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LCNG LCNG –– A Bridge Solution to A Bridge Solution to High Cost Fuels in Rural Alaska ?High Cost Fuels in Rural Alaska ?
Energy Action Coalition8 July 2011
Liquefied/Compressed Natural Gas –
Pilot Development for the City of Bethel
Michael W. Moora, PE
PDC Harris Group LLC
1
LNG Recent Press
27 June 2011, Petroleum News piece; 22 June RCA testimony by Utility + Donlin Creek Mine
Study Group
Cold Regions Design Forum, 16 Feb 2011 2
Study Group
• Supply shortfall starting 2014
• Import LNG
• Negotiations for supply underway
Who is PDC Harris Group?
• Joint Venture, established 2002
• PDC Inc. Engineers (Alaska, +30 years)
• Joint Venture, established 2002
• PDC Inc. Engineers (Alaska, +30 years)
• Upstream & Midstream Oil & Gas
• Anchorage & Fairbanks
• Upstream & Midstream Oil & Gas
• Anchorage & Fairbanks
Heavy Industrial Sector • Commercial
Buildings/Facilities
• DOD Facilities & Power
• Transportation &
• Commercial Buildings/Facilities
• DOD Facilities & Power
• Transportation & • Harris Group Inc.
(Lower 48, also +30 years)
• Harris Group Inc. (Lower 48, also +30 years)
Full-Service Engineer, JV
• Anchorage & Fairbanks Utilities
• North Slope Power Generation
• Anchorage & Fairbanks Utilities
• North Slope Power Generation
• Transportation & Environmental
• Transportation & Environmental
Light Industrial Sector
CWN Energy Action Coalition 3
Rural Energy Problem
• Dependent on petroleum-derived fuels
• Retail costs tied to crude $
• Tight market economics
Rural AK Communities • Tight market economics
• Subject to market volatility
• Staggering impacts for residents
• Incomes low, fuel prices inflated
• Spending > 30% of income for fuel
Communities (esp.
western AK)
CWN Energy Action Coalition, 8 July 2011 4
Mitigation Measures
• Wind, solar, biomass, hydro, geothermal
Renewable Sources
Advantage Disadvantage
Reduced (or zero) fuel cost Capital cost significant
CWN Energy Action Coalition, 8 July 2011 5
Reduced emissions and carbon footprint Implementation complex, relatively long schedule
Satisfy energy demand partially
• Residual dependence on petroleum
distillates
• Solar & wind electric generation requires
backup capacity
Conundrum
Renewable
• Decrease dependence on petroleum, but do not eliminate it
• Villages remain exposed to risks
• Market volatilityRenewable Resources in Rural
Alaska:
• Future price increases tied to tightening supplies
CWN Energy Action Coalition, 8 July 2011 6
Rural AK Fuel Prices Unlikely to Stabilize
$4.00
$4.50
$5.00
$5.50
Bethel Fuel Oil Pricing Forecast, 2011 - 2030 R
eta
il p
rice
, $
/ga
llon
ISER Paper 2011.1, “Alaska Fuel Price
CWN Energy Action Coalition, 8 July 2011 7
$2.00
$2.50
$3.00
$3.50
Re
tail
price
, $
/ga
llon
Projections 2011-2030”, Jan. 2011
Fuel Substitution
• Displacing diesel/fuel oil with economic substitute
– Alternatives basket:
• Coal
• LPG (butane & propane)
• LNG/CNG (natural gas)
• Methanol/ethanol
CWN Energy Action Coalition, 8 July 2011 8
Natural Gas vs. Petroleum Pricing Trends
Currently $100/bbl ÷ $ 4/ k ft3
= 25
Ratio on BTU: historically about 100% to 170% of gas
CWN Energy Action Coalition, 8 July 2011 9
2009: steep divergence between petro and natural gas pricing in US
Ratio on BTU: crude oil is currentlypriced @ 430% of natural gas
Hypothesis:
Since diesel fuel is petroleum-derived, and LNG is gas-derived, there may be a sufficient pricing differential to support LCNG substitution in remote Alaskan communities.
