Costs pose a challenge to low-hanging liquid gas fruit
THE ADVENT of medium and small-scale liquefied natural gas (LNG) offshore infrastructure developments presents a viable option to spur the development of a gas economy, according to Wayne Glossop, business development manager for southern Africa at Finnish power systems company, Wärtsilä.
But Glossop said price was the main hindrance to the establishment of a gas economy.
“You can imagine that, if you are taking a molecule, say from shale gas in America, you are liquefying it, transporting it, re-gasifying it and putting it in the local market here, it is going to cost you a lot of money,” Glossop said.
“So your price benchmarks are a lot higher if you are talking about imported energy. Because of that, your markets become more limited.
“For sure you are not going to build a new refinery or a massive fertiliser plant based on imported energy. It is just too expensive. You would do it if you had a domestic and cheap supply of gas.
The National Development Plan has identified natural gas as a viable alternative to coal.
“But if you’re looking at imported energy, your market opportunities are limited. Yes, the energy market is at an alltime low and there are very interesting options around. But relatively speaking, it is a very expensive fuel source.”
The government has identified natural gas among the energy sources that will lead the country towards a lower carbon future and improved energy security as part of its policy to diversify the energy mix.
The National Development Plan (NDP) also identified natural gas as a viable alternative to coal.
In a move to demonstrate its commitment to the development of a natural gas industry for South Africa, the government plans to have a gas-topower programme that will contribute 3 126 megawatts of electricity.
Glossop said most of the markets would exist in the replacement of expensive fuels such as diesel.
He cited the conversion of buses as an example of how the gas market can be created. “But that is relatively small. When you are talking about Lngto-power import projects, you are talking large LNG carriers coming in, sitting in ports.
Let us take Coega, for example. If you are bringing in massive-scale shipments, you put it into a power plant as part of the gas-to-power programme and you want to put it in the other regional and local gas consumers. In the bigger scheme of things, off-take from transport will be very little.”
He said accessing the market had always been difficult. “Getting LNG from a source to a customer requires specialised technology. If you get gas into Coega, your options of getting that gas into the region were limited. But there are good consumers in the region and new technologies exist that now make this a viable option.”
He said market analysis had shown that the “low-hanging fruit” was liquid-fuel replacement in power generation.
“Basically any plant that burns diesel or HFO will easily and happily convert to gas if that gas was made available to that plant. Regionally, there is over 3 gigawatts of existing untapped liquid power generation along various coastlines that one can access with LNG. That is a big number.
“Conservatively, if you convert those to gas, you are consuming an additional 1.5 million tons of LNG a year assuming a flexible dispatch regime. That is the absolute, lowest and biggest fruit. That is going to support the gasto-power programme. If you can add another 1.5 million tons of LNG on to the off-take of the project, it makes the programme more feasible by improving the economics.
“The challenge is accessing that 3GW of power. Traditionally, the technology has always been… go big or go home. You either purchase or lease a massive LNG carrier or FSRU and park it on the shoreline or build a massive land-based terminal. It is all great if you have massive markets.
“But these power markets are not big enough to justify those investments. So you need something smaller. Globally we have seen a lot of growing interest in the medium and small-scale LNG infrastructure developments. There are great examples in the Scandinavian countries where they have well-developed medium and small-scale shipping LNG networks.”