LNG World Shipping July/August 2017 by rivieramaritimemedia

A Clean World Needs LNG. WE ARE READY.

Quality valves from HEROSE enable the safe transport, storage and bunkering of LNG. Our cryogenic experts provide components that fit your system.

Valves built to endure

HEROSE GMBH 23843 Bad Oldesloe Germany

This issue of LNG World Shipping Magazine is sponsored by

July/August 2017 www.lngworldshipping.com

Sveinung Støhle bets US$300 million a throw on FSRU demand Special report: Indian subcontinent invests in LNG imports Infographic: mapping the global FSRU fleet

“Two years ago, we couldn’t afford an FSRU. Charter rates were so expensive then that only governments or super-majors could afford them, to support 20-year offtake contracts” H-Energy chief executive, Darshan Hiranandani, page 26

An Ocean of Expertise Complete Solutions from a Trusted Partner

www.bs-shipmanagement.com

Newbuilding & Conversion Crew, Technical & Commercial Management Maritime Training Catering & Housekeeping Seafarer & Corporate Travel Software Application Solutions Consultancy Services Global Support & Expertise

Golar Arctic Golar Winter, Experience Exemplar, Expedient Höegh Grace

contents

July/August 2017

Hull 2419, Mitsui OSK h, Penco-Lirquen FSRU Excelerate TBC Golar Nanook der call-out, March 2017

Gallant, BW Singapore

ar Tundra, Hoegh Giant Golar LNG TBC

Independence FSRU Toscana mada LNG Mediterrana

Hull 2854, Gazprom GasLog, TBC

Neptune Excellence Golar Eskimo Explorer, Golar Freeze Excelerate Golar Igloo Hull 2461, Teekay LNG

NENT Exquisite, BW Integrity

ull 2909, Excelerate TBC GDF Suez Cape Ann** Excelerate, TBC

Comment 5 Floating import terminals: have we got FSRUs for you!

Infographic 6 LNG World Shipping presents its exclusive research on the global fleet of floating storage and regasification units (FSRUs), existing and planned UNFIXED FSRUs LIVE 15 Floating LNG has come of age this year, as PFLNG Satu has produced first JUNE 2017 Excelsior gas off Malaysia. LNG World Shipping maps the world’s confirmed floating Express Exmar FSRU barge production projects

, Nusantara Regas Satu g Shi You 301 + JSK FRU Neo Energy

nder call-out, April 2017

GDF Suez Cape Ann

Cover story 9 Skin in the game – Höegh LNG president Sveinung Støhle tells Karen Thomas why he keeps booking new FSRUs

Offshore LNG 13 Are charter rates and terms for FSRUs becoming more liquid and transparent? Karen Thomas asks the experts

Equipment 17 Variable frequency drives make pumps more efficient and other news about pumps and valves

Interview 21 As Sovcomflot prepares to lift the first cargoes from the Russian Arctic, president and chief executive Sergey Frank sets out his LNG plans

Area report 24 The Indian subcontinent is becoming one of the world’s fastest-growing LNG-import markets. But India, Pakistan, Bangladesh and Sri Lanka present very different prospects 26 H-Energy has just chartered India’s first FSRU. Chief executive Darshan Hiranandani explains why his two planned import terminals underpin India’s plans to source cheaper cargoes on ever more flexible terms

Operations 30 Excelerate has carried out its first ship-to-ship transfers involving an FSRU moored to a subsea buoy. Vice-president operations Charles Ruehl looks back at the challenges

www.lngworldshipping.com

LNG World Shipping | July/August 2017

ORDEBOOK

Höegh Hull 22

BW Hull 2489

Maran Gas Hu

contents Profile 33 Germany-based Herose sees LNG-fuelled engines as prime markets for its cryogenic valves. Mario Esche set out the company’s plans

Best of the web 34 The most-read stories on lngworldshipping.com in May and June

Ship orders and deliveries 37 Mike Corkhill tracks the LNG tonnage ordered and delivered in first-half 2017

Viewpoint 40 LNG shipping companies must support and empower all members of crew to improve safety standards, argues K Line LNG Shipping (UK) managing director Yuzuru Goto Front cover image (credit: Höegh LNG) Next issue September-October 2017 issue of LNG World Shipping. Main features include analysis of growing LNG-import demand in the Middle East, a spotlight on the flurry of new bunker-supply vessel orders and growth prospects, and the annual LPG World Shipping report. We also present the latest developments in LNG loading arms and couplings. Read the latest international LNG shipping news at www.lngworldshipping.com Follow LNG World Shipping on Twitter: @LNGkaren

July/August 2017 Editor: Karen Thomas t: +44 20 8370 1717 e: karen.thomas@rivieramm.com Consultant Editor: Mike Corkhill t: +44 1825 764 817 Commercial Portfolio Manager: Bill Cochrane t: +44 20 8370 1719 e: bill.cochrane@rivieramm.com Sales Manager: Ian Pow t: +44 20 8370 7011 e: ian.pow@rivieramm.com Production Manager: Richard Neighbour t: +44 20 8370 7013 e: richard.neighbour@rivieramm.com Subscriptions: Sally Church t: +44 20 8370 7018 e: sally.church@rivieramm.com Korean Representative: Chang Hwa Park Far East Marketing Inc t: +82 2730 1234 e: chpark@unitel.co.kr Japanese Representative: Kazuhiko Tanaka Shinano Co., Ltd t: +81 335 894 667 e: kazujt@bunkoh.com Chairman: John Labdon Managing Director: Steve Labdon Finance Director: Cathy Labdon Operations Director: Graham Harman Head of Content: Edwin Lampert Executive Editor: Paul Gunton Head of Production: Hamish Dickie Business Development Manager: Steve Edwards Published by: Riviera Maritime Media Ltd Mitre House 66 Abbey Road Enfield EN1 2QN UK

Subscribe from just £299 Subscribe now and receive six issues of LNG World Shipping every year and get even more: • Special reports: LNG Carrier Lifecycle Maintenance, Small-Scale LNG, Offshore LNG and Ballast Water Treatment Technology • access the latest issue content via your digital device • free industry yearplanner including key dates • access to www.lngworldshipping.com and its searchable archive. Subscribe online: www.lngworldshipping.com

LNG World Shipping | July/August 2017

Total average net circulation: 4,000 Period: January-December 2016

Disclaimer: Although every effort has been made to ensure that the information in this publication is correct, the Author and Publisher accept no liability to any party for any inaccuracies that may occur. Any third party material included with the publication is supplied in good faith and the Publisher accepts no liability in respect of content. All rights reserved. No part of this publication may be reproduced, reprinted or stored in any electronic medium or transmitted in any form or by any means without prior written permission of the copyright owner.

www.lngworldshipping.com

Designed to deliver a competitive edge OPTIMISED FOR LOW CAPEX AND REDUCED RISK

STRONG LNG AND LPG PROCESS TECHNOLOGY KNOW-HOW

THE MARKET’S MOST INNOVATIVE PORTFOLIO OF GAS CARRIER DESIGNS

OUR OFFERING INCLUDES EVERYTHING FROM CARGO PUMPS TO DUAL-FUEL POWER GENERATION

WÄRTSILÄ CONNECTS THE DOTS Wärtsilä has the expertise, experience and offering to sharpen your competitive edge in the gas age. Whatever your role in the market is, we have the abilities to take responsibility for everything from ship design to the complete fuel storage, process, distribution and use of gas on-board your vessel. A single-interface partnership with Wärtsilä will reduce risk for you. Why settle for less?

wartsila.com/lngandgas

YOUR BENEFIT: LOWEST LIFE CYCLE COSTS

LABY

OIL-FREE & LABYRINTH-SEALED UNIQUE SOLUTION WITH MAXIMIZED AVAILABILITY FOR YOUR BOIL-OFF GAS APPLICATION Best for ammonia, LNG, LPG, LEG, and other hydrocarbon gases No need for redundant compressor Contactless labyrinth sealing technology – no temperature sensitive piston & packing rings – no wear

Longest mean time between overhaul (MTBO) because of less wear parts Gas-tight-design for zero emissions Flexible shut-downs and start-ups without pre-cooling No. 1 in labyrinth-sealed compressors

Full range of services and top performing components through global organization and local service centers → www.recip.com/laby

COMMENT | 5

Have we got FSRUs for you O

ne of the main revelations from this year’s Gastech in Tokyo is just how excited the LNG shipping industry is about the prospects for floating storage and regasification units (FSRUs) and the way they unlock new import markets. This issue of LNG World Shipping looks in detail at the world’s floating import vessels and at the new markets waiting for these vessels to unlock them. See our exclusive infographic on pages 6-7. At the end of last year there were 24 FSRUs in service and nine on order. By mid-June this year, Hyundai Heavy Industries (HHI) had landed two additional FSRU orders. Karen Thomas, Editor

Höegh LNG boss Sveinung Støhle has more skin than most in the FSRU game, and will keep playing his hand

Höegh has ordered yet another 170,000m³ FSRU, for delivery late next year. And Turkey-based Kolin has ordered a 170,000m³ FSRU for delivery in 2019. US-based Excelerate Energy wants to book up to seven FSRUs – if it can raise the money to do so. And GasLog has pledged to book its first FSRU, although it has yet to say whether it will order new or convert one of its conventional LNG carriers, against its partnership with Gastrade in Greece. Dynagas is circling the FSRU market, too. Expect more orders by year-end. Operating FSRUs is also very specialist, of course. Excelerate recently completed the first shipto-ship LNG transfers on an FSRU moored in open waters to a subsea buoy. On page 30, Excelerate’s Charles Ruehl recalls the challenges this presents. Meanwhile, FSRUs continue their march towards global domination. In India, H-Energy boss Darshan Hiranandani has just chartered

www.lngworldshipping.com

the country’s first FSRU. He discusses his plans for GDF Suez Cape Ann on page 26. Mr Hiranandani tells us: “Two years ago, we couldn’t afford an FSRU because of the charter rates. Then, the charter rates were so expensive that only governments or supermajors could afford these ships, to support 20-year offtake contracts.” H-Energy chartered GDF Suez Cape Ann for a very competitive price. There is no market yet for FSRUs; there is no liquidity – this is a specialist niche that does not yet work like a shipping market. Experts think this is changing, however. That prompted us to examine how much it costs to charter an FSRU. The answer seems to be anything between US$100,000 and US$135,000 a day – depending on what the project needs. Brokers say that a three or four-tier market has emerged for FSRUs, with very distinct price points depending on the vessels’ size and age. Find out why on page 12. Our interview with H-Energy forms part of this issue’s area special report, looking at the energyhungry markets of the Indian subcontinent. The four markets in question are not easy to crack – but are on course to import around 100 million tonnes a year (mta) of LNG by 2030.

