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SPE 165898
Optimization of Compressed Natural Gas Marine Transportation with
CompositeMaterial Containers
Michael Nikolaou, University of Houston, Xiuli Wang, XGas, and Michael J. Economides, University of Houston
Copyright 2013, Society of Petroleum Engineers
This paper was prepared for presentation at the SPE Asia Pacific Oil & Gas Conference and Exhibition held in Jakarta,
Indonesia, 22–24 October 2013.
This paper was selected for presentation by an SPE program committee following review of information contained in an
abstract submitted by the author(s). Contents of the paper have not been reviewed by the Society of Petroleum Engineers and
are subject to correction by the author(s). The material does not necessarily reflect any position of the Society of Petroleum
Engineers, its officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written
consent of the Society of Petroleum Engineers is prohibited. Permission to reproduce in print is restricted to an abstract of not
more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of SPE
copyright.
Abstract
Marine transportation of natural gas is critical for its monetization. Pipelines and liquefied natural gas (LNG) are the
established technologies for offshore natural gas transportation, with compressed natural gas (CNG) recently proposed as an
economically preferable alternative under certain conditions.
In previous work, we have delineated areas in a transportationdistance/gasvolume diagram, where each of the three
transportation means mentioned above is economically most attractive. In general, once offshore pipelines are excluded
because of water depth and seafloor terrain limitations, CNG transportation is considered attractive compared to LNG for
relatively small volumes and short distances. Until recently, the preferred material for proposed CNG containers has been
metal, for reasons of simplicity, robustness, and development cost. However, metal CNG containers have a number of
disadvantages, the most obvious of which is that the container itself may be several times heavier than the contained gas, and,
consequently, such gas may be only a small fraction of the cargo carried by a loaded CNG ship.
Composite containers are an alternative to metal, with a number of advantages. First, composites are significantly lighter
than metal. Second, composite containers can reach considerably higher containment pressures (hence capacity), while still
maintaining lower weight compared to metal. Finally, composite containers are much less prone to corrosion, and as a result
can contain gas that has not been fully treated. These facts make composite containers an attractive proposition and greatly
increase the overall attractiveness of using CNG to monetize stranded gas.
We present here a thorough study using both metal and composite containers and optimized operating conditions, such as
pressure and temperature, to explore the applicability of CNG for marine stranded gas transportation. A new map of the
economic attractiveness of LNG and CNG as a function of transportation distance and gas volume is presented, showing a
considerably expanded area of CNG preference over LNG.
Introduction
Marine transportation of natural gas is critical for its monetization. Pipelines and liquefied natural gas (LNG) are the
established technologies for offshore natural gas transportation. The technical feasibility of a third alternative, namely
marine transportation of natural gas as compressed natural gas (CNG), was briefly demonstrated in the sixties, but without
commercial success [1]. Interest in marine CNG transportation has been rekindled recently, as a result of development of
new CNG containers suitable for marine transportation of natural gas [23], supported by economic feasibility studies (e.g.
[1]) that broadly delineated general conditions for which marine CNG transportation is favored. In general, once offshore
pipelines are excluded because of water depth and seafloor terrain limitations, CNG transportation is considered attractive
compared to LNG for relatively small volumes and short distances. Until recently, the preferred material for proposed CNG
containers has been metal, for reasons of simplicity, robustness, and development cost. However, metal CNG containers
have a number of disadvantages, the most obvious of which is that the container itself may be several times heavier than the
contained gas, and, consequently, such gas may be only a small fraction of the cargo carried by a loaded CNG ship.
2 SPE 165898
Composite containers are an alternative to metal, with a number of advantages [4]. First, composites are significantly
lighter than metal. Second, composite containers can reach considerably higher containment pressures (hence capacity),
while still maintaining lower weight compared to metal. Finally, composite containers are much less prone to corrosion, and
as a result can contain gas that has not been fully treated. These facts make composite containers an attractive proposition
and greatly increase the overall attractiveness of using CNG to monetize stranded gas.
We present here a thorough study using both metal and composite containers and optimized operating conditions, such as
pressure and temperature, to explore the applicability of marine CNG for marine stranded gas transportation. In addition to
specific numbers, we uncover general principles and associated factors that govern the relative advantages and disadvantages
of LNG vis as vis CNG. A new map of the economic attractiveness of LNG and CNG as a function of transportation distance
and gas volume is presented, showing a considerably expanded area of CNG preference over LNG.
Formulas for NPV calculation
To assess the economic merit of a CNG project using metal or composite CNG containers and to compare it to LNG
alternatives, we calculate the net present value (NPV) of each project over a finite time period.
The NPV is defined in a standard way as
Gas Sales
NPV PV CAPEX = ÷ (1)
where CAPEX refers to projectrelated capital expenditure; and
Gas Sales
PV refers to the present value (PV) of net cash from
gas sales over a time period of N years, equal to
After Taxes,
Gas Sales After Taxes,
1 1
ACF
PV DCF
(1 )
N N
k
k k
k k
i
= =
= =
+
¿ ¿
(2)
where
After Taxes,
ACF
k
is annual cash flow after taxes in year k ; i is the discounting interest rate; and DCF is discounted cash
flow.
Total CAPEX is assumed to be incurred instantly at zero time, and to comprise expenditures on terminals and on the gas
transportation fleet, i.e.
( )
Terminals Fleet fleet
CAPEX CAPEX ( ) CAPEX ( , ) = + q G L q (3)
where
Terminals
CAPEX ( ) q depends on the natural gas transportation rate that meets consumption, q ; and
Fleet fleet
CAPEX ( ) G
depends on the natural gas carrying capacity of the fleet of natural gas transportation vessels,
fleet
G , which in turn depends on
q and the transportation distance, L , from natural gas source to delivery destination.
Details on calculation of each of the above terms are provided below. Numerical values for all parameters that appear in
corresponding formulas are shown in Table 3. Additional details on data sources and derivations are provided in Appendices.
General trends for NPV of LNG and CNG projects
Before executing specific numerical calculations for NPV differences between LNG and CNG projects, important insights
can be obtained by identifying general trends that point to orders of magnitude of related quantities as well as to the effect of
various factors on these quantities. To derive our results, we make the following simplifying assumptions:
 The transportationed gas is consumed at a uniform rate, q , which does not change over time.
 As stated in Eq. (3), total CAPEX is the sum of two terms: CAPEX for terminals (liquefaction/regasification for
LNG, compression/decompression for CNG) assumed to be proportional to q ; and CAPEX for gas transportation,
assumed to be proportional to the capacity (volume) of the gas transportation fleet, which in turn is proportional to
the product × L q (as further elaborated in subsequent sections), i.e.
Terminals Fleet
CAPEX= × + × × C q C L q , (4)
 Annual operating expenditure (OPEX) is the sum of two terms: OPEX for gas volume change
(liquefaction/regasification for LNG, compression/decompression for CNG) assumed to be proportional to q ; and
OPEX for gas transportation (voyage costs), assumed to be proportional to the product × L q , i.e.
Transport VolumeChange
OPEX= × × + × C L q C q , (5)
 Asset depreciation is linear down to zero over N years, i.e. annual depreciation, D , is constant as
CAPEX
= D
N
, (6)
 Annual cash flow from gas sales is constant each year, i.e.
SPE 165898 3
Gas Sales,
ACF = ×
k
q T for all 1,..., = k N (7)
where T is the gas transportation tariff.
 The tax rate,
Tax
f , is constant.
 The annual interest rate, i , is constant over N years.
Based on the above assumptions, Eq. (1) yields
NPV ( ) = ÷ × ×
L L
A B L q (8)
where
( )
( )
Tax
Tax
Terminals
Tax Volume Change
1 ˆ
1
1
= ÷ × × ÷
 
