From little things, big things grow. RISC sees LNG market diversification into transport fuel as a long term growth area.
Woodside to help foster US LNG domgas wave
Monday, 25 July 2016
Anthony Barich, Energy News
NEW documents released by US regulators reveal Woodside Petroleum has a golden opportunity to kick off its pursuit of facilitating LNG for marine and trucking use via its partnership with Sempra Energy at the proposed Port Arthur LNG project in Texas.
While the 10 million tonne per annum Port Arthur project is clearly geared towards export markets, the Federal Energy Regulatory Commission has released documents that revealed it will also facilitate domestic LNG use.
The project will have two 160,000 cubic metre capacity storage tanks and associated marine and other facilities, along with truck-loading and unloading areas to participate in the growth of the LNG fuel market for ships and trucking.
Perth-based RISC principal advisor Martin Wilkes told Energy News that the US and China were the only places where small-scale inland LNG production appears to be working, either for power generation or transport, due to their large populations and, in the case of the US, their innovative nouse.
However, unlike other small-scale LNG start-ups that have gone bust in Norway and the UK before being bought out by Shell and resurrected, Woodside and Sempra’s initiative is bound to work – and develop further – as the domestic use of LNG for power gen and trucking grows.
AIM-listed Prometheus Energy tried micro-LNG from landfill but delisted towards the end of last decade before being bought out by Shell Technology Ventures; while Gasnor was also involved in small-scale shipping before Shell also bought it out in 2012.
Similarly in Australia, efforts to get small-scale LNG up and running have been less than successful as the local market for small-scale LNG has not grown as anticipated.
Wesfarmers has a small-scale plant south of Perth, Energy Developments’ West Kimberley Power Project had a difficult first few years, Energy World Corporation’s plant near Alice Springs has been shut-in for more than a decade, and a Tasmanian venture which targeted 20,000 tonnes per annum for transport has an offtake that is only 25% of the expected level.
“So like we saw with small-scale LNG companies in Australia, first movers find it difficult to make money, but other people have since come in and bought them out and are able to make money because they didn’t have to make that investment,” Wilkes said.
Yet Wilkes said that’s not something Woodside and Sempra have to worry about.
“The US has a huge reticulated system, both in terms of gas and transport networks,” he said.
“The US is an area where LNG for land transport has started, as opposed to Australia. It still has a long way to go there, but there are people who have started inland LNG facilities focused on trucks like China.
“The main game for Woodside and Sempra is clearly export into Asia or Europe, but it’s worthwhile developing those domestic facilities on the side because they can see that market growing.
“The level off take of trucks is miniscule compared to 10MMtpa; it might be 100,000tpa max – maybe 1%.”
While there was talk of Woodside developing a truck loading facility for LNG trucks for the North West Shelf venture some 20 years ago, diesel rebates are holding back local conversion to LNG.
The new Port Arthur documents filed by San Diego-based Sempra five months after it signed a development agreement for the project with Woodside, are expected to be followed by a formal application for permits to FERC within two months.
“FERC is currently conducting its pre-filing environmental review process for the project and will provide comments,” the regulator said in its just-released update of its review of the Port Arthur proposal to construct a liquefaction and export terminal and interconnected pipeline facilities.
“Port Arthur LNG will incorporate the comments in the resource reports it will submit with its formal application for the project, which is anticipated to be filed in September 2016.”
For Sempra, the Port Arthur project adds to its Cameron LNG export project in Louisiana, currently under construction, and its Costa Azul import terminal on Mexico’s Pacific coast.
The proposed Port Arthur project would use some of Sempra’s 2900 acres of property with nearly 5km of waterfront on the Sabine-Neches Ship Channel and about 2km of waterfront on the Intracoastal Waterway.
“The Port Arthur liquefaction project would involve the construction of an LNG export terminal and a marine facility, and the Port Arthur pipeline would involve building about 35 miles [56.3km] of new 42-inch-diameter pipeline to provide natural gas supply to the LNG facilities,” Sempra told FERC.
“The projects would also require the relocation of a portion of State Highway 87 and existing third-party pipelines to accommodate ship docking and loading at the marine terminal.
The Sempra-Woodside agreement signed last year provides a framework for responsibilities and cost sharing, which Woodside CEO Peter Coleman said was significant as it underlined a belief that there was a commercially viable development there.
Completing required commercial agreements, acquiring all necessary permits and approvals and securing financing commitments are still needed before a final investment decision is made.
FERC had previously evaluated and certified Sempra’s Port Arthur LNG site in 2006 for a proposed import and regasification facility and pipeline.
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