NGV Transportation Magazine

VOL. 25 | JAN - MAR 2016 | USD 30

NGVTRANSPORTATION

MAGAZINE

NGV Transportation

EMISSION CHARACTERISTICSOF AN HCNG ENGINE

THE VALUE OF THE ANCHOR CUSTOMER IN LNG PROJECTSTHE VALUE OF THE ANCHOR CUSTOMER IN LNG PROJECTS

COMPRESSINGYOUR DOWNTIMECOMPRESSING YOUR DOWNTIME

FEATURES:FEATURES:

SPECIAL REPORT:SPECIAL REPORT:

GASTECH SINGAPORE2015 EVENT REPORT

EVENT & EXHIBITION:

1 Vol.25 Jan - Mar 2016 NGV Transportation

EDITOR’S TWO CENTS

NATURAL GAS GLOBAL

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2016 has greeted us with some very disgruntled and moody markets. A barrel of oil is now cheaper than a bucket of chicken at KFC! The turmoil in the energy markets seems to have no end and this downward spiral that we’ve been stuck in is only giving everyone in the industry the jitters.

Cheap oil and a massive oversupply of gas that is expected to last till 2020 is keeping the industry on its toes. These are truly trying times and it is no doubt that many will be unable to handle the reduced price differential between oil and gas, not to mention dirty coal run power plants are looking more attractive by the day.

Business goes on as usual and the New Year brings with it new opportunities and challenges. Regardless of the instability in the markets, a gas era is upon us and vast amounts of energy are cheaply available and billions of dollars of infrastructure is already in place.

In this issue we have prepared for you some interesting technical articles, one on natural gas and energy storage for electrical grid services and another on the emission characteristics of HCNG engines. We also have a very interesting feature article on acoustic emission testing for recertification of CNG tanks. Rudolf also speaks on the importance of the Anchor customer in LNG projects in today’s oversupplied market.

Would just like to encourage everyone to keep your heads up and focus on your business. It is time to innovate and re-strategize to be able to function in the current market conditions. The industry is changing and we need to change with it if we are to excel.

I wish you all the best for the year ahead.

Ryan PasupathyEditor

NGVTRANSPORTATION

MAGAZINE

Greetings all!

CONTENT

SPECIAL REPORT: EMISSION CHARACTERISTICS OF AN HCNG ENGINE

16

03

ANALYSIS OF NATIONAL POLICIES AND ITS IMPACT ON NGV

GROWTH IN SOUTH KOREA

22

NEWS AROUND THE WORLD

COMPRESSING YOUR DOWNTIME: ACOUSTIC EMISSION FOR RECERTIFYING CNG AND INDUSTRIAL GAS TRANSPORT

TUBES AND CYLINDERS

EDITOR’S TWO CENTS

THE COMPETITION BETWEEN NATURAL GAS AND ENERGY STORAGE FOR

ELECTRICAL GRID SERVICES

GASTECH SINGAPORE 2015 EVENT REPORT

12

3901

27

35

FEATURES:

SPECIAL REPORT:

EVENT& EXHIBITION:

THE VALUE OF THE ANCHOR CUSTOMER IN LNG PROJECTS



The Kyoto Government has recently signed an agreement with Alaska LNG last month to import LNG to Maizuru in Japan. While it will definitely take some time before Alaskan LNG reaches Kyoto, the agreement is a big step forward in the goal towards ending dependence of nuclear power by 2040. At present, Niigata is the only prefecture on the Sea of Japan coast that has the facilities needed to serve as an LNG base. Kansai, the ports of Sakai, Osaka Prefecture, and Himeji, Hyogo Prefecture, have LNG facilities.

- Japan Times

Anadarko is pushing ahead with its US$20 billion Mozambique gas project and will make FID once the government approves its development plan. There has been some uncertainty as to when exactly Anadarko would confirm this mega project. Other large projects like these have been deferred by other companies due to the fall in oil prices. Anadarko aims to have its first LNG cargo leave Mozambique by the end of the decade, delayed from an original plan of 2018.

- Hellenic Shipping News

INDIA MOZAMBIQUE

Dec 2015: LNG Pipeline Project Clears Hurdles

Oct 2015: Gas-fired Power Plants Revived as LNG Price Falls Oct 2015: Anadarko Says Pushing Ahead with LNG Plans

The Indian national gas LNG pipeline project is back underway as it has recently cleared some land acquisition roadblocks that have been prolonging construction activities. Officials say that all these issues should be resolved soon.

The project plans to connect the Petronet LNG terminal at Puthuvype in Kochi to Kanjirkkode, at where two separate lines are to join it from Mangaluru and Bengaluru. The pipeline project was approved in 2010 and GAIL India launched construction in 2012 for the 1,114-km stretch on the Kochi-Kanjirkkode- Mangaluru and Bengaluru route.

- The Hindu

The drastic fall in international LNG prices has resulted in the revival of several gas fired power plants in India. The latest company to benefit has been Dabhol Power Project in Maharashtra, promoted originally by the American energy giant Enron, which had to shut down globally. The power plant will also get funding from the Power System Development Fund (PSDF) set up by the central government to subsidise the high cost of imported LNG.

- Dawn News

JAPANOct 2015: Kyoto Advances Nuclear-free Agenda with Alaska LNG Pact

4NGV Transportation Vol. 25 Jan - Mar 2016


Iran has said that they are preparing to bring 5 LNG plants online in the next three years. CEO of National Iranian Gas Company (NIGC) Hamidreza Araqi, announced today that Iran LNG, the project nearest completion, should come online within a year and a half – if Iran can find an investor. It is expected to produce 10 mtpa.

Repsol, Total, and Royal Dutch Shell had investments in three LNG plants before the imposition of nuclear sanctions in 2011. The sanctions banned the supply of technology like gas liquefaction equipment, stalling foreign involvement in construction. In addition to resuming construction activities Belgium’s Exmar is planning to develop the world’s first functioning Floating Liquified Natural Gas (FLNG) barge.

- The Maritime Executive

Iran has signed preliminary agreements with Korean, German and Chinese shipbuilders to construct for them LNG tankers. It is reported that a MOU has been signed with a German company, with preliminary agreements also reached with several South Korean and Chinese firms.

- Daily Times

Shell has confirmed its plans to build a specialized LNG bunker vessel that will deliver LNG to LNG fuelled ships in Northwest Europe. The new vessel will be based at the port of Rotterdam.

Shell’s Executive Vice President, Maarten Wetselaar commented saying, ‘Potential customers need to know that their LNG fuel will be delivered reliably and safely. Shell’s investment in this vessel, as well as commitment to buy capacity at the Gate (Gas Access to Europe Terminal), underlines our confidence in LNG becoming a bigger part of the fuel mix.”

- GCaptain

China’s Guanghui Energy has agreed to import LNG from Malaysian, state owned oil company, Petronas. Petronas will start to supply LNG to the Chinese company from 2017. The LNG will be transported to Guanghui’s terminal in Jiangsu, with capacity of 600,000 tonnes a year when its first phase of the construction is ready to operate, and then will eventually expand its storage to 3 mtpa.

- Reuters UK

The LNG terminal in Świnoujście, north-western Poland, could start receiving a shipment of fuel a starting from the second half of 2016. The shipments will be made under a deal between Polish gas monopoly PGNiG and Qatargas, the state-controlled gas distributor of Qatar.

- Reuters UK

IRAN NETHERLANDS

CHINA

POLAND

Nov 2015: Iran Plans to Emerge as Top LNG Exporter

Dec 2015: Shell Planning New LNG Bunkering Vessel

Dec 2015: Guanghui Energy Signs Preliminary LNG Deal with Petronas

Dec 2015: Poland to Receive LNG Shipment Every Month From H2 2016

Nov 2015: Iran to Complete Five LNG Plants in Three Years

Qatar, the world’s largest exporter of LNG is preparing for a looming oil glut, it isn’t about being the biggest seller – it’s about being the most efficient. Global LNG output is expected to rise by a third to about 330 million metric tons annually by 2018 with most of the new fuel coming from US and Australia which are poised to take over Qatar as biggest producers.

RasGas Vice Chairman, Ibrahim Ibrahim said that, “Qatar has decided to bow out of the race and will instead continue as one of the most profitable LNG sellers by taking advantage of the industry’s lowest production costs and a control over supply routes that lets it redirect LNG quickly between continents to exploit opportunities.”

- Bloomberg

The Canadian Environmental Assessment Agency has restarted its review of a proposal to export LNG from British Columbia after a 6 month delay. Pacific NorthWest LNG which is chaired by Petronas wants to build an $11.4-billion terminal on Lelu Island in the Port of Prince Rupert. The consortium is striving to become the first major LNG exporter in British Columbia.

The main cause of the delay has been due to the Skeena Watershed Conservation Coalition and other environmental groups have raised concerns about the risk to salmon habitat on Flora Bank, a sandy area located next to Lelu Island. If all goes smoothly for Pacific NorthWest LNG, the regulator could be in a position to issue a draft report as early as January.

- The Globe & Mail

Chevron announced that its US$54 billion Gorgon LNG project on Barrow Island will begin final preparation on its first liquefaction train soon. Strangely enough, the first LNG at Gorgon will be shipped in to the plant for commissioning.