There is no market yet for FSRUs; there is no liquidity – this is a specialist niche that does not yet work like a shipping market

I also caught up with Sovcomflot boss Sergey Frank in Tokyo, see page 21. Sovcomflot has just ordered the world’s first LNG-fuelled aframaxes, flagging up how much faith the giant Russian shipowner has placed in this new fuel source. I hope you enjoy this lively, interview-packed issue of LNG World Shipping. LNG

LNG World Shipping | July/August 2017

EXISTING FSRUS AND PLANNED FSRU TERMINALS, 2017 AMERICAS Jamaica (FSU) Golar Arctic Brazil Golar Spirit*, Golar Winter, Experience Argentina Exemplar, Expedient Colombia Hรถegh Grace Uruguay Chile Puerto Rico Brazil Argentina

Hull 2419, Mitsui OSK Hรถegh, Penco-Lirquen FSRU Excelerate TBC Golar Nanook Tender call-out, March 2017

AFRICA Egypt

Hoegh Gallant, BW Singapore

Ghana Ivory Coast

Golar Tundra, Hoegh Giant Golar LNG TBC

EUROPE Lithuania Italy Malta (FSU)

Independence FSRU Toscana Armada LNG Mediterrana

Russia Greece

Hull 2854, Gazprom GasLog, TBC

MIDDLE EAST Turkey Israel Jordan Dubai Abu Dhabi Kuwait

Neptune Excellence Golar Eskimo Explorer, Golar Freeze Excelerate Golar Igloo

Bahrain (FSU)

Hull 2461, Teekay LNG

INDIAN SUB-CONTINENT Pakistan Pakistan India Bangladesh

Exquisite, BW Integrity Hรถegh Hull 2909, Excelerate TBC GDF Suez Cape Ann** Excelerate, TBC

ASIA Indonesia Lampung FSRU, Nusantara Regas Satu Bali, Indonesia Hai Yang Shi You 301 + JSK FRU (FSU+FRU) China (FSU) Neo Energy Hong Kong, China

Tender call-out, April 2017

Source: LNG World Shipping June 2017/ GIIGNL

KEY

Infographic: Richard Neighbour

Existing FSRUs

Research: Karen Thomas

Planned FSRUs

* charter ends June 2017

Future / additional FSRU plan

** chartered from June 2018

UNFIXED FSRUs

LIVE

ORDEBOOK

JUNE 2017

Excelsior

Hรถegh Hull 2220

Express

BW Hull 2489

Exmar FSRU barge

Maran Gas Hull 2468

GDF Suez Cape Ann

Integrated marine services to LNG, FLNG and FSRU terminals Smit Lamnalco is one of the

Maintaining our exemplary safety

Head office Smit Lamnalco

leading experts in the marine

record is our priority. Whether you

The Netherlands

support industry. We pride

are looking for pilot boats or high

T +31 88 076 4800

ourselves on owning, operating

performance tugs with advanced

info@smitlamnalco.com

and crewing one of the most

LNG terminal capabilities you can

SMITLAMNALCO.COM

modern LNG and FLNG tug fleets

rely on Smit Lamnalco.

in the world.

LNG â&#x20AC;&#x201C; we know the drill

COVER STORY | 9

Støhle bets US$300 million a throw on FSRU demand Sveinung Støhle: It’s always better to build new. An FSRU is an FSRU – it’s not an LNG carrier

orway-based Höegh LNG is racing US-based Excelerate Energy to order new floating storage and regasification units (FSRUs) that will unlock new import demand for chilled gas. At the time of writing, Excelerate had yet to confirm a firm order this year, despite having signed a letter of intent in February for up to seven FSRUs, as it seeks ways to underwrite its expansion. Höegh, meanwhile, is already back at the shipyards. As of May, it had six FSRUs on the water and four on order. It ordered its ninth and tenth FSRUs in January: one at South Korea-based Hyundai Heavy Industries (HHI), the other at Samsung Heavy Industries (SHI). “And we have three options at each of these

www.lngworldshipping.com

shipyards,” Mr Støhle says. HHI will deliver the ninth vessel to the Höegh fleet at the end of this year. Hull 2909 is chartered to Pakistan-based Global Energy Infrastructure (GEIL), becoming the third FSRU based at Karachi’s Port Qasim. Höegh’s seventh FSRU, the HHI-built Hull 2552, now named Hoegh Giant, is fixed to Tema LNG in Ghana from next summer, becoming the first FSRU moored off sub-saharan Africa. The eighth is chartered to Chile’s Penco Lirquen from next spring. The tenth FSRU, at 170,000m³ built to Höegh’s standard size, is unfixed. This element of speculation is what separates Höegh from the rest of the pack: it keeps one FSRU free always, its secret weapon in new tenders. With interest in FSRUs now

The element of speculation is what separates Höegh from the rest of the pack: it keeps one FSRU free always, its secret weapon in new tenders

at fever pitch, that strategy has paid off. Of five FSRU contracts awarded last year Höegh landed two. As other players circle the market, considering when to play their hand, Mr Støhle has laid his money on the table. “If we have learned

Höegh LNG is one of the few shipowners to order new tonnage in the last year, to meet demand for floating storage and regasification units (FSRUs). President Sveinung Støhle explains why he always keeps one card in hand

anything over the years, it’s that if you don’t take a position – take some risks and put some skin in the game – you are not in this market,” he says. Five FSRU newbuildings will be delivered this year, to Höegh, BW LNG and Golar LNG, and to FSRU newcomers Mitsui OSK and Gazprom. Maran Gas, perhaps LNG’s most opportunist shipowner, entered the FSRU market in December. It has ordered a 173,400m³ vessel from Daewoo Shipbuilding & Marine Engineering (DSME) for delivery by summer 2020. Other shipowners planning to target FSRUs are GasLog, Teekay LNG and Dynagas. For all the interest in FSRUs, Mr Støhle says new rivals may struggle to gain a foothold. “I have yet to see a single FSRU contract go to a player that

LNG World Shipping | July/August 2017

10 | COVER STORY

places the order after the fact,” he says. “It might happen in the future, as the market grows. As of now, it has not. Our approach has been different. Our risk is US$300 million every time we place an order. “Our business model works because we can show the client that we deliver, within the time they need and to the specification they need. Timing is always important. Will other companies, like GasLog, come in? Yes, maybe. After all, the market keeps growing. And that’s good.”

Convert

Given its reputation as a buyer of newbuildings, Höegh took the market by surprise last summer when it announced a partnership with Wärtsilä and Moss Maritime to convert LNG carriers into FSRUs, seeking to cut by six months its vesselcompletion dates. Höegh said then that converting allowed it to pitch for projects starting in late 2017-2018. Ten months on, the company had yet to announce any conversions. And Mr Støhle takes issue with any suggestion of a

change of tack. “Höegh LNG’s strategy has not changed,” he says. “We believe that building new FSRUs is the best solution because you get the latest technology, efficiency and size. It’s always better to build new because an FSRU is an FSRU – it’s not an LNG carrier. “We can undertake a conversion if that is necessary. At Höegh LNG, we design our FSRUs, not the shipyard – particularly when it comes to the regasification system, which we designed in partnership with Wärtsilä. That system can fit on a newbuilding or on a conversion. Whichever option, it will be the same regas plant.” Höegh runs a tight ship, ordering in advance its FSRUs’ regasification equipment to cut lead times. “Our strategy is to order on a continuous basis and to have open at least one FSRU under construction,” Mr Støhle says. “So up to this point we have seen little value in that reduction in construction time. We have also put in offers to some projects based on conversion – our competition will also offer that – but we

“We have also put in offers to some projects based on conversion – our competition will also offer that – but we always offer the option of a newbuilding as well”

always offer the option of a newbuilding as well. We leave it to our clients to decide what they want.” And what FSRU charterers generally want, he says, is large, efficient vessels that support a send-out capacity of 750 mscf/d. Converted older vessels are less able to deliver this.

Market growth

When he last spoke to LNG World Shipping 18 months ago, Mr Støhle expected FSRU demand to increase by three to four new projects a year. Last year brought

six new ventures and – interviewed this spring at Gastech – he expects this higher growth to continue. “The LNG market is growing very quickly; there’s a huge drive by all the major sellers to open up new markets,” he says. “We have a market of very long supply and very low prices. New importers want to come in and take a position. “We are expecting four to six new projects a year. We won’t win them all. Last year, we won two and our objective this year is to win two again.” This spring, Höegh was shortlisted for 10 new projects, concentrated in emerging markets, in South America, Asia and Africa. However, it has also set its sights on the UK and Australia. In March, speaking during a row over Australia’s looming gas shortages in the south and east of the country, Mr Støhle described Australia, the world’s second-largest LNG exporter, as “top of the opportunity list” to import LNG. Höegh is talking to Australia about supplying an FSRU, Mr Støhle confirms. It could do so “within months,” if need be.

Höegh won two FSRU contracts last year and is shortlisted for 10 this year

LNG World Shipping | July/August 2017

www.lngworldshipping.com

COVER STORY | 11

“Politics aside, as a businessman I see an opportunity here, with the increase in LNG exports from this region and with the increase in local demand,” he says. “Two or three years ago, we were looking at prospects for shipping gas from the North West Shelf to the main demand centres along Australia’s south and east coast. “The distances are huge, making it too expensive to build new pipelines. [The southeastern state of] Victoria has its own gas pipelines. We suggested shipping LNG around the continent, into Adelaide or Sydney. But at that time, the price of gas was too high. “At today’s prices, it is possible to take LNG from the North West Shelf or from Indonesia or Malaysia and to deliver it to eastern Australia at a price equal to or lower than the existing local gas coming through the pipelines. “That supports the business case for putting in an FSRU and for opening these demand centres to the world market for natural gas. LNG is natural gas. It doesn’t matter where it comes from – if it’s priced on a competitive basis.”

Höegh sees Independence as its bunker-supply business model

THE FSRU OWNERS’ CLUB, JUNE 2017 Owner

Live fleet, vessel no

Orderbook, vessel no

Excelerate Energy

Höegh LNG

Golar LNG

BW LNG

OLT

Mitsui OSK

Teekay LNG

1 (FSU)

Gazprom

Exmar

Maran Gas

Source: LNG World Shipping, June 2017 *Letter of intent, signed with DSME, February. No orders confirmed at time of going to press

New ventures

In the UK, Höegh LNG is the preferred FSRU supplier to the Meridian LNG project, if the scheme in Barrow-inFurness in the north west of the country goes ahead. Meridian has until year-end to close its 2 mta offtake agreement with US-based Magnolia LNG. “LNG exports from the US will have a huge impact on the short-term energy market,” Mr Støhle says. “There are no destination clauses; the gas can go anywhere – and it will go anywhere. “With time, a portion of

www.lngworldshipping.com

that will end up in Europe, and in the UK. Cheniere has already sold LNG to Portugal, Spain and Greece. This is happening. That will require more import facilities… Certain people already own the capacity in the UK’s three existing terminals and if you’re not already part of that club, you need to find another way in.” Höegh has FSRU designs up to 265,000m³, a size designated H-max. Höegh’s standard-size 170,000m³

vessels deliver as much as 3.75 mta. However, FSRU growth is concentrated in the world’s emerging markets. Höegh’s challenge is to tap new buyers that want cheap gas, in smaller volumes and on more flexible terms. Mr Støhle plans to venture down stream, into smallscale LNG distribution, for domestic or industrial use. There are opportunities for LNG distribution using smaller FSRUs in Indonesia,

the Caribbean and Europe, he says. Höegh has set up a team to design and identify demand for 10,000m³-30,000m³ newbuilding FSRUs, that supply 30-100 mscf/d. These are as likely to be barges as full-sized FSRUs, he says. Höegh sees its Lithuaniabased FSRU Independence as an early business model. The 170,000m³ vessel is chartered to Klaipedos Nafta to meet Lithuania’s domestic demand. It also supplies LNG in parcels of up to 15,000m³ to Coral Energy for delivery across Scandinavia. From next year, Independence will also supply LNG to the 7,500m³ bunker-supply ship that Bernhard Schulte Shipmanagement has ordered from Hyundai Mipo to deliver gas as marine fuel to ports across the Baltic. Höegh’s FSRU fleet can also bunker LNG-fuelled ships. “We have not yet decided to get into this market,” Mr Støhle concludes. “Developing a new market segment takes time, resources and money. The question for Höegh is, can we obtain a similar return on investment from these small FSRUs to the returns we make on our 170,000m³ FSRUs?” LNG

LNG World Shipping | July/August 2017

Leading Position Reference Sensor Technology for Dynamic Positioning Applications Expert relative positioning sensors from 1m to 10,000m The standard laser sensor of choice by major DP Integrators

Premium long range, high precision radar sensor

Guidance Marine Ltd, 5 Tiber Way, Meridian Business Park, Leicester, LE19 1QP, UK Tel: + 44 116 229 2600 Email: sales@guidance.eu.com www.guidance.eu.com www.marine.direct

Real time situational awareness for DP Operators

Supported by our worldwide support network and international offices in:

FSRU charters: a three or four-tier market

GDF Suez Cape Ann deal heralds new liquidity for FSRUs H

öegh-owned, Engie-chartered GDF Suez Cape Ann will be the first floating storage and regasification unit (FSRU) based in India. H-Energy has fixed the vessel at Jaigarh in the west of the country from June next year. Various India-based FSRU projects have stalled, mostly because of cost and projected demand. H-Energy chief executive Darshan Hiranandani tells LNG World Shipping that he fixed GDF Suez Cape Ann for a very keen price. “Two years ago FSRU charter rates were so expensive that only governments or super-majors could afford these ships, to support 20-year offtake contracts,” he said. Mr Hiranandani’s comments raise an intriguing question – what does it cost to charter an FSRU? LNG carrier charter rates are transparent. In May, modern ships lifting Atlantic Basin LNG spot cargoes were earning US$30,000US$45,000/day. “General LNG rates have fallen substantially, but that has been a trend for longer than two years,” says MSI director Stuart Nicoll. “A lot of old LNG ships are seeking conversion, which should

“Of late the charter rate for FSRUs has also been coming under pressure and rates are currently around US$100,000 per day”

www.lngworldshipping.com

mean more interested parties bidding for FSRU work. “That should certainly make the FSRU market a lot more competitive.” Simpson Spence Young (SSY) Gas director Debbie Turner says that without knowing how Engie will support the H-Energy charter, it is impossible to determine the rate. “H-Energy got a cheaper deal [because they] have a small FSRU,” Ms Turner says.

