01 POWER ISLAND / 01 CCPP / DOE__Understanding Natural Gas and Lng Options October 11 2017_1

NEW AND EMERGING LNG/CNG MARKETS

One of the benefits of small-scale LNG is that fuels in the destination markets for which it substitutes are often diesel or fuel oil, so the environmental benefits, in terms of CO2 emissions, and especially particulates, can be substantial, and this is one of the primary elements of policy support that applies in China.

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NEW AND EMERGING LNG/CNG MARKETS

Emerging LNG Marine

Transportation Options

For most of the 50 years since the establishment of transoceanic LNG transportation, the size of gas carriers has grown from the 25,000 cubic meters that applied to the first commercial LNG exports from Algeria, through to 260,000 cubic meters which reflect the latest Q-max LNG carriers used to transport LNG from Ras Laffan.

However, a new business model is emerging for LNG, based on the socalled break-bulk approach of shipping the product in smaller units, rather than in standardized containers. The term does not exactly reflect the practice in the container ship industry, as, in fact, smaller LNG marine transportation, for power barges or ship bunkering applications, can often use standardized ISO containers which are loaded onto barges for moving around coastal waterways, or navigable rivers or channels.

In addition to modularized break-bulk applications, small-scale LNG carriers, which are similar in size to the 25,000 cubic meter ships used in the 1960s in the early days of LNG, are also becoming popular for the purposes of reloading LNG from regasification terminals, or for smaller offtake volumes from LNG liquefaction terminals.

The availability of these modularized bunker/coastal LNG barges and smaller scale conventional LNG carriers significantly improves the opportunity to develop niche African markets, such as coastal power stations or floating power barges, and road tanker operations. This, combined with the other emerging market features described in this section, significantly improves the potential for local and regional gas and LNG markets to play a more significant role in underpinning large scale gas resource development.

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NEW AND EMERGING LNG/CNG MARKETS

Peaking and Storage

As African gas markets develop, gas supply will need to be available to meet the peak demand in the gas distribution system. In this mode, companies will need to have the ability to take natural gas from storage or off the gas distribution network. Peak-shaving LNG facilities liquefy and store natural gas when supply exceeds demand in the pipeline network for eventual regasification during peak demand periods. The storage tank volumes in these facilities can be very large, capable of storing 1.0 to 2.0 BCF of natural gas.

Most well-developed gas transmission infrastructure, such as in North America and Europe, has some degree of LNG-based peak shaving to address relatively short-term changes in gas demand, often as a result of hot or cool weather, in addition to seasonal storage applications which typically do not involve LNG facilities.

LNG may also be transported by truck to nearby power stations that have small regas modules. The array of LNG peak-shaving facilities within the natural gas distribution network may result in other forms of LNG application, including vehicular usage.

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NEW AND EMERGING LNG/CNG MARKETS

Mid-Scale Virtual Pipeline Projects

Much of the population in African countries lives in the countryside in small communities, and connecting these communities in the traditional way using transmission pipelines would be too expensive. The virtual pipeline, filled either by compressed natural gas (CNG) or small-scale LNG, can be the solution to bring natural gas to these communities, through the installation of small Autonomous Gas Units (GAU).

CNG is a low-cost alternative for the transport of small to average gas volumes over moderate distances (+/-2000 km) where the volumes are too small for LNG or too far to transport by pipeline. The gas is compressed to around 250 bar and can be transported to small villages or used to supply natural gas for local vehicles.

A small-scale LNG system is another option to transport natural gas to remote villages, either by truck or small ships. Small regasification units can be built linked to a local gas network, establishing a local GAU. Successful examples of these GAU exists in many countries in the world, including Portugal, and may be replicated in many of the cities and towns in Africa, especially in those countries with recent discoveries of natural gas such as Tanzania and Mozambique.

Such small projects can actually be an opportunity for medium and small enterprises business, with a favorable economic impact on local communities by replacement of imported fuels and reduction of deforestation, given that the majority of those communities currently use wood as the main source of energy.

In Mozambique with the construction in 2014 of a 62 km gas distribution network in Maputo city by ENH, E.P. boosted the development of CNG for vehicles. Currently, the number of vehicles converted to CNG has increased significantly. Initially, the gas was compressed up to 250 bar and transported about 15 km from Matola to Maputo city in trailers, supplying

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NEW AND EMERGING LNG/CNG MARKETS

the Mother Station at gas stations, then the vehicles. The gas distribution network in Maputo has eliminated the need for CNG transport from Matola to Maputo, because the gas stations were connected to the pipeline, thereby reducing the initial costs. Similar experiences could be replicated in densely populated cities near the Rovuma gas fields, like Nampula, Nacala, and Pemba.

In Nigeria, Compressed Natural Gas (CNG) facilities serve the growing energy demand of customers unable to access gas pipeline supply in the Lagos area and environs. The CNG Mother Station is designed for output capacities of 150,000 standard cubic meters per day (SCMD) at a discharge pressure of 250 bar, and can serve customers within a 200km radius.

CNG is compressed into mobile tube trailers for onward delivery to customer locations, and the facility also has dispensing points for filling Natural Gas Vehicles (NGV) utilizing CNG as a primary or alternate fuel. Gas supply to the Mother Station comes from a service line that taps into the Greater Lagos gas pipeline distribution system.

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CONVERSION TABLES

Natural Gas Conversion

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CONVERSION TABLES

LNG Units Conversion

Units

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ACRONYMS AND DEFINITIONS

ACQ (Annual Contract Quantity) The Annual Contract Quantity (ACQ) is the volume of gas which the Seller must deliver and the Buyer must take in a given contract year.

ADP (Annual Delivery Programme) The Annual Delivery Programme (ADP) is a schedule of gas volumes to be delivered on definite dates or within definite periods in an imminent contract year in a long term contract. AfDB (Africa Development Bank)

AIPN (Association of International Petroleum Negotiators) Arbitrage Arbitrage is buying and selling the same commodity in two

different locations or markets to take advantage of variances in price.

AG (Associated Gas) Associated Gas is gas which is produced with oil in a primarily oil field.

ALARP (As Low As Reasonably Practicable) APCI (Air Products & Chemicals, Inc.) BENGAS SA (Beninoise de Gaz)

BL (Base Load) The proportion of delivery (or demand) below which send out (or demand) is not estimated to fall during a given period.

BOG (Boil Off Gas) The small amounts of LNG that boil off from LNG storage tanks in LNG plant operations and are recovered, or during transportation. BOG gas on LNG tankers can be used as a fuel to drive the ships.

BOE (Barrels of Oil Equivalent)

BP (Border Price) The price at which gas is traded at the border between two countries.

BTU (British Thermal Unit)

C&F (Cost and Freight)

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