Transport sector is a major consumer of fossil fuel, as well as one of the main sources of carbon dioxide (CO2). According to the European Commission, oil represents 94% of consumed energy in European transport sector. 84% of oil is imported to Europe, which leads to more than € 1 billion/day costs, as well as significant environmental impact. Moreover, the world’s reserves are reducing, oil price rises, and the number of cars is increases constantly.
So, it is obvious that oil dependency of the transport sector can’t be neglected not only in European, but also in world economy. That’s why over the past ten years there has been a wide research activity all over the world, aimed to replace oil fuels with alternative energy sources. As a result, we can identify today five energy sources, which can become alternatives to traditional fossil fuels used in the transport sector. These are LPG (Liquefied Petroleum Gas), Natural gas in form of Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG), electricity, liquid biofuels and hydrogen. However, at their current stage of development none of these alternative sources of energy will be able to completely replace oil in all segments of the transport sector. So, in order to make a full transition to alternative energy sources, all mentioned technologies must be pursued, with a focus on each transport mode needs. The key points of such transition will be technological and market development of a specific alternative energy source, as well as investments in related engineering projects and infrastructure.
In this context, liquefied natural gas (LNG) has a big potential to replace diesel fuel for long-distance road freight transport and marine vessels. The technology of natural gas liquefying has been known since 1960s. Today, almost all major oil & gas companies (Exxon Mobil, Shell, Total, BP, Gazprom, GDF Suez, Statoil and others) have their own LNG entities. However, only in recent years some companies, including Shell, have started to promote LNG as an alternative to oil in transport sector. Having access to significant financial, technological and operational resources, these oil & gas corporations can become the driving force for the future development of LNG as a transportation fuel.
Along with the businesses interest, development of LNG as a new transport fuel has found a positive response from the large number of authorities all over the world. For example, the European Commission considers LNG as the most promising alternative to diesel fuel for heavy trucks and sea shipping.
Today, there is practically no alternative to diesel fuel for long-distance freight transport. If EURO VI standard is applied for trucks, LNG can be as a long-term alternative to diesel fuel. Transition to LNG will completely cut sulfur emissions, and reduce CO2 emissions by 20-25%. The economic effect of LNG use for road transport is estimated between 15% and 25%.
Considering sea transport, LNG becomes an attractive fuel option, particularly because of new limits for sulphur content in marine fuels which will decrease from 1 % to 0.1 % starting January 1st 2015 in Sulphur Emission Control Areas (SECAs), including the Baltic Sea, North Sea and English Channel. These obligations will be relevant for about 1/2 of 10000 ships currently engaged in intra-EU shipping. Moreover, from January 1st 2020, sulfur limits will drop from 3.5% to 0.5% worldwide. In addition to environmental considerations, there are also strong economic arguments in favor of using LNG as shipping fuel. In 2012, landed price for LNG in the EU ranged from €300-410 per tonne, while the price for heavy oil was €480 per tonne. From 2015, it will be required for ships to use ultra-low sulphur marine gasoil, the price of which is around €780 per tonne. So, it becomes obvious that LNG has a huge potential to become a long-term alternative to existing types of fuels used in sea transport.
Pilot projects in these two sectors are LNG Blue Corridors and LNG in Baltic Sea Ports. LNG Blue Corridors aims to improve knowledge and awareness of LNG as an alternative fuel for medium and long distance road transport. The project aims to create four LNG corridors, which will connect over 12 EU members. This will include building 14 new LNG stations, as well as a fleet of about 100 LNG heavy trucks which will operate along these corridors.
The aim of the ‘LNG in Baltic Sea Ports’ project is to develop LNG bunker filling infrastructure in the Baltic Sea area. Seven ports are involved in the project – Aarhus, Copenhagen-Malmö, Helsingborg, Helsinki, Stockholm, Tallinn and Turku.
What is LNG?
Liquefied natural gas is natural gas cooled to -161°C. LNG is a clear, colorless and odorless liquid. It is neither corrosive nor toxic. LNG is lighter than water and when exposed to air quickly vaporizes. When natural gas is cooled into liquid form, its volume is reduced by a factor of 600, which means LNG uses 1/600 of the space required for the same mass of gas. LNG is a safe and cleanest burning fossil fuel. It produces less emissions and pollutants than either coal or oil. LNG is produced on the liquefaction plants. Then it is transported in special tankers. Upon arrival at the receiving facility, LNG is transferred into specially designed storage tanks, where it is stored as a liquid at near atmospheric pressure and – 160°C temperature.
In 2012, global LNG trade accounted for 236.3 MT, equivalent to 29% of world natural gas consumption. 28 countries are importing LNG and 18 countries are LNG exporters. On the supply side, Qatar was the largest exporter with 32% of global LNG exports. On the demand side, Asian countries accounted for 71% of LNG imports. At the end of 2012, there were 93 regasification terminals worldwide, reaching a total regasification capacity of 668 MTPA. There were 89 liquefaction trains in operation, with an aggregate nominal capacity of 282 MTPA.