The plant will serve as the export facility for gas flows from Chevron’s Jansz-Io and Gorgon offshore fields, approximately 80 km off the coast of Western Australia. At full production the plant’s capacity is 16 mtpa. The fields will also supply a large volume to the Australian local market.

- The Globe & Mail

QATAR

CANADA

AUSTRALIA

Jan 2015: Biggest No Longer Means Best in Qatar’s Strategy for LNG Wealth

Dec 2015: Pacific NorthWest LNG Plan Review Resumes After Long Delay

Dec 2015: Gorgon LNG Plant Nears Commissioning

PAKISTANOct 2015: Power Shortages Compel Pakistan to Launch LNG Import Company

Nov 2015: Textile Industry Wants Share in LNG Usage

Dec 2015: Green Light For CNG Sector to Import 75 mmcfd LNG

Islamabad is seriously considering setting up a company to import fuel including LNG. The company would be named Pakistan LNG Limited and would receive a mandate to import LNG from Pakistan State Oil. The country’s Petroleum Ministry is seeking approval to establish this company.

- Sputnik News

The textile industry is considering their options as the possibility of a gas shortage at its manufacturing facilities in the winter months looms. Pakistan officials have said that around 10 textile millers have approached the Petroleum Ministry to ask for a share in newly imported LNG to power their industrial facilities in the winter.

- The Express Tribune

The ministry of Petroleum in Pakistan has permitted the Universal Gas Distribution Company (UGDC) to import 75 mmcfd on its own for use in the country’s ailing CNG sector. A senior official of the Ministry of Petroleum said, “Since the UGDC has fulfilled requirements and managed to have agreements with buyers and sellers and in the presence of third party access rules, so the SNGPL should enter into an agreement with the UGDC in terms of capacity allocation for carrying the imported LNG exclusively for the CNG sector.

- The News Pakistan



Gazprom and Kuwait Petroleum Corporation agreed to cooperate in LNG, LHG and other petrochemical projects, as well as in scientific, technical and investment projects. Gazprom’s Baltic LNG project, a proposed LNG plant construction, oriented at the European and Latin American markets. The plant’s capacity will be 10 million tons of LNG per year with the possibility of expansion up to 15 million tons.

- Daily Times

Bahrain’s national Oil and Gas Authority – Nogaholdings, has awarded a consortium of Teekay LNG Partners, South Korea’s Samsung C&T and Gulf Investment Corp (GIC) a contract to develop an LNG terminal in the country.

The terminal will be located in Bahrain’s Hidd Industrial Area and will have a capacity of 800 million standard cubic feet per day. The consortium will build a floating storage unit, an offshore jetty to receive LNG shipments, a breakwater, an adjacent re-gasification platform, subsea gas pipelines from the platform to shore, an onshore gas receiving facility and an onshore nitrogen production facility.

- Reuters US

A multi-national deal to launch Yamal LNG will be signed next month. Russian Deputy Prime Minister Arkady Dvorkovich has said that, “As for Yamal LNG, all the basic questions have been addressed… Now all the basic conditions have been agreed on, so we expect the signing to take place in December.”

The $27 billion Yamal LNG project is financed by Total, Novatek and China National Petroleum Corporation (CNPC). Novatek has a 60 percent share in the project, while Total and CNPC have 20 percent each.

- RT.com

Golar LNG will supply West African Gas with a floating storage and regasification unit at an import facility in Ghana for 5 years that has an optional 5 year extension period. The FSRU Golar Tundra will undergo some mior modifications in Singapore before being shipped to Ghana.

“Ghana represents an exciting new business opportunity for Golar. West Africa is becoming an increasingly important region for our business and we are proud to be jointly developing Sub Saharan Africa’s first FSRU in partnership with WAG.” Golar LNG’s CEO, Gary Smith said.

- Splash 24/7

A Chinese and a Malaysian company have signed a project design contract to supply electricity generated from liquefied natural gas (LNG) to Svay Rieng’s Bavet Dragon King Economic Development Zone. Total investment in the project is an estimated $US643 million.

The first phase of the project includes building a new 5 megawatt temporary power supply facility; two 50MW power supply facilities and supporting LNG receiving stations. The second phase of the project is to build a new 250MW power plant and a supporting LNG receiving station.

- Khmer Times

RUSSIA

BAHRAIN

GHANA

CAMBODIA

Nov 2015: Russia’s Gazprom, Kuwait Petroleum Corporation Agree on LNG Cooperation

Dec 2015: Bahrain Awards Contracts for LNG Imports Complex

Nov 2015: Russian Arctic LNG Deal to Be Sealed in December

Nov 2015: Golar Wins FSRU Contract for LNG Imports Into Ghana

Nov 2015: Deal to Build LNG Plant in Bavet SEZ

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The Philippines is set to import LNG for the first time as it bids to replace quickly dwindling local gas supplies and cheap coal is looking like a really attractive option in the country. With 100 million people and one of the world’s fastest growing economies, the country aims to double its power generation capacity by 2030, hoping to put an end to daily blackouts that crippled its economy in the 1990s.

But despite government support for gas, a rash of approvals for coal-fired plants is already set to push coal’s share of power generation up sharply to over 50 percent by that time, while gas’ share may fade slightly to 15 percent.

- Reuters UK

Mitsui Bulk Shipping believes that Northern Sea Route and the Panama Canal LNG annual transits to Asia could climb as high as 11.25 million tonnes next year and eventually reach 27.5 million tonnes by 2025.

- Ship & Bunker

PANAMANov 2015: Panama Canal Predicted to Be Major LNG Access Routes to Asia

PHILIPPINESNov 2015: Cheap Coal Threatens LNG’s Toehold in Fast Expanding Philippines

Dr Vin Lawrence, Head of the Electricity Sector Enterprise Team (ESET) says there was a large number of credible bids that were put forward for the supply of natural gas to the new power plant to be built by Jamaica Public Service Company (JPS).

New Fortress Energy has been selected as the entity to supply LNG to the new plant, on which construction is expected to begin by the second quarter of next year. The arrangement will see New Fortress Energy installing the facilities to receive, store and re-gas the fuel for use at the new 190-megawatt gas-fired plant at Old Harbour.

- The Jamaica Gleaner

JAMAICANov 2015: LNG Suppliers Selected - Power Plant in Operation By 2018

LITHUANIANov 2015: Klaipeidos Nafta Partners with GASNAM on LNG Bunkering Standards

State owned Klapeidos Nafta has signed an MOU with the Spanish Association of Natural Gas for Mobility (GASNAM) to cooperate on the standards for LNG bunkering operations there.

Under the agreement, Klapeidos Nafta will exchange experience with GASNAM so as to develop an LNG bunkering standard that will cover the operations of LNG supply for both ships and trucks. Klaipėdos Nafta says it has plans to build a US$28.74 million LNG reloading station by early 2017 that will provide LNG bunkering capabilities to customers in the Baltics

- Ship & Bunker



The days of the next generation of LNG carriers is upon us and DNV GL are leading the field. DNV GL has announced the release of their latest developments in LNG Carrier design and technology.

PT Donggi-Senoro LNG (DSLNG) has shipped 9 out of 11 cargoes of LNG that were targeted to be shipped this year. As of November, Donggi-Senoro had already shipped the agreed-upon LNG supplies to KOGAS and Kyushu while for Chubu, the LNG supply would be delivered by the end of the year.

With a production capacity of 2 million tons of LNG per year, construction on the US$2.8 billion Donggi-Senoro LNG plant, which is located in Banggai regency, Central Sulawesi, started in 2011 and has been operational since June this year.

- Jakarta Post

NORWAY

INDONESIA

Oct 2015: LNGreen (DNV GL) – The Next Generation of LNG Carriers

Nov 2015: Donggi-Senoro Aiming for 36 LNG Cargoes Next Year

The next generation LNG Carrier that’s been designed by DNV has higher energy efficiency, improved environmental footprint, improved boil off rate and cargo capacity (These improvements make it significantly better suited for

future trading patterns), Optimized hydrodynamics, machinery and system configuration and cargo containment advancements.

The design for LNGreen won the CWC LNG Technological Innovation Award 2015. “One of the key issues for successful project development is to minimize costs across the value chain by achieving collaboration between partners, increased efficiency and carbon reduction. The LNGreen project embodies all of these values,” said the judging panel for the awards.

The LNGreen carrier is about 8% more energy efficient than conventional designs and has increased its cargo volume capacity by 5% which has huge savings implications.

- DNV GL Press Release



FINLAND

UAE

Oct 2015: Wärtsilä Launches its Innovative Mobile LNG Solutions

Nov 2015: Emgas to Set Up CNG Station at Al Ahli

Wärtsilä has recently launched its Mobile LNG for medium and small scale gas consumption activities. The all-in-one barge technology is primed to unleash the economic potential of many regions that are searching for a small to mid-range barge to perform their LNG receiving and

Emirates Gas has partnered with al-ahli group to set up a dedicated daughter station to supply Al Ahli Group’s fleet with CNG. This partnership will also facilitate Al Ahli Group in converting a fleet of approximately 450 vehicles to use an environmentally friendly compressed natural gas by the end of this year.

