January 2017

Magnolia LNG
The next U.S. Gulf Coast Project
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 ISSN 1747-1826

CONTENTS JANUARY 2017

03 Comment 31 Make it fit

Dr Pl G. Bergan and Dr Daejun Chang, LATTICE Technology, Norway and
South Korea, present a new, flexible LNG pressure vessel that is capable of
05 LNG news being designed to fit a range of spaces.

35 Development history of the gas

10 A new era for Australian LNG engine
Bernadette Cullinane, Deloitte, Australia, reflects on a challenging Ren Sejer Laursen, MAN Diesel & Turbo, Denmark, looks at the development
2016 for the LNG industry and looks ahead to a record year for of dual-fuel engine technology.
LNG in Australia.
39 Small scale LNG loading solutions
Tom Toth, Connect LNG AS, presents a floating transfer system.

43 Storage in severe conditions

Julien Castres Saint Martin, VINCI Construction Grands Projets, France, and
Patrick Genoud, Entrepose Contracting, France, look at the safe delivery of
large LNG storage tanks in severe conditions, from Western Australia to
Northern Siberia.

47 Easing the stress

Wasim Younis, Symetri, UK, presents the benefits of adopting analysis early on
in the design stage within the LNG industry.

51 Automation for productivity and

10 forecast accuracy
Christian Sommerhoff, IWB, Germany, outlines automation considerations for
LNG distribution to trucks.

15 Monetising flare gas 56 15 facts ... on Australia

Franoise Sabatier and Helmut Steinacker, Linde Engineering Division,
Linde AG, Germany, introduce a BOG reliquefaction plant developed
for Petronas LNG complex in Bintulu, Sarawak, Malaysia.

19 Back to basics
David Blanchard, Cryostar, France, explains how current market
conditions present an opportunity for small scale LNG.
ON THIS MONTHS C
COVER
23 Bigger is not always
ways better
Warren R. Miller and Fei Chen, Air Products
roducts and Chemicals Inc., USA,
explain why smaller plant capacitiess can sometimes equate to bigger
opportunities. 3D model rendition of the
planned LNG Limited 8 million tpy
26 A brighter future
re for LNG as ((or
or greater) project in La
Lake Charles,
L
Lou isiana, US. Currently s
Louisiana, shovel ready
a marine fuel having regulatory certaint
certainty (FERC
Martin Wold, DNV GL, Norway, outliness why interest in LNG
as a ship fuel is set to increase. and DOE approvals), cost ccertainty
(LSTK EPC signed with KBR KBR-led KSJV,
O&M contract with EthosEn
EthosEnergy),
industry-leading operational efficiency
with our patented OSMR liqu liquefaction
technology, and equity financing
nancin from
Stonepeak Infrastructure Partners.
Partne ASX:
LNG & OTC ADR: LNGLY.