No market

If GDF Suez Cape Ann is affordable, this must be because the market is deteriorating or oversupplied – or because the ship’s circumstances have changed, Mr Nicoll says. “The ship is on longterm charter to Engie, at what seems to be a very high rate if you take Höegh’s accounts at face value, having cost nearly US$300 million to build. “There was a break clause in the initial 20-year charter last year or at any time thereafter giving two year’s notice, but it doesn’t seem to have been exercised. That would imply that Engie needs a decent income on the vessel to cover its costs. This is especially the case after GDF Suez Cape Ann’s employment fell through on the Tianjin project.” There is not yet a market for FSRUs, says Drewry senior research analyst LNG Shresth Sharma. “Usually, there is no general charter rate for FSRUs. It depends on the vessel specification – new-built or old, contract duration, vessel-employment flexibility, and so on,” he says. Rates that FSRUs have fixed in four earlier deals suggest a

LNG World Shipping | July/August 2017

14 | OFFSHORE

Scaling up?

Industry-watchers doubt these large FSRUs will become the norm. “We don’t anticipate a trend towards building bigger units,” says the second source. “Ships on this scale do not offer the flexibility that is the unique selling point of an FSRU.

LNG World Shipping | July/August 2017

US$ 144,000

US$ 145,000 US$ 127,000 US$ 111,000

FSRU TC RATE ($/day)

figure for some tonnage, see right. “In 2013-2015, the rate has hovered between US$120,000-US$150,000/ day,” Mr Sharma says. “However, of late the charter rate for FSRUs has also been coming under pressure and rates are currently around US$100,000 per day.” Another broker, speaking off the record, highlights the variables: “I am intrigued by H-Energy’s comments. FSRUs have not come down that much in price. They are still around US$110,000US$135,000/day, depending on the project requirements. “This really is the question. Project requirements saw an Excelerate vessel fixed into Israel at around US$170,000/ day. Why? They took the infrastructure from the Gulf Gateway and placed it offshore Israel, then put the total cost into the charter hire. And within a one-year time period.” The source says Golar LNG Partners fixed its larger FSRUs for US$125,000-US$135,000/day. Other deals offered a golden handshake. “The second FSRU that went into Egypt gave a very cheap rate for the first six months, then went back up to the US$120,000s for the remainder,” the broker says. “These vessels are all in the region of 170,000m³ and can process up to 7.4 million tonnes a year.” A second broker says Turkish project partners Kolin, Kalyon and Etki Liman fixed GDF Suez Cape Ann sistership Neptune for a very low US$20,000-30,000/day, “plus significant additional operating expenditure, increasing the total costs to US$50,000-70,000/day. From the shipowner point of view, this may be a competitive deal; this project had an element of urgency.” This second source sees FSRU charters as a three or fourtier market: • First-generation FSRUs, built in the 2000s • Modern, standard-sized FSRUs circa 170,000m³, owned by Höegh, BW Gas and Golar • Barge-based FSRUs/converted floating storage units (FSUs) • Mitsui OSK’s 260,000m³, 2017-built FSRU, now seeking a shortterm fixture. “Charter rates for some of those older ships can be quite competitive, particularly when the vessel in question has been unemployed as an FSRU,” this broker says. “It probably doesn’t cost much more than US$100,000/day to charter such a ship.” The fourth tier is a category of one: Mitsui OSK’s (MOL's) giant FSRU to be delivered this summer and chartered to Uruguaybased Gas Sayago to import up to 4 mta. However, Montevideo will not need the FSRU until autumn 2018. MOL director Takeshi Hashimoto told this publication in January that he hoped to fix the FSRU “for about one year”. Industry sources name the interested parties as Botas of Turkey, as well as Argentina and Hong Kong. MOL is reportedly negotiating a short-term deal of US$130,000/day – if the counterparty is solid. Höegh LNG president Sveinung Støhle says Hong Kong Electric (HKE) wants a 170,000m³-260,000m³ FSRU. Enarsa of Argentina is said to be looking for an FSRU the size of a Q-flex or even a Q-max LNG carrier for the Puerto Rosales project.

Nusantara Regas Satu

Golar Spirit

Golar Winter

Golar Freeze

“To build it for a specific project, you need a 20-year charter agreement to justify the cost – all of that comes at a price. You can only justify having so much more storage for a market of significant demand. “Bigger FSRUs might seem the perfect solution to a highdemand market. But ordering such a unit presents a greater risk than usual for owner and financier.” By June, Höegh and BW Gas had received the first two of six FSRUs to be delivered this year. That leaves an orderbook of nine. Höegh has ordered two units this year and shipowners including Dynagas, Teekay LNG and GasLog plan to enter the market – but have yet to order. Even though the shipyards need the business, prices for a 170,000m³ newbuilding are steady, at around US$300 million. Up to seven older FSRUs come off charter by 2020. “Older ships are being redelivered as they come off their charters, creating downward pressure on prices,” the second source says. “Many players are waiting to see what happens with this first generation of FSRUs before committing to new tonnage. FSRUs are still a very attractive investment, but this is why we’ve yet to see a significant uptick in ordering.” All the sources we interviewed sense a sea-change in FSRU pricing and liquidity. Meanwhile, owners with a surplus of conventional LNG carriers are looking to convert older tonnage into FSRUs or FSUs. FSUs are deployed in Jamaica, Malta, Bali in Indonesia, and China. China National Oil Offshore Co (CNOOC) replaced GDF Suez Cape Ann with the 149,700m³ FSU conversion Neo Energy. Other FSUs are planned in Russia, Bahrain, Malaysia, Java in Indonesia, and India. This uncertainty deters shipowners from ordering new FSRUs. But as more FSRUs and converted storage units tout for business, increased supply will boost liquidity. H-Energy’s keenly priced deal signals a shift in the market. “This is creating a kind of marketplace for FSRUs,” says the second source. “Thus far, FSRUs have been pure infrastructure, not shipping, play. FSRUs, far from being a market, have no liquidity. This is not a shipping market. “Would-be charterers have simply not had choice. “Liquidity will grow if the secondhand/conversion market increases the number of older vessels that serve as FSUs, as global trade grows, to unlock new markets.” LNG

www.lngworldshipping.com

INFOGRAPHIC | 15

CONFIRMED FLOATING LNG (FLNG) PRODUCTION PROJECTS, million tonnes

US GULF Vessel/project name: Delfin LNG* Start date: 2020 LNG production: 13mta

MOZAMBIQUE Vessel/project name: Coral FLNG Start date: 2022 LNG production: 3.4mta

EQUATORIAL GUINEA MALAYSIA Vessel/project name: Fortuna LNG* Start date: 2020 LNG production: 2.5mta

Vessel/project name: PFLNG Satu Start date: April 2017 LNG production: 1.2mta Vessel/project name: PFLNG2 Start date: 2020 LNG production: 1.5mta

CAMEROON Vessel/project name: Hilli Episeyo Start date: 2018 LNG production: 2mta

AUSTRALIA Vessel/project name: Prelude Start date: 2018

CONGO BRAZZAVILLE, REPUBLIC OF THE CONGO Vessel/project name: New Age LNG* Start date: 2022 LNG production: 1.2mta

www.lngworldshipping.com

LNG production: 3.6mta

* Subject to final investment decision Source: LNG World Shipping, June 2017 Infographic: Ram Mahbubani Research: Karen Thomas

LNG World Shipping | July/August 2017

A clean world needs LNG. We are ready.

HEROSE is the leading manufacturer of cryogenic valve technology. We are manufacturing high quality valves for the handling of LNG during storage and bunkering processes of LNG fuelled vessels. We provide components that ďŹ t your system and installation conditions. Do not hesitate to contact us! Valves Built to Endure

HEROSE GMBH 23843 Bad Oldesloe Germany Phone: +49 4531 / 509-0 Fax: +49 4531 / 509 120 info@herose.com herose.com

EQUIPMENT | 17

Variable frequency drives make pumps more efficient The use of variable frequency drives is becoming more and more popular as a means of maximising efficiency. Here, the Sims Pump Valve Co looks at how effective they are

ariable frequency drives (VFDs) have been publicised as the instrument of choice to reduce electrical consumption for all pumps because they reduce the revolutions of the motor when the system experiences lower demand. In most fields, the majority of VFD systems operate by monitoring the discharge pressure of the pump. When the demand increases, the VFD increases the motor speed and when the demand decreases, the VFD reduces it. However, when the pump is running slowly using a VFD system, it can be operating so far from its design operating curve that a significant portion of the efficiency gained by reducing the speed of the motor is cancelled out, due to the mechanical losses of efficiency of the pump. The only ways to resolve this are to change the pump to match the operating range required, which can be expensive, or to fit an impeller to match the desired operating range of the pumping system. Sims’ impellers and wear rings are made of Simsite – a graphite combinationfibre continuously interwoven reinforced composite that is resistant to corrosive environments, erosion and cavitation. The use of advanced

www.lngworldshipping.com

technology in the design and machining of Simsite impellers and wear rings results in higher efficiency and a substantial reduction in energy costs compared with traditional cast parts. The longer-term benefits are reduced maintenance and replacement costs.

If this is multiplied by the total efficiency of the pump, of 76 per cent when operating with a system load requirement of 96 per cent, the total pump and VFD efficiency is 74 per cent. This means that the pump is operating at a capacity of 768m³ per hour at 73m head

Variable frequency drives (VFDs) have been publicised as the instrument of choice to reduce electrical consumption for all pumps because they reduce the revolutions of the motor when the system experiences lower demand.

A scrubber system that has recently been installed on a vessel belonging to one of the major cruise lines incorporates five main scrubber feed pumps designed for 800m³ per hour at an 80m head at 1,750 rpm with 250kW motors. All have been fitted with VFDs, located in a separate air-conditioned room. A review of the system has shown that these pumps operate at 96 per cent continuous load when the scrubber system is operating. The efficiency curve for the 300hp (250kW) VFD drive operating at 96 per cent load shows the efficiency of the VFD is about 97 per cent.

at 1,680 rpm. Using the formula in which bhp equals (capacity) x (head) x (specific gravity of sea water)/(3,960) x (pump efficiency), bhp in this case is (3,379) x (241) x (1.02)/(3,960) x (0.74), or 285hp. With a bhp of 285hp, the pump will have an efficiency saving of 11kW (19hp (300– 285) = 15hp) and an estimated energy saving of US$10,510 per year ((11 kW) x (0.11/kW) x (8,600 hours)). If a re-engineered machined Simsite impeller is used for this scrubber system, with an operating point of 768m³ per hour at 73m at 1,680 rpm, then the pump

efficiency would be 85 per cent, and the total pump and VFD efficiency would be 82.5 per cent. If the total pump and VFD efficiency of 82.5 per cent is put into the bhp formula, the bhp is 255hp (because (3,379) x (241) x (1.02)/(3,960) x (0.825)), which is an efficiency saving of 45hp (300hp-255hp), or 34kW. The estimated energy saving is US$31,784 per year (34kW) x (0.11/kW) x (8,600 hours)). The five cyclone feed pumps that pump from the drain tank to the cyclone separators are the same size and performance, but they operate in the range 50 per cent to 90 per cent for most of the time. The VFD chart shows that the VFD efficiency at 50 per cent of demand is only 89 per cent and the VFD efficiency at 90 per cent of demand is 96 per cent. The chart helps to show the energy savings and the cost saving potential that can be obtained by combining a VFD drive with an engineered Simsite impeller and ring set. Installing Simsite engineered pumps, impellers and rings, allows the maximisation of investment in a VFD pumping system, with fewer losses compared with a traditional VFD and pump set-up. Furthermore, with metallic pumps and impellers, corrosion, erosion and cavitation occur and force the VFD drive to increase the motor speed, which eliminates the cost saving energy benefits of the VFD system. LNG

LNG World Shipping | July/August 2017

18 | EQUIPMENT

Framo delivers pumping systems to Höegh LNG Framo has signed a contract with Höegh LNG to deliver pumping systems to a new floating storage and regasification unit (FSRU) being built at Samsung Heavy Industries in South Korea. The FSRU in question comes with three options. Using an on-board regasification unit, the FSRU converts liquid gas into vapour, then pumps it to shore. To do this it must heat the gas, which requires it to pump large quantities of seawater. Framo will supply the FSRU with four pumps. “Global demand for energy is on the rise, but in many areas the necessary infrastructure is not in place,” says Framo director oil and gas pumping systems Thorbjørn Vågenes. “An FSRU is a highly versatile alternative as a vessel can be moored at any quay and operate as a terminal. Furthermore, the investment costs are significantly lower than for onshore developments.” The delivery to Höegh LNG revolves around Framo technology that has worked in offshore operations for several years. Framo has already supplied a similar system to Shell's floating LNG (FLNG) vessel, Prelude. Framo claims its pump systems are lighter and have fewer components to maintain than conventional pumps for FSRUs. The Framo system will also eliminate the need for a separate pump room on vessels that often have limited space.