- Trade Arabia

regasifying needs.Director Midstream, Wärtsilä

Gas Solutions, Reidar Strande said, “The spot trading market in oil has been so dominant that the infrastructure has been built to reflect this dominance. But now we see that the balance, as well as the politics, is changing.”

He added that, “In the past, the LNG infrastructure was huge because of the necessity to achieve economies of scale. Now, however, the market is driven also by environmental pressures and by the fact that many countries want to reduce their dependence on oil.”

The barge can be used in combination with a fixed or floating power plant with installed capacity of up to 250MW, which is an excellent solution for many medium-sized communities that lack or have limited access to the national grid.

The solution is outed to be a flexible and easy-to-set-up option that could help bypass some time consuming red tape due to its mobility and size. The barge will be able to fill the industry gap between very large and very small scale receiving and regasification utilities. It is expected that isolated island communities will have the most to benefit from the technology.

- Wärtsilä Press Release

Revolutionising the Indonesian Gas MarketShangri-La Hotel, Jakarta, Indonesia 15 - 17 March 2016

Delegate Registration for the conference is now Open.To find out more about the savings you could make by registering early, please contact [email protected]

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FEATURE ARTICLE

COMPRESSING YOUR DOWNTIMEACOUSTIC EMISSION FOR RECERTIFYING CNG AND INDUSTRIAL GAS TRANSPORT TUBES AND CYLINDERS

I n the compressed gas tube industry, it is the general standard that government regulators require that all tubes

are retested and/or recertified every 5 years using a hydrostatic test and volumetric expansion test. These testing methods have been the standard globally to ensure that equipment required for gas transport and storage are in tip-top condition. TISEC Inc.

has been working on a game-changing testing method that boasts improvements to this part of the industry that are simply unparalleled to what is currently being used in the industry today. Begin to familiarise yourself with TISEC’s Acoustic Emission (AE) Technology.

Joel Hay, President of TISEC Inc. defines Acoustic Emissions as, “The class of phenomena where transient elastic waves are

generated by the rapid release of energy from localized sources within a material, or the transient elastic waves so generated.” The technology is one that has been improved by TISEC and has superior advantages over current hydrostatic and volumetric expansion methods. Breaking it down for us, Joel explains to us in simple terms, “One way to describe it, is it’s similarity to “micro-seismic testing”, where “Seismic testing” is performed on a large structure (The Earth) – with sensors (geophones) installed around the Earth in a geometric array, scientists are able to detect the epicentre of cracks in the Earth’s crust. Our “micro seismic testing” is performed on smaller structures – we place sensors on a structure and listen to the structure while it is being “loaded” or “stressed” and if there are any active growing defects during our monitoring, the source of the activity will be revealed, recorded, interpreted and reported.”

TISEC is a pioneer in structural integrity monitoring and has more than 40 years of experience in the field. Their expertise lies in inspection and monitoring, materials science, civil and mechanical engineering and risk informed decision making. The company is an arm of Structural Insights group which is an international group of engineering and inspection companies.

TISEC personnel began their research in this game changing testing method in the late 1980s through their previous company,


FEATURE ARTICLE

Tektrend International Inc. The company took on a joint research project to develop an acoustic emission test procedure for recertification of tube mounted trailers that were used to transport compressed gas. Tektrend collaborated with Air Liquide Canada and Air Liquide France, Transport Canada and US DOT for this project.

As a result of this work, permits were granted to Tektrend and subsequently to TISEC Inc. to use AE testing instead of hydrostatic volumetric expansion testing for tube recertification. Two permits were provided to them; one for five years where the proof pressure was 10% over the normal service pressure and another for 10 years where the proof pressure was 5/3 of the normal service pressure. TISEC currently is performing AE testing in Indonesia, Malaysia, Thailand, Australia, New Zealand, Canada, North America, South America, Africa and more

recently, Singapore.

Hydrostatic & Volumetric TestingHydrostatic & Volumetric Testing involves the tenuous job of removing each tube from the chassis of the truck or skid to be ready for the test. Another downside is that this test method allows for contamination inside the tube with water. It is essential that the water needs to be removed and the inner tube is completely dried out before being remounted onto the trailer frame. Depending on the number of tubes on a trailer, this could require the trailer to be out of service for 2-3 months!

A standard volumetric hydrostatic test involves a de-valved cylinder being filled with water. The cylinder is then connected to a test jacket sealing apparatus, which is then placed into a test jacket that has been filled with water as well. The Temperature of both the water

inside the cylinder and outside the cylinder needs to be the same to avoid calculation errors. The cylinder will then be pressurized causing the cylinder’s size to increase slightly. This expansion value is recorded by taking the difference from the amount of water forced out of the test jacket compared to the amount of water left in the expansion measuring device when the cylinder is depressurized.

Revolutionary TechnologyAE testing is carried out following calibration whereby the tubes are loaded to 110% of the maximum operating pressure. During this loading period, any structural flaws present in the cylinder wall will emit high frequency sound waves. These sound waves will travel down the cylinder where they are then picked up by piezoelectric sensors that are located at either end of the


FEATURE ARTICLE

cylinder. The time that it takes for the sound waves to be picked up by the sensors allows for determination of the exact spot at which a structural flaw is present. Structural flaws include cracks and plastic deformation.

AE is also significantly more sensitive compared to conventional ultrasonic methods in finding these structural defects in the pipes. With AE one is allowed to not only determine the precise location of the flaw but also the full extent of it. AE is able to detect defects caused by mechanical loads, pressurization, thermal stresses, magnetic forces and even chemical and microstructural changes. Besides recertification, AE can be used as real time structural integrity monitoring during spot welding, leak detection and machinery health monitoring.

Results of the analysis are generated using TISEC’s “System for Tube Testing And Reporting’ or STTAR Software. The software tracks test pressure and acoustic events from active flaws in the cylinder wall. Acoustic events detected in the cylinder walls are identified and located for further ultrasonic

testing. The system allows for results from up to 16 tubes to be viewed simultaneously.

In summary, the biggest advantages of using AE testing over hydrostatic and volumetric expansion testing methods for recertification are:

1. There is NO water contamination.

2. There is also NO disassembly

from trailer – the test is performed with the tubes on the trailer.

3. There is an extremely fast turnaround (relative to conventional hydrostatic & volumetric testing) – trailer is only out of service for 1-2 days!

4. AE tests are superior in terms of sensitivity.

The most fascinating aspect of this technology really has to be the turnaround. Conventional testing methods require trailers to have to be shut down for 60 – 90 days while AE can do the same in just 2 days! It is not often that technology is developed that can make such a drastic change to the industry. This is an improvement on efficiency of 3000% (and that’s just assuming it only takes 60 days with hydrostatic volumetric testing.

Joel Hay began his career as a non-destructive test inspector 30 years ago as an employee at TEKTREND International (now Olympus Group). TEKTREND provided advanced automated inspection systems for US Military applications. In over eight years of training and experience in the U.S. Navy and 16 years at TISEC Inc., Joel Hay has obtained valuable training and experience in mechanical and structural integrity, fabrication, nondestructive testing and overhaul projects. Now holding the position of President of TISEC Inc. (Canada), he

is presently leading inspection projects in 19 countries world-wide.

As a nondestructive test inspector for the U.S. Navy, he was certified in accordance with Military Standards, NAVSEA Nuclear standards and the standards set by the American Society for Nondestructive Testing (ASNT) and is currently maintaining ASNT TC-1A AE LIII. Joel is currently running Southeast Asian operations out of Indonesia. He can be reached at [email protected].

JOEL HAY

NTM By Ryan Pasupathy

Steel structure

Other businesses

Container crane

PipelineLNG secondary & satellite

LNG facilities

- Ballast water management system- Waste to energy etc.

2-1, Suehiro-cho, Tsurumi-ku, Yokohama 230-8611, JapanTel.+81-45-505-7435 Fax.+81-45-505-8902URL : http://www.jfe-eng.co.jp/en

Yokohama head offce

We have been engaged in the construction of close to 20% of onshore LNG receiving terminals in the world with no recordable incident.

JFE Engineering has been a leading international contractor for FEED, EPC and R&D of LNG Facilities since 1984.

JFE's LNG secondary & satellite terminals are some of the best solutions for energy users who do not have access to pipeline networks and want to convert their energy sources to natural gas.

JFE's port cranes are able to improve efficiency in cargo handling. The container cranes can also provide safeguards against earthquakes through application of its world class anti-seismic technology.

JFE covers every phase from FEED, EPC to O&M assistance for natural gas, petroleum and water pipelines.

JFE is also an expert on the construction of bridge buildings and associated technologies. JFE led the engineering and construction of the giant structure that now rests atop Marina Bay Sands Hotel & Casino.


SPECIAL REPORT

EMISSION CHARACTERISTICS OF AN HCNG ENGINE

Introduction According to the surveys on the long-term world energy demand in many economic institutes, they predict that the world energy environment is moving towards a gas era from the current petroleum era. Eventually hydrogen energy will occupy the majority of world energy demand. Therefore needs for natural gas vehicles are becoming higher and higher with the advent of this gas era and potential need for the development of bridging technology between natural gas and hydrogen is growing as well.

