LNG Shipping

1. Introduction
A key component of the total delivered cost of LNG is the cost of shipping/ transport from the export port to the importing country regasification terminal. The objective of this fact sheet is to provide an introduction to the shipping element of the LNG value chain and a guide to the associated costs. The LNG value chain can be summarised as follows:

Contents
1. Introduction 2. Safety 3. Types of Vessel 4. Features of LNG Vessels 5. LNG Vessel Size, Capacity and Speed 6. Global LNG Shipping Fleet 7. Shipping Costs
Figure 1

Normally, the transportation of the natural gas from the production resource to the customer is operated through a pipeline system. However, the pipeline system is difficult and costly transportation in circumstances where the distance between the production resources and the market is further than ~2,000 kilometres. As the countries with abundant natural gas resources like the Middle East countries, including lran, Qatar, and Yemen, etc., and Australia, are located far from consuming countries such as Japan Korea, Taiwan and China the economical and efficient method of transporting the natural gas is by ship. To facilitate the transport of gas it must first be liquefied to reduce its volume. The gas is condensed into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa/3.6 psi) by cooling it to approximately 162 C (260 F). Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. Regular, commercial, international LNG ship transportation began in the 1960s between Algeria and the UK.

References
and Further Readings Figure 1: LNG Value Chain Figure 2: Core Energy Group
Figure 3: KCC World LNG Tanker Figure 4: DC Logistics Tanker

Figure 5: Norton Rose LNG

Ship [PDF]

Figure 6 & 7: Germanischer

Lloyd Figure 8: Commodities Now - LNG Fleet Growth Set to Slow in 2010

2. Safety
LNG Shipping possesses the most envied safety record in world shipping with no significant accident or cargo spillage in its first 40 years spanning more than 40,000 sea voyages.

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3. Types of Vessels
LNG Carriers are classified by their cargo containment designs. There are three types of cargo containment systems: Kvaerner -Moss spherical tank Membrane system LNG - generally fall into two categories that were originally designed by the two separate companies, GAZ Transport (GTT) and Technigaz. Prismatic IHI - SPB Moss Spherical Design Vessel

Figure 2

Membrane GTT

Figure 3

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Prismatic - IHI - SPB

Figure 4

4. Features of LNG Vessels

To deliver by ship, the natural gas must be liquefied, and carried in the specially designed vessel with special insulation designated for LNG shipment. The ships are designed with double hulls and primary and secondary containment systems. The sophisticated safety systems on the ships includes gas and low temperature monitoring, heat and fire detection, cargo-related emergency shutdowns and nitrogen and inert gas pumping. Other standard safety features include global positioning equipment, global maritime distress systems and ship-to-shore communications. These features are illustrated below and overleaf. Inside the GTT No96 Membrane Containment System

Figure 5

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LNG Shipping
Membrane GTT

Figure 6

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LNG Shipping
Moss Spherical

Figure 7

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5. LNG Vessel Size, Capacity and Speed
The LNG industry has progressively been building larger ships, which results in lower per-unit LNG-shipping costs. In recent years ship sizes have increased from 145,000 cubic meters to over 250,000 cubic meters. A comparison of a conventional and larger (210 cubic metre Q Flex) ship is illustrated below.

Currently in quality improvement process for above image.

In terms of the volume of gas carried by an LNG ship a 138,000-cubic-meter-ship carries approximately 64,000 tonnes deadweight of LNG or approximately 2.9 Bcf of natural gas. A conventional 137,000 cubic metre vessels would travel at an average speed of 19 knots. Newer high speed designs are targeting average speeds of 60 knots.

6. Global LNG Shipping Fleet

As the following figure illustrates, there has been a significant growth in shipping capacity between 2000 and 2009, with the global fleet now exceeding 300 vessels.

Figure 8

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7. Shipping Costs
Under CIF type of LNG procurement, the seller bears the cost of shipping. Under FOB sales, the buyer bears the cost of shipping. Most ships are dedicated to particular LNG projects and are owned by LNG importing and exporting companies or shipping companies. LNG transportation costs are divided into operation and voyage costs. Operation costs are nontrading costs incurring irrespectively of the trading commitments of the ship. These costs include manning costs, insurance, repairs and maintenance (spares, store, lubricants etc, dry docking) and can be considered fixed. Manning cost is the largest among operation costs. Voyage costs include bunker costs, port costs and canal fees. They are associated with certain trade routes where loading and discharging ports are specified. Bunkers being the major cost including boil off rate. Boil off rate is the amount of boil off gas, which is produced due to some heat inleaks. This gas is used as a fuel for propulsion systems. Its value varies between 0.10.15% of the full content per day. Total LNG shipping costs expressed in dollars per million Btu are distance and time-sensitive. Representative shipping rates for Australia are presented below. It should be noted that these freight rates are provided for the class of vessel specified as at late 2007 which was a period characterised by high rates. Actual day rates can vary widely depending on vessel specifications. Although the average price of purchasing an LNG tanker is varies with customer, estimates range from an average of USD 180M for a 138,000-cubic-meter-ship (which carries 2.9 Bcf of natural gas) to over USD 220M for a 219,000 cubic-meter-ship. This price range illustrates the economies of scale. Factors Used: Size: 138,000 cbm Speed: 19 knots Boil off: 0.15% per day USD/ mmbtu Australia (Dampier) To Japan (Round Trip voyage: 16 days) Australia (Dampier) To South Korea (Round Trip voyage: 14 days) 0.72 0.71

The following rates illustrate the competitive advantage Australia has in Asia relative to Atlantic markets Australia (Dampier) To Lake Charles, USA (Round Trip voyage: 52 days) Australia (Dampier) To Barcelona, Spain (Round Trip voyage: 34 days) 2.29 1.59

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