CWN Energy Action Coalition, 8 July 2011 10
What is LNGLiquefied Natural Gas:
• Dry
• Conditioned
• cryogenic liquid
Cryogenic storage temperature
• Negative 260°F, atmospheric pressure
• Negative 117°F for pressurized storage (250 psig)
CWN Energy Action Coalition 11
What is CNG
CNG = compressed natural gas vapor
• temperature = ambient, not cryogenic
Pressure 2900-3600 psigPressure 2900-3600 psig
• cylindrical or spherical containers
• <1% of volume at atmospheric pressure
• energy density, BTU/gal
• ~42% of LNG, 2.5 gal = 1 gal LNG
• ~25% of Diesel, 4.0 gal = 1 gal Diesel
Cold Regions Design Forum, 16 Feb 2011 12
LCNG Definition
Liquefied Natural Gas
(LNG)
Pumping to high
pressure
Warming to Vaporize
Compressed Natural Gas
(CNG)
Integrated Combination of Liquefied & Compressed Natural Gas
• Fuel for LNG vehicles (fleet)
• Fuel short haul CNG vehicles
• Distribute -conventional natural gas system
Cold Regions Design Forum, 16 Feb 2011 13
Bethel/Rural Alaska
LCNG ConceptLN
G
CNG Bullets
LNG to CNGHeater
LNG Barge
to Gas Users
pum
p
On shore storage depot
CWN Energy Action Coalition
LNG Barge
Test hypothesis, price snapshotFuel shopping basket:
Diesel
(FOB US & AK)
LNG
(landed @ destination)
Propane
S. Korea
Imports
China
Imports Alaska,
CWN Energy Action Coalition, 8 July 2011 15
Diesel
Wholesale, US
Average
Alaska Diesel,
Wholesale FOB
Refinery
Imports
Average
Imports
AverageUS Imports,
Average
Alaska Landed in
Japan
Alaska,
Commercial
Delivery ANC
US Wholesale/
Resale FOB
Date Feb-2011 Feb-2011 Sep-2010 Sep-2010 Feb-2011 Feb-2011 Jun-2011 Mar-2011
$/MM BTU 20.96 22.64 10.41 6.61 4.16 12.64 40.32 15.33
Comparison 0.93 1.00 0.46 0.29 0.18 0.56 1.78 0.68
Same data, bar graph:
15
20
25
30
35
40
45
$ p
er
mil
lio
n B
TU
FOB refinery Landed basis
CWN Energy Action Coalition, 8 July 2011 16
0
5
10
15
Diesel
Wholsale US
Average
Diesel
AKWholesale
FOB Refinery
LNG landed S
Korea LNG landed
China LNG US ImportLNG Alaskan
landed Japan Propane AK
Commercial
Delivery ANC
Propane US
Wholesale
FOB
$ p
er
mil
lio
n B
TU
Risk in relying on snapshot data
What are the longer term trends longer term trends
of LNG versus diesel pricing?
CWN Energy Action Coalition, 8 July 2011 17
Historical Trend - Diesel
$25
$30
$35
$40
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Comparison of LNG & Diesel Price*, $/Million BTU
AK Diesel Wholesale,
FOB Refinery*
* data from Energy Information Administration monthly reports
CWN Energy Action Coalition, 8 July 2011 18
$0
$5
$10
$15
$20
Ma
r-2
00
3
Jun
-20
03
Sep
-20
03
De
c-2
00
3
Ma
r-2
00
4
Jun
-20
04
Sep
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c-2
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Jun
-20
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-20
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c-2
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Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
AK Wholesale Diesel,FOB Refinery
Historical, AK Diesel & AK LNG
$20
$25
$30
$35
$40
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Comparison of LNG & Diesel Price*, $/Million BTU
AK Diesel Wholesale,
FOB Refinery*
* data from Energy Information Administration monthly reports
CWN Energy Action Coalition, 8 July 2011 19
$0
$5
$10
$15
$20
Ma
r-2
00
3
Jun
-20
03
Sep
-20
03
De
c-2
00
3
Ma
r-2
00
4
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-20
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-20
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c-2
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c-2
01
0
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
AK LNG Delivered to Japan
AK Wholesale Diesel, FOB Refinery
Alaska LNG Landed in Japan*
Add LNG imported to the US
$25
$30
$35
$40
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Comparison of LNG & Diesel Price*, $/Million BTU
AK LNG Delivered to Japan
AK Wholesale Diesel, FOB Refinery
US Import LNG Landed
* data from Energy Information Administration monthly reports
CWN Energy Action Coalition, 8 July 2011 20
$0
$5
$10
$15
$20
Ma
r-2
00
3
Jun
-20
03
Sep
-20
03
De
c-2
00
3
Ma
r-2
00
4
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-20
04
Sep
-20
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De
c-2
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c-2
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c-2
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Sep
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01
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r-2
01
1
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Imported LNG Landed US*
AK LNG Landed Japan*
AK Diesel FOB Refinery*
Add $ for delivering diesel to Bethel
$30
$40
$50
$60
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Comparison of LNG & DieselPrice*, $/Million BTU
AK LNG Delivered to Japan, $/million BTU
Alaska No 2 Diesel Through Company Outlets
Price by All Sellers ($/MMBtu)
Landed US LNG Import Price, $/MMBTU
AK Diesel delivered to Bethel
AK Diesel Fuel FOB ANC ,
including adjustment for
shipping to Bethel @