÷ ÷ × × ÷

\ .
÷ ÷ × ×
L N
N
N
A f I T
f
I C
N
f I C
(9)
( )
Tax Transport
Tax
Fleet
1 ˆ
1
= ÷ × ×
 
+ ÷ × ×

\ .
L N
N
B f I C
f
I C
N
(10)
with
(1 ) 1
ˆ
(1 )
+ ÷
=
+ ×
N
N N
i
I
i i
(11)
(see Appendix A).
NPV difference between LNG and CNG
Inspection of Eq. (8) provides the following important insights regarding the NPV difference between CNG and LNG
projects.
First, the value of the gas tariff, T , has no effect on
LNG CNG
NPV NPV NPV ˆ A = ÷ , because Eqs. (8)(11) imply
NPV A
= A ÷A ×
L L
A B L
q
(12)
where
( )
Tax
Terminals Tax VolumeChange
1 1 ˆ
 
A = ÷ ÷ × ×A ÷ ÷ × ×A

\ .
L N N
f
A I C f I C
N
(13)
( )
Tax
Tax Transport Fleet
1 1 ˆ
 
A = ÷ × ×A + ÷ × ×A

\ .
L N N
f
B f I C I C
N
(14)
This realization is independent of whether economies of scale are considered or not, because the term ( )
Tax
1÷ × ×
N
f I T in
Eq. (9) is independent of CAPEX or OPEX assumptions. Of course, the value of T has a significant effect on the actural
NPV of either CNG or LNG projects, e.g. it affects whether that NPV is positive or negative.
Second, Eq. (12) implies that, to the extent that economies of scale are negligible and the factors
Terminals
, AC
Volume Change
, AC
Fleet
, AC and
Transport
AC are constant, the sign of NPV A depends solely on the transportation distance, L .
While this assumption is removed in the next section, where scale effects are examined in detail, the conclusion remains that
L is the key driver for the sign of NPV.
Third, it is clear that longer distances will favor LNG over CNG, due to the positive sign of the coefficient ÷A
L
B of L in
Eq. (12). This is because
Terminals
0 A > C ,
Volume Change
0 A > C ,
Fleet
0 A < C , and
Transport
0 A < C , reflecting the fact that CNG
requires relatively lower CAPEX for gas terminals and OPEX for compression as well as higher CAPEX and OPEX for
building and operating a transportation fleet, whereas the reverse is true for LNG.
4 SPE 165898
Selecting between LNG and CNG: Crossover distance
The crossover distance
Crossover
L , at which the relative NPV ranking for LNG and CNG is reversed, is where NPV 0 A = .
Equation (12), implies
Terminals Volume Change
Crossover
Fleet Transport
÷ ×A ÷A
=
×A + A
h C C
L
h C C
(15)
where the parameter
Tax
Tax Tax
1 1
ˆ
1 1
÷
= ~ +
÷ ÷
N
I f N i
h
f N f
(16)
(see Appendix B) is of the order of magnitude of
1
10 1/y
÷
for typical values of
N
I and
Tax
f (e.g. as in Table 1).
Equation (15) offers a simple criterion for assessing the relative merits of CNG and LNG, in that this equation relies on
very few assumptions, and describes explicitly the effect of relative costs on
Crossover
L . As such, it offers a quick assessment
of the magnitude of
Crossover
L , what affects it, and in what way, rather than a single number. Furthermore, Eq. (15) suggests
that what will alter the specific value of
Crossover
L over a range of gas rate values, q , is differences between LNG and CNG in
economies of scale reflected in each of the terms
Terminals
C ,
VolumeChange
, C
Fleet
C , and
Transport
C . Nevertheless, a nominal value
of
Crossover
L offers an order of magnitude expected for
Crossover
L . This claim will be supported in more detail in the next
section, where economies of scale and their effect on
Crossover
L are quantified.
Note that
Crossover
0 > L according to Eq. (15).
Note also that that
Crossover
L is not a function of the gas transportation tariff, T . This makes conclusions about the relative
economic attractiveness of CNG and LNG projects fairly robust in terms of gas price fluctuations.
Table 1. Typical values for parameters affecting NPV for LNG and CNG projects
Parameter Value
[%] i , ,
10
[y] N
10
Tax
[%] f 35
$million
Bcf/y
(
(
¸ ¸
T 5
[miles/h] v 23
For typical values of 0.10 = i ,
Tax
0.35 = f , 10 y = N (Table 1) it follows from Eq. (16) that 0.2 1/y = h . For sample
values of
Terminals
AC ,
VolumeChange
, AC
Fleet
AC , and
Transport
AC based on Table 2, Eq. (15) yields
Crossover
3.7 kmiles ~ L (17)
for CNG with metal containers, and
Crossover
5.2 kmiles ~ L (18)
for CNG with composite containers.
SPE 165898 5
Table 2. Sample values for process factors affecting
Crossover
L , Eq. (15).
LNG CNG Metal CNG Composite
Terminals
$million
Bcf/y
(
(
¸ ¸
C 27 0.5 0.5
Fleet
$million
kmile Bcf/y
(
(
×
¸ ¸
C 1 7.5 5.3
VolumeChange
$million
Bcf
(
(
¸ ¸
C 1.0 0.1 0.1
Transport
$million
kmile Bcf
(
(
×
¸ ¸
C 0.1 0.5 0.45
Values of i and N other than these in Table 1 have a very small effect on the value of
Crossover
L , as shown in Fig. 1,
obtained for the nominal value of
Tax
f in Table 1 and for the nominal values of parameters in Table 2. Therefore, the same
values of i and N will be held throughout this study.
Fig. 1. Effect of i and N on
Crossover
L . The dot represents the nominal point according to Eqs. (17) (left) and (18) (right).
Variability in the four factors
Terminals
AC ,
VolumeChange
AC ,
Fleet
AC , and
Transport
AC that determine the NPV difference between
LNG and CNG has a significant effect on the value of
Crossover
L , as shown in Fig. 2. Nevertheless, the general trend is that
CNG remains competitive in comparison to LNG for relatively short distances even for large quantities of transportationed
natural gas. This claim will be examined in more detail in the next section, where economies of scale are explicitly included
in the calculations.
6 SPE 165898
Fig. 2. Comparison of NPV of LNG and CNG (metal and composite) projects for parameter values in Table 1 and Table 2. The
shaded bands correspond to 50% ± variability in the coefficients
Terminals
C ,
VolumeChange
C ,
Fleet
C , and
Transport
C for LNG and CNG.
Note that the nominal NPV for LNG is negative because of the low gas transportation tariff of 5 $/Mscf = T ; however the relative
position and variability bands of the two NPV lines are independent of T .
An assessment of how each of the four factors
Terminals
AC ,
VolumeChange
AC ,
Fleet
AC , and
Transport
AC affects
Crossover
L is
provided by series expansion of
Crossover
L around the nominal parameter values shown in Table 1 and Table 2, resulting in
VolumeChange Transport
Crossover Terminals Fleet
Crossover Terminals VolumeChange Fleet Transport
0.85 0.15 0.76 0.24
o o
o o o
A A
A A
~ × + × ÷ × ÷ ×
A A A A
C C
L C C
L C C C C
(19)
and
VolumeChange Transport
Crossover Terminals Fleet
Crossover Terminals VolumeChange Fleet Transport
0.85 0.15 0.70 0.30
o o
o o o
A A
A A
~ × + × ÷ × ÷ ×
A A A A
C C
L C C
L C C C C
(20)
for metal or composite CNG containers, respectively. Eqs. (19) and (20) imply that relative variability in
Terminals
AC ,
VolumeChange
AC ,
Fleet
AC , and
Transport
AC can have significant effect on the variability of
Crossover
L , as confirmed in Fig. 2.
Interpretation of Eqs. (19) and (20) suggests that an uncertainty percentage in the cost coefficients of gas terminals or ships
results in an about equal percentage uncertainty in
Crossover
L , whereas an uncertainty percentage in the cost coefficients of gas
volume change and transportation has a significantly smaller effect.
When economies of scale are considered, the four factors
Terminals
AC ,
VolumeChange
AC ,
Fleet
AC , and
Transport
AC in Eq. (15) are
not constant. Rather,
Terminals
AC ,
VolumeChange
AC are functions of q , and
Fleet
AC ,
Transport
AC are functions of L and q . It is
differences in scaling among these four factors, rather than scaling itself, that result in different values of
Crossover
L for
different q , as will be quantified in the following sections.
Breakeven value of gas transportation tariff as function of transportationati on distance
The breakeven value of gas transportation tariff,
Breakeven
T , is where NPV 0 = . Equations (8)(11) imply
NPV
= ÷ ×
T T
A B T
q
(21)
where
Tax
Transport Tax Fleet
Tax
Volume Change Tax Terminals
(1 ) 1
1 1
ˆ
( )
 ×   
× ÷ × + × ÷ ×
 
