Advantages Of Switching To LNG

<p><span data-preserver-spaces="true">Mauritius is planning to introduce Liquefied Natural Gas (LNG) to the power-generation sector for the first time.&nbsp;</span></p><h2>&nbsp;</h2><h2><span style="font-size: 14pt;" data-preserver-spaces="true">Liquefied Natural Gas (LNG)&nbsp;</span></h2><p><span data-preserver-spaces="true">LNG is a clean and relatively environment-friendly energy source. It has been considered that coal has the world's largest known fossil fuel reserves of 900TWyr compared to LNG (215TWyr) and fuel oil (240TWyr). Therefore, with the escalating demand for LNG around the world, the price stability of LNG should also be carefully analysed with that of Coal/HFO.&nbsp;</span></p><p><span data-preserver-spaces="true">The main combustible matters that liberate heat during the combustion of conventional heat sources (e.g. LNG, biomass, coal, fuel oil, etc.) are Carbon and Hydrogen. The Carbon to Hydrogen ratio in LNG (3 to 1) is relatively lower than that of fuel oil (7 to 4) and coal (13 to 6).&nbsp;</span></p><p><span data-preserver-spaces="true">The gross calorific value of LNG (52,358 kJ/kg) is higher than that of fuel oil (43,942 kJ/kg) and coal (26,365 kJ/kg). LNG combustion technologies' combustion efficiency and heat transfer performance are relatively higher than those of systems burning the other two commodities.</span></p><p>&nbsp;</p><p><strong><span data-preserver-spaces="true">LNG as a Clean and Efficient Fuel&nbsp;</span></strong></p><p><span data-preserver-spaces="true">Since these power plants operate far from the end-user, the remaining 60% of heat is released into the environment as waste heat. Heat cannot be economically transferred long distances.</span></p><p><span data-preserver-spaces="true">This is due to a higher flame temperature and proper mixing of LNG with combustion air, resulting in low air required for complete combustion. Therefore, LNG generates about 30% less carbon dioxide (CO2) than fuel oil and 45% less than coal.&nbsp;</span></p><p><span data-preserver-spaces="true">Water vapour (H2O) generated during fuel combustion is also a greenhouse gas, but there is no accumulation of water vapour in the atmosphere like CO2, as it is associated with a natural cycle through evaporation and precipitation. The combustion of natural gas does not emit soot, dust, or fumes and almost no environmentally damaging Sulphur dioxide (SO2) emissions.&nbsp;</span></p><p><span data-preserver-spaces="true">With the unavailability of Nitrogen in LNG (fuel nitrogen) and the adaptability of advanced combustion technologies like staged combustion, a two-fold reduction in Nitrogen oxide (NOx) emissions can be observed. Therefore, using LNG has an inherent advantage over other fossil fuels.&nbsp;</span></p><p><span data-preserver-spaces="true">The heat from high-temperature energy sources (e.g. LNG/fuel oil) can be converted to electricity more efficiently than other heat sources with relatively low combustion temperatures.</span></p><p><span data-preserver-spaces="true">The main economic advantage of LNG is its use as a fuel in decentralised power generation systems. The process of electricity production using coal or heavy fuel oil (furnace oil) from remote locations is inefficient as it involves the production of heat energy first, which can only be converted into electricity with an efficiency of about 40% (typically 35-40%, but current hybrid cycles or commercially available combined cycle can go up to about 50% in tropical climates).&nbsp;</span></p><p><span data-preserver-spaces="true">Since these power plants operate far from the end-user, the remaining 60% of heat is released into the environment as waste heat. Heat cannot be economically transferred for long distances. Therefore, conventional centralised power generation systems already available in Mauritius are less productive in terms of fuel usage.&nbsp;</span></p><p><span data-preserver-spaces="true">Since LNG is a clean and economically transportable fuel, the decentralised power generation using co-generation and tri-generation systems operating in the proximity of the bulk energy consumers who consume electricity and heat in large quantities enhances the productivity of fuel usage.</span></p><h2>&nbsp;</h2><h2><span style="font-size: 14pt;" data-preserver-spaces="true">Tri-Generation Systems&nbsp;</span></h2><p><span data-preserver-spaces="true">Export processing zones, hospitals, and hotels are considered bulk energy consumers who simultaneously need electricity, heating and cooling. Mostly, electricity is the prime energy source for air conditioning, while fuel oil is used for heating.&nbsp;</span></p><p><span data-preserver-spaces="true">The main concept of tri-generation systems that produce electricity, heating, and cooling simultaneously is based on using this waste heat for air conditioning or other cooling or heating purposes.&nbsp;</span></p><p><span data-preserver-spaces="true">The minimisation of carbon dioxide emission (Carbon footprint) is an essential part of the tri-generation systems, a distributed method of efficient energy production adopted by major cities in the US, UK, Canada, Europe, and Australia. This provides business value for the heat generated in electricity generation.