Development of LNG Technologies
However, despite of positive trend in the development of LNG industry, the current number of liquefaction plants and regasification terminals does not correspond to potential demand, which could rise in the coming years. This demand will be mainly due to global trade. Today 90% of international trade is delivered by ships and from 2001 to 2011 its volume has tripled. So, considering upcoming regulation on sulphur content, the demand for LNG from transport companies may increase exponentially. To realize the full potential of LNG as a transport fuel, some technical issues must be solved in the coming years. The most challenging objective for maximizing LNG use in the transport sector is the development of associated infrastructure. This development can’t be done without involvement of big energy corporations as well as emergence of new small and medium-sized companies. Corporations have crucial investment and engineering capacities. Small companies as well as research labs could be a source of new innovative technologies. The key technical developments in LNG supply chain are related to advancements in liquefaction process, receiving terminals and carriers. From market and retail point of view, key developments concern refueling stations both for road transport and bunkering as well as ships and vehicles conversion to LNG.
Seven different liquefaction technologies were employed all over the world in different periods of time. At the same time Air Products’ technologies dominate the market today. Its LNG processes (AP-SMR™, AP-C3MR™ и AP-X™) make up to 82% of liquefaction technologies in existing projects. Almost the unique competitor of these processes is Optimized Cascade technology developed by ConocoPhillips. However, all these liquefaction technologies are typically used for high volume production of LNG destined for export. At the same time, there is a great potential of development of small-scale liquefaction plants, intended for internal use in different industries. We can already find this kind of installations in Norway, Finland and Russia. Small-scale liquefaction could become wildly spread, for example, in China, where LNG-fuelled vehicle industry is actively developing nowadays. Introduction of small-sized liquefaction plants may allow China to scale the existing transport network of LNG vehicles.
Another innovative solution in liquefaction process is development of floating natural gas liquefaction plants. This technology has made much progress over the past two years. The main advantage of floating plants is that they can provide access to gas fields that are not available to existing infrastructure (pipelines, marine terminals, etc.). Also, when an existing field is depleted, floating plants can move to a new location avoiding expensive offshore pipelines. To date, the most ambitious project in this field is a floating LNG platform, constructed by Shell near Australia’s north-west coast (start of production is scheduled for 2016).
As the number of LNG-importing markets continues to grow, the main challenge concerning development of receiving terminals is directly related to construction of new units in various countries. Today, 62% of global receiving capacity falls on Japan, the United States and South Korea. Including the United Kingdom and Spain, receiving capacity of the first five countries is 74%. The remaining 26% are held by 23 different countries. So, construction of new terminals will create new markets for LNG and enhance the existing ones.
Concerning terminals’ infrastructure, major technical challenges are related to the development of cryogenic equipment for LNG receiving and storage facilities. As it was mentioned above, natural gas is liquefied at the temperature of -162 °C, which makes LNG a cryogenic liquid. It means that its contact with different materials may cause a change in their physical qualities. As a result, materials can lose their functionality, becoming more fragile and less solid.
Therefore, operation of LNG involves the use of special materials and equipment. Thus, at the moment there are a number of technical problems related to improvement of cryogenic pumps, valves, piping, compressors and other types of equipment, traditionally used in oil and gas industry.
At the end of 2012, global LNG fleet consisted of 362vessels of all types, with total capacity of 54 bcm. Almost 90% of existing tankers are membrane-type vessels, with a capacity 125-180m3. At the same time, with the growing global demand for LNG, the number of orders for new Q-type tankers with capacities of more than 210m3 has raised during the last year. Furthermore, today we can see a growing demand for vessels allowing on-board LNG storage and regasification. In this case LNG is delivered to land by flexible pipeline connection. This type of vessels can be used as a floating LNG terminal, which can become a promising solution for countries and areas without LNG infrastructure.
Other technical challenges related to LNG carriers concern improvement of tankers’ component parts and systems. For example, the results of the research project NG2SHIPI/F have enabled to improve effectiveness of tankers’ transfer chain. For example, improvement of tanker’s pumping system enabled to reduce loading time by 20%; development of insulation system with 80% improvement in its thermal performances have made cargo transfer lines more efficient.
Development of LNG market will largely depend on future expansion of refueling and bunkering stations. Similarly to receiving terminals, main objective for coming years is to increase the number of refueling and bunkering stations across the countries.
The United States can be considered as a leader in terms of LNG use in trucks. To date there are 81 LNG refueling stations in the US, the majority of which is located on the West Coast. As far as Europe is concerned, there have been only few isolated refueling stations in Portugal, Spain, Italy, Sweden and the Netherlands till recently. However, the projects such as Blue Corridors, mentioned above, aim to change this situation. Another promising project is BiMe Trucks, which aims to develop LNG market for heavy long-distance vehicles. The objective of the first phase of this project is to launch 100 heavy trucks onto the North European market and to build refueling stations network.
