Small-scale LNG

LNG plant footprints: compaction costs?

This data file tabulates the acreage footprints and peak worker counts at c20 recent LNG projects. It is interesting how these variables are likely to change over time, to lower costs and due to COVID.

International LNG occupies c50-acres per MTpa and 1,000 peak workers per MTpa of capacity. This means that largest facilities can have over 20,000 workers on site at any one time, which will be challenging amidst COVID.

US LNG projects have been smaller, at c30-acres per MTpa, as high-quality input gas requires less pre-processing; and worker counts are as much as 4x lower, due to phased, modular construction designs (see below).

FLNG is c20x more compact than typical international projects but and has the highest density of workers. Modules which typically have large exclusion zones are congested. This will require extremely cautious operation. It could impact economics, through higher costs and lower up-times.

In principle, smaller plants should achieve cost advantages over larger plants. To reap these benefits, we are excited by novel “liquefaction” technologies, which are also tabulated in the file.

Heavy truck costs: diesel, gas, electric or hydrogen?

Heavy truck costs are estimated at $0.14 per ton-kilometer, for a truck typically carrying 15 tons of load and traversing over 150,000 miles per annum. Today these trucks consume 10Mbpd of diesel and their costs absorb 4% of post-tax incomes. Electric trucks would be 20-50% more costly, and hydrogen trucks would be 45-75% more, which is inflationary.

Heavy trucks, aka Class 8 trucks, consume 10Mbpd of oil, covering 1trn miles per year, moving substantively everything in global supply chains. Each truck typically carries around 15 tons of cargo, covering up to 1,000 miles per day, with a range of about 2,000-miles between fueling.

Heavy truck costs are estimated at $0.14 per ton-kilometer, for a typical vehicle, in the base case economics captured in this data-file. This is in the US. Additional fuel taxes apply in Europe.

Half of the costs of trucking comprises the labor costs of a driver, which accrue per hour or per year, and thus the ultimate per kilometer costs of truck transport depend on the amount of ground that can be covered. This is why utilization is crucial.

A standard diesel truck fills up 2 x 150-gallon tanks, imparting 2,000 miles of range, in about 5-minutes. A challenge for electric trucks, hydrogen trucks and other non-standard truck fuels is that fueling (or charging) may take materially longer (45-minutes for a hydrogen fuelling, up to 4-hours for a battery charging). Especially if a detour or a wait is needed to access scarce charging infrastructure.

Trucking costs and CO2 intensities of truck freight are compared in the data-file for diesel trucks, LPG trucks, CNG trucks, LNG trucks, electric trucks and hydrogen trucks (chart below).

Total trucking cost and CO2 emissions for different fuel types.

Electric trucks with 4-6 ton batteries, and 700-1,000km ranges, likely cost $110-170k more (i.e., 2x) than a typical diesel truck up-front. Fuel economy is 2x higher. Nevertheless, adding the costs of dedicated vehicle charging stations, the total energy costs can end up similar for both, especially in the US, where fuel taxes are lower.

Hydrogen trucks have been proposed for longer ranges, which could have fuel economies between diesel trucks and electric trucks. The key challenge is the high up-front costs of these fuel-cell vehicles, plus high cost of green hydrogen, which we estimate to be 2.5x higher than diesel trucks. We have also written on other challenges of hydrogen trucks.

Overall, the total costs of electric trucks are around 20% higher in Europe and 50% higher in the US; while the total costs of hydrogen trucks would be around 45% higher in Europe and 75% higher in the US. This is material. The look-through costs of trucking goods to meet the consumption needs of the average developed world citizen run to about $1,000 per person per year, or 4% of average post-tax incomes. 20-75% re-inflation eats up 1-3% of average incomes.

LNG trucks can be close to competitive. On an energy-equivalent basis, $3/mcf gas is 4x more economical than $3/gal diesel. However, the advantages are offset by higher vehicle costs, operational costs and logistical costs for LNG fueling stations. Mild environmental positives of gas are also offset by mild operational challenges.

