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Liquefaction Plants: Development of Technology and Innovation

Working Committee Contribution, 22nd World Gas Conference, Tokyo 2003 Ad Smaal, Shell Global Solutions Int., The Netherlands

The production of Liquefied Natural Gas (LNG) is of importance to the international gas community, as over 20% of cross-border gas trade is in the form of LNG. This paper discusses LNG market and technological developments up to 2010. In 2002, about 111 million tons per annum (Mtpa) of LNG was traded worldwide. As demand for LNG is growing, especially in the Atlantic Basin, LNG trade is expected to grow at a pace of 5 to 7 % per annum; global LNG trade is expected to reach around 190 Mtpa in 2010. Continuous pressure to reduce the cost of LNG has resulted in lower unit costs of carriers and plants; but technological innovation will be crucial to further lower the cost of upstream gas production and liquefaction plants. Liquefaction plants typically have multiple trains, with integrated gas treating and liquefaction facilities in each train. The liquefaction process and the maximum size of key equipment usually determine train size. Cooperation of technology providers and equipment vendors has resulted in larger train sizes, from about 0.4 Mtpa for the first liquefaction trains in Algeria to 3.9 Mtpa for the LNG trains recently started up in Malaysia. As a result, the specific cost of liquefaction plants has dropped significantly over the past few decades whilst efficiency has improved. As an example, the LNG plant of Oman LNG has an efficiency of around 92% and a specific capital expenditure around 200 $/ ton per annum, which is of the order of 50% of the specific costs of the earliest plants. The pressure to reduce LNG production costs will continue. Technical innovations in liquefaction processes and upstream gas production are needed to achieve this. An innovative approach to remote offshore gas is a floating LNG plant, a concept saving on upstream pipeline transport and onshore development costs. For onshore plants, application of electric motors as compressor drivers allows higher availability of the liquefaction process. Electrical drivers also have the advantage of high efficiency, when power is supplied by a combined cycle power station. Parallel line-up of key equipment allows standardization and more cost effective supply from a wider vendor base. Designs based on three large gasturbines (e.g. GE-7) achieve train sizes of around 7 Mtpa. Developments in liquids extraction will increase flexibility for producing different grades of LNG heating value to suit different markets. As there will not be one concept that meets all requirements, the challenge will be to offer robust and flexible designs for train sizes between 3 and 7 Mtpa. LNG technology has developed over the past decades mostly by capitalizing on economy of scale. But in the future, LNG plants will be more diverse, both in size and technology. LNG technology providers and contractors will increasingly have to rely on a flexible portfolio of processes, drivers and plant sizes to achieve fit for purpose solutions.

In the past thirty years, liquefaction has played an increasingly important role in the international trade of natural gas. For gas reserves that are remote from mature gas markets, liquefaction is often the only solution for gas monetization. From a humble beginning in 1964, liquefied natural gas (LNG) has become a significant factor in the transport of gas: in 2002, around 22 % of internationally traded gas was transported in the form of LNG. The LNG market has gone through a period of turmoil and rapid growth in the last few years. The total global trade of LNG in 1995 was 70 million tons, but global trade had increased to 111 million tons in 2002, a growth rate of over 7% per year. The immediate future of LNG trade can be understood from this trend, but not by linear extrapolation. Although the past decade has been characterized by significant development of the existing propane-MR technology, designs of future plants are likely based on a variety of processes. The purpose of this paper is to give an overview of the most likely developments in liquefaction technology for the coming few years. In the first part of this paper, the current global LNG market and expected growth in trade is described. In the second part, the past development of LNG plant technology is discussed, followed by a discussion of proposed improvements of large-scale liquefaction technology. The conclusions are summarized at the end of the paper.

Global LNG trade

In order to understand developments of global LNG trade, the three major markets dominating the current trade profile, need to be understood. These are: The Far East, comprising Japan, Korea and Taiwan; Europe, with France and Spain being the larger importers from a group of six; The United States of America, so far excluding the Pacific coast. Far East The most important importer in the Pacific basin is Japan. In the year 2002, the Japanese import of LNG shrank slightly: 53.7 million tons was imported against 55 million tons in 2001. But Korean and Taiwanese imports are growing strongly: Korea relied heavily on spot cargoes last winter. With the construction of the Guangdong terminal, China will become a new market for LNG in the Far East. With a second terminal already planned, the Chinese market for LNG is expected to grow rapidly. India is also poised to become an importer of LNG, despite uncertainties in the regulation of the internal gas market. Indonesia and Malaysia have traditionally been the main providers in the Eastern Pacific, but Australia, Oman and especially Qatar will significantly increase their exports into the Far East. When the Sakhalin project starts up, Russia will enter the market as a new exporter. Thus, both markets and suppliers will become more diverse. Europe LNG transport to European markets has to compete with natural gas transported by pipelines, thus exerting a downward force on LNG price. Nonetheless, the vicinity of 2

