Investing in Supply: Small to Mid-Scale LNG Facility Development in the US

With ever-increasing demand from natural gas fleet operators and high-horsepower applications such as the marine and railroad industries, the LNG industry needs fuelling to sustain its high growth. More specifically, it needs fuelling infrastructure – and lots of it.

LNG is increasingly being thought of as capable of offering a complete energy solution, and companies are beginning to plan for the long-term. There’s still a lack of small-mid scale infrastructure in place on the ground to unlock potential demand. This represents of course a huge opportunity for any company with the expertise to capitalise on the huge cost savings and environmental benefits that LNG has to offer.

FC Gas Intelligence spoke to executives from three different companies developing their operations in LNG – Linde, Puget Sound Energy and Waller Marine – to help us put the development of US small to mid-scale LNG infrastructure in context both domestically and internationally, and give us a better idea of the full value chain that is developing.

Linde LLC is the world’s largest industrial gases and engineering company, and a leader in the marine LNG environment in Europe for the last 10 or 15 years.

“I’ve been tracking this for 10 years and waiting to see us reach this point,” says Bryan Luftglass, Head of Strategic Market and Development for LNG in Linde’s Energy Solutions group. “I’m familiar with many people in the industry, and the consensus is that LNG’s time has come. There have been false starts in the past, but this time it appears that there’s sustainability in the LNG marketplace.”

The company has a long history in the marine sector, and recently developed a new LNG fuelling station design, with the first example set up in Indiana last year.

“With respect to marine, we’ve been a leader in the marine LNG environment in Europe for the last 10 or 15 years, and we’ll be transferring that knowledge over here to America. We see some promise in the locomotive area - we’re trying to understand how the timing of that will work, and what the prospects are for it to really come to the fore.”

“I think that customers, especially at this early stage, are looking for a complete solution. Strategic can be defined in many ways – we look at strategic as ‘enabling’. What we need is partnerships with other companies to provide those complete solutions to customers who value it.”

The company has made a lot of progress, according to Luftglass, leveraging the work the company does all around the world and bringing what the company has learnt overseas back to the US. Linde’s progress has not been without challenges, however, with the pace of growth in the market only just recently reaching a tipping point, as confidence from some stakeholders breeds confidence in others.

“The biggest challenge was the fact that the market has taken quite some time to develop. After the launch of the shale gas revolution in 2008, it probably took two or three years for it just to sink in with many people that we really are in a different economic paradigm. So having the confidence to invest ourselves, and seeing that customers are confident, has moved us to another point.”

Puget Sound Energy, meanwhile, is the largest electric and gas utility in the State of Washington. In 2013 it had around 750,000 natural gas customers, and also supplied over 1 million customers with electricity.

Given the firm’s proximity to the ports of Tacoma and Seattle, Puget saw an opportunity to be a supplier of LNG for future maritime use, as well as along the I-5 corridor for long-haul trucking using LNG. The firm was therefore contemplating the development of a new liquefaction facility in the region and looking for ways to utilise existing liquefaction capacity in the region to help supply transportation customers in the near-term.

“We’re trying to stay in the middle of the infrastructure piece - we’re not trying to do it all because that’s not necessarily in our wheelhouse,” said Clay Riding, Director of Natural Gas Resources. “We are trying to work with some gas suppliers, barging service providers and trucking service providers, and we’re trying to surround ourselves with those different teams that will help the project be successful.”

According to Riding, the way forward was building up partnerships with a wide variety of different companies and agencies, to push the line that it was perhaps time to change the model that has been used previously.

“We’ve spent a lot of time talking to the critical stakeholders – the coastguard, the environmental agencies, the policy makers from State and local government,” said Riding. “In terms of barriers, we’re dealing with customers that are not used to making long-term commitments for fuel. As a utility, that’s something that’s commonplace for us.”

“We have one model, the market has another model – most of these markets are used to filling up their tank of gas and paying for it when it gets filled up, and that model has to change. So it’s a combination of all those things. What we’re trying to do, as Nathan said, is move the ball forward by establishing these relationships and making sure we’re having good open dialogue with all the agencies.”

David Waller is the founder of Waller Marine, a maritime engineering and architecture solutions company based in Houston, Texas, which has supported the oshore oil and gas and marine transportation industries for over 30 years. The company currently designs and builds the world’s largest floating power plants.

The company does a lot of work in the Caribbean, and so the first step it took was to develop a small-scale LNG export facility at a site in Cameron, Louisiana, and the company currently holds a DoE license to export up to 1.25 million tons of LNG per year from that facility. It also owns a second site in Baton Rouge where it plans to install a small-scale liquefaction facility designated purely for the marine fuels market.

“We’re looking at liquefaction,” David Waller told FC Gas Intelligence. “We’ve designed a series of barges to transport LNG, going from 2,000 cubic metre bunker barges up to 50,000 cubic metre ATB LNG vessels. In order to create our market, we’re looking at the conversion, initially, of vessels in the brown water fleet of the US – the vessels that ply the Mississippi and Ohio rivers, and the interstate waterway systems.”

“We’ve got to convince the big towboat companies of the US that this is what they should do. As part of our marketing we go to them and say, ‘let’s partner in this field. We’ll help you convert your vessels and supply you with LNG. And these are the savings you’re going to make’.”
The problems faced by Waller in the US have arisen because the relative novelty of the technology in the US, but also from governmental red tape.

“In the US I think the major challenge is the permitting process. We have an export license through the DoE. We now have to get a permit though the Federal Energy Regulatory Commission (FERC), and that’s a long and expensive process. The DoE grants the license, while the FERC process is the one that actually allows you to do it!”