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 JOSEPH GREEN
EDITOR

COMMENT or many, 2016 will go down as one of the worst years

F in history. After a quick glance at the news, its hard

to disagree. Political turmoil, economic uncertainty
and a spate of celebrity deaths have dominated the
headlines over the last twelve months. Nevertheless, as we
limp, black-and-blue, into 2017, hope remains for a brighter
approximately 70% of east coast natural gas demand
by 2018. The reality of the situation is that the three
new plants will likely draw the majority of the natural
gas that would otherwise have been available to the
year ahead.
domestic market. A massive exploration and production
After a year fraught with challenges, Australian LNG
effort is required to boost output by enough to meet
also remains optimistic for a record year in 2017. A crucial
the demand of the LNG plants,2 otherwise Australia can
year for Oz, the country is set to become the worlds largest
expect to see a shortage sometime around 2019. AGL is
LNG exporter as multiple construction projects reach their
considering its options in light of these predictions.
conclusion. As production increases in tune with global
In this months issue, we feature a fascinating
supply, Australia will continue to face obstacles however, as
Regional Report from Deloittes Bernadette Cullinane,
it looks to cement its status as the leading figure in LNG
who investigates the LNG industry at large and looks
export; namely, weak demand and the subsequent oversupply
ahead to a crucial year for LNG in Australia. If you have
of the global market, coupled with forecasted price declines.
picked up a copy of LNG Industry at this years Australian
A hot topic towards the end of last year, the Australian
Oil & Gas Exhibition, be sure to let us know your
LNG market has generated much speculation. The majority
thoughts on one of the years most intriguing markets.
of 2017 forecasts have painted a mixed picture, whilst some
The New Year is often a time for resolution and
have ventured the once inconceivable. Recent reports have
change. That is the same for me as I take on the
suggested that despite the enormous spend on the push to
role of Editor at LNG Industry. I would like to thank
export gas, Australia may in fact be on the brink of importing
Callum OReilly for his continued words of wisdom and
it. Energy supplier AGL has announced that it may need to
guidance and we wish him well in his new role as Editor
spend up to AUS$300 million on an LNG import depot to
of our sister publication, Hydrocarbon Engineering.
shield itself from soaring gas prices and increasing difficulty
Moving forward, LNG Industry remains committed to
in finding local supplies. 1 There is method in the madness.
bringing you the highest quality technical articles and
Although no deal is yet in place, there is a strong possibility
thought-provoking pieces reflecting on the industry
that the cheaper solution for AGL will be to import gas from
worldwide. This will no doubt be a pivotal year for LNG,
any number of low-cost producers around the world, rather
and we will endeavour to cover every angle of what is
than utilise its reserves at home.
hopefully a brighter 2017.
Whilst it seems an extraordinary move, AGL is reacting to
economic realities. As reports discuss, the building of three 1. http://www.abc.net.au/news/2016-11-24/having-spent-
new LNG plants in Queensland state ... has dramatically 200b-to-export-lng-is-australia-about-to-import/8055164
altered the supply-demand balance along the eastern 2. http://uk.reuters.com/article/column-russell-lng-australia-
seaboard. According to AGL, the three plants will account for idUKL4N1DM1XQ