Algerian gas, and abundant availability of gas in the Middle East and Nigeria will feed a steadily growing stream of gas and LNG to Europe. Demand growth for LNG will be especially strong in South Western Europe: Russian pipeline supplies to this part of Europe are less competitive in view of the large distance. Algeria will remain an important supplier, potentially also by swapping supplies from Trinidad. But Nigeria and again Qatar will increase their exported LNG volumes. The Qatari government has made public their plans for export schemes to Italy and the United Kingdom, thus it appears certain that part of Qatars new capacity will be diverted west. Egypt is emerging as a new exporter on the Mediterranean side of the Suez Canal. USA The United States market is changing insofar the growth of domestic production fails to keep up with the growth of gas demand. This situation has resulted in a seasonbound increase of the natural gas price in the US, thus creating a favorable price environment for LNG. However, permit processes for LNG terminals can be lengthy, which may temper growth beyond expansion of existing terminal facilities. Due to its vicinity, Trinidad will be the initial beneficiary from LNG demand growth in the US market. However, new market entries such as Venezuela on the East coast and Russia on the West coast - given recent progress with West coast LNG terminals may also supply the US market.

200 180 160 140 Export (Mtpa) 120 100 80 60 40 20 0 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 Year

Venezuela Russia Norway Egypt Oman Nigeria Trinidad Qatar Australia Malaysia Indonesia UAE Brunei Libya USA Algeria

Figure 1. Past and expected LNG exports 2002 is considered a year of relatively slow growth in global LNG trade, with an increased in traded volume of barely 4%. Nonetheless, the longer-term outlook for LNG looks robust, and an annual trade growth of 5 to 7 % is expected. Keeping in mind that no one can predict the future, above considerations lead to an export scenario as indicated in Figure 1. Recent newcomers such as Qatar, Trinidad and 3

Nigeria will evolve into major exporters alongside the traditional large scale LNG exporters Algeria, Indonesia and Malaysia. As plants in Egypt and Norway are also under construction, it is clear that a myriad of new LNG expansions will enter the market in the coming decade. A trend concurrent to this demand growth is that the cost of new-built LNG carriers has decreased significantly over the last decade, in line with the specific cost reduction of LNG export plants. The price of a 140,000 m3 carrier was approximately 200 million US$ in the early nineties, but has dropped to around 150 million US$ now. These trends mean that on the one hand, many new and larger LNG trains will have to be built; the challenge will be to reduce costs of liquefaction trains by both further economy of scale and genuine reduction of process costs. Continuing development and innovation of liquefaction technology will be crucial to realize this. But first the past development of LNG trains will be discussed in the next section.

Past development of liquefaction technology

Liquefaction technology is based on the principle of a refrigeration cycle, where a refrigerant by means of successive expansion and compression transports heat from a lower to a higher temperature. LNG plants consist of a number of parallel units, called trains, which treat and liquefy natural gas and then send the LNG to several storage tanks. The capacity of a liquefaction train is primarily determined by the liquefaction process, the refrigerant used, and largest available size of the compressor / driver combination that drives the cycle and the heat exchangers that cool the natural gas. The first LNG plants were built in Algeria, the US and Libya. They used either a Cascade process, with 3 pure refrigerants, or a single mixed refrigerant. In Brunei, a two-cycle process was implemented for the first time, using propane and a mixed refrigerant, capturing the benefit of the two previous processes. This Propane Mixed Refrigerant (MR) process - developed by Air Products & Chemicals Int. (APCI) started to dominate the industry from the late seventies on. Economy of scale drove the size of propane-MR trains from 1.1 million tons per annum (Mtpa) for the first train built in Brunei to 3.9 Mtpa for the last LNG train that was recently started up (as part of Malaysia Tiga). This scale increase was realized by close cooperation of operating companies, process licensors and equipment vendors. As compressors are key equipment of any refrigeration cycle, compressor vendors such as Elliot, Dresser, Sulzer and Nuovo Pignone were instrumental in realizing compressor capacity increases. The earliest compressors were driven by steam turbines, but Shell and Nuove Pignone introduced gas turbines as mechanical drivers. The earliest applied gas turbines delivered around 25 MW of power (GE Frame 5), while the latest plants apply gas turbines that deliver 75 MW of power (GE Frame 7). Last but not least, the size of spool wound cryogenic heat exchangers, developed by APCI, was steadily increased to match the developments of compressors and drivers. 4