\ . \ .
×  
÷ × ÷ × ÷ × ÷

\ .
= ÷
N
N
N
T
N
f I
C f I C L
N
f I
C f I C
N
A
(22)
Tax
(1 ) ˆ ÷ ÷ × =
N T
f I B (23)
Therefore, by Eq. (21),
CNGMetal LNG CNGComposite LNG
SPE 165898 7
Volume Change Terminals Transport
Breakeven
Fleet
) ( ( ) + ×
=
+ × = + ×
T
T
A
T
C
B
C C h C h L
(24)
where h is as in Eq. (16). For typical values of 0.10 = i ,
Tax
0.35 = f , 10 years = N (Table 1) and for sample values of
Terminals
AC ,
VolumeChange
, AC
Fleet
AC ,
Transport
AC shown in Table 2, Eq. (24) yields the
Breakeven
T lines in Fig. 3.
Fig. 3. Breakeven value of gas transportation tariff as function of transportation distance for LNG, CNGMetal, and CNGComposite
projects for parameter values in Table 1 and Table 2. The shaded bands correspond to 50% ± variability in the coefficients
Terminals
C ,
VolumeChange
C ,
Fleet
C , and
Transport
C for LNG and CNG.
An assessment of how each of the four factors
Terminals
AC ,
VolumeChange
AC ,
Fleet
AC , and
Transport
AC affects
Breakeven
T is
provided by series expansion of
Breakeven
T around the nominal parameter values shown in Table 1 and Table 2, resulting in
Breakeven Terminals
Breakeven Terminals
CNG Metal
VolumeChange
VolumeChange
Fleet
Fleet
Transport
Transport
0.40
0.80 7.9
0.40
0.80 7.9
5.9
0.80 7.9
2.0
0.80 7.9
o o
o
o
o
+ ×
+ ×
×
~ ×
+ ×
×
×
+
+ ×
×
÷
+ ×
L
L
L
T C
T C
C
L
C
L
C
C
C
L
C
(25)
Breakeven Terminals
Breakeven Terminals
CNG Composite
VolumeChange
VolumeChange
Fleet
Fleet
Transport
Transport
0.40
0.80 5.9
0.40
0.80 5.9
4.1
0.80 5.9
1.8
0.80 5.9
o o
o
o
o
+ ×
+ ×
×
+
+ ×
×
+
+
×
×
×
~ ×
+
×
L
L
T C
T C
C
C
C L
L C
L
C
C
L
(26)
and
CNGMetal LNG CNGComposite LNG
8 SPE 165898
Breakeven Terminals
Breakeven Terminals
LNG
VolumeChange
VolumeChange
Fleet
Fleet
Transport
Transport
21.1
25.2 1.2
4.0
25.2 1.2
0.78
25.2 1.2
0.40
25.2 1.2
o o
o
o
o
÷ ×
÷ ×
×
+
÷ ×
×
+
÷
~ ×
+ ×
×
×
×
T C
T C
C
C
C
C
C
C
L
L
L
L
L
L
(27)
for CNGmetal, CNGcomposite, and LNG containers, respectively.
Equations (25)(27) allow a quick assessment of the effect of CAPEX or OPEX variability on the breakeven tariff value
for gas transporation over a certain distance. They point to what are important factors to consider improving for each
technology, such as terminals and liquefaction/regasification for LNG and transportation fleets for CNG. For example, these
equations imply that a 10% reduction in the transportation OPEX factor,
Transport
C , results in relative reduction of about 2%,
3%, and 0.1% on gas tariff for transportation over 1000 miles via CNGmetal, CNGcomposite, and LNG ships, respectively.
By contrast, 10% reduction in the terminals CAPEX factor,
Terminals
C , results in corresponding relative reductions of about
0.5%, 0.6%, and 8%.
Economies of scale and power laws
Power laws describing economies of scale are widely applicable [5].
For an activity whose cost (e.g. CAPEX, OPEX) depends on capacity, Q (e.g., natural gas processing rate, natural gas
storage volume, natural gas carrying volume, etc.), the resulting cost, F is assumed to follow economies of scale, namely to
depend on capacity through the standard power law
1
0
0
( ) ˆ
÷
÷
 
= × = × ×

\ .
a
a
Q
F Q c Q c Q
Q
(28)
where any combination of nominal capacity,
0
Q , and nominal CAPEX per capacity,
0
c , that satisfies
0 0 0 0
ˆ ˆ
÷
= × · = ×
a a
c c Q c c Q (29)
can be selected for representation of the constant c in Eq. (28).
Equivalently, cost per capacity is assumed to drop as capacity increases, following economies of scale, as
0
0
( )
ˆ
÷
÷
 
= × = ×

\ .
a
a
F Q Q
c Q c
Q Q
(30)
It is widely accepted that for economies of scale related to chemical process facilities the exponent a is of the order of
0.3 1 0.7 ~ · ÷ ~ a a , (31)
reflecting the decrease in cost per capacity as capacity increases [5]. Values of 1÷a closer to 0 or 1 indicate more or less
pronounced economies of scale, respectively. We substantiate these claims below with specific numbers for liquefaction and
regasification terminals, compression stations, and gas transportation ships.
Of course, economies of scale can easily be excluded from the calculations, if desirable for simplicity, by setting
1 1 0 ÷ = · = a a in Eqs. (28)(30).
CAPEX for LNG
The cost of LNG terminals and ships has varied widely in recent years [6]. While there are efficiency improvements due
to technological advances, prevailing market conditions continue to drive price volatility. Recent developments such as
floating LNG (FLNG), mini LNG (mLNG) and others offer more data points to the price mix. Nevertheless, we assess the
required CAPEX for LNG projects below, using average scenarios. We incorporate economies of scale, to be able to
characterize price trends over a wide enough range for comparison purposes.
CAPEX for LNG liquefaction and regasification terminals
For LNG, the CAPEX for terminals,
Terminals, LNG
CAPEX ( ) q , is assumed to be a function of the gas rate, q , and entails two
terms, referring to fixed costs for liquefaction and for regasification terminals, i.e.
SPE 165898 9
Terminals, LNG Liquefaction Regasification
CAPEX ( ) CAPEX ( ) CAPEX ( ) = + q q q (32)
Following Eq. (28), the dependence of
Liquefaction
CAPEX ( ) q on q is considered to be
Liquefaction
Liquefaction
1
Liquefaction Liquefaction 0, Liquefaction
0, Liquefaction
CAPEX ( )
÷
÷
 