It is well known fact that natural gas vehicles (NGVs) have the advantages of low carbon dioxide (CO2) emissions and a wide range of application to transportation sector. In addition, hydrogen-compressed natural gas (HCNG) is a promising fuel that can improve the performance of CNG vehicles reducing harmful emissions such as nitrogen oxides (NOx) and CO2. HCNG is considered to be a type of mono-fuel, and it is a mixture of 20–30 volume percent of hydrogen and the rest of natural gas. Many research results for HCNG engines have been reported which indicate

that HCNG engines can satisfy current and future emission regulations and are economically feasible [1–3]. An HCNG engine exhibits a leaner combustion than a CNG engine, which is possible because of the stable lean combustion characteristics of hydrogen. Consequently, nitrogen oxides (NOx) and CO2 emissions can be significantly reduced. NOx emissions caused by lean combustion can meet the EURO-VI standard (0.46 g/kWh). However, carbon monoxide (CO) and total hydrocarbon (THC) emissions, including methane


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(CH4), must be filtered through an oxidation catalyst (OC) to meet their corresponding standard (0.5 g/kWh) [4]. CH4 has a very stable molecular structure, and improvement in the conversion efficiency of the OC requires an increase in the amount of precious metal used in the OC. In order to ensure that the HCNG engine is cost-effective, a less expensive alternative is required for CH4 reduction. In the present study, a strategy of decreasing the valve overlap (VO) was employed to reduce CH4 emissions. Closing the exhaust valve earlier can lessen the level of hydrocarbon and CH4 emissions. The effects of decreasing the VO on the full load performance and the emission characteristics were evaluated.

Experimental MethodologyAn 11-L 6-cylinder CNG engine (Doosan Infracore Inc., GL11K) that satisfied the EURO-V emission regulations was used in the test. The detailed engine specifications are listed in Table 1. The speed and torque of the engine were controlled and monitored using an eddy current dynamometer (Schenck). The spark ignition timing and the fuel flow rate were controlled using a computer-based universal

engine control unit. An electronic throttle control and a waste gate control for the turbocharger system were employed to control the excess air ratio under each operating condition.

Figure 1 shows the experimental setup for the engine tests. The CNG from the compressed fuel vessel, which has a pressure of approximately 15 MPa, was decompressed to 0.67 MPa using a conventional regulator for vehicles. Next, it was supplied by an eight-gas fuel-metering valve connected to a gas mixer. A series of compressed tanks for hydrogen, which had a pressure of approximately 12 MPa, were employed and connected to the pressure controller. A 30% to 70% volumetric ratio of hydrogen to natural gas was selected for the HCNG. The flow rate of CNG was measured using a mass flow meter and that of hydrogen was directly controlled using a mass flow controller. The individual in-cylinder pressure was measured using piezoelectric pressure transducers (Kistler Co. Ltd., 6117BFD17). For the analysis of the in-cylinder data, a high-precision rotary encoder with a pulse per revolution of 1800 and a combustion analyzer (Dewetron Co., Dewe 800) were used to

observe the combustion stability. The excess air ratio of the air-fuel charge was monitored using a lambda meter (ETAS Co., LA4) located at the exhaust runner of an individual cylinder and downstream of the turbine.

To evaluate the effect of the VO, the torque, in-cylinder pressure, and emissions were measured for each VO condition. The VO with the original camshaft had a crank angle degree (CAD) of 32. In comparison, the duration of the VO with the modified camshaft decreased by 50% (to 16 CAD). The intake and exhaust valve timings for each camshaft are summarized in Table 2.

The composition of the exhaust gas, which included CO2, CO, THC, and oxygen (O2), was analyzed using an exhaust gas analyzer (AVL Co., AMA i60). The temperatures and pressures in the major parts of the engine, fuel flow, and exhaust gas concentrations were measured, and the resulting data was stored using a data acquisition system (GRAPHTEC Co., GL820).

The engine was operated at 1260 rpm with 1150 Nm, which are the operating conditions of a heavy-duty natural gas engine at maximum torque with a wide-

Type Description

Number of cylinders 6

Bore (mm) 123

Stroke (mm) 155

Displacement volume (cc) 11,050

Compression ratio 11.5

Max. power 222 kW @2,100 rpm

Max. torque 1,150 Nm @1,260 rpm

Item Intake valve (CAD) Exhaust valve (CAD)

Valve overlap (CAD)

Open at Close at Open at Close at

Original camshaft BTDC 18 ABDC 34 BBDC 46 ATDC 14 32

Camshaft with reduced valve overlap duration BTDC 10 ABDC 42 BBDC 54 ATDC 6 16

Table 2. Intake and exhaust valve timings for each camshaft.

Table 1. Engine specifications.

*CAD - Crank Angle Degree


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open throttle. The spark ignition timing was selected to maximize the thermal efficiency, and the maximum brake torque (MBT) was determined for each operating condition. The excess air ratio was increased, in increments of 0.1, from λ = 1.3 to the lean limit. The combustion performance and exhaust emissions were analyzed with respect to the excess air ratio for each fuel and VO duration. The temperatures of the CNG and intake air downstream of the intercooler were maintained at 42.5 ± 2.5°C, and the engine-inlet coolant temperature was maintained at 82.5 ± 2.5°C. Water-cooled heat exchangers were used for maintaining the temperatures.

Results and DiscussionThe EURO-VI standard decreases the CH4 level by more than one-

half compared to the EURO-V standard (1.1 g/kWh). It is established that the majority of THC (CH4 + Non-Methane Hydro-Carbon) emissions are produced as a result of crevices in the piston ring or the head gasket. In the present study, a modified camshaft with a reduced VO duration was utilized. This was because altering the combustion chamber geometry required a complicated redesign of the main components, such as the piston and engine head. Some of the THC emitted from the cylinder could be reduced by closing the exhaust valve early when the piston approached the TDC. Figure 2 shows the torque values at the MBT spark timing with respect to the excess air ratios for each VO condition. The torque values satisfy the

requirements based on the engine specifications, except at λ = 1.7 (the lean-burn limit). The torque value using CNG and the original camshaft is sufficiently high at the lean-burn limit. However, when using HCNG, the value decreases slightly because of the decreased exhaust gas energy. The introduction of HCNG fuel results in an improvement in the thermal efficiency. However, at a specific level of input energy, the increase in thermal efficiency corresponds to a decrease in the exhaust gas energy, as well as the temperature and the flow rate. Regardless of the fuel type, changing the camshaft with a decreased VO duration decreases the torque values at the lean-burn limit. The decrease in volumetric efficiency due to the decreased VO results in a reduced torque for

Figure 1. Schematic of experimental setup.


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Figure 2. Full load performance for each fuel vs. excess air ratio using original camshaft/modified camshaft with reduced valve overlap duration.

Figure 4. Methane emissions for each fuel vs. excess air ratio using original camshaft/modified camshaft with reduced valve overlap duration.

Figure 5. Nitrogen oxides emissions for each fuel vs. excess air ratio using original camshaft/modified camshaft with reduced valve overlap duration.

Figure 3. Total hydrocarbon emissions for each fuel vs. excess air ratio using original camshaft/modified camshaft with reduced valve overlap duration.

the modified camshaft. The torque values due to a

decreased VO duration at the lean-burn limit do not meet the required values for the engine specifications. However, the effects of the modified camshaft on the THC and CH4 emissions are another indication that the torque values can be satisfied by operating at a richer mixture condition or by improving the boosting system. Figures 3 and 4 show the THC and CH4

emissions for each fuel and camshaft condition, respectively. By employing a camshaft with a decreased VO duration, reduced THC and CH4 emissions were achieved for each fuel. The level of the THC increases steeply as the piston moves to the TDC because the unburned mixture, which remains in the cylinder via various storage mechanisms, is emitted. However, by closing the exhaust valve early, a certain amount of the unburned mixture

and burned gas is trapped within the cylinder. This strategy aids in the reduction of THC and CH4 when the amount of residual gas increases. The THC and CH4 reductions average approximately 28% and 41% for CNG and HCNG, respectively. The reduction ratio is different for each fuel because of the lower levels of THC and CH4 in HCNG. However, the extents of the reduction are consistent for each excess air ratio and average approximately


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Young Choi achieved his Ph.D. from the University of California at Berkeley in the US and has been serving as a principal researcher at KIMM. His research interests include natural gas engine for transportation and power generation, hydrogen engine for Unmanned Aerial Vehicle(UAV) and small-size engine for personal mobility.

Changgi Kim achieved his Ph.D. from the Korea Advanced Institute of Science and Technology(KAIST) in Korea and is serving as a principal researcher at KIMM. He is one of the outstanding experts in the area of gas engine and has more than 25 years of research experience in the field of internal combustion engines.

Cheolwoong Park achieved his Ph.D. from the Chiba University in Japan and is serving as a senior researcher at the Korea Institute of Machinery and Materials(KIMM) in Korea. He has published more than 20 international journal papers and 50 domestic journal papers in the field of internal combustion engines.

YOUNG CHOI

CHANGGI KIM

NTM By Cheolwoong Park, Changgi Kim, Young Choi

CHEOLWOONG PARK0.82 and 0.63 g/kWh for THC and CH4, respectively. The trapping of the unburned mixture and burned gas through closing the exhaust valve early is believed to be the main reason for emission reduction. The reduced VO duration negligibly influences the oxidation kinetics during combustion. This is similar to the analysis results of the above mentioned full load performance.

