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LNG in Asia: opportunities in a buoyant market

Mon 07 Aug 2017 by Karen Thomas

LNG in Asia: opportunities in a buoyant market
Peter Thompson: helping clients to assess whether conversions make sense

LNG is becoming the fuel of choice across Asia – leading to new opportunities in both land-based LNG import and floating storage and regasification facilities.

Countries such as Japan and South Korea have long relied on LNG for energy security and power generation. Now other Asian countries, including the Philippines, Thailand, Vietnam, Indonesia and Malaysia, are seeking to join them in the import market.

This is driven by their rapid economic growth and the expansion of major cities, which requires new ways of bringing new large-scale power generation online quickly to meet the increasing demand that follows such development.

Although locally available coal is still an attractive option in terms of fuel costs, LNG offers a lower-carbon solution at a scale not currently possible with renewables.

The drop in oil price and its gradual de-linkage from gas pricing, alongside discoveries of shale gas in the USA and China, means that LNG is now more affordable, making it a viable transition fuel from existing fossil sources towards renewables.

Growth in floating storage

Until recently, the development of land-based terminals has dominated the LNG-import market. However, floating systems have become increasingly popular as their initial capital costs are reduced, which, in conjunction with their typical programme advantages through faster implementation and earlier achievement of first gas relative to land-based systems, has given them a more competitive position.

In response, new, cost-effective solutions for land-based storage that allow for future expansion have been developed to serve smaller start-up facilities. These include the modular single-containment tank systems that Arup and others are pioneering for the small to mid-sized applications which will be able to compete against other benefits from floating solutions.

These benefits will include security and flexibility of operations – especially in areas where local politics and the potential for future gas development are less certain.

The conversion of LNG carriers into floating storage and regasification units – rather than the commissioning of newbuildings – can make floating storage options more commercially attractive, both in terms of cost and programme. However, care needs to be taken to ensure the candidate vessel will deliver the required operational performance and remain serviceable throughout the terminal life.

To this end, naval architects at Arup are helping clients assess the viability of such conversions and of hull-extension life, balancing the reduced cost of converted vessels against the efficiency of tailor-made floating storage.

Bunkering opportunities

Of course, LNG isn’t just for land-based power generation – it can also be a fuel for the carriers themselves as well as large ocean-going vessels. Replacing the current heavy fuel oil with LNG would make a major contribution to reducing carbon and sulphur emissions.

One factor holding this back is a lack of supporting infrastructure, including the necessary bunkering facilities for the refuelling of ships. There’s potential for floating LNG storage to provide such bunkering facilities across Asia and the rest of the world. With more options for refuelling, more vessels would be likely to convert to LNG – creating more demand.

Arup has recently worked on terminals that lend themselves to becoming bunkering facilities. These include a proposed terminal in Probolinggo, Indonesia, which is ideally suited for the refuelling of vessels Arup has been commissioned by PT Australasia LNG Indonesia (AALNG) to support the new 2.4 mta LNG terminal. We will deliver the pre-front-end engineering design (FEED) for the markine infrastrucutre and the vessel conversion for Probolinggo LNG terminal.

The project will covert an LNG carrier to act as a floating storage unit moored permanently at a 2.5km jetty. It will have multiple purposes, including gas supply to the region and break bulking.

There are certainly challenges on the horizon for floating storage but for the moment there remains plenty of potential for floating LNG storage to grow.


Peter Thompson is east Asia energy leader with Arup

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