= × = × × 

\ .
a
a q
q c q l q
q
(33)
with
Liquefaction
0.20 ~ a (34)
and
0, Liquefaction
0, Liquefaction
1, 937 Bcf/y
$14 million/(Bcf/y)
=
=
q
l
(35)
as shown in Fig. 4 (see Appendix C for justification and details). Note the wide confidence bands, particularly for CAPEX
per gas rate at very low gas rates and CAPEX at very high gas rates.
Fig. 4. CAPEX per gas rate (left) and CAPEX (right) for LNG liquefaction terminals as a function of gas rate. The dots correspond to
actual data (see Appendix C). The continuous lines are based on Eq. (33) (left) and Eq. (30) (right) with a from Eq. (71). The shaded
areas are 80% confidence bands for the averages at each q .
Similarly, the regasification contribution to
Terminals
CAPEX ( ) q is considered to be dependent on q as
Regasification
Regasification
1
Regasification Regasification 0, Regasification
0, Regasification
CAPEX ( )
÷
÷
 
= × = × × 

\ .
a
a q
q c q l q
q
(36)
with
Regasification
0.17 ~ a (37)
and
0, Regasification
0, Regasification
730 Bcf/y
$2 million/(Bcf/y)
=
=
q
l
(38)
as shown in Fig. 5 (see Appendix D for justification and details). Note again the wide confidence bands, particularly for
CAPEX per gas rate at very low gas rates and CAPEX at very high gas rates.
10 SPE 165898
Fig. 5. CAPEX per gas rate (left) and CAPEX (right)for LNG regasification terminals as a function of capacity. The data points are
from [7]. The continuous lines are based on Eq. (36) and the shaded areas are 80% confidence band for the averages.
CAPEX for LNG ships
The CAPEX for an LNG fleet is the sum of CAPEX for all LNG ships, namely
Fleet, LNG Ships, LNG Ship, LNG
CAPEX CAPEX = × n (39)
The number of LNG ships in the fleet is
Ships, LNG
Ship, max, LNG
(2 )
(
×
=
(
(
(
L v q
n
G
, (40)
where the ceiling function, x (
(
, denotes the smallest integer larger than x , and
Ship, max, LNG
G is the maximum size of an LNG
ship that is reasonably available with today's technology (Fig. 6).
Fig. 6. Number of LNG ships for transportation of gas at rate q over a distance L .
The capacity of each LNG ship in the fleet is
Ship, LNG
Ships, LNG
(2 ) ×
=
L v q
G
n
, (41)
as shown in Fig. 7.
SPE 165898 11
Fig. 7. Size of each LNG ship,
Ship, LNG
G , in a fleet for transportation of gas at rate q over a distance L .
The CAPEX for each LNG ship,
Ship, LNG Ship, LNG
CAPEX ( ) G , is a function of the gas carrying capacity (volume) of a ship,
Ship, LNG
G following economies of scale, as in Eq. (28), i.e.
( )
Ship, LNG
Ship, LNG
1
Ship, LNG
Ship, LNG Ship, LNG Ship, LNG Ship, LNG 0, LNG Ship, LNG
Ship 0, LNG
CAPEX ( )
÷
÷
 
= × = × × 

\ .
a
a G
G c G s G
G
(42)
with
Ship, LNG
0.47 ~ a (43)
and
3
0, LNG
3
Ship 0, LNG
1.0 $million/(1000 m LNG) 46 $million/(Bcf NG)
266,000 m LNG 5.6 Bcf NG
s
G
= =
= =
(44)
3
Ship, max, LNG
266,000 m LNG 5.6 Bcf NG = = G , (45)
(see Appendix E and Fig. 8).
Fig. 8. CAPEX and CAPEX per gas capacity (volume) for LNG ships (tankers). The data points are averages for LNG tankers of
capacities 155, 210 (QFlex) and 266 (QMax) thousand m3, (3.3, 4.4, and 5.6 Bcf NG, respectively) reported in [8] based on data from
[9]. The continuous lines are based on Eq. (42).
Combining Eqs. (42) and (41) yields the total CAPEX for LNG shown in Fig. 9.
0 1 2 3 4 5 6
0
50
100
150
200
250
0 50 100 150 200 250
G
Ship, LNG
Bcf NG
C
A
P
E
X
S
h
i
p
,
L
N
G
$
m
i
l
l
i
o
n
G
Ship, LNG
1000 m
3
LNG
0 1 2 3 4 5 6
60
80
100
120
140
160
180
0 50 100 150 200 250
1
2
3
G
Ship , LNG
Bcf NG
C
A
P
E
X
S
h
i
p
,
L
N
G
G
S
h
i
p
,
L
N
G
$
m
i
l
l
i
o
n
B
c
f
N
G
G
Ship , LNG
1000 m
3
LNG
C
A
P
E
X
S
h
i
p
,
L
N
G
G
S
h
i
p
,
L
N
G
$
m
i
l
l
i
o
n
1
0
0
0
m
3
L
N
G
12 SPE 165898
Fig. 9. CAPEX and CAPEX per gas capacity (volume) for LNG fleets.
CAPEX for CNG
CAPEX for CNG terminals
The main contributor to CAPEX for CNG terminals is gas compression, and secondarily decompression. For simplicity,
we assume that the CAPEX for a decompression station is half of the CAPEX of a compression station, which we discuss
next.
The cost of a gas compression station [10], is a function of the required compressor horsepower (HP), which, in turn, is a
function of the CNG compression ratio, r , and gas rate, q [1]. Assuming a compression ratio 4 r = , the CAPEX for
compression stations as a function of q is represented as
( )
Compression
Compression
1
Compression Compression 0, Compression
0, Compression
CAPEX ( ) HP( )
÷
÷
 