The change in NOx emissions must be evaluated because the slight increase in the residual gas affects the ignition delay and the combustion speed. Figure 5 shows the results of the NOx emission variation with respect to the excess air ratio conditions for different camshafts. The level of NOx emissions for the camshaft with a reduced VO duration is slightly higher than or comparable to that for the original camshaft. The increase in the EGR rate, caused by the trapped residual gas, generally reduces the combustion speed and temperature. Thus, the level of NOx emissions was expected to reduce via the dilution effect.

ConclusionsThe effects of the VO on the full load performance and emission characteristics of an HCNG engine were investigated. The torque values and emissions resulting from modifying the camshaft, by decreasing the VO duration, were examined for a heavy-duty natural gas engine. The camshaft with a reduced VO duration has lower torque values at the lean-burn limit because of the decrease in volumetric efficiency. The decrease in exhaust gas energy also significantly decreases the boost pressure and torque values. The trapping of the unburned mixture and burned gas, caused by closing the exhaust valve early, is the main

mechanism of the THC and CH4 emission reduction. The THC and the CH4 emission reduction is approximately 41% for the HCNG fuel. The level of the NOx emissions from the camshaft with a reduced VO duration is slightly higher than or comparable to the emissions from the original camshaft. This is because of the additional thermal energy of the residual gas.

References [1] Collier K, Mulligan N, Shin D,

Brandon S. Emission Results from the New Development of A Dedicated Hydrogen - Enriched Natural Gas Heavy Duty Engine. Warrendale, PA: SAE International; 2005.

[2] Karim GA, Wierzba I, Al-Alousi Y. Methane-hydrogen mixtures as fuels. Int J Hydrog Energy 1996;21:625–31.

[3] Thipse SS, Rairikar SD, K.P K, Chitnis PP. Development of a Six Cylinder HCNG Engine Using an Optimized Lean Burn Concept. Warrendale, PA: SAE International; 2009.

[4] Park C, Kim C, Choi Y, Lee J. Operating strategy for exhaust gas reduction and performance improvement in a heavy-duty hydrogen-natural gas blend engine. Energy 2013;50:262–9.

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FEATURE ARTICLE

THE VALUE OF THE ANCHOR CUSTOMER IN LNG PROJECTS

W hen Nigeria LNG started operations in 1999, it had become the

LNG project that has gone to FID with the longest lead time from first conception to realization ever. There was a first idea for the project as early as 1974 - at least that’s the earliest I know.

There is one project lagging even longer if you can call the

Iranian LNG projects such a thing yet. Extremely long lead times for LNG projects seem to have become the norm rather than the exception.

There are many reasons bringing LNG projects to their knees before they make it into FID range. The gas reserve might be insufficient or the wrong kind of gas. It might prove too difficult to collect the gas in the first place or the environmental conditions

where the gas is might prove challenging (let’s take Shtokman for evidence here).

At times, there are political reasons (Iran is a good example here) or civil movements make construction of an otherwise economically viable terminal impossible as countless examples in the US and other parts of the world can attest.

However, the most single important reason for failure


FEATURE ARTICLE

does not attract a lot of limelight. Its failure to assure that a creditworthy initial buyer gives the project the commercial foundation it needs to thrive on.

Project Genesis, Conception and Development in LNG tend to be complex and arduous processes with lots of pitfalls. But no matter how crazy the flow charts look, they all respond to the same commercial constraints that other projects respond to.

First and all importantly - investors and lenders want to be sure that they will get their money back.

Then, they also want to be sure that they make some new money on top of their investment and this should be more than what they would potentially get in interest from a bank.

And lastly, they want to be sure that whatever their arrangement is - would withstand the test of time as we are looking at decades of operations.

The sums of money involved are from large to gargantuan so payback would have to occur over decades. This long payback period requires a buyer able and willing to cough up the stomach to take the commercial risk. This buyer – willing and creditworthy

as he must be - as well as a contractual arrangement that would constrain him into a straightjacket of obligations limiting his abilities to react dynamically to changes in the market is what makes the project overcome gravity and fly.

Over a period of often 20 years this is mighty hard to swallow for even the biggest and most stable companies in those nanosecond times.

But it is this first anchor customer that is critically necessary in order to convince lenders that their monies are safe even in case the market goes totally awry and that the buyer is strong enough to take the hit (any hit in fact).

This is usually expressed in a Take or Pay obligation cast in iron coupled with a pricing formula that would give the lenders confidence that no matter what the market does, there would always be sufficient cash flow for covering their installments.

Take or Pay in this respect means that the buyer will take all volumes that he has contracted for the duration of the contract or pay if he does not take the cargo. This ensures steady cash flow necessary to ensure the timely payback

of debt accrued under a project finance deal plus a minimum return to potential investors.

This also means that if the market turns sour and the LNG cannot be sold for profit anymore the buyer would still buy the LNG at the agreed price in order to keep the project and hence the lenders safe.

If the buyer cannot offset the potential losses through optimization of his supply portfolio or diversion of cargos to better paying markets, he is going to lose money. That’s the deal.

This is no mean feat. Such a foundational offtaker is actually so precious that any project developer with a creditworthy, solvent and professional buyer with a deep market that is also willing and able to jump on board must be considered the luckiest man on earth.

The position of the off-taker is often made worse if the project is Greenfield in a country that has never done LNG before and hence has no experience in dealing with the LNG challenge. Many potential projects are also situated in territories with very inefficient legal protection or with over-regulated, bloated bureaucracies that make


FEATURE ARTICLE

developing any project there like wading in morass.

This adds enormous uncertainties to the prospect of being the sole anchor of stability in a sea of risk. Often, the buyer will have to make very onerous arrangements which will cost him dear if the project shows delays. Let’s just assume for the sake of an example, the buyer acquires Use or Pay LNG receiving capacity. Pushing this further we assume the Liquefaction project goes 2 years late with its startup date.

The regasification capacity has been contracted and must

be paid. The moment when you contract those things you will not know that there will be a delay in supply and you must take it as having supply in place and no regasification capacity to land your cargos is much worse. Same goes for shipping capacity if the contract is FOB.

Pull it the way you want it - newbie buyers meeting newbie LNG projects is a real tough deal for all involved. Plus, there will be more of those as there are regions in the world that have gas potential for small or mid-scale plants and which will never go global in sales but rather

regional because of their sizes.Someone taking this provides

a lot of comfort to a “would be project developer” so I would expect that they are treated very nicely. Strangely, that is not always the case. In fact, interested buyers are often subjected to running the gauntlet – even in those oversupplied times. Project Developers still seem to believe that there is plenty of market for their scarce product.

Sellers and project developers must be aware that those customers coming on board in spite of the challenges and risks are worth gold and should be treated as such. It’s a market in the end and in any market worth the term it’s the buyer that calls the shots.

That’s a lesson energy must come around to learn – or go away as the winds of change will blast all this old posturing off the face of earth quicker than we can implement changes from the last board meeting.

Energy is a commodity – delivering to customers exactly what they want when they want it and as much as they need is the art. When your buyer takes less and gives more he is a rare beast and those are priceless.

Rudolf is an entrepreneur and consultant active in the “methane based fuels and energy” industry. He is the founder of countless initiatives all with the aim to promote a methane based economy and affordable environmental protection.He is a professional business developer and negotiator who is involved in all aspects of the LNG business. He is also very actively promoting green technologies that work well with methane based technologies.Rudolf has helped secure first Regasification

capacity for his former employer EconGas at the GATE terminal in 2007 and holds a Masters degree in Commercial and Taxation law from the Jean Monnet faculty in Paris. He also runs a number of blogs, among them www.lng.guru and www.lng.jetzt.

RUDOLF HUBER

NTM By Rudolf Huber

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THE COMPETITION BETWEEN NATURAL GAS AND ENERGY STORAGE FOR

ELECTRICAL GRID SERVICESI n the electricity

industry, there is growing excitement about the capabilities and potential of energy

storage technologies, such as batteries, flywheels, compressed air storage, or pumped hydro. These technologies are often mentioned as ways to store renewable energy for times when wind or solar are not generating or as solutions to peak load management. However, power generation from natural gas is a good substitute for many energy storage applications, including frequency regulation, energy arbitrage, and renewables integration. And the currently low price of natural gas is greatly constraining the value of grid energy storage for several important applications. Right now, natural gas generation is an established technology, representing most of the new generation being built in the US, while energy storage is an emerging technology still exploring business models and experiencing relatively rapid price declines. Right now, the economics of grid storage is captive to the cost of natural gas, but may eventually pose a challenge to natural gas

generation in many grid services.Historically, electricity

systems have had limited energy storage capacity. Energy storage today makes up less than 3% of total installed capacity in the U.S., almost all of which is in the form of pumped hydro storage [1]. Although energy storage can provide many services beneficial to the grid, high capital costs and technical issues have historically limited deployment. However, trends over the last twenty

years have increased interest in energy storage: the difference between peak and off-peak load is increasing in most regions of the US, variable and intermittent renewables are being added at a rapid pace, and new energy storage technologies are being created and improved.

