New Frontiers: celebrating natural gas' new age...cautiously - The Barrel

Posted - By News Desk on July 2, 2012 12:45 PM - The Barrel

At the recent World Gas Conference in Malaysia, the bright prospects for developing new markets for natural gas was a major topic of discussion. But the road isn't going to be without bumps, or plenty of cost issues. Thomas Hogue talks about them in this week's Oilgram News column, New Frontiers.

One didn't hear the phrase "Golden Age of Gas" at early June's World Gas Conference in Kuala Lumpur as much as might be expected. It was clear, though, that the belief was strong that natural gas was coming into its own, no longer just the second hydrocarbon cousin of oil but a real player in its own right.
Gas is the new energy of choice, the WGC theme went, abundant, cheap--at least in the US--and clean. It will replace coal in power plants, and oil and diesel in cars, trucks and trains; solve the maritime industry's sulfur problems; and wean the world from its emissions habit until nations get serious about dropping fossil fuels in favor of solar and wind.
All this is beside the fact that coal looks to be the cheapest fuel of choice and convenience throughout much of Asia. While gas may be the fuel of the future, coal is what is available and affordable.
Vietnam, for example, even while it plans and builds LNG import terminals, is also planning to meets its growing power needs with new coal-fired plants to burn its own in-ground resources.
Vietnam's coal exports are expected to drop to 4 million-5 million mt a year by 2015, down from 16.5 million mt in 2011. That's on the way to coal's share of the country's energy mix rising to 46.8% in 2020 from 11.5% in 2010, according to state utility Electricity Vietnam.
Vietnam's master plan for power development for 2011-2020 names 63 coal-fired power plants to be built to add 31,920 MW of capacity to the nation's grid.
Meanwhile, little work is being done anywhere to develop the infrastructure needed for LNG to become a viable fuel for general motor vehicle use beyond captive, government-sponsored fleets, or to fund the massive investments required to make it a workable global option for the marine bunker industry.
All that without being gauche enough to bring up the buzz-kill that no matter the hard-data reality of extraction of shale, coal seam and other unconventional gas, a public relations battle is being fought by those using the scare-tactics of tainted water tables and the flaming taps of the movie "Gasland".
That publicity problem isn't quite the picture brought to mind by comments from Rahim Hashim, then president of the International Gas Union, in conference materials: "Rising energy requirements clearly favor the use of clean sources of energy, where natural gas stands out as the fuel of choice."
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That may be true in some eventual bright future but as noted, there are plenty of caveats along the way.
The IGU's rosy picture has the best chance of developing shortest time is in the marine bunkering industry. Fueling and driving ships has been a dirty business ever since coal and oil replaced tall ships and sails--and has always had the advantage of being done out of sight and mind of the general public.
Now bunker fuel oil is the next target of the clean-up regulators, with the UN International Convention for the Prevention of Pollution from Ships, or MARPOL, stipulating that world bunker fuel should contain no more than 3.5% sulfur from 2012 onwards, and no more than 0.5% sulfur from 2020.
And there really is no cheap way to manage that for ship owners or the people who charter them.
The options come down to stripping out the sulfur and other contaminants at source, which means even more refinery upgrades for an industry already struggling with thin margins; installing expensive scrubbers on ships to remove sulfur from fuel oil as it burns; or building and converting ships to burn LNG as fuel and putting in place the necessary infrastructure at the world's major ports of call.
"The rising cost of fuel is a key economic driver, and on top of this economic driver is the need for less emissions," said Lars Petter Blikom, segment director for natural gas with industry consultancy DNV.
"I do see reasons to be optimistic about the development [of LNG as a bunker fuel]," he added, noting that key bunkering hubs Singapore and Rotterdam have both said they plan to offer LNG to ships from 2014.
It's true that two fueling stations even at the world largest bunkering ports aren't about to overcome what Blikom also says is the "one real hurdle ... that LNG is not available when and where the ships need it."
Still, with LNG-powered coastal service vessels starting to be seen or planned in the Gulf of Mexico, Rotterdam, Singapore and elsewhere, some believe the path forward is clear.
"Arguably, the [maritime sector is the] fastest growing sector in the industry," said Gabriele Gozzi, president of industry association Natural Gas Vehicle Global. "[That's] driven both by economics of massive fuel price savings as well as mandates requiring the industry to reduce emissions. Shipping industry experts are now predicting that LNG will become the dominant fuel.
"By 2020, there will be more orders for LNG fueled ships than diesel or oil fueled ships, and by 2030, LNG will account for more than 50% of all marine fuel consumption," he added.--Thomas Hogue in Singapore
 
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