However, costs are not the only driver. The restriction on CO2 production under the Kyoto protocol has made efficiency a second driver for considering new process options. The Oman LNG plant was built with a specific capital expenditure of 200 $/ton, but the plant was also designed for a high energy efficiency of 92%. All these developments have led to the current state of the art in LNG technology, which is the two-cycle propane-MR process. The 4 Mtpa LNG train currently in operation in Shell-advised Malaysia Tiga, is considered to be the currently existing size benchmark. The LNG trains in Shell-advised Oman LNG are thought to be the leading example of cost and energy efficiency. Innovation in liquefaction process and technology will be judged against these benchmarks of size, cost and efficiency, but also operability and reliability will be important parameters. Two areas can be identified where major improvements are possible: better integration of the various elements of the LNG value chain, and using large scale processes and new technology in LNG production plant design and implementation.

Downstream / upstream integration

To lower total costs of all the facilities from well to market, proper process design integration between upstream gas gathering systems and the actual liquefaction plant is crucial. An example is increased reliability of upstream gathering systems, which reduces the need for gas supply redundancy. Both in Australia and Nigeria this concept has reduced total costs. The optimal location of for example condensate recovery can also be only fully optimized in an integrated design process between upstream and downstream. When gas is gathered offshore, it can be beneficial to move facilities inside the gate of the LNG plant and so allow offshore platforms to become unmanned. Another possibility is to move to subsea completion, and multi phase flowlines. If an LNG plant is fed from such a wet transport pipeline, this implies heavy reliance on upstream flow assurance and corrosion control. This concept is proposed for several Greenfield projects that are now on the drawing board. Advances in seismic and drilling techniques have markedly improved the chances of finding and producing gas reservoirs. Shell E&P is using these techniques in a new field development methodology called Smartfields. Drilling itself is poised to become less capital intensive. An example is the recently developed MonoDiameter borehole technique by the Shell/Halliburton Enventure JV, which are particularly suited for gas wells and cheaper than traditional telescopic boreholes. Another example of upstream / downstream integration is offshore LNG production, also called floating LNG or FLNG. The concept of bringing the liquefaction plant to the gas instead of the gas to the liquefaction plant eliminates the sub sea transport line and delays recompression, with potential savings in the hundreds of millions of dollars. Shell has proposed to apply this concept for the Sunrise reserves in the Timor Sea, located several hundreds of kilometers offshore of Northern Australia. Despite the engineering challenges involved, FLNG currently looks like an attractive possibility to unlock this reserve.

Innovations in Liquefaction plant design

As a consequence of the scale increase described previously, the two cycle propaneMR process is facing certain technological limits. In particular, the propane compressor (four-stage, single casing, around 65 MW) limits the size of the process to around 4 Mtpa. This means that alternatives to the traditional propane-MR process become important in order to further capitalize on economy of scale. On the one hand, several players develop solutions that maintain the two cycle concept, and also its inherent operability. Shell developed a liquefaction process with two mixed refrigerant cooling cycles, the Dual Mixed Refrigerant or DMR process. This concept allows the designer to choose the load on each cycle. It also uses proven equipment, e.g. spiral wound heat exchangers, throughout the process. The DMR process is the basis of the Sakhalin LNG plant, with a capacity of 4.8 Mtpa per train. Shell has also developed technology to further push the capacity of the propane cycle, by employing double casing instead of single casing equipment. This is a reliable method to bring the propane-MR process closer to a capacity of 5 Mtpa. Another possibility for the propane-MR process is to transfer power from the propane cycle to the mixed refrigerant cycle, a concept developed by APCI. The closer coupling between the two cycles by mechanical interlinking of compressors is an operational challenge. This so-called split MR concept will be applied for Union Fenosas planned LNG train in Egypt and the Rasgas third LNG train in Qatar. On the other hand, several players are venturing into three-cycle designs. Process licensor Phillips and contractor Bechtel updated the Cascade process and developed it into an alternative to C3-MR. This process results in train sizes of 3 to 3.5 Mtpa and was used for the LNG trains in Trinidad. Statoil has, in cooperation with Linde, developed a process based on three mixed refrigerant cycles. The process utilizes both plate fin and spiral wound heat exchangers, and has been selected for the Snohvit plant in Norway. APCI developed a three-cycle liquefaction technology that uses a nitrogen cycle for final cooling behind the normal propane and MR cycles. This process is called AP-X. The additional cycle brings the capacity to around 7 Mtpa. Shell has proposed a design that also employs three cycles, but with two MR cycles in parallel. Either a propane or mixed refrigerant cycle can be applied before the two parallel MR cycles. This PMR or parallel mixed refrigerant concept allows a production capacity of 7 Mtpa. Further capitalizing on economy of scale does reduce specific costs of LNG; however, it also increases the liquefaction plant size, which may make it hard to match with reserve base, financing and market. Thus, genuine cost reduction without scale increase is also important. Decreasing equipment count is a powerful method to reduce cost. This concept was used to bring cost down for both the Oman and Sakhalin LNG plants, with a strongly reduced equipment count compared to other recent Greenfield LNG plants.