The price of wholesale natural gas has a large effect on the price at which natural gas generation and services are offered on the market because the levelized


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Figure 1: Monthly average delivered natural gas and frequency regulation prices in New York ISO from 2008 through 2013.

cost of electricity for natural gas generators is mostly due to fuel cost. For natural gas generation, 50-70% of the levelized cost of electricity is due to the fuel [2]. This is not the case for other technologies such as coal power, for which fuel costs are less than 30% of the total cost of electricity. Thus, decreasing natural gas prices significantly decrease the cost of services from natural gas generation, which is the main competitor for grid energy storage in many applications.

Thus, falling natural gas prices in recent years may have significantly reduced the potential profit from U.S. energy storage projects, offsetting the technological improvements in storage technologies made over the same period. If this hypothesis is correct, a thorough examination of the relationship between natural gas price and the economics of energy storage is necessary to forecast the success of efforts in the deployment of grid storage. As an emerging technology, energy storage is a “price taker”, dependent on favorable electricity market

prices and niche applications until it becomes more mature. Any significant shifts in the prevailing electricity prices, such as those occurring since 2009, will have an effect on price-taking technologies such as energy storage, putting economic competitiveness beyond any feasible technological improvement for some technologies.

In a recent paper published in the journal Energy Policy [3], we investigated the effect that natural gas price has on the profitability of storage projects. We evaluated the relationship between natural gas price and the profitability of energy storage in two applications for energy storage: frequency regulation and energy arbitrage. Frequency regulation refers to the constant need to inject or remove small amounts of power from the grid to maintain a stable grid frequency. Both energy storage and natural gas generation are well suited to this application, as they can respond quickly to regulation requests. Energy arbitrage refers to the ability of storage to profit on wholesale energy markets by storing energy at low-priced hours and discharging at high-priced hours. Inexpensive natural gas competes with energy storage in this service by reducing peak prices and, therefore, the profitability of arbitrage with energy storage.

A brief description of the methods is provided here, but a full description can be found in

Figure 2: Average monthly delivered natural gas price versus breakeven capital cost of a flywheel. The estimated Beacon Power flywheel capital cost range and associated range of natural gas prices are overlaid onto the figure. Our results indicate that a flywheel device can break even only under frequency regulation prices associated with $5-8/mcf natural gas. Some points on this figure have a negative breakeven capital cost. This occurs when the revenue from frequency regulation service is insufficient to cover even the operating costs of the flywheel plant.


SPECIAL REPORT

the referenced journal article. In each of the applications, we created an engineering-economic model of a storage device providing that service, and used electricity market price data to determine the net revenue produced by the storage. Once we calculated the storage revenue, we varied the capital costs of storage to determine the “breakeven capital cost” - the capital cost at which the storage owner makes zero net revenue when accounting for amortized capital costs, operating costs, and revenues. In all analysis, we assumed that the storage system is small enough that it displaces only the marginal generator and has no effect on market prices. This means that our results assume the best-case scenario for storage, as the effect of non-marginal storage participants will lower potential storage revenue in either service.

Frequency regulation is an ancillary service where a grid-level plant (generator or storage) agrees to change their power output on a second-by-second basis, following a signal sent from the system operator used to balance short-

term differences in supply and demand. Participating plants bid into a frequency regulation market and are paid both a participation rate, in dollars per hour for each MW of service, and paid (or charged) for their net energy production (or consumption) during the period. Frequency regulation service has a limited market size but is an application where storage may

be able to produce significant revenue. Some energy storage technologies are well-suited to providing frequency regulation. For example, Beacon Power designed their primary product to provide this service [4].

The revenue that can be produced by a flywheel providing frequency regulation service is highly dependent on the frequency regulation price. Flywheel devices for frequency regulation generally do not provide any other services, nor do they consume any fuels that may have their own price volatility. In the two markets that we examined (PJM and NYISO), average frequency regulation price is highly correlated with the delivered price of natural gas to generators (Figure 1). When we compare these prices to the results of our engineering-economic model of a flywheel plant, we find a very strong relationship between the prevailing natural gas price and the breakeven capital cost of a flywheel plant, due to much lower revenue to the plant during periods of low gas price (Figure 2). If our estimated capital cost

Figure 3: Henry hub natural gas prices and daily variability in electricity prices (Washington DC, annual average) from 2002 through 2013. When natural gas prices are high, daily price variability increases because of more expensive electricity from peaker natural gas turbines, which set the market price during peak hours. When natural gas prices decrease, peak price falls closer to the low off-peak prices set by coal/hydro/combined cycle plants.

Figure 4: Monthly natural gas price and hourly energy arbitrage revenue from a storage device outside of Washington, DC under perfect and imperfect information. Energy arbitrage revenue is greater during periods of high natural gas price.


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for a flywheel plant is correct, then such a plant is profitable only when natural gas prices are above the $5-8/mcf range.

Energy arbitrage is a service that can be provided by grid energy storage where the storage is used to maximize revenue from time-shifting electrical energy from low price periods to high price periods. This is functionally similar to (but not exactly equivalent to) peak shaving, where a storage device attempts to reduce peak load by charging when demand is low and discharging during peak demand periods of the day. The vast majority of existing grid energy storage is in the form of pumped hydro storage, which generally operates to provide the energy arbitrage/peak shaving service that we model [5]. The potential market for energy arbitrage is very large - a cost-effective solution could be scaled up until it has significantly shifted wholesale electricity price. However, energy arbitrage is also an application that requires inexpensive storage, due to the low potential profit margins.

Our energy arbitrage

engineering-economic model does not model a particular storage technology. Rather, we model a generic storage device with attributes of existing or likely bulk storage technologies: pumped hydro, compressed air energy storage, and some battery technologies. Specifically, we model a 20 MW / 80 MWh storage device. The storage device has a round-trip efficiency of 75%, with the inefficiency divided equally between the charge and discharge portions of the cycle. We model the operation of the storage plant under both perfect and imperfect information about future electricity prices. In either case, the storage owner pursues a strategy of maximizing revenue through energy arbitrage.

In energy arbitrage, a storage device attempts to maximize net revenue by purchasing charging energy when electricity prices are low and selling the stored energy when electricity prices are high. Thus, energy arbitrage revenue is related to short-term variation in energy prices rather than average energy price. Figure 3 compares annual averages of natural gas

prices and the daily variability in wholesale electricity prices (daily high price minus daily low price) in Washington, DC (the PEPCO DC price node in PJM). Natural gas prices strongly affect variability in electricity prices because they dictate the marginal costs of generation from peaker natural gas turbines. Peaker turbines have low capital cost and moderate efficiency and are designed and operated to produce relatively expensive electricity for a few hours each day. A significant fraction of their levelized costs is due to fuel, so a decrease in natural gas price will decrease the price of electricity during peak periods each day. The marginal off-peak generator is likely to be a coal, combined cycle natural gas, or hydro plant (depending on location) and is less sensitive to fuel prices.

Figure 4 shows the monthly natural gas price and estimated storage revenue for a location outside of Washington, DC. Because energy arbitrage revenue depends on large daily variations in electricity price, low natural gas prices greatly reduce the potential revenue to storage. As a result, the breakeven capital costs of storage have decreased significantly from earlier estimates (Figure 5). While a $250/kWh arbitrage storage device would be profitable in 2004-2007, the same plant would have to have a capital cost around $100/kWh to be viable, given current electricity prices. Since 2008, the energy storage industry has faced a difficult trend: as the new storage technologies have become ready for the market and the more mature technologies have lowered their costs, the decreasing cost of natural gas has been reducing the potential revenue of energy storage.

Energy arbitrage is a service that can be provided by grid


SPECIAL REPORT

energy storage where the storage is used to maximize revenue from time-shifting electrical energy from low price periods to high price periods. This is functionally similar to (but not exactly equivalent to) peak shaving, where a storage device attempts to reduce peak load by charging when demand is low and discharging during peak demand periods of the day. The vast majority of existing grid energy storage is in the form of pumped hydro storage, which generally operates to provide the energy arbitrage/peak shaving service that we model [5]. The potential market for energy arbitrage is very large - a cost-effective solution could be scaled up until it has significantly shifted wholesale electricity price. However, energy arbitrage is also an application that requires inexpensive storage, due to the low potential profit margins.

Our energy arbitrage engineering-economic model does not model a particular storage technology. Rather, we model a generic storage device with attributes of existing or likely bulk storage technologies: pumped hydro, compressed air energy storage, and some battery technologies. Specifically, we model a 20 MW / 80 MWh storage device. The storage device has a round-trip efficiency of 75%, with the inefficiency divided equally between the charge and discharge portions of the cycle. We model the operation of the storage plant under both perfect and imperfect information about future electricity prices. In either case, the storage owner pursues a strategy of maximizing revenue through energy arbitrage.