$1.34/gal
* data from Energy Information Administration monthly reports
CWN Energy Action Coalition, 8 July 2011 21
$0
$10
$20
$30
Ma
r-2
00
3
Jun
-20
03
Sep
-20
03
De
c-2
00
3
Ma
r-2
00
4
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-20
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-20
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c-2
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0
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-20
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c-2
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0
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r-2
01
1
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Imported LNG Landed US*
AK LNG Landed Japan*
AK Diesel FOB*
LNG Facts
Technology for storage & distributing evolved thru US aerospace
Density is
BTU content is 60% the equivalent volume of diesel fuel
Considered a safety hazard
• Temperature, flammability, vapor dispersion US aerospace
liquid rocket fuels
• H2 (-423 °F) & O2
(-296°F)
Density is
45% H2Odiesel fuel
• i.e. 1 gal diesel = 1.67 gal LNG
vapor dispersion
• As are most fuels
8 July 2011 22
Add $ for double hauling LNG
$30
$40
$50
$60
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Comparison of LNG & Diesel Price*, $/Million BTU
AK Diesel delivered to Bethel
Japanese LNG delivered to Bethel
Landed US LNG delivered to Bethel
* data from Energy Information Administration monthly reports
Japanese basis: $28.35/million BTU
Diesel $42.50/million BTU or $5.70/gal
CWN Energy Action Coalition, 8 July 2011 23
$0
$10
$20
$30
Ma
r-2
00
3
Jun
-20
03
Sep
-20
03
De
c-2
00
3
Ma
r-2
00
4
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-20
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-20
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De
c-2
00
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Ma
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0
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Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
US basis: $20.22/million BTU
What about historical propane prices?
$25
$30
$35
$40
Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Comparison of LNG, Propane & Diesel Price*, $/Million BTU
AK LNG Delivered to Japan
AK Diesel FOB Refinery
AK LNG landed in Japan
US Propane Wholesale/Resale
* data from Energy Information Administration monthly reports
AK Diesel FOB Refinery*
CWN Energy Action Coalition, 8 July 2011 24
$0
$5
$10
$15
$20
Ma
r-2
00
3
Jun
-20
03
Sep
-20
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De
c-2
00
3
Ma
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00
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r-2
01
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Co
st o
f Fu
el,
US
Do
lla
rs p
er
Mil
lio
n B
TU
of
He
ati
ng
Va
lue
(H
HV
)
Imported LNG Landed US*
AK LNG Landed Japan*
Seasonal US Propane*
Potential bridge solution to high cost fuel in rural Alaska?
Perhaps: based on pricing advantage
• Needs study • Needs study
• Identify real village supply chain economics
• Equipment costs for storage & distribution systems
• Develop permitting requirements
CWN Energy Action Coalition 25
Initiative chosen to advance
LCNG Project ConceptBridge to Lower Energy Prices in Rural Alaska
26
LCNG storage and fueling station, Norway
LCNG Advantages
• Lowered emissions, especially CO2
• Equipment available to suit small village to hub citysmall village to hub city
• Storage, transport & conversion technology fully-developed
• LNG nominally 20% to 50% Diesel, $/million BTU
CWN Energy Action Coalition 27
The LCNG Concept
• Concept design for stage 2 pilot equipment
Stage 1 –Conceptual
stage 2 pilot equipment
• Capital cost estimate
• Supply chain economics
Conceptual Design &
Economics
CWN Energy Action Coalition 28
Cooperative Development
w/ City of Bethel
LCNG Initiative cont’d
• LNG depot + delivery barge
• Bethel Pilot Systems
• Pilot storage & distribution natural
Stage 2 –Install • Pilot storage &
distribution natural gas
• Retrofit boiler & furnace
• Retrofit diesel engine -generator
Install Pilot
System
CWN Energy Action Coalition 29
LCNG Concept Continued
• Village-wide system design
• Capital & operating
Stage 3 –Large Scale operating
economics
• Install & monitor full village system
Large Scale Deployment
CWN Energy Action Coalition 30
LNG & CNG Fuel Considerations
• NOx, HC, PM & CO2
Air emissions advantage compared to liquid fuelsAir emissions advantage compared to liquid fuels
• Relatively simple
Conversion from existing fuelsConversion from existing fuels
• Relatively simple
• Forced air home furnaces
• Boilers, residential and commercial
• Slightly more complex
• Otto-cycle (gasoline)
• More complex
• Diesel engine
CWN Energy Action Coalition 31
Fuel Considerations, cont’d
Diesel Engine Retrofit
• fuel and controls to burn~ 90+% NG, <10% diesel
• Mobile (trucks, buses, heavy equipment)
• Stationary (power generation)
Transportation Fuel• Both CNG and LNG used extensively in Asia,
Europe & S America.