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 LNGNEWS
Malaysia
First LNG produced from
PFLNG SATU
etronas has announced that the first LNG has been
P produced from its floating LNG (FLNG) facility,
PFLNG SATU.
The operational milestone marks a decade long journey
for Petronas since conceptualising a FLNG facility to
maximise the potential of remote and stranded gas reserves.
PFLNG SATU, which operates at water depths between 70 m
and 200 m, has a processing capacity of 1.2 million tpy.
Petronas Acting Vice President LNG Assets, Development
& Production, Adnan Zainal Abidin said: At 365 m long and
with 22 modular systems, PFLNG SATU is an engineering
marvel that brings together the liquefaction, production,
storage and offloading processes of LNG to the offshore gas
field. We have successfully stretched the limits of our abilities
with floating LNG technology to maintain our technical edge
as a key LNG supplier.
On 14 November 2016, PFLNG SATU reached its final
stages of commissioning and start-up with the introduction
of gas from the KAKG-A central processing platform at the
Kanowit gas field. Petronas expects its FLNG facility to lift its
first cargo and achieve commercial operations in the 1Q17.
Canada
Bear Paw receives EA approval for natural gas pipeline
NG Limited has announced that its indirect wholly owned
L subsidiary, Bear Paw Pipeline Corp. Inc., has received
environmental assessment (EA) approval from Nova Scotia
Environment for its natural gas pipeline.
Bear Paw is proposing to build and operate a
pipeline that will stretch 62.5 km from Goldboro to the
proposed Bear Head LNG export facility in Point Tupper,
Richmond County, Nova Scotia, Canada. The Goldboro to
Point Tupper pipeline connects Bear Head LNG to the
North American natural gas pipeline network. LNG Limited
claims that expenditures for the construction of the pipeline
will only commence following the financial close of the
Bear Head LNG project.
Greg Vesey, The Managing Director and CEO of
LNG Limited, said: The environmental assessment approval
The Netherlands
Gate Terminal celebrates
opening new LNG facilities
longside shareholders Gasunie and Vopak, and partners
A Shell and the Port of Rotterdam, Gate Terminal has
celebrated the expansion of the LNG terminal at the
Maasvlakte in Rotterdam, the Netherlands.
The terminal now features a third berth, as well as new
infrastructure for loading small LNG vessels. These vessels
will enable distribution to LNG terminals in other North Sea
and Baltic ports where LNG tankers are prohibited from
delivering because of their draught. In conjunction with LNG
bunker vessels, the third berth will also make it easier for
ocean-going vessels to be loaded with LNG in Rotterdam.
To celebrate the occasion, 400 guests were invited to
a networking event, which included a mini-symposium in
which several experts shared experiences and developments
regarding the use of LNG as marine fuel.
Allard Castelein, CEO, Port of Rotterdam Authority, said:
The Port of Rotterdam Authority highly values a more
sustainable transport sector. As a result of cooperation with
many parties we lead the way in this transition, Rotterdam is
the LNG hub of Europe. A new facility as the third berth is a
good example of what you can achieve together.
is an important regulatory component that furthers our
goal to be the leader in helping Nova Scotia realise
the LNG opportunity that will benefit the province and
community.
Bear Paws pipeline is integral to the development of
Bear Head LNG. We are putting all the elements in place
to develop a successful LNG export facility on Cape Breton
Island and the pipeline is a strategic and critical element.
Bear Head LNGs focus is to provide access to overseas
markets for North Americas natural gas resources on
competitive economics.
Bear Head LNG is uniquely positioned to provide
liquefaction services to Western Canadian, Northeast US, and
offshore Nova Scotia resource owners desiring to sell natural
gas to the global LNG market.
January 2017 5
 LNGNEWS
Lithuania
Skangas signs LNG reload
agreement with Statoil
kangas has announced that it has signed an agreement with
S Norways Statoil for a small scale LNG reload operation at the
Klaipeda LNG terminal in Lithuania.
At the time of writing, the reload was set to take place in early
January 2017, becoming the first reload carried out at the terminal,
and marking the first time that Skangas has sourced LNG from
Statoil.
Skangas sees this latest agreement as the next step towards
increasing support for the development of the small scale market
in Northern Europe.
Tor Morten Osmundsen, the CEO of Skangas, said: We see this
latest agreement as a confirmation of the two companies common
interest to promote LNG in order to continuously develop the
small scale LNG market.
Both companies have already concluded other agreements as
part of their business relationship. These include feed gas to the
Skangas LNG plant in Risavika, Norway, as well as a bunker supply
agreement to the platform supply vessels delivered from several