In energy arbitrage, a storage device attempts to maximize net revenue by purchasing charging energy when electricity prices are low and selling the stored energy when electricity prices are high. Thus, energy

arbitrage revenue is related to short-term variation in energy prices rather than average energy price. Figure 3 compares annual averages of natural gas prices and the daily variability in wholesale electricity prices (daily high price minus daily low price) in Washington, DC (the PEPCO DC price node in PJM). Natural gas prices strongly affect variability in electricity prices because they dictate the marginal costs of generation from peaker natural gas turbines. Peaker turbines have low capital cost and moderate efficiency and are designed and operated to produce relatively expensive electricity for a few hours each day. A significant fraction of their levelized costs is due to fuel, so a decrease in natural gas price will decrease the price of electricity during peak periods each day. The marginal off-peak generator is likely to be a coal, combined cycle natural gas, or hydro plant (depending on location) and is less sensitive to fuel prices.

Figure 4 shows the monthly

natural gas price and estimated storage revenue for a location outside of Washington, DC. Because energy arbitrage revenue depends on large daily variations in electricity price, low natural gas prices greatly reduce the potential revenue to storage. As a result, the breakeven capital costs of storage have decreased significantly from earlier estimates (Figure 5). While a $250/kWh arbitrage storage device would be profitable in 2004-2007, the same plant would have to have a capital cost around $100/kWh to be viable, given current electricity prices. Since 2008, the energy storage industry has faced a difficult trend: as the new storage technologies have become ready for the market and the more mature technologies have lowered their costs, the decreasing cost of natural gas has been reducing the potential revenue of energy storage.

Grid energy storage is often offered as a necessary solution to issues introduced by fluctuating wind and solar

Figure 5: Breakeven capital cost versus year for a storage device providing energy arbitrage service at three locations. These results assume perfect information about future electricity prices and exclude all operating costs except for purchased electricity. Data availability for New York City and Chicago limit the range of years analyzed for those locations. In the 2005-2008 period, prevailing electricity prices would allow for storage with a cost in the $200-$300/kWh range to be profitable. Since 2009, electricity prices have had lower daily variability, and storage capital cost must be less than $100/kWh to be reliably profitable.


SPECIAL REPORT

NTM By Eric Hittinger

Eric Hittinger is an Assistant Professor of Public Policy at Rochester Institute of Technology and holds a PhD in Engineering & Public Policy from Carnegie Mellon University. His research combines engineering models and economic analysis to understand the capabilities and effects of likely changes to electricity systems in coming decades, with particular focus on energy storage, renewables, and alternative market designs.

ERIC HITTINGER

generation, implying that the existing grid assets are insufficient for accommodating renewable generation. If this were true, then existing price signals should indicate the need for storage. One would observe real-time prices collapsing when renewable generation picked up and price spikes when the power output dropped off unexpectedly. Alternately, if significant short-term variability was introduced by renewables, the frequency regulation price would be expected to increase. In actual fact, however, the opposite has been observed: since 2007, wind and solar capacity has increased almost ten times [6], but real-time price variability and frequency regulation prices have both decreased. This is true even in West Texas, where significant wind development continues in an area of very little load. Despite large additions of wind power causing frequent negative prices during windy periods and prompting a significant expansion in transmission capacity out of the area, real-time price variability in West Texas has been decreasing since 2007. Significant additions of natural gas capacity, combined with decreasing natural gas prices, can explain this effect.

Average energy arbitrage revenue and average frequency regulation revenue or storage

devices in the year 2012 are both approximately a third of what they were in the 2004-2008 time period. This drastic shift in potential revenue is both a major obstacle to energy storage investment and a signal that energy storage is not currently needed for bulk energy arbitrage or frequency regulation. However, while the two services we investigated were commonly discussed applications in the early 2000s, the focus of the storage industry has appropriately shifted somewhat towards distributed storage and other similar applications. Even though there have been significant improvements in storage performance and price over the last ten years, this technological progress is slowly starting to result in appreciable deployments of energy storage.

There are several important implications of the trends presented above. First, industry and policy makers must be aware that the fundamental economics of energy storage have shifted significantly in the last ten years and that the conclusions of analysis using pre-2008 data may no longer apply. Second, while regulatory reforms and policy support have increasingly acknowledged the unique contribution of energy storage, future efforts must shift their focus towards better

support of currently valuable applications for the technology, such as distributed storage. Third, decision makers should understand the relationship between natural gas prices and many of the grid-level services provided by energy storage. This means that energy storage planning should be created with an appreciation that the storage industry is currently experiencing temporarily adverse market conditions which have hindered deployments in the last six years. It also means that continued decreases in the cost of storage technologies may eventually threaten natural gas generation in many of its current grid services.

Works Cited[1] EPRI, “Electricity Energy

Storage Technology Options,” 2010. [Online]. Available: http://my.epri.c o m / p o r t a l / s e r v e r . p t ? A b s t r a c t id=000000000001020676. [Accessed September 2011].

[2] US Energy Information Administration, “Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2014,” April 2014. [Online]. Available: http://www.eia.gov/forecasts/aeo/electricity_generation.cfm. [Accessed October 2014].

[3] E. Hittinger and R. Lueken, “Is inexpensive natural gas hindering the grid energy storage industry?,” Energy Policy, vol. 87, pp. 140-152, 2015.

[4] Beacon Power, “Smart Energy 25 Flywheel,” 2011. [Online]. Available: http://www.beaconpower.com/products/smart-energy-25.asp. [Accessed June 2011].

[5] E. Ela, B. Kirby, A. Botterud, C. Milostan, I. Krad and V. Koritarov, “National Renewable Energy Laboratory,” May 2013. [Online]. Available: http://www.nrel.gov/docs/fy13osti/58655.pdf. [Accessed January 2014].

[6] US Energy Information Administration, “Electricity Data Browser,” October 2014. [Online]. Available: http://www.eia.gov/electricity/data/browser/. [Accessed October 2014].

Market ReportingConsulting

Eventsilluminating the marketsPetroleum

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EVENT & EXHIBITION

Gastech 2015 was a phenomenal event with Gas experts and industry p r o f e s s i o n a l s

gathering in Singapore from around the globe to discuss some of the industry’s most pressing issues. Gastech is the leading event for the international oil and gas industry and has become an event for everyone to meet

every once every 18 months. The event was first held in

1972 and had its focus on LNG and LPG Shipping. Through the years, however, the event has evolved to cover the entire supply chain of the gas industry. This year saw more than 20,000 delegates and 750 exhibitors.

The event this year was set up by Pico Art International and saw all major players

present. Many exhibitors even had double story booths that were elaborately designed and beautifully finished. There were several ‘mini-conferences’ that were on-going at various locations in the exhibition area throughout the day.

Each of these areas could fit about 50 people and each had a different theme and sponsor for each string of presentations

GASTECH SINGAPORE201527 – 30th October 2015 | Singapore EXPO

EVENT REPORT:


EVENT & EXHIBITION

the ‘Age of the Customer’ where it comes to gas procurement.

Up next was Ala Abu Jbara of Qatargas who spoke on the Changing Global Dynamics of the gas market. He explained that he believes that there is currently a fundamental rebalancing of the gas market which he says is due to global economic turmoil. He says that the change can be seen in China’s slowing growth, the drop in oil prices are all signs that the energy market is changing. Global demand is still expected grow albeit somewhat slower than expected.

The changing LNG market is facing a global demand plateau, an evolving LNG trade favouring the contract market, emerging Middle East demand and new supply additions from PNG, Angola and Peru as well as increased competition from coal and renewable sources of energy. He says that the current oversupply in the market is going to face a further increase of about 40% up till 2020 with large volumes of gas coming from new projects in Australia and the United States.

Spotlight on IndonesiaI then attended the Spotlight on Indonesia section. The speakers gave an update on the situation in Indonesia and identified opportunities for investors seeking to enter the Indonesian market, with particular attention to opportunities in gas infrastructure development. It is expected that by 2025, Indonesia will experience a huge shortage of LNG due to projects coming to the end of their lifespan and increasing demand from domestic sources. This finds the country in need of some US$20 billion to use gas to solve their electricity shortage problems. In addition to this, East Indonesia requires the establishment of a virtual pipeline through

the use of FSRUs and mobile transportation networks as they are unable to develop a physical pipeline in this area.

The government is also reportedly doing its part to assist in development of natural gas in the country by making huge changes to the types of permits that they are granting. They are actually reducing their complex assortment of permits from 42 to just 4 by 2017. This is hoped to ease the process of obtaining permits to carry out natural gas infrastructure development in the country.

Slowdown in ChinaIs China’s gas market slowdown a temporary or long-term? Xiaofeng Ren of BG Group figures that this is a cyclical downturn and the industry is undergoing cyclical rebalancing. She said that she does not expect industry and investment growth to return to previous highs. She feels that the market is caught in a transition period of gas supply and demand.

According to her, natural gas is undergoing a shift from a utility product to a commodity product which is the eventual deregulation of prices such that they can move freely based on market factors. Xiaofeng feels that a proper transition phase is needed for full deregulation and for prices to adjust.

A good thing, however, is that fuel use in China is a policy issue as their environmental problems are steadily getting out of hand. So the government knows that they need to be on board this issue for their own good.

Xiaofeng also went on to say that there is still huge potential of unlocked demand for gas which exists primarily at coal based power plants. These coal plants can be replaced by gas plants that could provide much needed heating to south-

which were given the tagline – Centres of Technical Excellence (CoTE). NGV Global held one of these CoTEs whereby they had strings of presentations on NGV regional dynamics. Besides these ‘mini-conferences’, there were 3 separate conference areas.

