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Top 3 trends affecting the small scale liquefaction industry

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Hydrocarbon Engineering,

Technavio has released its latest report regarding the top three trends affecting the small scale liquefaction industry until 2020.

Technavio’s latest report on the global small scale liquefaction industry provides an analysis on the most important trends expected to impact the market outlook from 2016 - 2020. Technavio defines an emerging trend as a factor that has the potential to significantly impact the market and contribute to its growth or decline.

The global small scale liquefaction industry is in its nascent stage and is expected to grow tremendously in China, the US, and Scandinavian countries such as Norway, Sweden, and Finland. The adoption of the technology is expected to be slow in other regions of the world.

According to Sayani Roy, a lead analyst at Technavio for research on oil and gas, “China leads the world in the adoption of small scale liquefied natural gas as a fuel and accounts for approximately 75% of the global small scale liquefaction capacity. The country is expected to retain its dominance during the forecast period. The primary drivers for the rapid adoption of small scale liquefied natural gas in the country are low gas prices and the need to curb pollution levels, especially in the urban areas.”

The top three emerging trends driving the global small scale liquefaction industry according to Technavio energy research analysts are:

  • On and off competition for SSLNG from oil prices.
  • Monetisation of marginal or small gas fields.
  • Research and development (R&D) in gas fuelled and dual-fuel engines to enable expansion of SSLNG in multiple sectors.


On and off competition for small scale liquefied natural gas (SSLNG) from oil prices

Fossil fuels accounted for approximately 86% of the total energy supply in 2014. Oil took the largest share in total energy supply in 2014 with approximately 33% share. On the other hand, natural gas accounted for approximately 23% of the total energy supply. During 2015 - 2035, oil is expected to grow at a rate of 0.9%/y while gas is forecasted to show a 1.8%/y growth rate.

For diesel, energy price per million British thermal units (MBTU) is approximately US$15.59 (considering crude oil price at US$79.90/bbl). For gas, energy price per MBTU is approximately US$5.69 (considering the natural gas price at US$5.66/MBTU). As can be seen from the calculations, energy from gas is proving to be much cheaper than from diesel, which is widely used in the power and transportation industries as fuel.

Oil and gas price differential may act as a driver or a barrier in different years. The eventual impact of this can be seen in the long term future. During the forecast period, till 2018, the oil prices are expected to stay low. As a result, the SSLNG industry is expected to see some slackening of interest. Post-2018, with expected increase in oil prices, the SSLNG industry should witness robust growth.

Monetisation of marginal or small gas fields

Small or marginal gas fields have always been a cause of concern for many countries. Such gas fields do not justify the cost associated with exploration and production. However, with SSLNG gaining popularity, the prospect of exploring and recovering gas from marginal and small fields becomes more feasible than ever. The capital investment required for setting up a value chain for SSLNG is much less as compared to a large scale LNG plant. This is due to the modular and small size of liquefaction and regasification units.

“Many countries such as India, Nigeria, and China have been struggling with the issue of monetising the small gas fields. In 2016, India decided to auction 68 marginal fields. Nigeria has listed 30 marginal fields, out of which nine have been monetised. The prospect of SSLNG using gas from small or marginal gas fields is expected to gain momentum during the forecast period,” says Sayani.

R&D in gas fuelled and dual fuel engines to enable expansion of SSLNG in multiple sectors

Engine manufacturers have been seeing a lot of interest in gas fuelled and dual fuel engine technology from various sectors. These interested parties include owners and operators of ships, buses, heavy trucks, locomotives, and drilling equipment. The engine industry is evolving rapidly to produce engines according to customer needs.

A lot of engine technologies are being put in the testing phase. Multiple multinational companies and research organisations have reported the beginning or completion of testing phases of engines for various sectors. GAINN, a research and innovation services provider, runs a programme for six member states in Europe that takes up engineering studies on ship retrofitting, port LNG infrastructure, and bunkering stations.

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