bases in Norway, including possible ship-to-ship (STS) transfer.
News Highlights
X US to become net energy
exporter
X Indian government ofcials seek zero
import tax on LNG
X Asia is the biggest US LNG buyer
Visit our website for more news: www.lngindustry.com
6 January 2017
South Korea
GTT technology to be
used on vessel ordered by
Gaslog
aztransport & Technigaz (GTT) has announced
G that its Mark V technology will be used to equip a
new LNG carrier ordered by Gaslog. The vessel will be
constructed at Samsung Heavy Industries (SHI) shipyard
in Geoje Island, South Korea, with delivery scheduled for
2019.
The Chairman and CEO of GTT, Philippe Berterottire,
said: Gaslogs choice of our new membrane containment
system highlights the confidence of our partners in our
innovations.
We are constantly striving to enhance the
performances of our systems. This first order of Mark V
shows our ability to meet market requirements.
Mark V technology reduces the guaranteed daily
boil-off rate of LNG to 0.07% of the tank volume
per day. It also optimises the dynamic insulation
resistance.
 France
LNGNEWS
Dunkirk regasification
terminal starts commercial
operations
DF has announced that commercial operations have started
E up at the Dunkirk regasification terminal in France.
The terminal is the second largest in mainland Europe, and
is the only one that is directly connected to two consumption
markets (France and Belgium). It has a regasification capacity
of 13 billion m3/yr, which accounts for over 20% of French and
Belgian natural gas consumption.
The terminal is composed of a jetty, three 200 000 m3
isothermal LNG storage tanks, and a regasification unit. The
jetty is capable of receiving up to 150 tankers per year, from
low-capacity tankers (65 000 m3) to the largest LNG tankers
in the world (Q-Max tankers with a capacity of 267 000 m3).
Five articulated arms are installed to unload the ships at a
maximum flowrate of 14 000 m3/hr. The regasification unit
consists of 10 heat exchangers, supplied with tepid water by
the neighbouring nuclear power plant in Gravelines with an
underwater 5 km tunnel.
The Executive Director of the EDF Group, in charge of
the Gas Sector and Italy, Marc Benayoun, said: I am delighted
that commercial operations have started up at the Dunkirk
regasification terminal, thus creating a new point of gas
importation in France and strengthening security of supply in
Europe. It also contributes to the development of the gas supply
market, on which the Group already operates with its Italian
subsidiary, Edison, and wishes to further strengthen its share. I
would especially like to thank the EDF, partners and contractors
teams who have worked together since 2012 to complete this
strategic asset.
23 - 25 January 2017 14 - 16 February 2017
European Gas Conference 2017 CWC Iran LNG & Gas
Vienna, Austria Partnerships Summit
www.europeangas-conference.com Frankfurt, Germany
www.iranlngandgas.com
13 - 14 February 2017 22 - 24 February 2017
Floating LNG Australasian Oil & Gas (AOG)
London, UK Perth, Australia
www.floating-lng.co.uk www.aogexpo.com.au
8 January 2017
Turkey
Inauguration of the first
floating LNG import
terminal in Turkey
n 23 December, ENGIE and the Turkish construction
O companies Kolin and Kalyon inaugurated the ETKI LNG
terminal.
The inauguration ceremony was held in the presence of
President Recep Tayyip Erdogan, Prime Minister Binali Yildirim and
Minister of Energy Berat Albayrak.
ENGIE was selected by project developers Kolin and Kalyon
to deliver this fast-track floating storage and regasification unit
(FSRU) based solution. The group committed the Neptune, one of
the two FSRUs of its fleet, to the project.
The 145 000 m3 capacity vessel will act as an LNG receiving
and storage facility and will deliver natural gas in gaseous form.
The overall infrastructure developed by Kolin and Kalyon includes
a jetty and an onshore gas pipeline to connect the terminal to
the national gas transport grid, operated by BOTAS. From final
investment decision (FID) to completion, record breaking terminal
project development took only 6.5 months.
The Neptune vessel arrived at ETKI LNG terminal berth on
11 December fully loaded with LNG and proceeded immediately
with commissioning operations.
The rationale of the FRSU-based solution chosen by Kolin
and Kalyon lays in its flexibility, cost-effectiveness and speed of
implementation. With a capacity of up to 20 million m3/d of gas
send-out, the new ETKI LNG Terminal will be a key contributor
to Turkeys natural gas security of supply, especially in the winter
period. It will complement Turkeys two existing onshore LNG
terminals, thus enhancing the countrys diversification of gas
import structures as well as supply sources.
23 - 24 February 2017
LNG Summit United States
Houston, US
www.lng-usa.com
04 - 07 April 2017
Gastech
Chiba, Tokyo, Japan
www.gastechevent.com
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 A new era for
Australian LNG
Bernadette Cullinane, Deloitte,
Australia, reflects on a challenging
2016 for the LNG industry and
looks ahead to a record year for
LNG in Australia.

