Catching Cold or Catching Fire? Current state and growth prospects for small-scale LNG

The small-scale LNG market is rapidly growing on both the supply and demand side. Forecasts of growth to 2030 of up to 100 mt are widely shared, and there is a significant chance growth could far exceed this, with some forecasts for key sectors leading to a much higher overall demand.

SSLNG production and supply

Current SSLNG liquefaction capacity is estimated at 28mtpa. Supply infrastructure in terms of refuelling facilities for road and marine applications is becoming well established in China, and parts of Europe and North America, as well as some other markets around the world.

We expect small-scale liquefaction capacity to increase rapidly in coming years, particularly in markets where there is existing gas infrastructure and demand for LNG as a liquid fuel, or in areas where small-scale production provides an effective means of developing smaller gas resources. Small-scale liquefaction will face competition in LNG supplies from large-scale facilities, particularly regasification terminals. In addition, wider issues affecting the gas and LNG retail market in terms of the growth of LNG or alternative energy supplies from renewables or electric vehicles, will have a corresponding impact on small-scale liquefaction.

Marine transportation

The marine sector represents a very promising opportunity for LNG. Most obviously the MARPOL VI legislation is forcing a number of operators to actively consider alternative fuelling options and LNG is clearly suitable for reasons of both price and environmental performance. The scale of the shipping sector makes it attractive to LNG suppliers whilst ship and engine designers and manufacturers are developing a range of offerings.

Current, Planned and future ECAs

Source: MJMEnergy

Road transportation

The trucking sector also represents a promising opportunity for LNG although the prospects are likely to vary quite widely from country to country. The relatively low cost of natural gas, increasing restrictions on emissions, and growth in road freight requirements are factors that are likely to make LNG a viable option in many parts of the world.

Number of LNG Refuelling Stations in the U.S.

Off-grid and power generation sectors

Off-grid LNG use remains a small area of the global energy and LNG market. It has strong potential for growth, and can prove extremely competitive with oil products, particularly as economies of scale and greater availability reduce the cost of SSLNG supplies. However, it remains a limited and niche market, and is likely to face competitive pressure from renewables, particularly as costs of wind, and solar PV fall. SSLNG-to-power is a niche market in the early stages of development with particular advantages for small islands and other isolated markets. These advantages also apply to markets where there is a limited gas pipeline supply system, where SSLNG can compete very strongly on price (as well as emissions) with oil products. The key challenge for SSLNG in the off-grid and SSLNG-to-power sectors is likely to be developments in renewable technology, particularly when partnered with falling costs and increasing capabilities in energy storage, as well potentially competition from gas pipeline development or other conventional fuel sources.

By Nick White and Chris Brooks, MJM Energy

Complete report – Catching Cold or Catching Fire? – CEDIGAZ Insights No. 29, September 2018 – 105 pages – PDF Format – public price €1000 (VAT excluded)