• Energy density disadvantage of CNG limits use to shorter-haul
CWN Energy Action Coalition 32
LCNG Fueling Station
El Paso’s Sun Metro LCNG fueling station completed 2002 (compliments of North Star)
Cold Regions Design Forum, 16 Feb 2011 33
LNG Commerce
• 1st piloted in WV 1917
• Cleveland 1st commercial plant 1949
• 1st LNG tanker, L Charles/UK 1959
1940s to 1980s moderate growth
Process developed nearly
100 years ago
• 1 LNG tanker, L Charles/UK 1959
• Algeria/UK 1965, Algeria/France 1966
• 1st Asian import, Kenai/Japan 1969
• 1st US import (Algeria to Boston) 1972
• 1st Asian production (Malaysia) 1983
CWN Energy Action Coalition 34
US LNG Commerce• 1970s: initial imports
• Everett MA
• 2 more re-gas plants in GA and MD
• 1978: deregulation of natural gas industry
• Domestic production LNG • Domestic production LNG imports
• GA & MD facilities shuttered 1980
• LA re-gasification plant opens 1981, closes 1982
US Trends, 70s - 80s
Unstable Market
CWN Energy Action Coalition 35
US LNG Commerce
• Low import volumes
• Zero US imports in 1986 • MA resumes import of
Late 80s to Early 00s – Bubble Disappears
1986
1980s – Surplus of Inexpensive Natural Gas
• MA resumes import of Algerian LNG 1988
• Rapid increases in importation
• 18 BCF 1995
• 238 BCF 2001
CWN Energy Action Coalition 36
Recent LNG Trends2000 to 2007
• Increased US LNG shipments• Increases in US gas demand• US gas supply tightens• Decreases in world-wide LNG $• GA reopens 2001• MD reopens 2003• MD reopens 2003
• Numerous regasification plants planned for US East, West and Gulf coast
• In the wings: Development of shale gas completion technology
CWN Energy Action Coalition 37
LNG Trends Cont’d• US = chaotic
• Declining US Gas Pricing
• Demand destruction in US
• Surplus domestic production – shale based
• Many canceled LNG re-gasification projects in US
• Some completed LNG re-gasification plants • Some completed LNG re-gasification plants shutdown
• Declining LNG imports & pricing
• US price low (parity w/ ng @ $4/mm
• Kenai LNG plant mothballed (2011)
2008 – Present
CWN Energy Action Coalition 38
LNG Safety
• Cryogenic temperatures• Dispersion – vapor cloud formation
No denying risk of LNG handling & storage
• Dispersion – vapor cloud formation• Flammability
Other fuels share some of same risks
CWN Energy Action Coalition 39
LNG Accidents
• Failure of low Ni steel LNG tank (lack of stainless in WWII)
• Liquid entered sewer system & ignited
• 128 deaths
Most notable, Cleveland
1944
• Ca Energy Commission: www.energy.ca.gov/lng/safety.html
Recap and Summary of Accidents +
Safety Studies
CWN Energy Action Coalition 40
LNG Safety cont’d
• Terrorist threat (Ship & Port Security Code, 2003), (US Maritime Transportation
Array of codes, Maritime Transportation
Security Act, 2002)
• Safety of US land-based systems (DOT, FERC)
• Safety of US waterfront systems (US Coast Guard)
codes, standards & guidance to mitigate risk
CWN Energy Action Coalition 41
LNG Shipping1952 - 2003, LNG ships - 33,000 voyages worldwide
• 2,400 to or from U.S. ports.
• 3 billion cubic meters of LNG.
Types of tanker accidents include
• engine room fires
• collisions
• groundings
• loss of containment
• embrittlement - cargo spillage
There have been no cargo explosions, fires, or shipboard
deaths.
CWN Energy Action Coalition 42
LNG Safety cont’d
• Reactivated east coast units• New GOM units• Enhanced scrutiny• New methods of assessment (risk based)
Recent permitting of regasification
in US
Risks can be reduced to
extremely low levels
CWN Energy Action Coalition 43
What Isn’t Known(read: Study Scope of Work)
Supply Chain
LNG Source
OPEX $
CAPEX $
CWN Energy Action Coalition 44
Path Forward
Stage 1 Supply Chain
Study
• Funding - AEA Emerging Energy Technology Grant
• Other Sources
• Federal DOE
Stage 2 • Proof of conceptStage 2 Village Pilot
Program
• Proof of concept
• Confirm supply chain economics
Stage 3 Scale Up
• Hub to satellite network
• Economy of scale
CWN Energy Action Coalition 45
