LNG: Breaking Taboos is a Necessity

By Richard Hepworth, President of Trelleborg’s marine and infrastructure operation, and Vincent Lagarrigue, Director of Trelleborg’s oil and marine operation

In a recent article, Platts’ Ira Joseph makes the case that “breaking taboos in the LNG industry is a time-honored tradition.” Primarily, he’s addressing the way that the market operates, but this is a sentiment that has underpinned Trelleborg’s work in the infrastructure sector for many years. We’ve long argued that LNG projects need to embrace fresh thinking when it comes to the transfer zone, and to do things differently from the fuels that have gone before it if it is to succeed.

Looking at the dynamics of the market in 2019, it’s clear that the market is evolving rapidly. LNG, seen in the long term, is certainly in a healthy position. But it’s not without its complications – which, means that there can be no let-up in the pace of development of physical infrastructure.

Writing in the Financial Times, David Sheppard argues: “The LNG market is a long-term game and, while it is suffering from oversupply, that is unlikely to continue. Gas demand globally rose almost 5 percent last year, according to the International Energy Agency, more than double the pace of growth for oil demand.” Much of this demand is still driven by Asia. Platts Analytics expects LNG demand to grow by 40 percent over the next decade, largely due to growth in Asia’s booming economy.

In Asia in particular, “steps have already been made to open up markets, add new participants and promote price discovery,” according to Platts. However, demand patterns are likely to change. Chinese demand continues to grow, with government policies on air pollution driving the switch away from coal to gas. It’s still estimated to become the world’s biggest LNG importer, overtaking Japan in the mid-2020s.

However, despite this growth, factors such as competing fuels, increased energy efficiency, and infrastructure constraints, mean that the market will also have to rely on demand from Southeast Asia. These dynamics, in the next few years, it seems, will put pressure on LNG suppliers to ensure that this growth continues.

“The cost of moving gas from A to B in any form remains relatively high and problematic, while the number of competitive fuel options are rising within key use sectors for gas,” Joseph continues. “Taking the most expensive form of gas supply (imported LNG) and placing it into the most competitive sector for gas use (power) will be the defining story for gas demand growth in the next decade.”

The same dynamics are at play when it comes to the deployment of LNG as a marine fuel. Major operators such as CMA-CGM and many cruise lines have established themselves as first movers when it comes to LNG adoption. However, infrastructure must keep pace – as LNG World Shipping puts it, the industry must make up for lost time when it comes to infrastructure.

According to LNG World Shipping, DNV GL sees weaknesses in what it calls ‘stranded supply’. Few large terminals, it argues, are set up to cater for smaller LNG carriers, a deficiency that suppliers hope to rectify by tapping under-used floating storage and regasification units (FSRUs) anchored near areas of stranded demand.

This is where infrastructure suppliers like Trelleborg come in. In 1999, Trelleborg was one of the first suppliers of the integrated Ship-shore Link technology that changed the way LNG carriers could trade – from liner markets to spot markets – making all assets flexible. The same has happened with LNG fueling with Trelleborg providing the safety link for the fueling systems on the CMA-CGM ships, among others, as well as the bunker barge.

By adopting new approaches to infrastructure development, we can play a vital role in reducing the cost of LNG transfer, and speeding up how it can be deployed. With our Cryoline technology, Trelleborg’s latest example innovative solution for the LNG market – for example, it’s possible to not only conduct transfers that would otherwise be unfeasible due to environmental concerns, or remote locations, as well as adapting existing terminals to handle a wider range of vessels.

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