2020: LNG light in the dark, certainty for 2021

by Diego Gavagnin

It is difficult at the end of a year like this to calmly communicate positive developments and enthusiasm, in any field. But we have to hold on to hope, and in this we have been luckier. For the small-scale LNG industry, 2020 was a good year, worldwide and also in Italy. And 2021 will be even better.

We can say that the point of no return has been passed. Small-scale LNG is now mature and fully scalable. Apart from cruises, the impact of the health crisis has been relative. The market trends we try to intercept with our news show steady progress if not acceleration. And we are not referring to the goal of 100 service stations in Italy, but to the confirmation, and increases, of investments in the maritime sector.

The costs of ships and maritime logistics are not comparable with other direct uses of LNG. Confirmations are the consolidation of supply terminals and the entry into service of more and more new tankers for ship-to-ship supplies.

It is news these days that the economic impact of the coronavirus will lead to a leap forward for Asian economies, with China overtaking the United States in 2028, five years ahead of schedule. Beijing, already by far the world leader in direct land uses of LNG (transport, industry, isolated networks), is planning expansion into the maritime sector.

Last June, the Chinese port of Yantian, connected to the port and city of Shenzen, adjacent to Hong Kong, was chosen as an LNG refuelling centre with an initial capacity of 230,000 tonnes per year. Ships, mainly container ships, will be refuelled by barges. Zhoushan, China's main port, has also been activated and the first bunkering barge will operate by next June.

Not only China, the whole of North Pacific Asia is on the move (but Australia has also decided to equip itself). Beijing is competing with Singapore to become the main LNG bunker hub in the area. The Malaysian city-state alone accounts for 25% of all the world's maritime supplies.

As Argus Agency reported in a recent report, South Korea plans 140 LNG ships by 2026, Japan 30-35% LNG bunker by 2050, and the ports of Tokyo and Nagoya are receiving subsidies to implement their own bunkering capacity. Ferry ships are already operating and ISO containers of Siberian LNG are leaving Japan for Chinese onshore consumption. And just around the corner is India. These developments will have to be taken into account by all.

With Northern Europe and the Mediterranean, the world's main shipping lanes are being covered. Spain, France and Italy are intensifying their initiatives. For ship-to-ship and tanker-to-ship supplies, after Barcelona and Marseilles, Alcegiras (Gibraltar) and Patras in Adriatic Greece, among others, are on the way. The South Shore is also appearing, with Morocco and Egypt in the front row, waiting for Algeria.

For Italy, the great leap forward will take place in 2021, with the operation of coastal depots in the ports of Santa Giusta-Oristano and Ravenna, for a total capacity of 29 thousand cubic metres of LNG, and the arrival of the first Italian tanker. The Sardinian depot will give a regional dimension to the island's methanisation process, which began last summer with LNG tankers from Livorno, while the one in Veneto will be able to bring the south back to Italy, replacing the (impossible) supplies from France.

The start of tanker refuelling by the OLT regasifier off Livorno is crucial, while maritime demand is building, thanks to the unexpected turnaround of the Liguria Maritime Directorate and the La Spezia Port Authority, where regular ship-to-ship LNG refuelling has been taking place for a month. In 2021, tanker-to-ship refuelling is also expected to arrive. Elio, the LNG ferry owned by Caronte, has been forced to use diesel fuel for 26 months.

Having confirmed its European leadership in terms of service stations and circulating lorries, the recovery underway in the production of bioNG and its distribution to lorries, and hopefully soon to ships, which bureaucracy does not currently allow, seems exceptional.

As has already been illustrated in recent months, the new global and national frontier of small-scale LNG is to move from fossil to renewable. Scandinavian countries are now leaders in its production, but Italy's gap is not unbridgeable. It is no coincidence that the title of our next international conference (Bologna Exhibition Centre 23/25 June 2021) will be "Small Scale LNG and bioLNG Routes".

The developments we have briefly outlined here, especially the confirmations and new global investment decisions, were by no means a foregone conclusion. The health-economic crisis at the beginning of the year caused oil prices to plummet and so did marine diesel prices. Analysts predict that they will remain low, because the coronavirus has changed lifestyles and work, with car use being the first victim.

The prediction of low marine diesel prices could have changed decisions towards LNG, but it did not happen. This means that even at global shipowner level, the price of fuel remains a key factor, but the environmental aspect now prevails, seen as a business value (which is now reflected in the assessments of financial analysts). It is also beginning to be understood that removing sulphur from fumes, solidifying it and dumping it in the sea is not a good choice, even if it is permitted.

Another "danger" for investment in direct LNG use has been the emphasis on strategies and incentives for hydrogen development, announced by the EU followed by many other countries. But globally, as the weeks go by, the assessment, already expressed in last June's ConferenzaGNL webinars, that small-scale LNG is not a competitor to hydrogen, but a precursor, is consolidating.

The two energy carriers share the general architecture, components, cryogenics and logistics. LNG is now an established reality, hydrogen will be in the future. Sea and land routes will be the same, as will supply logistics, and they will be able to coexist for a long time, while waiting for the costs of the latter to fall. If bioLNG becomes as widespread as expected, the very low, if not neutral, environmental impact will be similar to that of hydrogen produced with renewable electricity.

The last problem, which is not the least important, remains open: emissions of methane, a climate-changing substance, in the various cycles of natural gas use. It also concerns LNG, albeit to a lesser extent, because of cryogenic confinement. This issue, which was underestimated during the years of natural gas development as a substitute for coal and oil, now requires close attention. The technologies to avoid emissions and leaks are there, at costs that have little impact on the final price. It is a question of standardising and applying them.

For those wishing to learn more about these topics, we recommend the collection of our news on the website, the proceedings of the International Forum in Genoa on 19/20 November and the final conference of the European programme Interreg Italy-France on small-scale maritime LNG.

On behalf of the Scientific Committee of ConferenzaGNL and Mirumir, the promoting company, we wish our readers a happy 2021.