&nbsp;</span></p><p><span data-preserver-spaces="true">Since the electricity and heat needed are produced on-site, low energy distribution/transmission losses are also achieved.&nbsp;</span></p><p><span data-preserver-spaces="true">LNG is a clean and relatively environment-friendly energy source. However, coal/HFO is the most cost-effective energy source for centralised power generation in Mauritius, aside from the risk of environmental pollution.</span></p><p><span data-preserver-spaces="true">The heat from high-temperature energy sources (e.g. LNG/fuel oil) can be converted to electricity more efficiently than other heat sources with relatively low combustion temperatures. Therefore, we can use fossil fuels more productively than just heating applications.</span></p><p><span data-preserver-spaces="true">Tri or co-generation systems typically show higher combined efficiencies (combined electricity generation and useful heat) of about 85%, whereas the modern combined cycle power plants operating in remote tropical climates have shown only about 50%.&nbsp;</span></p><p><span data-preserver-spaces="true">Moreover, LNG offers a lower energy cost compared with traditional liquid fuels. Compared with VLSFO or HFO, LNG's energy cost per metric ton starts with a 20% advantage because it contains 20% more energy per metric ton.</span></p><h2>&nbsp;</h2><h2><span data-preserver-spaces="true"><span style="font-size: 14pt;">LNG as an Energy Source for Industry and Communities</span>&nbsp;</span></h2><p><span data-preserver-spaces="true">Finally, LNG can be used as a fuel source for industries and communities (towns and villages) located in areas not connected to the main gas/electricity networks. Homes in these areas are forced to use home heating fuel or electricity, which are significantly more expensive than natural gas.</span></p><p><span data-preserver-spaces="true">The desire of communities and private individuals to control their budgets is shared by industrial players seeking an economically stable and accessible energy source. LNG is an alternative to fuel oil, LPG, and coal, enabling industrial players to save energy supply costs and equipment maintenance costs.</span></p><p><span data-preserver-spaces="true">In addition to its competitive cost, LNG is an excellent solution to help industrial players bring their facilities into line with current environmental regulations, which will become even stricter in the future. While industry globally accounted for 85% of Sulphur dioxide emissions (SO2) in 2011, conversion of these industries to LNG would lead to the generation of lower CO2 emissions and virtually no nitrogen oxide (NOx), Sulphur dioxide (SO2) and fine particles.</span></p><p><span data-preserver-spaces="true">In Europe, 25% of electricity is produced in coal-fired power plants. These power plants can only convert 33-45% of the energy produced by coal combustion into electricity.</span></p><p><span data-preserver-spaces="true">By way of comparison, a thermal power plant fueled by natural gas rather than coal is associated with:</span></p><ul><ul><li class="ql-indent-1"><span data-preserver-spaces="true">81% reduction in carbon dioxide (CO2)</span></li><li class="ql-indent-1"><span data-preserver-spaces="true">8% reduction in nitrogen oxide (NOx)</span></li><li class="ql-indent-1"><span data-preserver-spaces="true">100% reduction in Sulphur (SO2) and fine particle emissions</span></li></ul></ul><p><span data-preserver-spaces="true">&nbsp;</span></p><p><span data-preserver-spaces="true">The impact of natural gas on the environment is low, such that if coal-fired power plants were replaced by thermal power plants fueled by natural gas, the CO2 emissions of the European energy sector would be cut by 60% and 20% on a global scale.</span></p><p><span data-preserver-spaces="true">Therefore, LNG loaded on trucks could also be used by industrials off-grid or as a cleaner fuel for road or maritime transport.</span></p><p><span data-preserver-spaces="true">At the end of February 2021</span></p><ul><ul><li class="ql-indent-1"><span data-preserver-spaces="true">IFO 380/180 : 9,4/11,2 $/mmBTU = 360/430 $/ton</span></li><li class="ql-indent-1"><span data-preserver-spaces="true">MGO 0,1% S : 13,q $/mmBTU = 530 $/ton</span></li><li class="ql-indent-1"><span data-preserver-spaces="true">Gas TTF : 6,8 $/mmBTU (lhv)= 318 $/ton</span></li><li class="ql-indent-1"><span data-preserver-spaces="true">CH3OH : 24,6 $/mmBTU = 464 $/ton</span></li><li class="ql-indent-1"><span data-preserver-spaces="true">Crude oil Brent: 12,2 $/mmBTU = 467,2 $/t = 64,0 $/barrel</span></li></ul></ul><p><span data-preserver-spaces="true">&nbsp;</span></p><p><span data-preserver-spaces="true">&nbsp;</span></p><p><span style="font-size: 10pt;"><em>This article was contributed by our expert&nbsp;</em><a class="editor-rtfLink" href="" target="_blank" rel="noopener"><em>Alessando Nanotti</em></a><em>&nbsp;</em></span></p><p><span data-preserver-spaces="true">&nbsp;</span></p><h3><span style="font-size: 18pt;" data-preserver-spaces="true">Frequently Asked Questions Answered by Alessando Nanotti</span></h3><h2>&nbsp;</h2><h2><span style="font-size: 12pt;" data-preserver-spaces="true">1. Can LNG replace oil?