MARINTEK has developed a competitive concept for small-scale, short-sea based LNG distribution. This will make natural gas available in regions with lower levels of demand than are commercially viable with pipelines or larger ships. Figure 1 illustrates how the concept could be developed on the western coast of Norway.

Figure 1 Small scale, short-sea distribution of LNG.

The deep-sea LNG market

An LNG production and distribution system is a huge investment and has traditionally been developed on the basis of long-term contracts. This picture is now changing and we are seeing that there are growing opportunities for spot trades in the deep-sea LNG market. This situation offers new possibilities for trading of LNG.

The short-sea LNG market

Small-scale distribution of LNG is a new approach. The source for LNG could be a small-scale LNG production facility, either a base-load LNG plant or an LNG receiving terminal. Compared to the deep-sea LNG market, a short-sea, small-scale LNG distribution system would use smaller ships, in the range from 1 500 m3 to around 10 000 m3 LNG. The receiving facilities and local storage tanks are based on a modular design in order to support standardised solutions with good scalability. As such the concept is based on a multi-modal distribution chain for LNG that would comprise the following elements;

Small LNG ships
Modular shore-based storage facilities receiving LNG from the ships.
Final distribution to end-users by rail or road tankers, and containers or low-pressure pipelines.

The small LNG ships are an important link in the distribution chain. The number of vessels, their capacity and routes should be defined so as to obtain a high frequency of calls at the storage tank facilities. With a short time period between replenishment of LNG to the tank facilities the capacity of, and thereby investment in, regional storage facilities can be kept at a minimum. Figure 2 and Figure 3 show a small LNG ship offloading at an industrial site, and the LNG receiving and storage facilities at site.

Figure 2. Small LNG ship. (Photo: Naturgass Vest)

Figure 3. LNG receiving and storage terminal at industrial site. (Photo: Naturgass Vest)

MARINTEK references

MARINTEK has performed a number of projects and carried out several conceptual developments related to the distribution and use of LNG, see reference projects list.

In-house (MARINTEK) concept studies

KYSTGASS – Coastal Gas Distribution
A conceptual development of financially viable small-scale LNG distribution systems. The small-scale LNG distribution system comprises smaller, short-sea LNG ships, local terminals and solutions for multi-modal end distribution. The challenge of the conceptual development was to establish a financially viable solution, so that LNG could become cost-competitive with alternatives such as fuel oils. This could make natural gas available in regions with lower levels of demand than are commercially viable with pipelines or larger ships.

LNG as bunker fuel
Given local availability of LNG, our concept for the use of LNG as a bunker fuel shows that it can be cost-competitive with marine bunkers. Furthermore, the environmental benefits would be considerable, e.g. with respect to NOX and CO2 emissions. This concept for gas-fuelled ships is based on gas engine developments at MARINTEK and our general cryogenic knowhow.

Industrial development projects

INNOGASS
Innovative use of LNG for local industrial and domestic applications, based on a short-sea LNG distribution system. The project included the development of technology to support an economically viable small-scale LNG distribution chain. The project is based on the concepts developed in MARINTEK’s KYSTGASS project.

LNG Norge
A commercial feasibility study for the Norwegian oil company Statoil. LNG Norge, a subsidiary of Statoil, was established to conduct the development of a new business segment for natural gas distribution in Scandinavia, based on the small-scale LNG distribution chain conceptually developed by MARINTEK.

CRUISE
Small-scale LNG distribution in EU short-sea regions. MARINTEK was asked by the EU Commission to establish a project for LNG distribution to “energy islands”, i.e. islands that lack connections to the electricity grid or gas pipelines. The basis for the request from the EU Commission was the MARINTEK KYSTGASS project. The consortium has been established with Statoil as lead.

Publicly financed studies

ENOVA SF
Feasibility studies for economical distribution of natural gas in Norway, dimensioned for the Norwegian energy market, i.e. the fossil fuels part of the energy market. The studies included bulk transport of natural gas (LNG, CNG) and pipeline distribution.
ENOVA is a Norwegian government-owned energy agency with a mandate to achieve more environmentally sound energy production and efficient energy use.

NVE – The Norwegian Water Resources and Energy Directorate
A basic analysis for a public-sector study for application of LNG as a mode of distribution of natural gas to industrial and domestic users in Norway.

In summary, a small-scale, short-sea based distribution system for LNG, such as the KYSTGASS concept, would make natural gas commercially viable in regions with small-scale needs. The concept as developed is commercially robust, as the main investments are the ships and the modularised storage facilities. The number of ships and the capacity of each storage facility can be adapted as time goes on, to meet the development of the demand for natural gas. Committed investment costs could thus be kept to a minimum while scaling options are retained.

Figure 4. LNG distribution chain; cost positions. Different routes and volumes along the coast of Norway.

Figure 4 illustrates example of cost positions for the short-sea LNG distribution chain for alternative routes and volumes along the coast of Norway. On the basis of more detailed knowledge of the alternatives, the conclusions are that the small-scale LNG distribution chain can be commercially viable, even for regions with low levels of demand.

Contact at MARINTEK: Per Magne Einang

(Article in MARINTEK Review No 1-2004)

Published January 26, 2005