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Traditionally, the transportation of LNG has been done in big LNG carriers that move the product in the most economical way from the producers. LNG is then re-distributed via pipelines to the final users. But the same that other energy sources have been changing the way they are transported over the years, there are changes in the LNG distribution and transportation that make it feasible and even economical (specially if we take into account the whole of the supply chain) to move small LNG parcels with the use of Small LNG carriers, able to get closer to the final customer.
Due to the changes in the way energy is consumed and the increase in Liquefied Natural Gas (LNG) movements, we see clear opportunities for the development of Small LNG Carriers and barges that would help in the following ways:
- Peaks in demand: In some places demand for energy greatly varies during the year. A small LNG Carrier could help during those peaks, allowing for the construction of a pipeline that covers only the valley periods (instead of a much bigger and more expensive one that can cope also with the peaks), and therefore greatly reducing the investment required and the risk involved.
- Expanding demand over time: In many cases, demand is expected to grow strongly over the years, and the pipelines are being built to last for about 10 years, after which they will have to be duplicated in some routes. Small ships can make this transition smoother.
- Covering small islands.
- Reducing the number of big receiving terminals, with jetties for 150,000 cbm or bigger ships and storage tanks of 300,000 cbm or bigger. The flexibility of the small ships would allow for instance to only build one major terminal and several satellite smaller ones, thus reducing drastically the total LNG inventory in the system.
- Flexibility of supply
- Re-balancing stocks in all the terminals: The Small carriers could help balancing the terminals.
- Changes in demand. In cases where the product contracts allow it, these small carriers can allow for re-balancing demand, moving product delivered to one terminal to a more needed destination.
- LNG as fuel for ships: As a substitute for use of other bunkers in the future, LNG could save money to Ship Owners while being environmentally friendly
There is a small fleet of small scale LNG ships in the market today designed with sizes between 1,000 to 40,000 cbms and able to transport LNG, ethylene, butadiene, propylene and LPGs. The size of what is considered a small LNG carrier comes given by the technology used: the smaller ships use IMO type C tanks, which are best suitable and economical for ships of those sizes. This makes more logical the use of Ship Owners with previous experience in the ethylene and ethane transportation segment, since they are more familiar with the technology and the requirements of smaller ships.
That might be the reason why most small LNG carriers today are in fact owned by Ship Owners coming from an ethylene transportation background and not from traditional “big LNG” Owners.
LNG requirements are minus 168 deg C, compared to the minus 104 deg. C of the Ethylene, so these ships will be extraordinarily capable of transporting all the alternative products once they are prepared for it.
This design is a basic one that can be modified and adapted to different needs and sizes. Please contact us if you would like to discuss any related project or you would like us to look at the best solution for your small ship LNG transportation.
What do you need to know before you decide what ship you need?
Before starting negotiations with Ship Owners, you have to fully understand some of the possible restrictions:
- Load and disport restrictions: is there a draft restriction ? LOA? Beam?
- Fuel to be used: will it be fuel oil for greater flexibility or will it be the LNG vapours themselves to reduce the environmental impact and reduce costs ?
- Cabotage requirements: in the case of loading and discharging in the same country, there are, most likely, restrictions in the number and nationality of the crew members, special taxes or special organisational requirements (a Ship Owner’s representative office in the country in some cases). Some countries require cabotage ships to be built in the country.
- Others: Organisational issues within your organisation ? Others ?
Also, before talking to the Owners, would be important to have a detailed analysis of product flows over time, tank capacities, ship’s capacities and alternatives scenarios. A multi-variant scenario that reflects the alternatives and risks associated over time.
Analysis of transportation alternatives:
Each one of the options has advantages and disadvantages:
- Building our own ship requires expertise and financial strength. In a simpler ship, the design wouldn’t be a problem. In the case of a Small LNG carrier, probably you would have to use a ship engineering company to do the design (several of the players in the market are subcontracting part of the design to a German based company for instance).
- A Ship Owner building an LNG carrier(s) for your own use will require a long term commitment with that Ship Owner, since the small scale LNG carriers’ market is not liquid and they will have few alternatives for using the ship anywhere else. Therefore, a long term contract (a time charter) will be made using a modified contract (normally a shelltime 4 contract modified to reflect the particularities of the deal)
- Using an existing LNG carrier already in the market will limit our options tremendously. Right now there is only one company with tonnage available (Norgas). They have several ships of 10,000 and 12,000 cbms available. The ships are multipurpose, and that might be a limitation.
Hire us as consultants to help you in the process. You would lower substantially your costs and increase your chances of success.
Mr. Eduardo Perez has more than 25 years of experience in the petrochemical industry
. Among other positions he’s worked for:
- Lauritzen Kosan Copenhagen: 7 years in charge of business development, looking at new projects (Small LNG) and new markets.
- Norgas Carriers: 2 years in Houston and Singapore: Vice President Commercial in charge of all the commercial activities of the shipping company. Norgas has now 3 small LNG carriers.
- Dow Chemical USA: 3 years as global chartering manager for gases for the company
- Dow Chemical in Argentina: 3 years as responsible for the gases shipping and transportation requirements of the company in South America.
- Dow Chemical in Holland: 3 years as responsible for the Chartering of gases for the company in Europe.
- Dow Chemical Spain: 7 years in charge of logistics and supply chain for the region.
All in all, we have plenty of applicable experience, having worked on both a Ship Owner and on a Charterer.