“An FSRU is a highly versatile alternative as a vessel can be moored at any quay and operate as a terminal. Furthermore, the investment costs are significantly lower than for onshore developments.”

Thorbjørn Vågenes: Framo has supplied pump systems to Höegh and to Shell's Prelude

ABB and MTU prove durability of VCM system Durability field-test results of ABB’s variable valve train system, Valve Control Management (VCM), have shown unprecedented success of the technology on an MTU high-speed gas engine. The successful running of each VCM actuator for 7,000 hours on an engine is an important milestone for the forthcoming serialisation of this technology, ABB says. Typically, a durability test for serialisation lasts around 5,000 hours for large engines. VCM is an electro-hydraulic valve train system for four-stroke gas and diesel engines, developed by ABB for and in collaboration with enginebuilder MTU, and optimised for its engines. The technology originates from a similar principle in the automotive industry, enabling a stepless variation of engine valve timing and valve lift from one engine cycle to the next, adjusting the amount of air or air-fuel mixture entering the cylinder.

LNG World Shipping | July/August 2017

Thus, it increases the adaptability of engine performance in multiple ways, providing the flexibility for best performance and fuel economy at varying loads and speeds, in various ambient conditions and with differing fuel qualities. MTU has now made available data from the durability field testing of 12 VCM actuators on the S4000 gas engine installed at its own combined heat and power plant in Friedrichshafen, Germany. In the 12-month period of operation in the field, measurements of the valve lift curves showed excellent repeatability – the valve lift curves measured at the beginning and after 7,000 hours of operation are identical. The VCM actuators were inspected several times with a positive result that detected no wear or ageing effects. LNG

www.lngworldshipping.com

Topflight Ship Design Experience SENER Design and Engineering SENER ensures the highest quality from Concept Design to Production Engineering since 1956, bringing affordability and innovation.

www.marine.sener

INTERVIEW | 21

SOVCOMFLOT BOSS SERGEY FRANK TARGETS GROWING LNG DEMAND Shipowner Sovcomflot will lift the first cargoes from Yamal LNG this autumn. President and chief executive Sergey Frank ponders Arctic opportunities and small-scale investment and explains why he has faith in LNG as the marine fuel of the future. By Karen Thomas

ovcomflot boss Sergey Frank, caught between meetings at Gastech with “30 minutes sharp” to offer LNG World Shipping, turns out to be in a relaxed and expansive mood. Picture New York’s Times Square in 1900, he says. A photo from that year shows the famous intersection of roads filled with horse-driven carriages. Compare that to an image of Times Square in 1910 and already the city landmark is filled with cars. This is how quickly technology can change, Mr Frank concludes. The Sovcomflot president and chief executive believes global shipping is facing a similar sea-change, as a new generation of LNG-powered vessels replaces ships that use oil-based fuels. Sovcomflot is leading that shift. In March, it placed a US$240 million order for four LNG-powered aframax oil tankers. In April, it finalised its LNG-supply deal with Shell Western LNG to supply fuel to the Hyundai

www.lngworldshipping.com

Mipo-built tankers at Gate Terminal, Rotterdam and in the Baltic Sea. “The deal completes two years of intensive work by Shell and Sovcomflot, covering technical, commercial and logistical aspects, and intellectual concentration,” Mr Frank says. “For us, aframaxes are a good place to start. We are the number one aframax shipowner and Shell is the number one charterer of aframaxes. “The aframax, with its relatively short steaming times, is the workhorse of the market. There is a good density of traffic between the ports of loading, in Russia and the Baltic region, and there is a predictable sailing pattern between Primorsk and Rotterdam. “Most traffic is five days’ steaming. That offers a certain predictability and stability. That’s very helpful in taking the first, small step – particularly when you don’t yet have access to global infrastructure. We are confident that we can make

these ships commercial – while also being significantly cleaner and greener.”

LNG first?

Having ordered the world’s first LNG-fuelled aframaxes, will Sovcomflot switch to LNG propulsion for all future orders? “We need to grow our fleet of LNG-fuelled aframaxes, step by step, to create a uniform fleet,” Mr Frank says. “We are working with Rosneft and with Hyundai Heavy Industries and with Russian shipbuilders to build up that sophistication at Sakhalin Island, which is a major centre of oil production that mainly uses aframaxes. “We think this is the right time to change our equipment, to go for LNG. We expect China to introduce severe emissions legislation because of its concerns about the environment. And we expect other shipowners to follow.” This year is a landmark year for Sovcomflot. The 100th anniversary of the Russian

Sergey Frank Born: Novosibirsk, 1960 Studied: Maritime Navigation, Far East Nautical Engineering College, Vladivostok PhD technical sciences, Far East State University, Faculty of Law, Vladivostok Career: 2004-present, president and chief executive, chairman of the board Sovcomflot 1998-2004, Minister of Transport, Russian Federation 1995-1996, deputy director maritime transport, Ministry of Transport

LNG World Shipping | July/August 2017

22 | INTERVIEW

Christophe de Margerie is ‘the world's most powerful LNG carrier’ (credit: J van Droogenbroeck)

Revolution is also Sovcomflot’s tenth year operating gas carriers. And the landmarks keep coming. There is talk of an initial public offering. In May, Russian economy minister Alexei Ulyukayev said the government might raise US$357 million from selling 25 per cent of Sovcomflot. And in March, Sovcomflot completed sea trials and mooring trials on its 172,600m³ ice-class newbuilding, Christophe de Margerie, “the world’s most powerful LNG carrier”. These final trials complete the shipowner’s 10-year drive to adapt its double-acting tanker (DAT) concept to a new class of LNG carrier, built to deliver sensitive cargoes from the harshest operating environment on earth, unlocking Russian Arctic gas reserves. DAT technology will enable Christophe de Margerie and its 14 sister-ships to sail year-round, slicing stern-first through ice up to 1.5m thick at 5.5 knots, thanks to dualfuel diesel electric (DFDE)

engines fitted with three powerful azipod units. Sovcomflot is the largest owner of azipod-propelled ships. “Every day, around the world, our ships have 36-40 azipods running under the water,” Mr Frank says. “It makes all aspects of the operation different and special – and now we will have the most powerful LNG carrier on the water with 45MW of

“Sovcomflot is not a casino player; we are industrial players and efficient utility players. We see LNG as an organic industry, to be judged project by project.”

LNG World Shipping | July/August 2017

propulsion power. “This achievement reflects our years working in these waters with smaller ships that have used the double-acting concept since 2007. We have built up a track record and have trained a generation of masters, chief engineers and electrical engineers.” That track record will be tested very soon. Yamal LNG may load its commissioning cargoes as early as October. Safety will be paramount. If the Arctic is a sensitive environment, it is also very hard to reach, should something go wrong. Sovcomflot operates its own safety procedures for Arctic waters, based on its experiences off Sakhalin Island, Mr Frank says. It works with Murmanskbased Rosatomflot, which operates a fleet of nuclearpowered icebreakers, as well as tugs and support craft. Under the Portoflot project, Rosatomflot is contracted to supply three ice-class Arc4 escort tugs, one port icebreaker and one icebreaking tug to the Yamal LNG project to 2040.

Fleet growth

In a separate interview at Gastech, Novatek chairman and chief executive Leonid Mikhelson told LNG World Shipping that Yamal LNG will need up to 10 conventional LNG carriers to deliver cargoes from the transhipment hubs at Montoir and Zeebrugge to final destination. Meanwhile, Novatek is considering the business case for a second north Russia export project, Arctic LNG, that will match or exceed the 16.5 million tonne (mta) Yamal LNG project. With a fleet of just nine LNG carriers, all fixed elsewhere (see table), is Sovcomflot getting ready to order new tonnage? Here, Mr Frank prefers not to be drawn. “We will consider opportunities for new investment project by project,” he says. “If the project fits our investment criteria and our risk-management objectives, we could certainly invest in more ice-class LNG carriers. Why not?” Sovcomflot has a diverse fleet of nearly 150 owned

www.lngworldshipping.com

INTERVIEW | 23

oil, shuttle and product tankers, LNG and LPG carriers, bulkers, and service and support ships. Despite this, says Mr Frank, the company considers itself an industrial conglomerate first, a shipowner second. “We do not see much fun in buying speculative assets and hoping – because of market ups and downs – that we find ourselves, through luck, in the right place at the right time,” he says. “That approach makes the [shipping] industry operate like a casino. “Sovcomflot is not a casino player; we are industrial players and efficient utility players. We see LNG as an organic industry, to be judged project by project. We see no need to take exotic steps – we are happy to build our LNG shipping business by selecting those projects that fit our philosophy. “It’s the same approach we’ve taken with our tanker fleet over the last 10 years. Here, we’ve achieved average annual business growth of 12-15 per cent a year, even though in that period we had maybe two years of market growth, in 2014-2015.” Traditionally, shipowners order LNG newbuildings against long-term LNG supply contracts, between export project and named buyer. How will Sovcomflot respond to the shift away from the long-term deals that have underpinned both project approvals and ship orders? “We prefer to work on any given project from day one, so we have to adjust,” Mr Frank concedes. “That’s the most favourable approach, particularly if a project involves some degree of operational complexity or involves working in a harsh environment. “This is where we have experience and can offer a competitive advantage that adds value. We’ve never been

www.lngworldshipping.com

SOVCOMFLOT LNG CARRIER FLEET Name

type

year built

capacity, m³

propulsion

deployed

Yamalmax

2017

172,600

DFDE

Yamal LNG

SCF Melampus

Atlanticmax

2015

170,200

TFDE

Shell time charter

SCF Mitre

Atlanticmax

2015

170,200

TFDE

Shell time charter

Velikiy Novgorod

Atlanticmax

2014

170,200

TFDE

Gazprom charter

Pskov

Atlanticmax

2014

170,200

TFDE

Gazprom charter

Tangguh Towuti

conventional LNGC

2008

145,700

DFDE

Tangguh LNG

Tangguh Batur

conventional LNGC

2008

145,701

DFDE

Tangguh LNG

Grand Aniva

conventional LNGC

2008

147,000

steam turbine

Sakhalin II

Grand Elena

conventional LNGC

2007

147,000

steam turbine

Sakhalin II

Christophe de Margerie

Source: June 2017, LNG World Shipping/Sovcomflot

enthusiastic about taking massive positions for the sake of it… But we are looking at new projects, yes, and most probably those projects will be in the north.”