= × = × × 

\ .
a
a q
q c q l q
q
(46)
with
Compression
0.36 ~ a (47)
and
0, Compression
0, Compression
365 Bcf/y
$million
0.2
Bcf/y
q
l
=
=
, (48)
(see Appendix F and Fig. 10).
Fig. 10. CAPEX for CNG compression stations. The continuous line is Eq. (46), based on data collected in [11] (see Appendix F).
0 100 200 300 400
0
20
40
60
q Bcf y
C
A
P
E
X
C
o
m
p
r
e
s
s
i
o
n
$
m
i
l
l
i
o
n
0 100 200 300 400
0.20
0.25
0.30
0.35
0.40
0.45
0.50
q Bcf y
C
A
P
E
X
C
o
m
p
r
e
s
s
i
o
n
q
$
m
i
l
l
i
o
n
B
c
f
y
SPE 165898 13
CAPEX for CNG ships
The CAPEX for a CNG fleet is the sum of CAPEX for all CNG ships, namely
Fleet, CNG Ships, CNG Ship, CNG
CAPEX CAPEX n = × (49)
The situation with
Ships, CNG
n and
Ship, CNG
CAPEX is somewhat more complicated with CNG than with LNG [12], since the
CNG ships themselves provide temporary storage during loading and offloading of transportationed gas at a finite rate,
offload,max
q (of the order of up to 0.2 Bcf/d with current technology [23]). Because CAPEX on CNG ships constitutes most
(over 80%) of the total CAPEX of CNG projects [1], we discuss below how to keep that expenditure low by designing a
sensible CNG fleet through proper selection of the number and size of CNG ships.
To account for economies of scale, we use again Eq. (28) for the CAPEX of each CNG ship, i.e.
( )
Ship, CNG
Ship, CNG
1
Ship, CNG
Ship, CNG Fleet, CNG Ship, CNG Ship, CNG 0, CNG Ship, CNG
Ship 0, CNG
CAPEX ( )
÷
÷
 
= × = × × 

\ .
a
a G
G c G s G
G
(50)
Because no commercial CNG project has materialized to date, the values of the parameters in the above Eq. (50) cannot be
based on actual data. However, estimates have been provided by developers of CNG containers [1], based on which it can be
inferred that
Ship, CNG
0.24 ~ a (51)
and
Ship 0, CNG
0, CNG
1 Bcf
$million
300
Bcf
=
=
G
s
, (52)
as shown in Fig. 11 (see Appendix H).
Fig. 11. CAPEX and CAPEX per gas capacity (volume) for CNG ships. The data points are from [1]. The continuous lines are based
on Eq. (50).
The total number of CNG ships is
Ships, CNG Cycles
= × n n n (53)
where
Cycles
offload, max
1
q
n
q
(
= >
(
(
(
(54)
is the number of concurrent delivery cycles of CNG transportation ships required to meet demand of gas rate q ; and n is
the number of ships in each cycle delivering gas in succession, one after another, each ship having capacity [12]
Ship, CNG Ship, max, CNG
Cycles
offload, max
(2 )
min{ , }
( 1)
×
=
× ÷ ÷
L v q
G G
q
n n
q
(55)
0.0 0.2 0.4 0.6 0.8 1.0
0
50
100
150
200
250
300
G
Ship, CNG Metal
Bcf
C
A
P
E
X
$
m
i
l
l
i
o
n
0.2 0.4 0.6 0.8 1.0
300
350
400
450
500
550
600
G
Ship , CNG Metal
Bcf
C
A
P
E
X
G
S
h
i
p
,
C
N
G
M
e
t
a
l
$
m
i
l
l
i
o
n
B
c
f
14 SPE 165898
Selecting a value for n has a significant effect on the total capacity of the CNG fleet, with higher values of n resulting in
lower values of
Fleet, CNG
G as shown in Fig. 12, adapted from [12]. Following the analysis in Appendix G, we select
min
4 > = n n and
Ship, max, CNG offload, max
min
Cycles
(2 )
max{ , 1 }
× (
+
(
(
= +
(
(
(
L v q q
G q
n n
n
(56)
Fig. 12. Total capacity of a CNG fleet that contains n ships for each of
cycles
n gas deliverly cycles, as a function of dimensionless
gas consumption rate,
offload,max
q q . The number of delivery cycles,
cycles
n , depends on the gas consumption rate, q , and
maximum gas offloading rate,
offload,max
q , as
cycles offload,max
( =
(
n q q . The shaded areas are conic bounds, with the upper bound
being
offload,max
1 2 ÷
q q
n
[12]. Note, that the required fleet capacity
fleet, CNG
G is fairly well approximated by its upper bound
CNG
2
× ×
L
f q
v
in Eq. (84) when 1 n >> .
The dependence of
Fleet, CNG Metal
n and
Fleet, CNG Metal
n on q and L resulting from combination of Eqs. (56), (53), and (54) is
shown in Fig. 13, and corresponding ship sizes are shown in Fig. 14.
SPE 165898 15
Fig. 13. Number of ships for transportation of gas at rate q over a distance L using metal or composite CNG containers. The
apparent discontinuities when crossing values of q equal to multiples of
offload, max
73 Bcf/y = q are due to the change of
Cycles
n by
1. The two graphs are identical.
Fig. 14. Size of ships for transportation of gas at rate q over a distance L using metal or composite CNG containers. The two
graphs are identical.
Combining Eqs. (50), (56), (53), and (54) yields the results in Fig. 15.
16 SPE 165898
Fig. 15. CAPEX and CAPEX per gas capacity (volume) for CNGMetal or CNGComposite fleets.
Note that economies of scale for CNG ships are much less pronounced than for LNG ships, as manifest by the fact that
Ship, CNG Ship, LNG
0.24 0.47 ~ << ~ a a (c.f. Fig. 11 and Fig. 8). This was expected with current technology, since increased CNG
ship capacity is created not by increasing CNG container size but by adding more CNG containers, in a modular fashion [2
3]. Note also that the potential exists for reduced CAPEX on CNG vessels in the future as experience on CNG ships
accumulates and placement of CNG containers on barges, which are less expensive, becomes a possibility.
OPEX for LNG
OPEX for LNG terminals
The cost of gas liquefaction and regasification is set at [13]
0,LNG
$million
1
Bcf
= l (57)
OPEX for LNG ships
Shipping costs consist of operating costs (mainly staffing, insurance, and repairs & maintenance) and voyage costs [6].
Such costs are proportional to travel distance times the amount of gas transportationed, but the proportionality constant
follows economies of scale, as LNG tanker size increases, i.e.
SPE 165898 17
Transport, LNG
Ship, LNG
Transport, LNG 0, Transport, LNG Transport, LNG Ship, LNG
0, Transport, LNG
OPEX ( ) ˆ
÷
 