10
 ith the rapid growth in global LNG trade, and the final phases of multiple

W Australian LNG construction projects drawing to a close in 2017, Australia is on

track to become the worlds largest LNG exporter. Seven LNG projects are all set
to add in excess of 60 million tpy capacity, effectively doubling total gas production and
tripling Australias gas export capacity.
LNG will overtake coal as Australias second biggest export earner by 2018 and
become a critical growth driver for the countrys economy. According to modelling by
the Reserve Bank of Australia (RBA), LNG exports will add approximately 0.75 of a
percentage point to GDP within 18 months, that is one-fifth of the 3.5% growth that
the Treasury predicts will occur in that year.1 After years of planning and an often
fraught capital intensive construction phase, LNG in Australia is now entering an
exciting new era.
This article reflects on the trends that emerged in 2016 and provides some
thoughts about the future.

11
 Global LNG supply increasing
massively
Most of the new LNG supply expected in the next five years
will come from Australia and the US. After several years
of limited growth in new liquefaction capacity driven by a
lapse in final investment decisions (FIDs) for new greenfield
projects, as well as delays faced by those projects under
construction, there is a huge amount of new supply entering
the LNG market. Approximately 135 million tpy of new LNG
capacity is currently being built, 74% of this in two countries
Australia and the US. Along with the US first LNG exports
from trains at Sabine Pass, more than 40 million tpy of that
volume was set to be commissioned by the end of 2016,
across Australia, Malaysia, and Angola.
Australian production is ramping
up
It has been a long time in the planning and construction,
but Australias LNG mega-projects are finally entering
the all-important production phase. Kicked off by the
Queensland Curtis LNG project at the start of 2015, the
second half of the year saw the project reach full production
from both trains. Subsequently, there were first exports
from Santos Gladstone LNG (GLNG) project in October 2015,
Origin Energys Australia Pacific LNG (APLNG) in January 2016,
and Gorgon LNG in March 2016.
However, other projects are limping to the finish line
as project delays remain a big supply theme. The LNG
industry has long struggled to deliver new projects on
schedule. Fatigued by productivity challenges and cost
overruns, the last of the LNG projects under construction
are struggling to get over the finish line.
Despite these challenges, Australia is on track to have
10 operating LNG projects by 2019 2020. This massive
ramp up in capacity translates to over 84 million tpy in
export capacity by 2019 2020, above Qatar and
positioning Australia as the worlds number one LNG
exporter. As a result of this ramp up, Australia will
experience a huge exports boost.
The haves and the have nots
With so many major LNG export projects coming online
simultaneously, ensuring there are sufficient feedstock
gas reserves is critically important. A rapid increase in gas
production can be expected over the next few years, to
support Australias burgeoning LNG industry.
LNG is an industry where access to low cost reserves
and the security of long-term contracted sales volumes
makes all the difference. Those LNG project operators with
access to low cost gas and/or already signed contracts will
enjoy a competitive advantage as they can profitably
navigate the current market and build growth until prices
recover by 2020. Operators without a ready supply of low
cost feedstock gas and/or without the security of
long-term gas supply contracts look vulnerable.
Global market to remain
oversupplied
Based on forecast LNG supply from existing projects and
those under construction, together with weak LNG demand
forecasts, Macquarie estimates excess supply in the global
12 January 2017
market will peak at approximately 70 million tpy in 2019
before returning to balance by 2023.2
Seven years is a long time for a dynamic, rapidly
evolving market like LNG to be in oversupply mode.
Disruptive forces will abound and there may be more
examples of LNG buyers breaking long-term supply
contracts. As LNG markets mature and become more
sophisticated, more flexibility will be built into supply
contracts. If the supply overhang persists, there is also
likely to be a curtailment of existing, uncontracted
capacity. Those LNG projects with high ongoing CAPEX
commitments and low operating breakeven are most at
risk of getting shelved.
More choices for buyers
With the US shipping its first LNG cargoes in February 2016
and on track to potentially export 60 million tpy of LNG by
2020, representing approximately 20% of global supply, Asian
buyers have much greater supply options than in the past. As
a result, the balance of power in contract negotiations has
shifted with buyers more able to dictate terms. Australian
LNG producers are expected to face lower prices when they
renegotiate long-term deals with Asian utilities, with new
sources of supply, including US exports, giving buyers an
advantage in contract talks. Asian buyers are also delaying