Small-scale

Speaker after speaker at Gastech this year highlighted the opportunity that lies in small import markets, particularly for gas-to-power projects. “Gas to power is a big saga,” Mr Frank says. “Of course, we follow what the big names are doing with such projects. But for us the question is, where is the marine component? We need to be patient. We need to wait. Gas to power is now a mainstream activity in LNG – but it’s not the only way for the LNG business to progress.” Meanwhile, Sovcomflot has yet to venture downstream, into LNG small-scale distribution. That may soon change. The company is considering a couple of ventures – although

“One thing we are looking at is LNG bunkering. We are evaluating the opportunity here, particularly along Russia’s rivers”

Mr Frank hesitates over whether these are small-scale LNG projects. “One thing we are looking at is LNG bunkering,” he says. “We are evaluating the opportunity here, particularly along Russia’s rivers. Russia has a huge network of rivers with definite potential for LNG as a fuel. “There’s good potential to build the equipment – that’s to say, small ships that are not ocean-going – on very competitive terms. Russia has specialist companies that can deliver these. We are looking in that direction certainly. “Frankly, this is not the most important song we plan to sing. With small-scale, it may be slightly more difficult for us to extract synergies from our current operations.” Do does Sovcomflot plan to order Russia’s first LNG bunker-supply ship? “Yes, well why not?” Mr Frank concludes. “Maybe we could consider such a ship for the Baltic region.” And with that prospect hanging in the air, our thirty minutes is up. LNG

LNG World Shipping | July/August 2017

24 | AREA REPORT

Quenching the Indian subcontinent’s thirst for LNG T

he Indian subcontinent is on course to become one of the world’s fastest-growing markets for receiving LNG cargoes. Last year, India and Pakistan posted the world’s third and fourth largest annual increases in LNG imports, lagging behind only Egypt and China. In 2016, India imported nearly 20 million tonnes (mt) of LNG, increasing its intake by a whopping 39 per cent. But regional demand is about to soar, as India and Pakistan invest in new import and distribution infrastructure – and as Bangladesh and Sri Lanka race to join them.

India

Analysts tip India as one of the world’s most exciting LNG-import prospects. The country’s four LNG-import terminals, which all lie on the west coast, can receive 30mt of LNG a year (mta). But new projects are shifting the focus east, and opening a more flexible approach to imports. In April, Mumbai-based H-Energy announced that it has chartered a floating storage and regasification unit (FSRU), becoming India’s first floating import terminal. H-Energy has chartered GDF Suez

Analysts expect south Asia to become one of the world’s fastest-growing LNG-import markets. Tapping that demand isn’t easy – but the potential is immense. Karen Thomas reports

Cape Ann from next summer, to be moored off India’s west coast at Jaigarh. This is just the first of two FSRUs that the Indian conglomerate plans to charter, see interview with H-Energy chief executive Darshan Hiranandani on page 26. Several FSRU-based projects have been proposed in India, but progress has been slow. Industry sources blame uncertainty over demand, high project costs and red tape as obstacles to new ventures. In the meantime, India is also expanding or adding shore-based regasification capacity. At least two new projects are planned. GSPC LNG is building a terminal at Mundra in northeast Gujarat to handle the largest Q-max LNG carriers. The terminal, which features two 160,000m³ storage tanks, will handle an initial 5 mta – although this could double if demand requires it.

Moored at Port Qasim, Exquisite, left, handled Pakistan's first LNG imports

LNG World Shipping | July/August 2017

Indian Oil is planning a 5 mta landbased regasification terminal at Ennore, north of Chennai. This has a tentative 2019 start date. This, like several other new projects, has turned east. H-Energy wants to base its second FSRU at Digha in West Bengal from 2021. This FSRU could also deliver LNG to neighbouring Bangladesh. Two import terminals are planned at Kakinada in Andhra Pradesh. But at least one is now in question. In May, Engie and Shell pulled out of a GAIL-backed project, which proposed to import LNG via FSRU. Indian sources say the two multinationals demanded a guaranteed minimum volume to reach a final investment decision. This summer GAIL was negotiating with the state government, seeking to salvage the scheme. That leaves the VGS-backed Krishna Godavari LNG terminal. It aims to import up to 3.6 mta through the east coast port, using a floating storage unit (FSU) and a floating regasification unit (FRU). Petronet, India’s largest importer of gas, is driving regional infrastructure investment. The company has pledged to increase its LNG-import and regasification capacity to 30 mta by the end of the decade. Petronet plans to supplement its terminals at Dahej in Gujarat and at Kochi in Kerala with new ventures at home and in neighbouring countries. It has expanded capacity at Dahej from 10 mta to 15 mta. A third development phase will increase this figure to 17.5 mta. Petronet also plans to invest in new capacity in Mauritius, Bangladesh and Sri Lanka, see opposite.

www.lngworldshipping.com

AREA REPORT | 25

Japanese companies have carried out LNG feasibility studies for the Ceylon Electricity Board. India’s prime minister Narendra Modi signed an MoU to develop the LNG project when he visited Colombo in May.

Saira Ahmed names Pakistan’s second FSRU BW Integrity

Bangladesh

Pakistan

New importer Pakistan is on course to open its second FSRU-based import terminal at Port Qasim and has chartered a third FSRU. Now, it plans a fourth FSRU at the port to create the country’s first private LNG-import terminal. Engro-backed Elengy Terminal Pakistan introduced the country to the LNG-importers club. In its first year, it received 1 mta using the 150,900m³ FSRU Exquisite, chartered from Excelerate to import up to 5.2 mta to 2030. In February, Excelerate signed a fasttrack deal with Engro and its consortium partners Shell and Fatima to supply a second FSRU next year. Excelerate has not said which FSRU it will deploy – or whether the vessel will come from its existing fleet. The shipowner has unfixed tonnage but is also trying to raise funds to expand its fleet. Pakistan’s second FSRU will be the BW LNG-owned, 2017-built, 170,000m³ BW Integrity. The vessel is chartered to Pakistan Gas Port (PGPL) to import an initial 5 mta and was due to be delivered in June to Port Qasim. BW Integrity left the shipyard in January and completed its sea trials in March. It

laid anchor off Singapore on May Day and was not yet under way to Pakistan at the time of going to press, in mid-June. Höegh LNG will supply Pakistan’s fourth FSRU, having agreed a 20-year charter deal with Global Energy Infrastructure (GEIL). Höegh will deliver Hyundai Heavy Industries (HHI)-built Hull 2909 to Port Qasim next spring. The 170,000m³ vessel will deliver up to 4.3 mta.

Sri Lanka

Sri Lanka may soon join the LNGimporters club, too. It plans to take in LNG via Kerawalapitiya on the west coast, between Colombo and Negombo. The 2 mta project is valued at US$250 million. A 300MW oil-burning power plant will switch to gas and a pipeline will encourage other industries to follow suit. Some reports suggest that Sri Lanka sees an FSRU as the best solution. A 50/50 Indian-Japanese partnership will build the infrastructure. Sri Lanka sources have named Petronet the Indian partner. Plans for the joint venture were due to be finalised this summer.

Bangladesh’s LNG-import plans are advancing even faster. Moheshkhali floating LNG terminal was due to complete financing this year. Petrobangla has signed terminal use and implementation agreements with Excelerate. The US-headquartered shipowner will supply a 138,000m³ FSRU to the project, to start early next year, importing up to 3.5 mta. The project is billed as the world’s first fully integrated floating LNG terminal. Excelerate will provide all the services under a single deal. It has fixed the vessel, which it has yet to name, for a 15-year contract. Bangladesh plans several additional import projects. Also on Moheshkhali, Power Cell has invited bids for a 3.5 mta, land-based project. Power Cell wants an international partner to take up to 60 per cent of the project, awarded as an EPC venture. Petronet is shortlisted for the scheme, alongside Shell, Mitsui & Co and Chinese players. However, Petronet has also signed an MoU to build a 7.5 mta import terminal on Kutubdia Island. The US$950 million project includes small-scale proposals to deliver LNG by barge and truck to off-grid customers around Bangladesh. The race to deliver multiple projects across the Indian subcontinent highlights the region’s thirst for gas. Pinning down the demand and recouping investment is tricky. But there is no questioning south Asia’s appetite for chilled gas, to combat shortages and to meet growing power demand. LNG

INDIAN SUBCONTINENT, LNG IMPORTS 2015-2030

14.4

47.8-57.4

2015 imports (mt) Forecast 2030 imports (mt, range)

www.lngworldshipping.com

1.01

10.1-18.8

13.0-18.8

Source: OIES, 2016

LNG World Shipping | July/August 2017

26 | AREA REPORT

Darshan Hiranandani: wherever gas is made available in India, we find industries very eager to move

‘Two years ago, only governments and energy majors could afford an FSRU’ Mumbai-headquartered H-Energy plans to enter India’s LNG-import market, chartering two floating storage and regasification units (FSRUs) to receive short-term and spot cargoes. Chief executive Darshan Hiranandani outlined his plans to Karen Thomas

What opportunity do you see for LNG demand growth in India?

“Increasingly, we are seeing new projects follow the upstream business model when it comes to securing the finance. It must be balance-sheet funded, not project funded”

LNG World Shipping | July/August 2017

The Indian economy has been very comfortable switching from liquid fuels to gas for transport and for industry. Wherever gas is made available in India, we find industries very eager to make that move. The problem in India is to determine whether demand stands at five or 50 mta. As the LNG industry moves towards shorter-term contracts, and as the customer does the same, there are problems financing the downstream infrastructure. This is where the challenge lies. We have found, moving into

new areas, you can achieve good growth. But there is no silver bullet. It’s all about getting the pipelines, about getting new areas connected – which is where H-Energy can play a role.

H-Energy is new to investing in upstream oil and gas; what are your immediate priorities? Right now, our focus must be on India, on mid-stream and downstream opportunities. If and when we see the gas supply tightening, we will switch our focus to upstream. It is difficult for most players to operate midstream and downstream in India – we believe we

www.lngworldshipping.com

AREA REPORT | 27

have an important role to play here. We expect the strongest demand to come from domestic use and transport fuel. This will push industrial users to source gas in other ways. Our model is to target customers that need around 1 million tonnes a year (mta).

H-Energy plans new LNGimport ventures on India’s west coast at Jaigarh and on the east coast at Digha, using FSRUs at both ports. What stages have these two projects reached? On the west coast, we will initially charter the Engieowned FSRU GDF Suez Cape Ann at Jaigarh in Maharashtra, with a 60km pipeline to connect to existing customers. We will also have a 600km pipeline that connects to new customers that have no gas at all. For us, this is the missing piece in the jigsaw. There can be no increase in demand if you do not connect to the customer. Otherwise, it’s just commodity shopping. At Digha, we require a 145,000m³–170,000m³ vessel. However, we believe that our permitting process requires three to four months more. Once that is complete, we aim

The Hiranandani Group

to move ahead with the final investment decision (FID), with a commercial operations date of fourth-quarter 2020. Here, we have made considerable progress in terms of the anchor customer, having signed a heads of agreement for 1 mta of offtake with North West Power Generation Co Ltd (NWPGCL), a Bangladesh Power Development Boardowned utility.

Does uncertainty over demand force H-Energy – and other companies seeking to tap India’s thirst for gas – to invest in LNG infrastructure on a speculative basis? You can’t undertake superprojects; you must focus on smaller projects, one at a time, because that’s how the customers sign up. We have customers signed up for our first 60km of pipeline. When it comes to the 635km pipeline, we are probably looking to expand this at the rate of 100-200km at a time, as we sign customers up and move forward. If you don’t get enough takers, you don’t build it. These two projects have a strong business case; we have the spot suppliers. But increasingly, we are seeing new

projects follow the upstream business model when it comes to things like securing the finance. It must be balance-sheet funded, not project funded.

What is H-Energy’s LNGdevelopment strategy? Right now, we are simply a buyer of natural gas. We take delivery of the gas ex-terminal, at Hazira and at Dahej, for supply to our customers. We started to do this to prepare ourselves to build and manage our own terminals. But for us, it’s not just about the terminal; it’s about delivering a service to the customer. There is a gap in the market, and the role of an aggregator is important. We believe we can play that role, piecing together the chain – whether that’s building pieces of infrastructure, or pulling together the bits that exist. And so we have a marketing entity and an infrastructure entity. They work together to ensure that we develop products that make sense.

