En­ergy needs are chang­ing in Asia. Might liq­ue­fied nat­u­ral gas be the so­lu­tion?

Norway-Asia Business Review - - Contents - SOFIE LISBY

When Abdel Fat­tah el-Sisi be­came Pres­i­dent of Egypt in 2014 one of his main pledges was to find a so­lu­tion to wide­spread en­ergy short­ages that left parts of the coun­try in darkness sev­eral times a day for hours at a time.

En­ergy de­mand at the time was some 20 per­cent higher than sup­ply, ac­cord­ing to some es­ti­mates, and the en­ergy short­age meant se­vere dis­rup­tion for busi­nesses as well as the gen­eral pub­lic.

A num­ber of fac­tors con­trib­uted to en­ergy short­age in Egypt. Pop­u­la­tion growth – by some es­ti­mates to the tune of 1 mil­lion peo­ple in the first six months of 2015 – and in­creas­ingly hot sum­mers, which caused a surge in air­con­di­tion­ing us­age, con­trib­uted to the cri­sis, as did in­creas­ing ur­ban­i­sa­tion and a grow­ing econ­omy. In ad­di­tion, de­ple­tion and a lack of new ex­plo­ration and de­vel­op­ments also in­flu­enced pro­duc­tion. Fur­ther­more, sup­ply was capped by the for­eign com­pa­nies that op­er­ate many of Egypt’s nat­u­ral gas re­serves, who were owed bil­lions of dol­lars by the Egyp­tian gov­ern­ment. The so­lu­tion was to start im­port­ing liq­ue­fied nat­u­ral gas (LNG), the gov­ern­ment found. How­ever, the coun­try needed the in­fras­truc­ture to re­ceive, store and re­gasify the LNG. En­ter BW Group.

“His­tor­i­cally Egypt has been a net en­ergy ex­porter but sig­nif­i­cant en­ergy short­ages have meant the coun­try is now a net im­porter,” ex­plains Yngvil Åsheim, Man­ag­ing Di­rec­tor of BW Group’s LNG divi­sion. The com­pany bid on and won a ten­der to build and op­er­ate a float­ing stor­age and re­gasi­fi­ca­tion unit (FSRU) in Egypt’s Ain Sokhna port to al­low the coun­try to im­port LNG. The project – a state-of-the-art new built 170.212 cu­bic me­tre FSRU with as­so­ci­ated in­fras­truc­ture – took just three months to de­liver from con­tract sign­ing, a world record.

“To put this num­ber into per­spec­tive, it usu­ally takes 2-3 years from green light to im­ple­men­ta­tion,” ex­plains Ms Åsheim. “But en­ergy is so im­por­tant for sta­bil­ity so the Egyp­tian gov­ern­ment was de­ter­mined to find a so­lu­tion quickly. Im­ple­ment­ing the right in­fras­truc­ture can be done very quickly and ef­fi­ciently if all par­ties work to­gether. What is typ­i­cally de­lay­ing the process is if the reg­u­la­tory setup is not in place.”

Ms Åsheim speaks from ex­pe­ri­ence. BW Group is one of the world’s lead­ing play­ers in the tanker, gas and off­shore seg­ments. With a his­tory dating back to 1935, BW Group to­day em­ploys more than 5000 peo­ple world­wide and has of­fices in Sin­ga­pore, Nor­way, Den­mark, USA, China, Ber­muda, In­dia, the Philip­pines and Cyprus. The com­pany’s LNG divi­sion is among the big­gest in the seg­ment.

“Our LNG divi­sion has two ac­tiv­i­ties,” says Ms Åsheim. “The first is tra­di­tional LNG ship­ping where we

trans­port LNG in spe­cially built ves­sels and the sec­ond is the build­ing and op­er­a­tion of float­ing im­port ter­mi­nals, so called FSRUs, where we re­ceive, store and re­gasify the LNG be­fore it is sent ashore.”

