Three years ago, Strategy&, the strategy consulting arm of global finance powerhouse PricewaterhouseCoopers (PwC), published a report that proclaimed that small-scale liquefied natural gas (ssLNG) may be “the next big wave.” This small-scale approach to LNG requires far less capital than traditional LNG ventures and enables production at remote locations. The 16-page Strategy& report details why they thought that ssLNG, “a niche but nascent industry that is already profitable and scalable,” was poised to disrupt the energy industry. According to Strategy&, ssLNG “is well placed to meet the growing demand from the shipping and trucking industries for fuels that are more environmentally friendly than oil and diesel. ssLNG also enjoys advantages in addressing off-grid power generation for industrial and residential needs in remote locations.”
LNG’s unique selling point as a cleaner fossil fuel makes it a particularly attractive alternative for the ultra-dirty shipping industry. This is a particularly attractive and potentially lucrative market because the shipping industry not only acknowledges that it needs to move away from the heavy bunker fuel that is currently the industry standard, it actually wants to change and is actively seeking cleaner fuel options.
ssLNG companies would therefore be wise to strike while the iron is hot. “As companies approach the ssLNG market,” Strategy& advises, “they should be prepared to act quickly. In selected applications, such as marine and off-grid power generation, it will be vital for participants to establish first-mover advantage. But they will also need to have the right strategy in place, underpinned by the appropriate capabilities, which include the ability to build partnerships across the LNG chain.”
But, as with all burgeoning sectors, there is still major footwork that needs to be done in order to make ssLNG scalable and pragmatic. In a Gas Processing News report called “Small-scale LNG: A reality today may be a game-changer for tomorrow,” LNG insider Srinivasa Pachipulusu also emphasizes the importance of the “LNG chain,” writing that: “ssLNG development is dependent on the development of a complete supply chain. Only a few companies have successfully developed the infrastructure required for a complete supply chain. This supply chain includes natural gas production, gas processing facilities, liquefaction units, export facilities, LNG carriers, import terminals, small-scale LNG transportation, SSLNG remote storage facilities and truck refueling stations.”
Now, three years after these reports were published, it looks like some key energy players were paying attention. In North America especially, ssLNG is booming. Just this week GasWorld published an article which contends that “North America is expected to witness the highest global small-scale liquified natural gas (LNG) capacity additions in the world, expected to contribute to around 37% of the global additions by 2024.” This report is based on data recently released by analytics and consulting firm GlobalData, which revealed that “North America is likely to witness total small-scale LNG liquefaction capacity additions of 7,270 kilo-tonnes per annum (ktpa) by 2024.”
The report, as paraphrased by GasWorld, went on to document that “the capacity of planned projects which have received necessary approvals for development accounts for nearly 2,890ktpa, while remaining capacity of 4,380ktpa is expected to come from early stage announced projects.”
“North America is expected to witness the start of operations of 26 new-build small-scale LNG terminals by 2024,” Haseeb Ahmed, Oil and Gas Analysts at GlobalData, was quoted by GasWorld. “Of these, nine are planned terminals and the remaining 17 are announced. Browntown II and Browntown in the US are the largest upcoming small-scale LNG terminals in the region, with a capacity of 2,120ktpa each by 2024.”
This bodes well for the United States’ ailing shale and gas sector, which desperately needs to push into new markets and create more demand for their product. If GlobalData is right it’s certainly a silver lining for shale and gas companies who are struggling to get out of the red.