= × × × = × × 

\ .
a
G
c L q C G L q
G
(58)
with
Ship, LNG
0.30 = a (59)
0, Transport, LNG
$million
0.07
kmile Bcf
=
×
c (60)
Ship, 0, Transport
4.5 Bcf = G (61)
(see Appendix I and Fig. 16).
Fig. 16. Transportation cost per gas unit per sourcedestination distancefor for LNG ships.
OPEX for CNG
OPEX for CNG terminals
0,LNG
$million
0.1
Bcf
= l (62)
OPEX for CNG ships
Because CNG reduces gas volume 200 times, as opposed to 600 by LNG, we set
Transport, CNG Ship, LNG Transport, LNG Ship, LNG
( ) 3 ( ) = × C G C G (63)
Results
Use of the formulas in the preceding section along with the data in Table 3 produces the NPV results shown in Fig. 17.
0 1 2 3 4 5 6
0.08
0.10
0.12
0.14
G
Ship , LNG
Bcf
C
T
r
a
n
s
p
o
r
t
$
m
i
l
l
i
o
n
k
m
i
l
e
B
c
f
18 SPE 165898
Table 3. Parameter values in formulas used to calculate NPV
LNG
CNG
Metal Containers
CNG
Composite Containers
Terminals
CAPEX
a
0.20 (Liquefaction)
0.17 (Regasification)
0.36 (Compression)
0.36 (Decompression)
0.36 (Compression)
0.36 (Decompression)
0
[Bcf/y] q
1937 (Liquefaction)
730 (Regasification)
365 (Compression)
365 (Decompression)
365 (Compression)
365 (Decompression)
0
$million
Bcf/y
l
(
(
¸ ¸
14 (Liquefaction)
2 (Regasification)
0.2 (Compression)
0.1 (Decompression)
0.2 (Compression)
0.1 (Decompression)
r NA 4 4
Fleet
CAPEX
Ship
a
0.47 0.24 0.24
0
$million
Bcf
s
(
(
¸ ¸
46 300 210
Ship 0
[Bcf] G
5.6 1 1
Terminals
OPEX
Volume Change
$million
Bcf
C
(
(
¸ ¸
1 0.1 0.1
Fleet
OPEX
Transport
a
0.30 0.30 0.30
0, Transport
$million
kmile Bcf
(
(
×
¸ ¸
c 0.07 0.21 0.21
Ship, 0, Transport
[Bcf] G
4.5 4.5 4.5
SPE 165898 19
20 SPE 165898
Fig. 17. NPV per natural gas rate for LNG, CNG Metal and CNG Composite. The white lines correspond to NPV=0.
Comparison between LNG and CNG Metal or CNG Composite is shown in Fig. 18.
SPE 165898 21
Fig. 18. Difference in NPV/q between LNG and CNG Metal and between LNG and CNG Composite. The intersection between the
plotted surface and the 0plane is the line indicating the value of
Crossover
L for each corresponding q .
The breakeven value of the gas transportation tariff as a function of L and q for LNG and CNG Metal and CNG
Composite is shown in , and the difference between corresponding values between LNG and CNG (Metal and Composite) is
shown in
22 SPE 165898
Fig. 19. Breakeven value of gas transportation tariff as a function of transportation distance and gas rate for LNG, CNG Metal, and
CNG Composite.
SPE 165898 23
Fig. 20. Difference in
Breakeven
T between LNG and CNG Metal (left) and between LNG and CNG Composite (right). The white lines in
each contour plot indicate the value of
Crossover
L for each corresponding q (shorter distances favor CNG).
It is interesting to compare the fraction of CAPEX allocated to the transportation fleet for each of the three options
studied, as shown in Fig. 21.
5
5
5
5
5
5
5
5
5
4
4
4
4
4
4
4
4
3
3
3
3 3
3
3
2
2
2
1
0
1
2
3
4
5
6
7
8
0 2 4 6 8 10
0
100
200
300
400
500
Distance, L kmiles
G
a
s
r
a
t
e
,
q
B
c
f
y
T
Breakeven , LNG
T
Breakeven , CNG Metal
2
2
2
2
2
2
2
2
2
1
1
1
1
0
0
0
0
1
1
2
2
3
4
5
6
7
8
0 2 4 6 8 10
0
100
200
300
400
500
Distance, L kmiles
G
a
s
r
a
t
e
,
q
B
c
f
y
T
Breakeven , LNG
T
Breakeven , CNG Composite
24 SPE 165898
Fig. 21. Fraction of CAPEX allocated to the transportation fleet for LNG, CNG Metal, and CNG Composite.
Discussion and conclusions
The relative advantages and disadvantages of LNV vis a vis CNG for marine transportation of stranded natural gas were
examined for both metal and composite CNG containers. Fundamental analysis combined with actual data revealed the
following general principles that underlie the marine LNG/CNG comparison.
 The key factor for determining whether marine LNG or CNG is economically preferable is the distance between
natural gas source and delivery destination, with shorter distances favoring CNG.
 A secondary factor for determining whether marine LNG or CNG is economically preferable is the quantity of
natural gas transported, to the extent that it influences differences in economies of scale for LNG and CNG systems.
Smaller quantities of gas generally can be transported more economically using CNG, rather than LNG, for larger
distances than larger quantities can.
 The price of natural gas has no effect on whether CNG or LNG is preferable. However, price obviously has a strong
effect on the overall economic feasibility of whichever of CNG or LNG is chosen.
 Composite CNG containers have significantly better economics than metal CNG containers.
The above findings offer a strong incentive towards undertaking a pioneering commercial effort for proofofconcept of
marine transportation of stranded gas using CNG, with potentially important implications well into the future.
Nomenclature
NPV= Net present value ($million)
PV = Present value ($million)
CAPEX= Capital expenditures ($million)
SPE 165898 25
N = Total number of years (#)
k = Year number (#)
CF = Cash flow ($million/y)
DCF = Discounted cash flow ($million/y)
ACF = Annual cash flow ($million/y)
i = Interest rate (% or fraction)
= q Gas transportation rate (Bcf/y)
L = Gas transportation distance (oneway, from origin to destination) (kmiles)
Fleet
= G Fleet capacity (gas volume) (Bcf)
Ship
= G Ship capacity (gas volume) (Bcf)
Terminals
= C Terminals cost per gas rate (compression and expansion for CNG, liquefaction and regasification for LNG)
($million/(Bcf/y))
Fleet
= C Gas transportation fleet cost per gas rate per distance between gas origin and destination
($million/kmiles/(Bcf/y))
OPEX= Operating expenditures ($million/y)
VolumeChange
= C Gas volume adjustment cost per gas volum (compression and expansion for CNG, liquefaction and
regasification for LNG) ($million/Bcf)
Transport
= C Gas transportation cost per gas volume per distance between gas origin and destination
($million/kmiles/Bcf)
= D Annual depreciation in linear scheme ($million/y)
, =
L L
A B NPV factors, Eq. (8)
=
N
I Time factor for NPV calculation, Eq. (11)
tax
f = Tax rate (% or fraction)
A = x
LNG CNG
÷ x x for the variable x
Crossover
= L Upper bound on distance for which CNG is economically favored over LNG
= h Factor for calculation of
Crossover
L , Eq. (16)
T = Gas transportation tariff = Gas sales price – Gas purchase price ($million/Bcf)
, =
T T
A B NPV factors, Eq. (21)
Breakeven
= T Lower bound on gas price for which gas transportation is economically feasible
= Q Capacity (e.g., natural gas processing rate, natural gas storage volume, natural gas carrying volume, etc.)
( ) = F Q Cost as a function of capacity ($ million)
a = Exponent in power law for economiesofscale, e.g. Eq. (28)
( ) = l q Land facilities cost per gas consumption rate unit ($/(Bcf/year))
= n Number of ships
= (
(
x Ceiling of x = smallest integer greater than or equal to x
MTPA= Million tones LNG per annum
s = Ship cost per gas volume ($million/Bcf)
v = Voyage speed (mph or kmiles/y)
travel
t = Oneway travel time from gas source to delivery destination
r = CNG compression ratio
HP = Compression power (hp)
References
1. Economides, M.J., K. Sun, and G. Subero, Compressed Natural Gas (CNG): An Alternative to Liquefied Natural Gas. SPE
Production & Operations, 2006. 21(2): p. 318324.
2. EnerSea Transport LLC. 2013; Available from: http://www.enersea.com/.
3. Sea NG Corporation. 2013; Available from: http://www.coselle.com/.
4. Neptune Gas Technologies, L. Neptune CNG System. 2013; Available from: http://neptunegas.ca/technology/index.html.
5. Peters, M.S., K. Timmerhaus, and R.E. West, Plant Design and Economics for Chemical Engineers. 5th ed. 2003: McGrawHill.
6. Thakur, N. (2011) LNG shipping economics on the rebound. Petroleum Economist, http://www.petroleum
economist.com/Article.aspx?ArticleId=2801286.
7. Griffin, K., et al., The Global Liquefied Natural Gas Market: Status & Outlook. 2003, US Energy Information Administration.
8. Capman Consulting (2012) LNG Report 2012.
26 SPE 165898
9. Drewry Maritime Research. 2012.
10. Rui, Z., et al., Regressions allow development of compressor cost estimation models, in Oil & Gas Journal. 2012, PennWell
Corporation: Tulsa, United States, Tulsa. p. 110115.
11. Miscellaneous, Oil & Gas Journal Databook. 2010, Tulsa, OK: PennWell.
12. Nikolaou, M., Optimizing the Logistics of Compressed Natural Gas Transportation by Marine Vessels. Journal of Natural Gas
Science and Engineering, 2010. 2(1): p. 120.
13. Shively, B., J. Ferrare, and B. Petty, Understanding Today's Global LNG Business. 2010: Enerdynamics.
14. CornotGandolphe, S., et al. THE CHALLENGES OF FURTHER COST REDUCTIONS FOR NEW SUPPLY OPTIONS
(PIPELINE, LNG, GTL). in 22nd World Gas Conference. 2003. Tokyo, Japan.
15. Cheniere Energy, I., November 2011 Investor Presentation. 2011:
http://www.plsx.com/finder/viewer.aspx?doc=11502&slide=263892#doc=11502&slide=263892&.
Appendix A. Derivation of NPV formula, Eq. (8)
Assuming constant annual cash flow after taxes, i.e.
After Taxes, After Taxes
ACF ACF constant = =
k
(64)
we have
After Taxes
Tax
ACF ACF (ACF )
ACF (1 )
= ÷ ÷ ×
= × ÷ + ×
Tax
Tax
D f
f D f
(65)
where the annual cash flow is
Gas Sales
ACF ACF OPEX = ÷ . (66)
It follows that
( )
( )
Gas Sales After Taxes,
1
After Taxes,
1
After Taxes
Tax
Gas Sales Tax Tax
PV DCF
ACF
(1 )
(1 ) 1
ACF
(1 )
ACF (1 )
(ACF OPEX) (1 )
=
=
=
=
+
+ ÷
= ×
+
= × ÷ + × ×
= ÷ × ÷ + × ×
¿
¿
N
k
k
N
k
k
k
N
N
N
Tax N
N
i
i
i i
I
f D f I
f D f I
(67)
Substitution of
Gas Sales
PV from the above Eq. (67), CAPEX from Eq. (4) and OPEX from Eq. (5) into Eq. (1) yields
( ) ( )
( )
( )
Terminals Fleet
Transport Volume Change Tax Tax
Terminals Fleet
NPV 1
+ × ×  
= ÷ × ÷ × × ÷ + × ×

