Reasons for Small-Scale LNG Sector Growth
The small-scale LNG sector is set to grow considerably in the coming years with the current capacity of 25M mtpa reaching 30M mtpa by 2020 and 80M mtpa by 2030, according to Wood Mackenzie. What are the reasons for this expansion and why companies should invest in small-scale LNG?
The upcoming implementation of the 0.5% sulphur cap in 2020 raises the LNG demand in the maritime sector since it can reduce sulphur emissions and particulate matter by 99%, NOₓ emissions by 85% and release up to 25% less CO2.
New bunkering projects could benefit from shipowners switching to LNG. A lot of them are looking into dual-fuel vessels and diesel-to-LNG retrofits, even for vessels that haven’t reached the end of their lifecycle. Most prominently, ferry fleets are ahead of the transition by replacing older diesel ferries with ones powered by LNG.
Some experts predict that by 2030 commercial shipping could have up to 20% of LNG-fuelled ships worldwide with marine bunkering demand growing to more than a quarter of small-scale LNG output.
LNG is gaining popularity the best alternative fuel source to power vehicles. The LNG road fuelling network is largely developing in China with more than 2000 stations and an active fleet of around 220,000 trucks as well as in the EU with 150 stations and over 3500 vehicles. The US is also considering investments in LNG-fuelled trains that will not only reduce emissions but could lessen fuel costs by as much as 50%.
The road transport sector is expected to take up the majority share of the global small-scale LNG market and boost its growth. Due to its economic advantage, LNG is perfect for long-haul, heavy-duty vehicles. However, for passenger cars another natural gas product, compressed natural gas (CNG) is preferred. The Volkswagen Group estimates that CNG could reach a share of up to 10% of cars in Germany and Europe.
Forecasts approximate that CAGR of the off-grid power generation segment of the small-scale LNG market will reach the highest levels in the future. According to Shell Outlook 2018, LNG for power generation will account for 45% of demand by 2030, followed by industry, agriculture and transportation.
Due to its flexibility, small-scale LNG allows forgoing pipelines, which benefits remote locations and island regions that rely on oil-based power generators. For example in the Asia Pacific, the large-scale gas infrastructure is poorly developed, therefore, the best way to satisfy the growing demand for LNG is through small-scale LNG.
Additionally, LNG is easily re-gasified for electricity production, meaning that in the case of peak demand or extreme weather conditions it can be used for power generation more reliably. The quick response and the ability to store the gas supply indicates that small-scale LNG is a great choice for countries to ensure the security of supply.
Small-scale LNG has great potential, offering opportunities to develop new markets, diversify energy supply and in the long term, the possibility to integrate with large-scale projects. This makes it attractive to investors and market developers.
Attend the 2nd Small-Scale LNG Summit in Milan on 12 February 2019 to find out more about investment opportunities and advantages this sector can provide. You will be able to hear from LNG experts, government representatives, industry insiders and key executives about small-scale LNG market development, innovations, regulatory framework, digitalisation of projects and more important subjects.