LNG Receiving Terminals

Nov 1, 2016

Overview

Nexant recently completed a Process Evaluation/Research Planning (PERP) report that reviews and compares the technologies and equipment that are employed to unload, store and vaporize LNG, and identifies the key opportunities and threats facing regasification terminal project development going forward.  A version of this PERP report was first published by Nexant in 2006 (“LNG Regasification”, PERP 05/06S12), when global gas market conditions were exceedingly different.  One of the key differences was the position of the United States, where a large gap between consumption and its existing gas production base was believed to be imminent.  The innovative configurations for proposed U.S. LNG import terminal designs, which largely centered on offshore solutions, was a factor in the fairly rapid proliferation of new LNG import schemes around the world.  The leaps and bounds in LNG terminal configurations since the release of Nexant’s original report, and the dramatic change in global LNG markets since 2006, were critical factors in Nexant’s decision to update its 2006 report.

Selected Findings

LNG import terminals around the world, irrespective of their physical location and configuration, all serve the same function: to unload and store gas in its liquid form before vaporizing it and sending it to downstream markets for consumption by end-users.  While all import terminals generally have the same components and serve the same function, their specific designs and configuration vary according to a myriad of factors: current and potential future downstream gas market dynamics; location-specific geotechnical characteristics; site-specific topography; and the potential for public opposition to large-scale onshore developments.  Such factors are considered and weighed by project sponsors in order to arrive at a terminal configuration and layout that best suits local market needs while ensuring a reasonable rate of return for the owners.  Indeed, the final choice of terminal is a reflection of the owner’s perception of existing and projected regional gas market dynamics, the local political/social climate, and geographical/geological constraints of the physical terminal locale itself. 

Prior to the new millennium, all the world’s LNG receiving terminals were located onshore.  Although the size of LNG import terminals varied greatly according to market needs, there was little to distinguish them in terms of their physical configuration.  All facilities had many common elements: berthing and unloading facilities, storage tanks, and vaporizers were universal features.  The only variations were owners’ choices in LNG containment tank size and composition; the characteristics of the terminal’s berthing facilities; and the method used to vaporize the LNG.  These choices, of course, were proscribed by site and market-specific considerations.  But the dawn of the new millennium saw a rapid expansion in terminal configurations available to project developers, and today there are several offshore options available for consideration.  These terminals perform the same function as their onshore counterparts, and feature the same core components of unloading, storage, and send-out.  However project owners must address the challenge of fitting these components onto a (comparatively) small fixed or floating structure, and address the operational challenges of performing these processes in a sheltered or open water environment.  The rise of offshore terminalling solutions must be seen in multiple contexts: as an expression of the prevailing local social/political environment; a reflection of the local energy market’s dynamics; and of course, the ongoing technical innovations by the LNG industry.

Although security of supply provisions and attention to safety remain paramount concerns for LNG import project developers, sweeping changes to regional gas markets have significantly broadened the commercial considerations that underpin the LNG industry as a whole and for LNG import projects in particular.  In recent years, the LNG industry has experienced rapidly growing production capabilities, while demand growth has slowed significantly as markets have matured and economic problems and/or policy decisions have depressed demand for gas-fired power generation in key LNG markets.  Moreover, the consolidation of gas and power sector liberalization efforts in Europe, which is slowly spreading to certain countries in Asia and the Asia Pacific, has motivated former gas and power monopoly companies in these regions to search for new business opportunities.  Meanwhile, there is a growing body of new market outlets for LNG, as various countries around the world seek to introduce LNG into their primary energy mix or expand current gas use via LNG imports. 

This confluence of factors has created a very dynamic business environment for existing and future LNG import terminal owners, as exporters and importers seek to adjust the terms of business with each other.  This vibrant business environment also provides opportunities for entities with no formal LNG producing, importing, or shipping assets (e.g., banks and trading companies) to seek a toehold in the business.  Going forward, Nexant expects this diverse pool of existing and potential developers will identify creative ways to cater to demand in a way that minimizes their exposure to risk while leveraging their existing LNG business experience and assets.  For these players, a judicious approach toward vetting LNG import opportunities, coupled with the selection of a business model appropriate for the downstream market served by the terminal, will go a long way toward accomplishing these goals.

The PERP report “LNG Receiving Terminals” was published in October 2016.  The table of contents may be viewed or downloaded on the NexantThinkingTM website at  http://thinking.nexant.com/sites/default/files/report/field_attachment_toc/201610/2016S11_TOC.pdf.  The report may also be ordered via the NexantThinkingTM website at http://thinking.nexant.com/eform/submit/order-report?report=44477.