\ .
÷ + × ×
N
C C L q
T C L C q f f I
N
C C L q
(68)
which immediately implies Eq. (8).
Appendix B. Derivation of approximation in Eq. (16)
Using the approximation (1 ) 1 + ~ + ×
N
i N i and substituting
N
I from Eq. (11) into Eq. (16) yields
Tax
Tax
Tax
Tax
Tax
(1 )
(1 ) 1
1
(1 )
(1 ) 1
1
1
1
+ ×
÷
+ ÷
=
÷
+ × ×
÷
+ × ÷
~
÷
= +
÷
N
N
f i i
N i
h
f
f N i i
N i N
f
i
N f
(69)
SPE 165898 27
Appendix C. CAPEX for LNG liquefaction terminals, Eq. (33)
According to [14], p. 11, doubling the capacity of an LNG liquefaction terminal reduces the CAPEX per gas flow rate by
about 25%. This reduction in specific cost is due to economies of scale, usually due to utility sharing among liquefaction
trains (e.g. see [15]). Consequently, the term
Terminals
( ) CAPEX ( ) / ˆ = l q q q must satisfy the equation
(2 )
1 0.25
( )
= ÷
l q
l q
(70)
The function in Eq. (33) satisfies Eq. (70) if
Liquefaction
ln0.75
0.42
ln 2
÷
= = a (71)
However, available data indicate that economies of scale may be less pronounced, as can be claimed based on example data
shown in Table 4. One instance is ALNGT13 (9.6 MTPA), resulting from expansion of ALNGT1 (3 MPTA) with two
additional liquefaction trains and with specific cost reduction from 270 to 200 $/MTPA, corresponding to
Liquefaction
ln(200 / 270)
0.26
ln(9.6 / 3)
÷
= = a (72)
However, the instance of ELNGT12/ ELNGT1 implies
Liquefaction
ln(200 / 270)
0.43
ln(7.2 / 3.6)
÷
= = a (73)
Therefore, we choose to fit the entire data set in Table 4 using Eq. (30) with results shown in Eqs. (34) and (35) and Fig. 4.
Table 4. Data on specific costs of liquefaction terminals
Project
Capacity
(MTPA)
Capacity
(Bcf/y)
Specific cost
($/MTPA)
ALNGT1 3 138 270
Gladstone 3.5 161 2000
ELNGT1 3.6 166 270
Snohvit 4.3 198 1200
Angola 5.2 240 1650
ELNGT12 7.2 332 200
Curtis 8.5 392 1700
Sakhalin 9.6 443 1000
ALNGT13 9.6 443 200
Oman 10.4 480 270
Gorgon 15 692 2100
Nigeria 22 1015 390
RasGas 36.3 1675 350
Qatargas 42 1937 420
Fig. 22. Specific cost of liquefaction projects (data points) and fit by Eq. (30) with a from Eq. (71) (continuous line) along with 95%
confidence interval for averages (shaded area).
Appendix D. CAPEX for LNG regasification terminals, Eq. (36)
According to [7], p. 46, "In the United States, most new terminals are estimated to cost US$200 to US$300 million for a
sendout capacity from 183 to 365 Bcf/y (3.8 to 7.7 million tons/y) of natural gas". Using these data points with Eq. (36)
yields
28 SPE 165898
Regasification
365
ln
183
1 0.4
300
ln
200
a
 