How much LNG do you plan to import? If we start to import our first cargoes through the FSRU moored at Jaigarh next June,

we should import around 2 mta over the following 12 months. We expect our west coast demand to grow within five years to some 4 mta. We are considering whether to build a landbased terminal to meet that demand. But we must wait and see whether we get good deals on Q-max tankers, whether there is additional liberalisation, and so on, before deciding whether to replace GDF Cape Suez Ann. We have several options. On the east coast, we see about 1.5 mta demand on day one, from Bengal and Bangladesh, and that will ramp up to about 3 mta by 2025. “Two years ago, FSRU charter rates were so expensive that only governments or super-majors could afford these vessels, to support 20-year offtake contracts.”

Does the deal with Engie include an LNG-supply agreement? No, it’s purely a vessel-charter agreement. Engie of course remains a strong contender to provide LNG but we are talking to a range of suppliers. We have signed an initial deal, but the details are confidential for now. We won’t be announcing

Jaigarh should import its first LNG cargoes next June

Founded: 1985 by Niranjan Hiranandani Core business: property development, India and Dubai Chairman: Niranjan Hiranandani Managing director and chief executive: Darshan Hiranandani

www.lngworldshipping.com

LNG World Shipping | July/August 2017

28 | AREA REPORT

H-Energy will import an initial 2 mta through Jaigarh

any 15-year contracts with the likes of RasGas; rather, we’ll be revealing the agreements for our first five or 10 cargoes.

What progress have you made so far at Jaigarh? We have chartered the vessel and have set the commissioning date for GDF Cape Suez Ann next June. We expect to finish work on the jetty by December, and have moved that deadline forward. We have permitting for the land that covers all the options; for an FSRU, for a floating storage unit (FSU) with vaporisation and for a completely land-based import terminal. We can ramp this project up in whatever way makes most commercial sense. Two years ago, we couldn’t afford an FSRU because of the charter rates. Those rates were so expensive then that only governments or supermajors could afford these vessels, to support 20-year offtake contracts. Today, we can afford to charter an FSRU to import an initial 2 mta, because of the way the market has changed.

I can’t tell you the charter terms. What I will say is that if we needed to import 5 mta off the bat, a land-based terminal would of course make better financial sense. Because we don’t, and are expecting demand to ramp up, it suits us to start off with an FSRU.

Canada has made slow progress with its LNGexport ambitions: how confident are you that AC LNG will succeed where others have stalled? Our concept in eastern Canada is a plug-and-play terminal that’s already connected to a pipeline. It’s not about building miles and miles of pipelines. The future of that project depends on whether the North America Free Trade Agreement survives. But we think that exporting LNG out of western Canada is now a no-go. We are looking for supply deals that will directly support our two terminals at Jaigarh and Digha and so are also talking to prospective LNG suppliers in the US Gulf. Right now, we don’t know where this will take us. We

LNG World Shipping | July/August 2017

expect the supply overhang to last until 2024, at the very least. However, we also expect the technology for liquefaction to improve, with a dramatic impact on project cost structures and on unlocking stranded fields. The market is extremely dynamic – it is extremely hard to predict how things will change. We need to work out how viable AC LNG will be. We also need to get a grip on the changes taking place in floating liquefaction technology. So we will wait to see how these issues play out.

Is there a risk that as demand grows for small-quantity, short-term LNG supply, it becomes harder to invest in future gas supply, which could lead to shortages later? We have an option agreement for the proposed AC LNG project in Canada, on the east coast in Nova Scotia. Here, we have secured the export permits and are waiting to secure the environmental permits. This is a beautiful, deepwater site near Halifax. Connecting the site to the grid is not the problem;

there’s a cost attached to getting Marcellus shale gas to that site.

That short-term structure gives Jaigarh and Digha a very different business model to the LNG-import terminals at Hazira and Dahej, with their long-term, large-scale supply deals, doesn’t it? It’s very different. But we think the demand is there, to create a broad base for our offtake. One option is to sign commodity-based contracts like those linked to coal or ammonia, for example – depending on the size of the customer, we can be flexible. The customer, of course, wants the moon. But they are not in the business of LNG; they are in the business of steel, or cement, or glass. Our objective is to source gas for them on that basis. We don’t take any speculative risk. Everything is back to back. We will sell what we’ve bought. “The customers want the moon. But they are not in the business of LNG; they are in the business of steel, or cement, or glass. Our objective is to source gas for them on that basis.” LNG

www.lngworldshipping.com

Your Partner in

DESIGN: ARTGARDEN | FOTO: © ADOBE STOCK

SHIP PERFORMANCE MONITORING KYMA Office WEB

KYMA WEB API

PERFORMANCE analysis

MRV and EMISSIONS reports

KYMA

CHARTER PARTY module

BIG DATA

STEAM analysis

SHAFT POWER measurements

ENGINE condition

+47 55 53 00 14

sales@kyma.no

TRIM optimization

G/E LOAD optimization

service@kyma.no www.kyma.no

Air Products nitrogen generators

When reliability matters Now onboard more than 450 LNG carriers

High T/C Levels? Minimize your time in yard for Special Surveys  Repair WBT coatings on voyage prior to SS  Prepare for CAP surveys; - easier CAP 1 and 2 ratings  Keep yard stays to a minimum Ballast Tank Upgrades Deck Upgrades Hull / Superstructure UHP Blasting Spray painting Marine Scaffolding Steel repairs SPS Overlay

Since 1982, Air Products offers low

Coating Inspectors Steel Inspectors

maintenance, economic, and easily installed

Brazil Norway Singapore Gdynia Nigeria

wide range of nitrogen capacities, nitrogen

nitrogen generation systems applicable to a purities and system physical dimensions.

www.msi.no — info@msi.no — T (47) 64 93 30 03

The “Voyage Repair” Specialists

www.airproducts.no

30 | SHIP-TO-SHIP TRANSFERS

Hello, buoys Excelerate tackles a ship-to-ship LNG transfer with a twist

ubsea unloading buoys are not new. The oil industry developed the technology for receiving terminals where land is at a premium, or the port is too shallow, or where building a deepwater port is too expensive or too tricky. Moored to the sea bed, the STL system incorporates a subsea buoy that is connected into the hull of the vessel. A subsea riser then connects the buoy to a pipeline manifold on the seabed to allow for the delivery of natural gas. When the vessel disconnects, the buoy floats 30m-50m below the surface until it needs to reconnect. A standard-size mating cone connects the turret to the vessel. This means that the buoy is both a mooring device and the conduit to deliver gas to shore. US-based Excelerate Energy spotted an opportunity to use buoybased systems to support floating LNG operations when it launched the world’s first floating storage and regasification units (FSRUs). It deployed STL buoy systems to work with first-generation FSRUs, delivering natural gas to shore using subsea pipes linked to the turret. And so, in 2005, Excelerate launched Gulf Gateway Deepwater Port,

Excelerate Energy has transferred LNG ship-to-ship in its first operation involving a floating storage and regasification unit (FSRU) moored to a subsea buoy. Four transfers in, vice-president operations Charles Ruehl tells Karen Thomas about the challenges

Charles Ruehl:

“Because this had not been done before, we had to work through various risk assessments”

116 miles (187km) off Louisiana. It went on to launch a dual-buoy system at Northeast Gateway off Boston, Massachusetts in 2008 and Hadera Deepwater LNG terminal, the subsea unloading buoy-based system that in November 2012 opened Israel to LNG imports. Gulf Gateway is now decommissioned. Israel Electric Corp (IEC) charters Excelerate’s 138,000m³ FSRU Excellence to deliver up to 3.7 mta of LNG. The terminal was built to meet increased demand for

LNG World Shipping | July/August 2017

energy in the region while the country’s gas reserves are being developed. Israel is a gas-hungry market. There is a disadvantage to using STL-based FSRUs. When the FSRU runs empty, it must disconnect from the turret and sail to an LNG-reload terminal or to a sheltered harbour to top up its cargo ship-to-ship (STS). This takes the vessel off-site and out of operation, in the case of Excellence, sailing 12-14 hours to Cyprus, to carry out STS at Limassol. The world’s first LNG ship-

to-ship transfer involving an FSRU moored to an STL buoy took place last autumn.

Planning

Altogether, the operation took six to eight months to plan. Excelerate held meetings with the port authority, the harbour master, the tug-boat operator, the STS fender provider and the operator of the LNG carrier. “Because this had not been done before, we had to work through various risk assessments, looking at the sea conditions and to ensure that the mooring system and the STL design made it capable of handling two vessels simultaneously while carrying out the transfer,” says Excelerate vice-president operations Charles Ruehl. “We carried out several studies, looking at haz-ops and manoeuvring to demonstrate this to the industry, to the third-party shipowner, to the customer and to Israel Natural Gas Lines, the owner of the STL buoy and pipeline. We needed to reassure everyone that the design and the systems could support this transfer.

www.lngworldshipping.com

SHIP-TO-SHIP TRANSFERS | 31

“Previously, we have never had a commercial reason to carry out this kind of transfer. There was a commercial reason for this project, however; it ensures that the FSRU can continue to send gas out to the network for industrial use and power generation, while refilling. In other words, it ensures a continuous supply of gas from the vessel, with no interruption of service, while reducing overall costs for the operation.” The east Mediterranean is known for its calm summer waters. Excelerate planned the transfer with a 72 hour operating window.

Storms

Calm seas are a must. The FSRU weathervanes around the STL buoy when connected to minimise the wind and wave forces on the vessel. And so, when an LNG carrier arrives alongside, the FSRU moves away from it. This presents a challenge for the tug crew. As luck would have it, high seas delayed the debut transfer by a day. Excelerate waited and the weather turned. The first tug was fixed to the stern of the FSRU to hold it in position as the LNG carrier approached. Three additional tugs then brought the LNG carrier alongside. With the vessels secured, using the LNG carrier’s standard mooring lines, the transfer proved fairly straightforward. Excelerate connected the hose saddles from the FSRU to the LNG carrier, before starting the cooldown and transferring the cargo, which came from Trinidad. “A lot of people have the misconception that LNG is a volatile, dangerous cargo,” Mr Ruehl says. “As a cargo, in fact, it’s not. This is about getting people comfortable with the processes involved in carrying out an STS. Having carried out more than 1,200 STS operations, Excelerate is very comfortable with that.”

www.lngworldshipping.com

STS # 1009

LNGc

Start Date

End Date

Location

Transfer, m3

FSRU

3rd Party

9/4/2016

9/5/2016

HGIT

129,844.650

Express

1029

9/28/2016

9/29/2016

HGIT

103,717.798

Excellence

1051

3rd Party

11/4/2016

11/5/2016

HGIT

123,148.965

Excellence

1087

3rd Party

3/15/2017

3/17/2017

HGIT

124,914.702

Excellence

Excelerate took several hours to connect gear and cool down the emergency release couplings, LNG cargo-transfer hoses and hose-support saddles, before starting the cargo transfer. That done, it completed the custody transfer and warmed the gear. Having disconnected all the equipment, the two ships prepared for unmooring. The mooring master or pilots came alongside again for manoeuvring, which can take place during daylight or at night. The weather remained calm throughout. Mr Ruehl explains: “All LNG STS operations are subject to strict met-ocean or weather parameters in place primarily to protect the cargo tanks from sloshing damage. On the conventional carrier delivering LNG, cargo at certain levels within the tank can damage the inner liner due to cargo sloshing around inside. “This is especially critical with open water STS operations, considering the location’s environment… The met-ocean

parameters in place for operations to commence are under 2m for height of significant swell and less than 8 seconds for time period of swell. Some suppliers, or even locations, may impose stricter restrictions.”