The pro­cesses in­volved are highly tech­ni­cal. LNG is nat­u­ral gas cooled down to mi­nus 163 de­grees Cel­sius to liq­uefy it. In liq­ue­fied form, the gas’ vol­ume is de­creased by 600 times, mak­ing it eas­ier – and safer – to trans­port. The FSRU in Ain Sokhna is the world’s most utilised, re­ceiv­ing 60 car­goes in its first year of op­er­a­tion. At its peak in sum­mer, it re­ceived new LNG ship­ments ev­ery 3-4 days. Once the LNG ship­ment reaches the FSRU, it is heated to around 5-10 de­grees Cel­sius and sent out via high pres­sure gas lines. The unit pro­duces 4.5 mil­lion tonnes of LNG per an­num (by com­par­i­son, Sin­ga­pore uses 6 mil­lion tonnes an­nu­ally) and the out­put gen­er­ates around 5,000 megawatt of power. The case for nat­u­ral gas Prompted by what some call “the shale revo­lu­tion”, nat­u­ral gas pro­duc­tion has in­creased sig­nif­i­cantly over the past decade. As a re­sult, many coun­tries, in­clud­ing the USA, Rus­sia and Aus­tralia, ex­port huge amounts. “Ten years ago we looked at im­port­ing gas to the USA; now they are ex­port­ing,” notes Ms Åsheim. “The challenge is de­mand. A lot of coun­tries lack the in­fras­truc­ture and the tech­nol­ogy to im­port the gas, which was the case in Egypt, and that is where we come in. The FSRUs are cost ef­fi­cient and re­quires limited ad­di­tional in­fras­truc­ture and min­i­mal foot­print on land.”

Ac­cord­ing to Ms Åsheim, the rea­sons for im­port­ing gas are man­i­fold. En­vi­ron­men­tal con­cerns is one of them; CO2 emis­sions from nat­u­ral gas com­bus­tion is around 50-60 per­cent less than for coal. Other coun­tries have com­pletely dif­fer­ent mo­tives for im­port­ing, she ex­plains. “For ex­am­ple, Lithua­nia can get all the gas it needs from Rus­sia but it’s a po­lit­i­cal is­sue, they want en­ergy in­de­pen­dence. Some coun­tries im­port gas as a way to com­ple­ment re­new­able en­ergy sources such as wind, hy­dro or so­lar power. LNG can be a good match to re­new­ables. When there is less wind or sun, LNG can be an al­ter­na­tive source be­cause it is re­li­able.” LNG in Asia Sev­eral coun­tries in Asia have projects in var­i­ous stages of devel­op­ment to im­port LNG via FSRUs. Ac­cord­ing to the In­ter­na­tional En­ergy Agency (IEA), most Asian coun­tries will need to im­port more gas to meet de­mand growth, as pro­duc­tion (when rel­e­vant) fails to grow at the same pace as con­sump­tion. Ac­cord­ing to an IEA re­port re­leased in 2014, over the medium term, half of the an­tic­i­pated in­crease in gas con­sump­tion will re­quire ad­di­tional im­ports. How­ever, projects of­ten suf­fer from poor plan­ning and lengthy im­ple­men­ta­tion, says Ms Åsheim. “A lot of the times, projects are be­ing de­layed due to is­sues re­lated to risk,” she says. “There are is­sues re­gard­ing sup­port­ing in­fras­truc­ture, power plants not be­ing built, po­lit­i­cal and reg­u­la­tory ob­sta­cles. Thai­land, Hong Kong, Philip­pines, Myan­mar and Viet­nam have all been talk­ing about im­ple­ment­ing FSRUs In­done­sia al­ready has two FSRUs in op­er­a­tion and sev­eral planned.”

Ac­cord­ing to Ms Åsheim, the case for LNG in Asia is strong. En­ergy needs are grow­ing rapidly and there is an in­creas­ing em­pha­sis on cleaner en­ergy. How­ever, there are sev­eral ob­sta­cles as well. Cost is one of them. “En­ergy prices have gone down and they will likely stay rel­a­tively low. Coal is cheap so it is dif­fi­cult to com­pete if you think only about costs,” she says. In ad­di­tion, she notes, while de­mand is there, vol­ume re­mains rel­a­tively low so coun­tries can­not ben­e­fit from economies of scale.

“The only ex­cep­tion would be China,” she says. “China is de­ter­mined to use LNG as an al­ter­na­tive to coal and they have built land based ter­mi­nals to sup­port their needs. They have taken the long term view and have been will­ing and able to make the in­vest­ment.” Above: The LNG Tanker BW Pav­il­ion Leeara of Sin­ga­pore at al­most 100,000 tons dead­weight built in 2015.

En­ergy needs are chang­ing in Asia and else­where. Might liq­ue­fied nat­u­ral gas be the so­lu­tion?


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