Unlike trucks segment, most of the world’s LNG-fuelled ships are located in Europe. Today LNG bunkering is especially prevalent in Norway and Sweden. Beyond these countries, there are projects of development of LNG bunkering stations in various ports in the Netherlands, Belgium, the United Kingdom, and France. Specifically, the port of Rotterdam in the Netherlands expects to begin LNG bunkering by 2014.
From technical point of view, main challenges are related to stations’ safety. As a cryogenic liquid, LNG poses different safety issues than conventional liquid fuels, including accidental spills. For example, in June 2013 a new ISO standard concerning bunkering safety was adopted (‘Guidelines for Systems and Installations for Supply of LNG as Fuel to Ships’). This document determines major safety requirements for LNG bunkering processes and infrastructure.
Another technological challenge related to ships’ bunkering is the development of ship-to-ship LNG transfer. It is mainly related to the development of LNG bunkering vessels which could feed sea-going ships. This technology has a big potential, because it will allow ships to refuel in areas where there is no appropriate infrastructure.
Diesel to LNG conversion
In order to develop LNG for transport market, the number of LNG-powered vehicles and vessels should be on a constant increase. The key equipment of LNG machine is an engine, which actually permits to run on LNG.
There are currently three natural gas engine technologies used for large marine vessels: 1) spark-ignited lean-burn, 2) dual-fuel diesel pilot ignition with low-pressure gas injection, and 3) dual-fuel diesel pilot ignition with high-pressure gas injection. Spark-ignited engines operate exclusively on natural gas, while diesel pilot ignition engines can operate on a range of fuels, including natural gas, marine distillate, and marine residual fuels. There are three main manufacturers in this market: Wärtsila, Rolls-Royce, and Mitsubishi Heavy Industries.
In some cases, existing diesel engines can be converted to dual-fuel diesel-gas operation. Converting an existing engine is economically more feasible than installing new ones, especially taking in account that conversion basically brings the same benefits as new engines.
Concerning road transport, it is worth to mention the American company Cummins Westport, which is already offering a wide selection of LNG engines destined to heavy trucks. In Europe Volvo that has also started production of new 13-liter LND engine. The engine’s advanced high pressure diesel ignition technology will provide significant fuel efficiency gains compared to spark-ignited natural gas engines, making it a viable solution for long-haul trucking applications.
Another American company Motiv Engines proposes a revolutionary new design of LNG engine. Its Compact Compression Ignition (CCI) engine has an inherent advantage to the natural gas engines available today. A conventional spark-ignited LNG engine has a brake thermal efficiency of around 27% whereas Motiv Engines’ CCI-engine can reach a brake thermal efficiency of 50%. According to US fuels prices, operating a diesel truck costs $0.18 per horsepower hour, a spark-ignited LNG engine – $0.14 and a CCI engine – $0.07.
Concerning road transport there are mainly two ways of converting a heavy duty truck to LNG. The first is to repower the diesel engine with a spark-ignition engine. The second is to add a diesel-LNG dual fuel system. In either case, one or two LNG tanks must be added to the truck and, in the case of the spark-ignition engine, the diesel fuel tank must be removed.
Liquefied natural gas (LNG) is not a new developing concept. It is a proven technology that has been used for years, mostly in power and industrial sectors. At the same time, only few years ago have we started to consider LNG as an alternative to oil fuels in certain segments of the transport sector. Because of its economic and environmental benefits, LNG has a huge potential to replace oil in heavy road transportation and marine shipping. LNG is also largely supported by regulatory authorities and some oil & gas corporations. The most challenging hurdle in making a transition to LNG in the transport sector is mostly related to new infrastructure development. The growth of LNG-fuel market will largely depend on technological advances as well as substantial investments in associated infrastructure buildout. At the same time this demand for new technologies gives tremendous development opportunities to different kinds of businesses, research organizations and investors.
Being already a mature technology, LNG doesn’t require long-run creating of something entirely new. The future innovations are mostly related to technologies that can improve, optimize and support development of LNG fuel industry. That’s why LNG industry today opens the door to entrepreneurs, small and medium businesses, which along with big corporations could enable rapid adoption of LNG as a new transport fuel. Another key factor that will determine pace and tenor of LNG market development is investment. Access to substantial investment is an integral part in LNG infrastructure development. At the same time, as one of the fastest growing fuels in the world, LNG opens new promising investment opportunities for energy investors. Considering legislative and regulatory initiatives combined with long-term prospects for an abundant LNG supply, it makes sense for investors to invest in LNG-powered vehicles and ships, fueling stations and other infrastructure facilities.