\ .
= ÷ ~
 

\ .
(74)
Using the same data for calibration yields the values in Eq. (38).
Table 5. Data on specific costs of regasification terminals
Regasification Terminal Capacity (Bcf/y) Cost ($million)
EcoElectrica, Puerto Rico 34 150
AES, Dominican Republic 46 70
Fujian LNG, PRC 128 250
GNL Quintero, Chile 146 775
Golden Pass LNG, Sabine Pass, LA 730 1100
Dragon LNG, Milford Haven, Wales 730 1300
Appendix E. CAPEX for LNG fleet, Eq. (42)
The required gas carrying capacity for each ship,
Ship, LNG
G , depends on the gas consumption rate, q , and travel distance, L ,
as follows: The total capacity of an entire LNG fleet is
Fleet, LNG
2
~ ×
L
G q
v
, (75)
This capacity is distributed over as few ships as possible, to ensure the smallest possible CAPEX and OPEX. Because there
is an upper bound,
Ship, max, LNG
G , on the maximum capacity of an LNG ship (as shown in Fig. 8) the number of required LNG
ships is
Ships, LNG
Ship, max, LNG
(2 )
(
×
=
(
(
(
L v q
n
G
(76)
Consequently,
Ship, LNG
Ship, max, LNG
(2 )
(2 )
×
=
(
×
(
(
(
L v q
G
L v q
G
, (77)
According to [8], based on data from [9], new LNG tankers of capacity 155,000 m
3
cost $180190 million, and QFlex
(200,000 m
3
) and QMax (266,000 m
3
) tankers cost $200300 million. Using average values of $185 and $250 million,
respectively, the preceding three data points can be approximated by an equation similar to Eq. (28), with
Ship, LNG Ship, LNG
1 0.53 0.47 ÷ = · = a a , as shown in Fig. 8.
Appendix F. CAPEX for CNG compression stations, Eq. (80)
The cost of compression stations as a function of HP has been reported in [10], using US data from 1992 to 2008 collected in
[11]. The authors in [10] use a quadratic function of HP in the range 3,000 to 30,000, namely
2
Compression
0 6 7
CAPEX
HP HP
HP HP
a o o + × + ×
= (78)
with
0
6,500, 617 o = ,
6
1, 019.361 a = ,
7
0.0041406 o = . To allow for better extrapolation in either direction, a powerlaw
(cf. Eq. (28)), in the form
Compression
Compression
Compression
CAPEX
HP
HP
a
c
÷
= × (79)
is fit to the above Eq. (78), with
Compression
Compr 1 ession
$
49,178
hp
a
c
÷
= ,
Compression
0.36 a = (Fig. 23).
SPE 165898 29
Fig. 23. CAPEX for compression stations. The dashed line is based on [10]. The continuous line is from best fit of Eq. (79).
The total cost for a gas compression station [10], is a function of the required compressor horsepower (HP), which, in
turn, is a function of the CNG compression ratio, r , and gas flow rate,
c
q [1]. The CAPEX for compression stations as a
function of HP is represented as
( )
Compression
Compression
1
Compression Compression 0, Compression
0
HP( , )
CAPEX (HP) HP( , ) HP( , )
HP
÷
÷
 
= × = × ×

\ .
a
a r q
c r q c r q (80)
with
( )
2
2 1 0 hp
HP( , ) (ln ) ln ( ) ˆ
÷
= × + × + × = ×
c q
r q h r h r h q F r q (81)
as reported in [1].
Therefore, for a given compression ratio, r , in Eq. (81), substitution of HP into Eq. (80) yields Eq. (46). For a
compression ratio 4 r = the required HP
c
q , by Eq. (81), is
hp
2
HP hp hp
21.933 (ln4) 20.976 ln4 14.275 85.5 234
MMscf/d Bc
(
f/
)
y
4
÷
= × + × = + = =
q
F
q
. (82)
Therefore, substituting Eq. (82) into Eq. (79) yields
Compression
Compression
Compression
Compression
Compression
1
Compression
1
0, Compression
0, Compression
1
1
$ hp
49,178 234
Bcf/y hp
$million
1.63
(Bcf
CAPE
)
X
ˆ
/y
÷
÷
÷
÷
÷
 
 
×
 

\
=
=
 
= × × 

\ .
. \ .
 
×


\ .
a
a
a
a
a
q
q
l
q
q
q
(83)
For a reference gas rate
0, Compression
365 Bcf/y
c
q = , Eqs. (29) and (83) yield
( )
Compression
Compression
0.36
0, Compression 0, Compression 1
$million
1.63 36
$million
( ) Bcf/y 0.2 5
(Bcf/y) Bcf/y
a
c a
l c q
÷
÷ ÷
 
×

.
×

\
= = = .
Appendix G. Selecting the number and size of ships in a CNG transportation fleet
It has been shown [12] that the capacity of CNG fleet is bounded as
Fleet, CNG CNG CNG Fleet, LNG
CNG
1 2 2
ˆ
2
1
s × × = × × = ×
÷
L L
G q f q f G
v v
n
f
(84)
with
0
HP
6 7
HP
c HP
a
5000 10 000 15000 20000 25000 30 000
1500
2000
2500
3000
hp
$
h
p
30 SPE 165898
Fleet, CNG
CNG
Fleet, LNG
1
ˆ
2
1
= >
÷
G
f
G
n
(85)
as shown in Fig. 12, adapted from [12]. The CNG capacity factor,
CNG
f , in Eq. (84) refers to how many times larger a real
CNG fleet is than a theoretically ideal (but physically unrealizable) CNG fleet of infinite ships ( n = ·), each of
infinitesimally small capacity (Fig. 12) – essentially an approximation of a twoway floating pipeline. As shown in Fig. 24,
opting for a relatively larger number of relatively smaller CNG ships results in significant reduction of
Fleet, CNG
G , entirely due
to better logistics [12]. Additional reduction of
Fleet, CNG
G could result from introducing temporary CNG storage capacity in
addition to that of CNG ships, but this possibility is not considered here, for the sake of simplicity.
Fig. 24. CNG fleet capacity factor as a function the number of CNG ships per delivery cycle (cf. Fig. 12).
Based on the preceding arguments, it is evident that a reasonable value of n must be selected to make
Fleet, CNG
G , and
consequently keep
Fleet, CNG
CAPEX low, without overly increasing the corresponding
Fleet, CNG
OPEX .
In reducing
Fleet, CNG
G , overly large values of n are to be avoided, since, in addition to higher
Fleet, CNG
OPEX , such values
will eventually increase
Fleet, CNG
CAPEX , due to reverse economies of scale associated with very small ships, as quantified in
Eq. (50). This claim can be quantified as follows.
Combination of Eqs. (49)(55) yields
Ship, CNG
Fleet, CNG 1
offload, max
offload, max
CAPEX
1
÷
·
 
 ÷ ÷

(
( \ .
a
n
q q
n
q q
(86)
with
Ship, CNG
1 0.76 ÷ = a (Eq. (51)). The optimal value of n can be computed from Eq. (86) in terms of
offload, max
q q as
offload, max
offload, max
opt
Ship, CNG Ship, CNG
1
2
8.3
+
(
(
~ s =
q q
q q
n
a a
(87)
(Fig. 25).
3 4 5 6 7 8 9 10
1.0
1.5
2.0
2.5
3.0
n
f
C
N
G
G
F
l
e
e
t
,
C
N
G
G
F
l
e
e
t
,
L
N
G
SPE 165898 31
Fig. 25. Approximation (continuous line) and exact values of
opt
n .
Appendix H. CAPEX for CNG fleet, Eq. (50)
According to [1], new CNG ships based on Votrans technology cost $150 and $300 million for gas carrying capacities of 0.4
and 1.0 Bcf, respectively. Fitting Eq. (28) to these data results in Eqs. (51) and (52).
Appendix I. OPEX for LNG fleet, Eq. (58)
Data from Drewry Maritime Research reported in [6] implies the gas transportation costs shown in Fig. 26. Fitting the
slopes,
1 2
,   , of the two straight lines by the power law
Transport, LNG
0, Transport, LNG
0, Transport, LNG

÷
 
= 

\ .
a
G
c
G
(88)
yields Eq. (60).
Fig. 26. LNG transportation cost as function of distance for LNG tankers of capacities 170,000 (linear fit: Cost 0.0733 = ×L ,
2
0.99 = R ) and 215,000 m3 (linear fit: Cost 0.0683 = ×L,
2
0.99 = R ).
0 1 2 3 4 5
0
1
2
3
4
5
6
7
8
9
q
q
offload, max
n
o
p
t
0 2 4 6 8 10 12
0.0
0.2
0.4
0.6
0.8
Distance , L kmiles
T
r
a
n
s
p
o
r
t
c
o
s
t
$
m
i
l
l
i
o
n
B
c
f
170,000 m
3
215,000 m
3