipbuilding and SeaOne Caribbean signed a letter of intent for the design and construction of at least two 366-metre long, 2 billion cubic feet capacity compressed gas liquid (CGL®) carriers.

CGL is natural gas, mixed under relatively high pressure and low temperatures to form a solvent, or gas liquid. SeaOne has developed patented technology for the process.

Under the agreement, Sembcorp Marine will design the neo-Panamax CGL carriers for SeaOne’s Caribbean Fuels Supply project, incorporating ship component ideas from Sembcorp Marine’s subsidiary, Europe-based LMG Marin.

SeaOne will load the cargoes from a CGL production plant being built at the Port of Gulfport in Mississippi. The Caribbean Fuels Supply project aims to develop an eco-friendly, low-cost and safe way to transport gas and gas liquids as a single cargo.

The outlook is promising, especially for small-scale LNG carriers. Demand is growing especially for end users located in remote areas not served by pipelines as tighter regulation on emissions is encouraging growth in small-scale LNG projects which are economical and quick to market.