Another possibility is to overcome size limits of key equipment by constructing part of the refrigeration cycles in parallel. Although this increases equipment count, it also decreases the size of equipment and thus stimulates competition between equipment vendors: the largest size equipment can usually only be produced by one vendor. This GameChanger concept allows a plant size of 5.3 Mtpa, and significant cost savings. The GameChanger design also introduced electrical motors to drive the refrigeration cycle compressors. In certain situations, electrical motors are a more reliable and less bulky driver than Frame 7 gas turbines. The needed electricity will be generated by a gas turbine-driven power plant. As the redundancy of an additional gas turbine is needed to ensure reliable power generation (n + 1 concept), maintenance schedules can be reduced by servicing gas turbines one by one, not disturbing production. In short, electrical drive improves the availability of an LNG plant. 50 MW electrical motors are already available for direct drive applications and electric motor vendors are currently working on 65 MW electrical drivers. Before 2010, a 75 MW electrical motor, the equivalent power output of a Frame 7 gas turbine, will undoubtedly be developed. Electrical drive may also offer several schedule benefits, as the power plant and the liquefaction plant can be constructed separately. The EPC phase of a greenfield LNG plant takes on average 39 months from Final Investment Decision to Start up, while brownfield projects can be much faster. For a GameChanger plant a reduced schedule is possible due to the ease of installing smaller equipment. A new level of efficiency can also be realized via electric drive as the required power can be produced in a combined cycle power plant.

Specific Capex ($/tpa) 200


Three driver processes

GameChanger 3 4 5 6 Capacity (Mtpa) 7 8

Figure 2. Specific costs of various processes as a function of capacity

New liquefaction trains will not only have to be cost effective, but also flexible. As the American market will be a major market for growth, LNG producers will have to face the challenge of producing LNG to a lower specification of heating value. As a consequence, solutions have been developed in order to produce LNG with a reduced heating value. In a LNG production plant, deeper LPG extraction has been developed, while inert blend-in is a possible solution for LNG import terminals. It is clear that the drive to lower costs will continue via many different routes. As large trains are not appropriate in every market situation, solution providers will have to be able to offer LNG plant sizes ranging from 3 to 7 Mtpa. As indicated in Figure 2, Shell aims to maintain a portfolio of operable LNG plant solutions based on various different processes and covering the capacity range of 3-7 Mtpa. Rather than becoming standardized technology, a variety of LNG processes will play a role in liquefaction in the years to come.

Current trends suggest that international trade of LNG trade is set to grow by 5 to 7 % per annum until 2010. This would mean a global trade of LNG of around 190 million tons in 2010. Recent newcomers such as Qatar, Nigeria and Trinidad will grow into major exporters, but a myriad of other new exporters will also enter the market. The past decade was characterized by a strong decrease in the cost of carriers and increasing economy of scale for LNG plants. Strong innovation in upstream development and liquefaction process will be needed to achieve further reduction of costs. The past three decades have caused the two-cycle propane-MR process to become the workhorse of the industry. The latest completed propane-MR LNG trains show that liquefaction trains can be built up to 4 Mtpa, at a specific cost of 200 $/tpa and an energy efficiency of 92%. As the two-cycle propane MR process runs into equipment constraints, several important innovations are needed to increase capacity and/or bring costs down. Better conceptual alignment of tasks between upstream and downstream may bring total costs down in the supply chain. An example of closer upstream / downstream integration is floating LNG. Alternative processes based on mixed refrigerants or multiple cycles are being developed. Electric motors in the range of 50 to 75 MW are becoming alternative drivers for refrigeration cycle compressors. Electric drivers supplied from a combined cycle power plant will significantly lower CO2 emissions. As an alternative to scale increase, GameChanger methodology can bring cost down by stimulating competition and increasing availability. As a wider variety of liquefaction processes and train sizes becomes available, both offshore and onshore, a portfolio of LNG solutions crystallizes that covers the entire range of 3 to 7 Mtpa per train.