This data-file compares different trucking fuels — diesel, CNG, LNG, LPG, electric trucks and Hydrogen — across 35 variables. Most important are the economics, which are fully modelled, in the 2020s in the US, in the 2020s in Europe and incorporating deflation in the 2040s.

Shell: the future of LNG plants?

Shell is revolutionizing LNG project design, based on reviewing 40 of the company’s gas-focused patents from 2019. The innovations can lower LNG facilities’ capex by 70% and opex by 50%; conferring a $4bn NPV and 4% IRR advantage over industry standard greenfields. Smaller-scale LNG, modular LNG and highly digitized facilities are particularly abetted. This note reviews Shell’s operational improvements, revolutionary greenfield concepts, and their economic consequences.

Long-Term LNG Demand: technology-led?

This is a simple model of long-term LNG demand, extrapolating out sensible estimates in the world’s leading LNG-consuming regions. On top of this, we overlay the upside from two nascent technology areas, which could add 200MTpa of potential upside to the market. Backup workings are included.

Small-Scale LNG liquefaction Costs: New Opportunities?

Cutting-edge LNG technologies can deliver 15% pre-tax IRRs, taking in $3/mcf gas and selling $10/mcf LNG: even after scaling down to nano-sized 4kTpa units. This data-file shows our workings, across six tabs.

The model tabulates our best-estimates into the costs of typical small-scale LNG projects (SMR and Nitrogen Expansion, below).

We also present and contrast a novel small-scale LNG technology, Galileo’s Cryobox, including economic sensitivities (below).

LNG in transport: scaling up by scaling down?

Next-generation technology in small-scale LNG has potential to reshape the global shipping-fuels industry. Especially after IMO 2020 sulphur regulations, LNG should compete with diesel. This note outlines the technologies, economics and opportunities for LNG as a transport fuel.

LNG as a Shipping Fuel: the Economics

This model provides line-by-line cost estimates for LNG as a shipping fuel, compared against diesel. We used industry data and academic studies to estimate the all-in costs for (a) trucking LNG (b) small-scale LNG and (c) LNG bunkering, to supply a relatively fuel-intensive shipping route.

After IMO 2020 regulations buoy diesel pricing, it should be economical to fuel newbuild ships with small-scale LNG; and in the US it should be economical to convert pre-existing ships to run on small-scale LNG.

Fast-charge the electric vehicles with gas?

When electric vehicles are widespread, how will we fuel them? Our model shows the economics can be compelling for powering fast-chargers using gas turbines.

The electricity would cost 13c/kWh, at $3/mcf input gas (e.g., in the US), 20% utilisation of the infrastructure and a c7.5% pre-tax IRR.

Carbon emissions are lowered by c70% compared to oil-fired vehicles. And the grid is spared the strain of sudden demand surges.

Is upside suggested for gas? Utilisation of the fast-charging infrastructure is much more important to the overall economics than the gas price. This means that greater EV adoption can accommodate considerably higher gas prices.

Our model is constructed as a sensitivity analysis, based on economic data from gas turbines (chart below), so you can flex the assumptions.

Costs of an LNG fuelling station

We have tabulated the costs of constructing an LNG-fuelling station for road vehicles across 55 distinct cost-lines, based on data from a dozen sites in Europe. Total capex will average €1M/site. Effectively, this is a $250/tpa re-gasification plant. Overall, we estimate distributing LNG to road-consumers will add $10/mcf to the costs of gas-fuel. Around 30% of the capex costs are specifically linked to LNG, and could be slim-lined for a CNG-only fuelling station.

Maintenance costs for gas-powered trucks?

This data-file tabulates the maintenance costs incurred by a fleet of 42x CNG-powered trucks, over 16M miles in the United States. Maintenance costs averaged 8c/mile, of which 1.6c/mile (i.e., 20%) was specifically attributed to running on CNG. Specifically, gas spark plugs must be replaced every 60,000 miles, niche maintenance operations are more expensive and in one instance, the truck engines were damaged by ‘wet fuel’.

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