Outcomes

Four transfers in, it is standard procedure at Hadera to place the location mooring master or pilots on board both ships and to use tugs to assist with manoeuvering and mooring. Excelerate and its partners have also agreed to restrict the tug manoeuvres to daylight hours. Excelerate has compared the timings of the first buoy-based transfer with the time it takes the Israel-based FSRU to sail to reload at Limassol in Cyprus. Refilling the FSRU in situ takes just under 48 hours, compared with 98 hours if the vessel needs to depart – less than half the time. Pumping the cargo takes around 24 hours. At the time of writing, Excelerate was about to carry out its fifth LNG transfer in

situ, delivering and loading cargoes onto an FSRU moored to an STL buoy. The first four transfers, a total of more than 481,626m³, transferred an average 120,407m³ load. So pleased is Excelerate with the new transfer method that it has not sent Excellence to Limassol for reloading since last September’s trial operation. It has the option to return to Cyprus if there are storms off Israel. If all goes to plan Excelerate hopes, with practice, to cut in situ transfer times to just 39 hours. “This transfer technique offers cost savings to our customer in Israel,” Mr Ruehl concludes. “It’s cost-effective, because it means not having to disconnect the vessel from the buoy, nor then sailing to another location, hiring tugs and service vessels at that location to bring fenders alongside, reloading then sailing back to connect to the STL buoy. “It’s cost effective – it’s simply a more efficient operation. Israel’s gas demand changes on a daily basis. For the offtake partner, it improves both efficiency and security of supply.” LNG

It takes two: ship-to-ship transfers need calm seas

LNG World Shipping | July/August 2017

LNG & LPG Ship/Shore Interface conference

16-17 November 2017, London

Book now!

www.lngshippingconference.com

The challenges of optimising ship and terminal operations at the jetty, offshore and bunker station The third LNG Ship/Shore Interface conference will once again bring together leading figures to discuss ship and terminal operations at the jetty, offshore and bunker station. This event provides essential operational best practice information to all stakeholders in the LNG transportation supply chain including, vessel owners/operators, ports, LNG project developers, energy majors, charterers and equipment/service suppliers. This event focuses specifically on the ship/shore interface, where LNG carrier and terminal operations link to discharge LNG. It is also the point at which aspects such as cargo and custody transfer systems, berthing and escort tugs, mooring and jetty arrangements and cargo-handling equipment performance are at their most critical. 2017 PROGRAMME HIGHLIGHTS: • Comprehensive update on key industry developments • Terminal and jetty design and services • Port approach, berthing and mooring technologies • FLNG and FSRU ship-shore interface challenges • The latest in cargo transfer technologies • Risk management and emergency response procedures • Latest developments in design and build of LNG carriers • Best practice training and competence • The latest updates from key industry associations including SIGTTO Please follow Karen Thomas Editor of LNG World Shipping on Twitter or sign up to our weekly newsletter for comprehensive coverage of developments in the global LNG shipping industry. Book your place online today at www.lngshippingconference.com/book-now or contact Ian Pow on +44 20 8370 7011 or ian.pow@rivieramm.com

www.lngshippingconference.com

Platinum sponsor

Official publication

Organised by

COMPANY PROFILE | 33

HEROSE TARGETS THE

FUELS OF THE FUTURE Germany-based Herose sees LNGfuelled engines as prime markets for its cryogenic valves. Mario Esche set out the company’s plans

What are Herose’s main LNG business interests?

Herose is a manufacturer of cryogenic valves with more than 140 years of experience in manufacturing and selling these products. We are introducing our knowhow in the cryogenic air gases business to LNG. Here, we are concentrating on four major application areas: storage, transport, fuelling and processing.

What products fit which business areas?

Snapshot CV Name: Mario Esche Based in: Bad Oldesloe, Germany Educated: Masters in sales and marketing management, Hamburg Nordakademie Graduate School Outlook: In the coming year, in all three business units apart from cryogenic, we are providing safety vales for general industry and valves for oil-immersed transformers. We expect our business to grow this year. The new regulations from IMO will mobilise the whole shipping industry, and we will be part of that.

www.lngworldshipping.com

If we have a look at the four application areas, we find gate, globe, ball, check and safety valves used throughout these applications. Herose supplies a complete range of valves for shipping installations that have critical fire-safe requirements based on fire-resistance tests according to ISO 10497. Herose has also developed valve packages to support LNG import terminals and bunkering infrastructure. For the marine industry, the valves must be classified. Ours are classified by leading societies, including DNV GL, ABS, Bureau Veritas and RINA. For LNG bunkering, Herose supplies emergency shut-down valves that stop the flow of LNG within seconds. These actuated devices can be pneumatic or electrically driven and can be used in Ex Zones. The product standard for Herose LNG valves meets DIN EN 12567.

Where do you see opportunities and challenges in growing that business?

The opportunity is that more and more shipping companies, particularly cruise-vessel operators, are thinking of alternative fuels such as natural gas. With the IMO regulations coming up in 2020 we see great potential in the marine business. Aside from the ships, there is also the infrastructure, to be built up on shore, for bunkering and import terminals. Our biggest challenge relates to world oil prices – and to questions about what will happen to US industry under the regime of president Donald Trump. Will there still be a focus on greener gases and alternative fuels, or will we go back to using traditional fuels?

Bad Oldesloe-based Herose has a 140-year track record making valves

Which projects and market segments are you focusing on this year? The focus is on small and mid-scale LNG projects for onshore and marine business. There is a lot of activity and preparation in the cruise industry, so we are busy producing valves for cruise line operators. We also see the small-scale LNG business in east and Southeast Asia as a prospective growth area for us this year.

Fresh LNG carrier orders have slowed in recent months; how is Herose adjusting to this?

Our major focus is on LNG fuelled vessels, rather than on LNG cargo vessels, so the slowing down of orders for fresh LNG carriers is not affecting us.

On which segments are you focusing your R&D and marketing efforts to grow your business?

Knowing cryogenic processes, we are always looking forward to next-generation fuelling. Hydrogen and helium will play an important role, and the temperatures involved are much lower and the pressures much higher in this field. That presents a challenge for our research and development. As for marketing, we are working to introduce the marine LNG industry to Herose’s long years of experience in cryogenic air gases. We have long-term frame contracts with the major air suppliers, including Linde, Air Liquide, Praxair and Messer, which means we have partners who are expert in high-quality valves. LNG

LNG World Shipping | July/August 2017

34 | BEST OF THE WEB

YOUR PARTNER IN SHIP PERFORMANCE MONITORING www.kyma.no

BEST OF THE WEB The LNG World Shipping website is updated daily, tracking the latest developments in shipping, projects, products and services. Our news coverage is online-only. Here are the most popular web-only stories and online Comment pieces from May and June

lngworldshipping.com

Flexible ISO tanks boost small-scale LNG

ENI approves Mozambique Coral FLNG project

Tank containers are helping the worldwide spread of small-scale LNG. A cryogenic IMO Type-C pressure vessel fitted in an ISO standard-size frame of 20, 30 or 40ft long, the LNG tank container offers quick access to natural gas. The units can be lifted from flatbed road vehicle chassis to a flatbed rail car or loaded, using standard container-handling equipment, on a container ship. The tanks can also act as static storage units.

ENI has signed a US$8 billion deal to develop the Coral South gasfield off Mozambique, giving a green light to the 3.4 million tonne a year (mta) floating LNG project Coral FLNG. Production will start in 2022 and the entire 3.4 mta output is contracted to BP. South Korea-based Samsung Heavy Industries (SHI) will build the specialist floating production vessel, a contract said to be worth US$2.5 billion. The east African project is billed as the world’s first ultradeepwater floating LNG project.

bit.ly/2rXJEv1

Kaiser halts Excelerate sale, pledging to keep the LNG firm private Excelerate Energy’s billionaire owner George Kaiser has halted his plan to sell the floating storage and regasification unit (FSRU) shipowner but has pledged to “increase the size and profitability” of the offshore LNG business. Excelerate owns nine FSRUs and one LNG carrier. It needs to expand to meet growing demand. To do that, it needs funds. However, the Oklahoma businessman has rejected all potential suitors and has called time on the sale. bit.ly/2qqBT34

bit.ly/2rNcnpz

LNG carriers exposed as neighbours bar Qatar’s US$11 billion fleet In early June, the dispute between Qatar and its neighbouring Arab states looked set to restrict movements of the gas-rich emirate’s US$10.7 billion national fleet. Bahrain, Saudi Arabia and the UAE barred Qatar-owned ships from their waters, forcing the fleet to reroute through Iranian and Omani waters to transit the Strait of Hormuz. http://bit.ly/2szB7yP

www.lngworldshipping.com/s/knowledgebank

Exclusive: Stolt-Nielsen sets out its LNG shipping goals Stolt-Nielsen Gas (SNG) has ordered two 7,500m³, dual-fuel LNG carriers from Keppel Singmarine with options to purchase three additional ships of a similar size. The two vessels will enter service in 2019 and can also deliver LNG bunker supplies. SNG has two ventures, at Orestano on the Italian island of Sardinia and at Rosyth in Scotland. bit.ly/stolt4LNG

Editor’s selection: Poten LNG shipping opinion

To view more whitepapers visit the Knowledge Bank at www.lngworldshipping.com To upload a whitepaper to the Knowledge Bank, please email Steve Edwards at steve.edwards@rivieramm.com

LNG World Shipping | July/August 2017

Storage capacity can be used in two ways. It provides importers with the operational flexibility to sell volumes on short notice, and traders or portfolio players can use physical storage to take a long position on future prices. http://bit.ly/potenPAPER

www.lngworldshipping.com

FREE ACCESS

TO TECHNICAL DOCUMENTATION FOR MARINE & OFFSHORE PROFESSIONALS

Take advantage of the Maritime Technology Knowledge Bank. • A unique, free to access resource for the global shipping industry • Access whitepapers and technical documentation covering every aspect of maritime technology, equipment and new products.

www.lngworldshipping.com/knowledgebank

YOUR PARTNER IN SHIP PERFORMANCE MONITORING www.kyma.no

SHIPORDERS AND DELIVERIES | 37

Half-year LNGC fleet update – 10 orders, 21 deliveries

he year to date has been busy for the development of the LNG carrier fleet, with 21 ships delivered and 10 newbuildings contracted. Dominating the year’s headlines are LNG bunker vessels, coastal tankers, multigas carriers, floating storage and regasification units (FSRUs) and additional tonnage for leading owners. The delivery tally for the first six months of the year includes the first two purpose-built LNG bunker vessels and four 27,500m³ LNG/ethane multigas tankers. The dedicated bunker vessels are the 5,100m³ Engie Zeebrugge built by Hanjin yard for a group comprising Fluxys, NYK, Engie and Mitsubishi Corp and the 6,500m³ Cardissa that STX completed for Shell. Both are equipped with fourstroke, dual-fuel main and auxiliary engines, and bow thrusters to make them more manoeuvrable. Engie Zeebrugge’s home base is the Fluxys terminal in the Belgian port of Zeebrugge; Cardissa’s is at the Gate LNG terminal at Rotterdam in the Netherlands. The availability of the two bunker vessels – and berthing arrangements built to accommodate small LNGCs – does much

to support use of LNG as marine fuel in northern Europe. Four 7,500m³ coastal LNG carriers have been ordered. All four will primarily be engaged in regional distribution but will be equipped to carry out ship-to-ship (STS) LNG bunkering too. The 7,500m³ coastal LNGC quartet comprises two for Korea Line that Samsung Heavy Industries (SHI) will build for delivery in May and December 2019 and two for Stolt-Nielsen Gas (SNG) that Keppel Singmarine will fabricate at its yard in Nantong, China for completion in the second and third quarters of 2019. The Korea Line ships will be chartered by South Korean state-owned gas utility Kogas and employed domestically. They will feature the KC-1 membrane tank containment system, which Kogas has been developing over the past decade with the country’s three leading shipbuilders. This co-operation is formalised under their KC LNG Tech tank design venture. KC-1 is an alternative to the two GTT membrane tank systems. If they choose the KC-1 option, SHI, Daewoo and Hyundai will save on the royalty fees they pay on vessels that incorporate the GTT No 96 and

Mark III/V cargo containment technologies. The only other LNGCs contracted with KC-1 tanks to date are two 174,000m³ vessels that SHI will complete for South Korea’s SK Shipping later this year. Orders for the SNG pair were confirmed in May 2017, following approval of the proposed newbuildings by the board of parent Stolt-Nielsen Ltd. SNG is working to develop coastal LNG distribution operations in Sardinia and Scotland. It plans to employ the new ships, at least to some extent, on these schemes Four new conventional-size ships have been contracted so far in 2017; a 173, 400m³ duo for Flex LNG at Daewoo Shipbuilding & Marine Engineering (DSME) and a 180,000m³ pair for Knutsen OAS at Hyundai. To be delivered in 2019, each of the four vessels will be powered by a pair of two-stroke, dual-fuel engines, incorporating high-pressure, gas injection fuel gas supply systems. Knutsen ordered its pair against a long-term charter with Iberdrola of Spain to lift cargoes at Cheniere’s Corpus Christi terminal in Texas. The Flex contract has boosted the owner’s orderbook to six vessels. Knutsen aims to secure a mix

