Technology Matters for Second Wave LNG Export Terminals
A key decision for the developer of an LNG export facility is the technology to be used to convert the natural gas into LNG so that it can be exported. Owners of the different technologies used to complete this transformation compete for this business and the decision carries both risks and rewards for the project. The liquefaction technology decision is based on capital and operating costs, LNG production profile, overall desired production capacity, and the scalability of the facility.
Each technology has tradeoffs; for example, a smaller liquefaction block might have a lower initial capital cost and provide a quicker path to initial production, but a larger baseload liquefaction facility benefits from the economies of scale achieved with the lower equipment count of a large train. From a technical standpoint, factors such as technology performance history, natural gas composition, climatic operating conditions, constructability and maintainability are also considered.
At the end of the day, an LNG terminal is mostly a giant refrigerator with a cooling and compression cycle whose technology is simpler than that of many petrochemical facilities from a process engineering standpoint. However, the way in which each liquefaction technology cools and compresses natural gas to produce LNG is different, and some processes and configurations are more or less novel than others. Today, we look at the technologies chosen by the developers of the second wave of major LNG export facilities that have been recently approved by FERC or which are working their way through that process. We also consider the impact of FERC's newly announced Houston office dedicated to LNG projects.
An understanding of the choices made provides insight into the market share of the technology owners and also aids in anticipating potential risks to the projects themselves.
Current Status of the Second Wave Projects
There are twelve major LNG export terminals that have recently been approved by FERC or are currently awaiting approval. Below is a chart that shows how long each of these projects has taken to work its way through that process.
The Technology Chosen by Each of the Projects
Our friends at EPC Risks 1 have provided us with the information below regarding the various technologies used to liquefy natural gas and information on the market captured by these technologies in this second wave of LNG export terminals.
As can be seen above, the second most common technology for liquefaction, ConocoPhillips’ Optimized Cascade (COP Cascade) process, has essentially been skipped over in this wave of projects, likely due to their breakup with their exclusive EPC contractor, Bechtel. Even the most popular technology, Air Products and Chemicals, Inc.’s AP-C3MR,™ has seen an erosion of its market share, although it remains the most common choice, based on the amount of planned installed capacity. The big winner in this wave of projects is clearly Chart Industries’ Integrated Pre-Cooled Single Mixed Refrigerant (IPSMR) system.
Air Products and Chemicals, Inc.’s AP-C3MR™
The AP-C3MR™ is the world’s leading large-scale (over 3.0 MTPA per train), baseload liquefaction technology. It has been used by Cameron LNG, Cove Point LNG, and Freeport LNG in the United States. In addition to these U.S. facilities, it accounts for about 70% of the global LNG liquefaction capacity. All three of the technologies proposed for use in the second wave facilities have been technically proven and successfully used in LNG production. However, AP-C3MR™ has the longest demonstrated performance history and broadest experience in handling different operating conditions and gas compositions in large-scale liquefaction applications. There is no novelty in the technology for the projects that have selected AP-C3MRTM as their technology.
Black & Veatch’s PRICO® SMR and Chart Industries IPSMR
PRICO® and IPSMR are both proven technologies, but, as can be seen in the market share chart above, have not generally been used for large-scale projects like those in this second wave. Both processes are referred to as Single Mixed Refrigerant (SMR) technologies with equipment and process flows that are not that different from one another. SMR technologies have primarily been used for small-scale LNG facilities (0.1 to 1.0 MTPA) per train. However, both are being deployed in this second wave in new ways. For example, the train capacity for Jordan Cove LNG (1.5 MTPA) exceeds most PRICO® trains in the world, and there are no other projects with five PRICO® trains combined into a single facility. Likewise, while the capacity per SMR liquefaction block for Driftwood LNG, Venture Global’s projects, and the Corpus Christi Stage 3 Expansion is comparable to single block capacities in operation, the novelty is that there are no current facilities that combine seven to twenty of these liquefaction blocks together. Because these projects are either stretching the capacity on a per train basis beyond the norm, or are combining many trains into one large facility, the projects will be using a previously unproven configuration and will potentially face unknown issues that AP-C3MR™ facilities will not.
Transitioning from FERC Permitting to Potential Staffing Constraints
On July 23, FERC announced a reorganization that created a new division within its Office of Energy Projects that will be focused on both new and existing LNG facilities. This “Division of LNG Facility and Inspection” will consist of 20 current LNG staff in Washington and eight additional full-time employees to be located in a new office in Houston. While it appears that this group’s focus will be LNG terminals, the workload appears to be growing at a faster rate than the announced staff. FERC’s regulation of LNG terminals starts at the initial design stage and continues throughout the operation of the facility.
The announcement made this scope clear in stating that the reorganization was designed to “accommodate the growing number and complexity of applications to site, build and operate liquefied natural gas export terminals.” Whether this staffing increase of 40% will be sufficient to handle the projected increase in operating terminals when the first wave projects come online this year and next, while also trying to manage the design and construction process for the second wave, will need to be watched carefully as an additional risk factor. As can be seen in the above chart, the increase in staffing cannot be seen as a short-term commitment as the process to approval is not quick, and the construction period can last from three to almost five years. The key for each of the companies whose technology has been chosen for these projects will be whether the projects actually go forward. Our platform allows you to easily monitor the progress of these projects, and we can also provide you with a graphical report that can be customized for specific projects and pushed to you on a periodic basis. If you would like to receive such a status report, for example, on just those projects that have chosen IPSMR as their technology, or for more information regarding COP Cascade missing the second wave, please let us know.
1. EPC Risks is an emerging corporate analysis research firm, whose co-founders have over 30 years of combined experience working for or with EPC contractors, particularly in the LNG and petrochemical industries. EPC Risks produces thoughtful, tailored reports using a bottoms-up analysis for projects, contractors, and owners involved in the EPC industry. EPC Risks’ goal is to identify the biggest risks facing the EPC industry, contractors, and individual megaprojects.
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