signing new long-term supply contracts, mindful of the
growing supply volumes in the global market.
Subdued near-term outlook for
LNG pricing
Operators of LNG projects without the security of locked-in
long-term (20 years) offtake should look away now. LNG
prices (using landed Japan as the benchmark) are forecast to
decline over the outlook period due to the lower oil prices,
a deterioration in the global gas supply/demand balance
and the shift towards spot-based contracts. Greater supply
options and a more liquid, transparent spot market will give
gas buyers more power in contract negotiations. With finance
options limited, it is a tough environment for early stage LNG
projects to get off the ground.
Despite the uncertain near-term demand outlook and a
weak gas pricing backdrop, global LNG supply keeps
increasing. Investment bank Morgan Stanley estimates
global LNG supply growing at a 9% CAGR over the period
2015 2020.3 That equates to over 140 million tpy of new
liquefaction capacity scheduled to come online during the
next five years. Presenting at LNG18 in Perth, Australia, in
April 2016, Wood Mackenzie talked of 30 LNG trains to be
added by 2020.4 That is an LNG train every eight weeks
and represents a 50% increase in LNG supply in just
five years. Much of this increased capacity will come from
Australia and the US. Supply competition is increasing and
the next decade will see more low-cost supply options.
Proposed Australian LNG projects
Several of the less advanced Australian projects under
proposal have been discussed for years. All of these projects
have their own complex issues (project partners, politics,
market, resources, etc.) and have been beset by delays,
controversies and challenges. It is unlikely that any new LNG
projects will be sanctioned in the current climate.
Australian LNG projects at the
top of the cost curve
The economics of new LNG projects look even less attractive
in light of Australias high cost base and labour issues.
Being an expensive place to do business is a particularly
big problem for capital intensive infrastructure projects in a
challenging commodity pricing cycle. According to JP Morgans
cost estimates, the majority of Australian LNG projects occupy
the upper end of the cost curve.5 Project owners are guiding
mid to single-digit returns at current oil prices. Consensus
amongst industry analysts is new LNG projects need to return
an over 10% internal rate of return (IRR) at under US$60/boe
to have any chance of being commissioned.
The market is slowly but surely
switching to spot trades
Goldman Sachs noted in 2016 that spot purchases in
recent years have been cheaper than cargoes bought under
long-term deals.6 Spot trades were forecast to cost 31% less
than contract purchases in 2016. This is an alarming trend
for Australian LNG producers as long-term contracts roll off.
Certainly, the days of a few large players exerting oligopoly
style pricing power are well and truly over.
The next few years promises to see the share of
uncontracted LNG volumes increase further with
aggregators/traders playing a bigger role to clear the market.
What is more, thanks to greatly reduced LNG pricing, margins
are much thinner in the industry, reducing opportunity for
profitable inter-basin trade (i.e. trade between Pacific and
Atlantic basins).
There is also likely to be an emergence of spot trading
exchanges, such as the newly announced GLX LNG cargo
trading platform.
An uncertain future for FLNG
Described as a true breakthrough technology a few years ago,
the current assessment of the floating LNG (FLNG) technology
is uncertain. Questions are being asked about whether FLNG
technology will live up to its hype after the decision by
Woodsides Browse gas venture to freeze work was followed
by the axing of a floating design for the Abadi gas field in
Indonesia. Other Australian FLNG ventures have been sensitive
to cost and price issues. It remains to be seen whether FLNG
will be the way forward for new projects, or an option with
limitations as well as advantages.
Looking forward to 2017
While 2016 was certainly a year filled with challenges, the
positives will outweigh the negatives in the long run, and 2017
is set to be a record year for LNG in Australia.
References
1. CASSIDY, N. and KOSEV, M., Australia and the Global LNG
Market, Reserve Bank of Australia (RBA), (2015), http://www.
rba.gov.au/publications/bulletin/2015/mar/pdf/bu-0315-4.pdf.
2. MEYER, J., LNGs hammer blow to thermal coal, The Sydney
Morning Herald, (24 February 2016), http://www.smh.com.au/
business/energy/lngs-hammer-blow-to-thermal-coal-20160223-
gn1cod.html
3. Morgan Stanley analyst note, Shipping and LNG Market
Outlook, (4 May 2016).
4. The rise of the LNG portfolio player, Wood Mackenzie,
(20 April 2016), https://www.woodmac.com/analysis/video-the-
rise-of-the-LNG-portfolio-player
5. JP Morgan analyst note, Global LNG, (1 October 2015).
6. PATON, J., LNG Golden Promise Fading for Goldman on Wave
of Oversupply, Bloomberg, (5 November 2015), https://www.
bloomberg.com/news/articles/2015-11-05/goldman-says-lng-
buyers-may-break-term-contracts-for-spot-deals
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