Abstract

The global energy industries are exposed to two major development trends:

  1. Ever increasing focus on environmental emissions, and

  2. an increasing price disparity between oil and natural gas.

Both trends are strong forces for pushing investments from oil projects to natural gas projects.

In the downstream area, three key developments are significant;

  1. the implementation of LNG as maritime fuel,

  2. the implementation of LNG in land transportation, and

  3. the implementation of LNG in power production.

Already, it can be observed that LNG is winning market share from liquid oil based fuels in all these fields. Common for all these areas of application is that LNG must be delivered in smaller volumes than the industry is currently set up to deliver.

For LNG as a maritime fuel, the trend is most developed in Norway, where more than 20 LNG fuelled ships are sailing, and 20 more will be delivered over the next two years. These ships, along with a range of small industrial consumers, are supplied with LNG from small scale liquefaction plants in Norway. LNG supplies are provided by trucks and small LNG carriers.

DNV has done a comparative study of the economics of the "Norwegian way", and other concepts for small and medium scale distribution of LNG, and how the various concepts fit into the existing large scale LNG operations. The study has developed cash flow models for the various concepts for different volumes of LNG, and has estimated price mark-ups to end consumers. The models also include uncertainty estimates for input variables and present the results as probabilistic values. The study demonstrates that LNG is the preferred solution in most cases. But it is also concluded that a more efficient supply infrastructure to end customer supplied from large scale and effective liquefaction and bulk transportation will boost the development and unlock a large new market for LNG.

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