LNG CARRIERS ORDERED 1 JAN-19 JUNE 2017 Hull no

shipbuilder

capacity m³

delivery

owner

propulsion

charterer

cont system

details

2945

Hyundai

170,000

2019

Kolin/Kalyon

DFDE

Kolin/Kalyon

GTT Mk III Flex

Turkey FSRU

2909

Hyundai

170,000

2018

Höegh LNG

DFDE

TBC

GTT Mk III

Höegh FSRU #10 TBC

2470

Daewoo

173,400

2019

Flex LNG

LSDP (HP)

TBC

GTT No 96

2471

Daewoo

173,400

2019

Flex LNG

LSDP (HP)

TBC

GTT No 96

TBC

2963

Hyundai

180,000

2019

Knutsen OAS

LSDP(HP)

Iberdrola

GTT Mk III Flex

Corpus Christi exports

2964

Hyundai

180,000

2019

Knutsen OAS

LSDP(HP)

Iberdrola

GTT Mk III Flex

Corpus Christi exports

TBC

Samsung

7,500

2019

Korea Line

TBC

Kogas

Type C

Jeju Island deliveries

TBC

Samsung

7,500

2019

Korea Line

TBC

Kogas

Type C

South Korea

TBC

Keppel Singmarine

7,500

2019

Stolt-Nielsen

DFDE

TBC

Type C

Coastal distribution

TBC

Keppel Singmarine

7,500

2019

Stolt-Nielsen

DFDE

TBC

Type C

Coastal distribution

bunkering Nantong Nantong

Gas Gas

LNG World Shipping, 19 June 2017

www.lngworldshipping.com

LNG World Shipping | July/August 2017

YOUR PARTNER IN SHIP PERFORMANCE MONITORING www.kyma.no

38 | SHIPORDERS AND DELIVERIES

of long-term contract and spot market employment for this fleet. Since the start of 2016, Greece-based Maran Gas has taken delivery of 10 LNG carriers, creating a fleet of 37. It still has six conventional-size LNGCs and a 173,400m³ FSRU under construction, all at DSME. The FSRU marks the company’s first foray into the floating regas sector. Among the seven ships that DSME has completed so far in 2017 are a 174,000m³ quartet that will lift cargoes produced by Train 3 at Sabine Pass in Louisiana under 20-year charters with Kogas. SM Eagle and SM Seahawk are owned by Korea Line; Hyundai LNG Shipping controls Hyundai Princepia and Hyundai Peacepia. DSME and Samsung Heavy Industries (SHI) are neck-and-neck in the race to become the top LNGC builder. Hyundai Peacepia, commissioned at DSME on 8 June, is the latest ship completed this year. On its entry into service both Samsung and Daewoo had built 108 LNGCs. Samsung’s 100th LNGC was the 170,000m³ LNG Port Harcourt II, completed for Nigeria LNG in December 2015. Between them, Samsung and Daewoo have built 43 per cent of the

existing LNGC fleet of 502 vessels. The Maran Gas FSRU, contracted in December 2016, highlights the continued interest in these vessels as a fast-track, low-cost option. So far in 2017, two FSRUs have been ordered. Two more – BW Integrity and Hoegh Giant, both of 170,000m³ – have been completed. Both will be built by Hyundai and 170,000m³ in capacity. One will be used by Kolin in Turkey, commencing in 2019. The second, Hull No 2909, scheduled for completion next year, will be Höegh LNG’s 10th FSRU. As for the deliveries, BW Group is to position SHI-built BW Integrity in Karachi, to become Pakistan’s second FSRU, this summer. Hoegh Giant, completed by Hyundai for Höegh LNG, begins work as an FSRU in Ghana next summer. Now, Dynagas looks set to emulate fellow Greek owner Maran Gas, ordering its first FSRU. The company’s preliminary discussions last summer with Hudong-Zhonghua yard in China about building a pair of regas vessels agreed nothing definite. More recently, Dynagas is reportedly losing interest in an option to convert its LNGC Clean Energy into an FSRU.

This raises the possibility that Dynagas will soon finalise an order for one or two FSRUs with Hudong. One recently contracted floater does not meet LNG World Shipping’s definition of an LNG carrier. But we want to make special mention of the floating LNG (FLNG) vessel that Eni ordered in June at Samsung for Coral LNG off Mozambique. Slow growth and the anticipated 50 per cent expansion in LNG production capacity in the second half of this decade have temporarily dampened interest in new LNG projects. Several proposed FLNG projects have been delayed or cancelled. Eni’s is the first FLNG vessel contracted since February 2014 and only the fifth newbuilding of this type. Due for completion in 2021, the 238,700m³, US$2.5 billion floater will have four pairs of GTT Mark III membrane storage tanks and will produce up to 3.4 million tonnes per annum (mta) of LNG. Meanwhile, 28 more LNG carriers are due to be completed by year-end. While this number is easy to pinpoint, what remains very much a mystery is the number of additional LNGC newbuildings that will be contracted by 31 December. LNG World Shipping will keep you posted. LNG

LNG CARRIERS DELIVERED 1 JAN-19 JUNE 2017 Vessel name

delivery

capacity m³

owner

builder

charterer

containment

details

Cesi Qingdao

January

174,000

CESI/MOL

Hudong

Sinopec

GTT No 96

APLNG exports

Maran Gas Roxana

January

173,400

Maran Gas

Daewoo

Shell

GTT No 96

Shell business

Maran Gas Ulysses

January

174,000

Maran Gas

Hyundai Samho

Shell

GTT Mk III

Shell business

Seri Cenderawasih

January

150,000

MISC

Hyundai

Petronas

Moss

Petronas projects

JS Ineos Innovation

January

27,500

Evergas

Sinopacific

Ineos

Type C

Ethane service

Torben Spirit

February

173,400

Teekay

Daewoo

Shell

GTT No 96

Shell business

Maran Gas Olympias

February

173,400

Maran Gas

Daewoo

Shell

GTT No 96

Shell business

Asia Integrity

February

160,000

Chevron

Samsung

Chevron

GTT Mk III

Gorgon exports

Ougarta

March

170,000

Hyproc Shipping

Hyundai

Sonatrach

GTT Mk III

Algerian exports

BW Integrity

March

170,000

BW Group

Samsung

Pakistan GasPort

GTT Mk III

Port Qasim FSRU

JS Ineos Intuition

March

27,500

Evergas

Yangzijiang

Ineos

Type C

Ethane service

SM Eagle

April

174,000

Korea Line

Daewoo

Kogas

GTT No 96

Sabine Pass exports

Hoegh Giant

April

170,000

Höegh LNG

Hyundai

Quantum Power

GTT Mk III

Tema FSRU

JS Ineos

April

27,500

Evergas

Sinopacific

Ineos

Type C

Ethane service

Independence Engie Zeebrugge

April

5,100

Fluxys/Gas4Sea

Hanjin

Engie

Type C

Zeebrugge bunkering

Hyundai Princepia

May

174,000

Hyundai LNG

Daewoo

Kogas

GTT No 96

Sabine Pass exports

SM Seahawk

May

174,000

Korea Line

Daewoo

Kogas

GTT No 96

Sabine Pass exports

JS Ineos Invention

May

27,500

Evergas

Yangzijiang

Ineos

Type C

Ethane service

Cesi Beihai

June

174,000

CESI/MOL

Hudong

Sinopec

GTT No 96

APLNG exports

Cardissa

June

6,500

Shell

STX

Shell

Type C

Rotterdam bunkering

Hyundai Peacepia

June

174,000

Hyundai LNG

Daewoo

Kogas

GTT No 96

Sabine Pass exports

LNG World Shipping, 19 June 2017

LNG World Shipping | July/August 2017

www.lngworldshipping.com

Visitor pre-registration is available! Please go to www.marintecchina.com for more information.

40 | VIEWPOINT

Embracing failure – LNG shipping can reshape safety culture N

Yuzuru Goto: creating a collaborative culture from within

Everyone has bad days. What matters is how you react to the inevitable – how you handle failure

or-Shipping in Oslo highlighted a positive shift to digitalisation in our industry – but as much as I enjoyed that focus, it also struck me that safety at sea slipped off the event’s main agenda this year, writes Yuzuru Goto. For years, the shipping industry has focused on technology, training, regulations and procedures. Despite this, LNG shipping is still at risk of major accidents. That risk has prompted large energy corporations to put the human element at the top of their agendas. Strategies for tackling the human element to improve safety vary from company to company. At K Line LNG Shipping (UK), we believe that the way to improve safety and to reduce major accidents is to create collaborative organisational cultures from within. Tradition holds that the way to avoid failure is to do everything right in the first place. But failures occur because technology, training, regulations and procedures cannot eliminate risk in a complex industry like shipping. Everyone has bad days. What matters is how you react to the inevitable – how you handle failure. I believe this is an industry blind spot. When we focus on doing everything right in the first place and police this through inspections and audits, we risk making people reluctant to admit their failures, concerns and mistakes. This, in turn, creates and supports a culture of coverups – creating a negative cycle based on distrust. In too many major shipping accidents, crew knew there was a problem before the event of the failures that caused the incident, but they failed to raise or correct the issue. The way to tackle this is to create an organisational culture that allows us to be vulnerable, to feel safe enough to admit failure and report it. LNG shipping needs to create a culture that embraces failure as the way to learn. What we need is not to punish, but to help our people collaborate to manage failures before the situation

LNG World Shipping | July/August 2017

becomes critical and leads to a major accident. We can significantly cut the number of major accidents in LNG shipping and improve maritime safety in general. Our industry has everything to gain from reducing major accidents. LNG shipping – with its stronger value chain of charterers, terminal operators, shipowners, shipmanagers and underwriters and with our stringent safety standards – is well-placed to lead change across shipping. Supported by maritime consultant Propel, K Line LNG Shipping (UK) has been working on eight safety-leadership behaviours. We are applying this methodology to break down the barriers between ranks and to build bridges between them, or between different nationalities or locations, including ship versus shore. We are working to build trust and collaboration within the organisation, to make our safety culture more mature – reducing the risk of major accidents. Using Propel’s insight through Attensi’s advanced platform, we are the first company to utilise a human interaction-focused 3D simulation model with scale. We are using this to train all our staff to practise failure in a safe environment – and, more importantly, to learn from it. This leaves K Line LNG Shipping (UK) with a dilemma, however. Creating a culture that is open to failure sits uneasily with a compliancebased maritime safety regime based on ticking the right boxes. It takes courage to be open, to admit to or highlight mistakes. But now is the time for LNG shipping to stick to its purpose and be a role model. K Line LNG Shipping (UK) is not alone in this. We met other believers at Nor-Shipping and are working together to drive that shift in culture. Safety shouldn’t be dull; together let’s make it fun. LNG Yuzuru Goto is managing director of K Line LNG Shipping (UK)

www.lngworldshipping.com

Â®

GAS TRANSFER SOLUTIONS A SINGLE SOURCE FOR THE ENTIRE LNG AND HPNG TRANSFER CHAIN: FROM LNGC TO FSRU AND FROM FSRU TO JETTY

MIB ITALIANA S.P.A.

Via Garibaldi, 6 - 35020 Casalserugo (PD) - Italy Tel. +39 049 8741272 - e-mail: info@mibitaliana.it

PIONEERING A STEP-CHANGE IN THE SAFETY OF LNG AND HPNG TRANSFER APPLICATIONS

MIB INTERNATIONAL Ltd

Sun Alliance House, Little Park Street Coventry, CV1 2JZ, ENGLAND Tel. +44 (0) 24 76225202 - e-mail: sales@mibinternational.co.uk

www.mibitaliana.it

LNG Solutions for the Marine Industry

Chart’s maritime LNG solutions reduce operating costs while dramatically improving emissions for compliance with today’s stringent requirements in the marine industry. Cryogenic Solutions for: • LNG ship fueling systems

• Bunkering vessels

• FLNG

• Bunkering stations

• FSRU

• Port power applications