Read part one of this article here.
Equipment and process innovations
LNG plants are built by a relatively small number of engineering firms that are specialised in the field. Likewise, components are manufactured by companies that have concentrated their research and development efforts in the sector. Together, they bring several decades of expertise that allow operators to optimise construction and operations.
LNG plants are based upon well tested technologies that have been successfully used for several decades. An LNG plant anywhere in the world could be constructed from a series of building blocks; the process would significantly reduce engineering and manufacturing costs.
LNG production requires an immense amount of energy to cool the gas into liquid. There are several ways, for instance, of increasing energy efficiency at LNG facilities, and thus reducing operating costs. Gas turbine exhaust can be captured in the process train or at the power generation plant. The exhaust can then be used to create steam that can drive equipment, generate electric power or assist in the liquefaction train. When compared to industrial gas turbine drivers (also known as Frame machines), aero derivative gas turbines (which have inlet air chilling/cooling to augment power) provide superior combustion efficiencies when used as refrigerant compressor drivers.
All of the innovations present significant challenges. Offshore plants are capital intensive when compared to traditional plants. An offshore plant must be built to handle extreme weather conditions, including category 5 hurricanes. Wave motion adds wear and tear to machinery and complicates operations. All functions of an LNG facility must be crammed into one quarter of the space used by a conventional facility, creating expensive engineering compromises. Shell estimates that its Prelude facility will cost approximately US$3.5 billion/million t of production capacity, more than twice the amount for a conventional onshore facility.
Small scale plants, while useful in serving a niche market, suffer from economies of scale, as well as other drawbacks. Traditionally, a rule of thumb for a full scale plant has been that the liquefaction train costs approximately 40% of project capital expenditures; the remaining capital investment is for upstream pipelines and storage, road, utility and port infrastructure, and housing and related amenities for construction workers and staff. While small scale plants require little in the way of construction housing and staff amenities, other non-liquefaction train costs add an inordinate amount when compared to the small scale output.
Increases in fuel efficiency through capture of waste energy require large, upfront capital investment. Combined cycle power plants (CCPP) and heat recovery steam generators (HRSGs) are expensive; in addition to the units themselves, a complex system of piping, high alloy metallurgy and steam management adds to costs. Aero derivative turbines have smaller outputs than Frame turbines, so more units are needed to meet process needs. Finally, energy needs are not confined to any one component, such as the liquefaction stream; the most efficient energy system has to take into account the guarantee of a large, stable amount of electricity for the entire facility.
While operating savings can be significant, a cost/benefit analysis may indicate that reduced fuel costs may be offset by other factors. “The one trap to avoid is playing capex vs opex, where you can make quick technical decisions to reduce capex with the result of increasing opex for the life of the plant,” said Chris Caswell, Director, LNG and FLNG, Engineering and Construction (Global) for KBR Inc.
While building a generic plant completely from components may look good on paper, the reality is quite different. No two LNG plants are quite the same; feedstock, geographic conditions, markets and other factors can be markedly variable; why spend extra capital to build a universal component that can withstand earthquakes, for instance, when only a minor number of units might actually be deployed in a seismic region?
“Recent projects are fully challenging the hypothesis that modularisation is an automatic route to reduced capex and EPC schedule,” said Caswell. “Several iterations are in progress, from full to partial modularisation and from a large versus small scale module philosophy, with mixed results.
"Not all projects would benefit from modularisation, and it is best to understand why you should modularise as opposed to how you would modularise. In the end, the answer will be that modularisation is appropriate when the site specific elements of the opportunity require modularisation to develop a viable EPC execution plan.”
The same goes for standardisation. “In my view, nearly every customer intends on leveraging standardisation in their project, but is quickly overwhelmed with the site specifics,” said Caswell. “Feedstock composition, ambient temperature, the ability to import utilities, and local regulations are never the same at any two sites.”
The near term future for LNG facilities is dominated by low commodity prices. Supermajors are struggling with their budgets to justify long term, multi billion investments in a wide variety of projects, including LNG. A total of over 103 million tpy has been proposed for Canada, and almost 280 million tpy for the US alone; in the current environment, most facilities will be either delayed or cancelled.
Those new facilities that are given the green light will also increasingly have to take into account greenhouse gas (GHG) emissions. The cleanest currently operating LNG plant, Norway’s Snøhvit field, has a life cycle GHG emission from production, transportation and liquefaction of 0.35 t/CO2e/t of LNG. In late 2014, the British Columbia government announced legislation that would manage CO2 emissions from planned LNG plants in the province. The BC government estimates that five plants would generate 13 million tpy, adding approximately 20% to the province’s current emissions. The legislation would establish a 0.16 CO2e t/t of LNG produced; facilities would be encouraged to reach that mark through a mix of efficiencies, clean electricity, offset purchases and a CAN$25/t payment to a BC technology fund.
Over the longer term, the LNG market is expected to grow at a healthy rate, and greenfield facilities will eventually be built. For those that do proceed, investors will be looking more carefully than ever at ways of achieving lower construction and operating costs; new technologies and innovative processes will help them achieve their goals, but only after being proven in the field.
Written by Gordon Cope. This is an abridged article taken from the May 2015 issue of Hydrocarbon Engineering.
Read the article online at: https://www.hydrocarbonengineering.com/special-reports/28042015/lng-market-update-part-two-667/