</span></h2><p style="text-align: justify;">Yes it can.&nbsp;</p><p style="text-align: justify;">LNG is currently considered a bridge fuel, with a role to play in displacing dirtier fossil fuels such as oil and coal. It is also seen serving hard to decarbonize sectors.&nbsp;</p><p style="text-align: justify;">LNG brings energy where it is needed and connects remote consumers to supply of modern, efficient, secure energy. LNG is a very flexible source of energy that can be used as feedstock for power, heat and steam generation, but also as an alternative fuel for ships, trucks, and other large vehicles. It can be transported by tankers, trucks and/or rail as it has a high energy density.</p><h2>&nbsp;</h2><h2><span style="font-size: 12pt;" data-preserver-spaces="true">2. Who are the leading producers of LNG?</span></h2><p>The first LNG commercial plant started operations in 1940 in Cleveland, Ohio, USA. It was a peak shaving plant to cover the high gas demand during the winter period. The terminal was in operations for almost four years until a fatal accident occurred in 1944. This accident postponed the implementation of new LNG project for several years.</p><p>In 1959, Great Britain received the first LNG carrier, the Methane Pioneer, from the US. LNG international trade started in 1964 between Algeria and France and the UK.</p><p>The first liquefaction facilities in Algeria, the CAMEL (Compagnie Alg&eacute;rienne du M&eacute;thane Liquide) project had a capacity of 1.2 mtpa and the process was developed by Air Liquid and Technip and used three separate cooling cycles (propane, ethylene and methane).</p><p>Since then, more than 30 LNG exporting facilities have been built all over the world (19 countries) with a total capacity of 462 mtpa, with capacity range from 1 to almost 8mtpa per train. As mentioned, the LNG technology is mature and the excellent safety record demonstrates the strong standards and regulations, and industry commitment to risk management.</p><p>Global liquefaction capacity was 462 million tonnes per annum (MTPA) at the end of 2021. Australia with 88MTPA, the US (86MTPA) and Qatar (77MTPA) are the largest producers of LNG.</p><p><img style="display: block; margin-left: auto; margin-right: auto;" src="" width="695" height="431" /></p><p><span style="font-size: 10pt;"><strong>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Global LNG Capacity Growth 1990-2027 (Source:IGU)</strong></span></p><p>&nbsp;</p><p>As of April 2022, the global LNG trade connects 19 exporting markets with 40 markets with importing capabilities.</p><p>Global LNG trade grew by 4.5%, reaching an all-time high of 372.3 million tonnes (MT) in 2021, as the strong post-pandemic recovery resulted in a surge in LNG imports.&nbsp;</p><p>The growth in exports was mainly driven by the US (+22.3MT, +49.8%), Egypt (+5.2 MT, +391.2%) and Algeria (+1.2 MT, +11.4%). Australia remained the largest LNG exporter in 2021.&nbsp;</p><p>China overtook Japan as the largest LNG importer, increasing its net imports by 10.4 MT in 2021.</p><h2>&nbsp;</h2><h2><span style="font-size: 12pt;" data-preserver-spaces="true">3. Why is LNG becoming more popular as a cleaner fuel?</span></h2><p>The idea to liquefy the natural gas appeared after some centuries of gas experiments as a solution to bring large volumes of gas from the source to the consumers in an economical way. The LNG reduces the volume of natural gas approximately 600 times.</p><p>The LNG provides:</p><ul><li style="list-style-type: none;"><ul><li>gas transport across long distances where pipelines are not feasible or too expensive</li><li>flexibility of gas importation</li><li>secure supply from different suppliers</li></ul></li></ul><p>&nbsp;</p><p>The LNG industry has historically developed import/export projects of ever increasing capacity to capture economies of scale. The maturity of the technology, however, now allows development of other LNG</p><p>applications, often of smaller scale, that increase gas distribution flexibility and to reach new consumers as illustrated.</p><p>In this new market approach, the demand for small scale LNG is growing both to monetise small gas fields or associated gas and to deliver gas to a new and different type of customer.</p><p>LNG technologies are readily available making it possible for &ldquo;fast-track&rdquo; implementation of modular LNG facilities with relatively low investment (compared to pipelines or large scale facilities).</p><p>Small-scale LNG can enable rapid establishment of power plants or industries (fertilizers, food industry, ceramic, etc.) in areas limited by lack of infrastructure.</p><p>Use of small-scale LNG as a fuel for the transportation sector - trucks, buses, ships - is increasing, stimulated by the increasing cost of conventional fuels and environmental concerns.</p><p><span data-preserver-spaces="true">&nbsp;</span></p><p>&nbsp;</p>
KR Expert - Alessandro Nanotti

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