Keynotes & IntroductionI spent my time shuffling between these 3 conference areas and occasionally dropping by into one of the CoTE presentations when there was not much going on in between the speeches or during lunch time. Let me tell you about my exciting journey throughout Gastech, detailing to you the most interesting things that I gathered over the 4 days.

The first keynote speech was by Noel Tommy of Wood Mckenzie, who gave insight into the Pacific Gas Market which he believes is currently oversupplied. He feels that cheap coal has a major influence on gas prices. He says that with the continuous flood of cheap gas coming from Russia that they will be competing quite fiercely for market share and allow them to gain a foothold in the market. He says that this combined with low immediate demand from gargantuan gas importers Korea and Japan that prices will most likely keep gas prices low till after 2020.

This was followed by a discussion by Patrick Breen of Gas Strategies who spoke on why there is significant change going on in the industry and why we need to be aware of it. His main point of his presentation was that there is huge need for sellers to improve on their service element as he believes that low arbitrage opportunities and lower FIDs make buyers search for sellers with the best service as there is so much choice in the market at the moment. He ended off saying that he sees the next 5 years being


EVENT & EXHIBITION

eastern and northern provinces during the freezing winter months. Xiaofeng concluded her presentation saying that ultimately, China’s gas market outlook will be shaped by China’s choice of fuel mix.

Oil Price CollapseWhat does the oil price collapse mean for the international gas market (short to medium term)? This was the topic of Geoffrey Hureau of Cedigaz’s presentation. He says that there are a number of factors that will affect the market. He says that Opec’s decision to stop supporting the oil price has the largest implication to supply dynamics.

Other than this, the shift in supply will now be heavily weighted on US production (Shale Gas) and MENA geopolitics while demand will be affected by the low price in oil and see the benefits of gas use outweighed in some instances as oil will be a cheaper alternative, he says. Global growth is also expected to increase demand as we begin using more gas for power generation and vehicular fuel. LNG Capacity is expected to grow and the oversupply will probably last till 2020.

Pakistan LNGRahil Pitafi gave an overview on the LNG situation in Pakistan. Rahil told us of the huge energy shortage that is affecting the country’s GDP growth. Currently gas makes up 46% of Pakistan’s energy mix, with majority of gas being used for power generation and the rest being used to supply the country’s 3 million NGVs.

It has become a pressing need for Pakistan to sort out their gas shortage problems as they have been conducting many load shedding exercises across the country. The TAPI pipeline is also experiencing further

delays due to security issues that need to be sorted as the pipe runs through certain regions in Afghanistan.

It has been 10 years since the idea of LNG in Pakistan was first proposed and tried to be passed. The arrival of LNG in Pakistan holds a lot of promise however with ever increasing demand closing in on 15 mtpa, it will take a lot more LNG to completely eradicate shortages. It is hopeful that more long term deals can be secured with gas from USA, Australia, Asia and Africa.

MegaprojectsPhilip Loots, a lecturer at UWA in Perth, gave a very good presentation on his study of Oil and Gas Megaproject (Projects with cost > US$500 million) success. He started off saying that the new $US50 per barrel will require a new approach in order to be successful.

His current study on Megaprojects saw that 65% of all mega projects failed. Of these falling projects, 33% experienced cost overruns, 66% experienced operability problems, 50% were not completed on time and 38% were over budget.

His study provided various reasons for failure which included inadequate scoping, inadequate definition of project objectives, insufficient site info, unrealistic time and cost targets and inappropriate risk allocation. Much of these issues can be resolved in the planning phase and greater transparency between the companies involved. Megaprojects can be great thing for the industry but it’s worrying that more than half never manage to reach completion.

Know Thy EnemyHenning Gloystein, Energy Editor at Reuters made a presentation on Coal, entitled Know Your Enemy. Which

makes a lot of sense when speaking about gas – Coal is its arch-nemesis. It is by far Gas’ biggest competitor and our most largely used filthy fuel for power generation.

He explained that coal has been in steady decline since 2011 and currently is back at 2003 levels (below $US50). The largest coal importer in the world is India and it will be a long time before India is able to swap it out for gas (or at current prices even have the desire to do so) Japan also is currently building some 40 more coal plants to supplement their shutdown of nuclear operations following the meltdown at Fukushima.

Coal is simply too cheap to not buy and burn, and it’s plants are cheap to maintain and develop. Gas projects on the other hand cost 40-50 billion dollars. Every single aspect of working with coal is cheaper! This is some pretty bad news for gas.

As cheap as it is, coal mining is extremely dangerous and results in 10-15 thousand deaths a year. And in the coal industry, this has become a ‘norm’. Coal mine operators take these things in their stride because ‘these things happen’ in coal mining. This is not even taking into account the deaths that are caused from air pollution resulting from coal burning. Perhaps this is exactly why it should be stopped.

Sadly Henning concluded with the disappointing reality that coal will continue to remain a dominant fuel for power generation in Asia for quite some time more. Perhaps if we’ve learned anything from Gastech, let’s understand that there’s still a long way to go where gas development is concerned and we just have to work harder to flourish as we enter a golden age of gas.

NTM By Ryan Pasupathy

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NGV GROWTH IN SOUTH KOREA

ANALYSIS OF NATIONAL POLICIES AND ITS IMPACTS ON

Another NGV success story lies hidden in democratic East-Asian nation of South Korea.

The country is famous for its technological innovations by companies such as Samsung and Hyundai. It is no wonder that the people there are strong supporters of NGV use and have a thriving NGV industry in their own backyard.

The story begins early 1997 when, examinations regarding the validity of promoting the operation of NGVs were conducted as a joint effort led by the Ministry of Environment. The Korean Association for National Gas Vehicles (KANGV) was established as a non-profit organization where experts in related fields could discuss relevant matters on the subject.

The association allowed them to help the government with readjustment of related regulations and establishment of support measures to promote natural gas vehicles through negotiations with related ministries. A following

result of these negotiations was the amendment of articles pertaining to NGV in the High-Pressure Gas Safety Control Act, the Automobile Management Act, and the Clean Air Conservation Act to help facilitate growth of an NGV industry. It took them several years but by 2004, they had almost 5000 CNG buses on the road. From then on things really picked up speed and in

2014 they had 40,531 NGVs on their roads.

The government implemented various assistance policies aimed at promoting natural gas including paying a portion of the purchase cost of vehicles for bus operators and providing establishment loans for fuel station owners.

Incentives & SubsidiesSouth Korea started its NGV

Figure 1: Korean NGV Statistics, 2014


Continued Stability & SuccessThe NGV Industry in Korea has shown steady growth over the 10 years and looks like with continued government support and planning that the industry will continue to thrive well into the next 10 years as well. There are always challenges that present themselves and they are often thee focus of the best success stories. South Korea has a steadily growing NGV industry that still has much more room for growth past the bus sector and into other forms of public transportation and even privately owned vehicles. The challenges should prove surmountable in South Korea’s case and we are interested to see just how these excellent innovators prepare for an era of cheap gas.

programme by adopting CNG medium and heavy duty (MDHD) buses (as of December 2010, around 26,000 CNG buses and some 900 garbage trucks operate in South Korea) and later by adopting other CNG or LNG-powered HDVs.

To promote use of NGVs the South Korean government developed numerous policies aimed at the natural gas bus sector. They implemented the Natural Gas Bus Support Policy which includes Tax exemption and loan incentives.

Problems AheadThere are several challenges however that this thriving industry is going to face though going forward. The global oil price drop is putting NGVs into a less competitive position in terms of fuel cost compared to petrol and diesel vehicles.

This has allowed for Euro 6 diesel buses, which came into NTM By Ryan Pasupathy

the market last year, to have made NGVs less of an option. Since both diesel and CNG buses are in compliance with Euro 6 emission standards. Diesel models also have many other advantages including car price, performance (torque, etc.) and charging convenience.

Government policy has also changed such that the Ministry of Environment allocated a smaller budget for year 2015. Metropolitan cities with high CNG bus ratio are not subject to the subsidy any more.

They can only apply for purchase subsidy for CNG Hybrid buses. The Government thinks that it has been providing subsidy to CNG buses long enough (15 years) and wants to gradually phase out the subsidy. As emission control technology for petrol and diesel vehicles is improving with tighter standard, comparative environmental benefit from CNG buses has got smaller.

Type Refuelling Station Bus Company Manufacturers/Suppliers

Tax Exemption

• 3% corporate tax exemption for fixed station construction

• Apply industrial rate for electricity bill

• Reduction of environmental impact fee (10-20%)

• VAT(10% of the bus price)• Acquisition tax(app. 4%)• Environmental

improvement tax

• 50% tariff reduction on main parts import

Loan / Incentives

• Loan on station construction: USD 583,000/compressor 10yr repayment, 5yr deferment period, floating interest rate

• Low sales compensation if: bus refuelling /day is <31 (100/day capacity station), bus refuelling/ day is <22 (50/day capacity station)

Purchase subsidy[2015 – NEW]• CNG bus* Large $ 10,000 / Small $ 5,800* CNG hybrid $ 33,000• CNG garbage truck* 11 ton $ 35,000* 5 ton $ 22,500

Table 1: Incentives and Subsidies for NGVs in South Korea

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