Compressed natural gas (CNG) may open stranded natural gas reserves around the world, introduce new energy solutions to remote markets, and address unnecessary flaring, all while enhancing balance sheets of participants.

The major players pursuing this technology include TransCanada and Sea NG, both of Canada, EnerSea from Houston and CETech and Knutsen from Norway, members of the Centre for Marine CNG.

Currently, more than one third of the world’s natural gas reserves remain stranded and have not yet been exploited. Alternative market options for these offshore reserves have been limited due to reserve sizes and low production rates as well as geographical obstacles that have prevented traditional pipeline solutions. This situation caused innovators to look for a solution to fill this niche, accessing hundreds of billions of dollars of natural gas using a new technological solution — marine CNG. Taking reservoir gas at pressure — temporarily storing it in purpose built containers for transporting and discharging into receptive markets — seemed like a perfect extension of a technology application that has been used on roads and rails for decades.

The value chain is, at least theoretically, quite simple and economic. For a smaller application in a benign coastal environment, a series of barges or small ships would be tasked with

CO2 storage piping being wound onto Coselle. (Photo courtesy of the Centre for CNG)
loading at an offshore structure, steaming to a nearby port and coming alongside for discharge to a natural gas cogeneration facility. At any one time there would be a minimum of a single barge or vessel loading, one in transit and one discharging, ensuring uninterrupted supply. Supply risk could also be mitigated by using on-site propane bullets or low-sulfur diesel as a backup fuel source. In a larger project the barges would be substituted by larger ships, the discharging and offshore loading would be accomplished using submerged turret mooring systems and the market would likely be an established grid system. Reliability of supply risk, if any, would be mitigated in the way current interruptions are managed in the United States Northeast, for example, via inherent capacity in the storage and grid systems.

While many of the technology proponents may be closer to the deal flow, the Centre has analyzed the following three opportunities as the most exciting applications facing the emerging marine compressed natural gas industry:
• Coastal or island power generation particularly to displace heavy fuel oil;
• Sequential gas-cap blowdown service for a small region such as the North Sea; and
• Flaring moratoria compliance off West Africa.

The marine CNG industry has been a long time in the making. Marine CNG is technically and economically viable. A remaining challenge was succinctly conveyed by one engineer, “Am I going to dedicate 500 professional and technical staff to a project with (US) $5 billion EBIT (earnings before interest and taxes) potential, or to an LNG project with $15 billion?” It was a remarkably good point. While international oil companies have huge reserves, the near term potential rests with the national oil companies with smaller reserves, regional demand and ability to control both supply and market.

The collective market capitalization of the current major participants exceeds US $200 billion. The commitment of human resources and development dollars to date is valued in the hundreds of millions. What follows is a short summary of the major technological proponents for this new monetization scheme. All proponents have committed to long term support and membership with the Centre with the exception of Norway’s Knutsen, which continues to support the Centre’s consulting efforts and participates in our annual International Marine CNG Forum.

SEA NG. With approval to construct the world’s first marine CNG vessel in hand, Calgary-based SEA NG is positioned to start the first project. After partnering with Marubeni Corp. and Overseas Shipholding Group (OSG) in late 2006, SEA NG, under the leadership of David Stenning, president and chief executive officer, has incredible momentum and access into Southeast Asia, which is regarded as a very applicable region for this niche technology. As Stenning recently commented, “After over a decade of conquering the technical challenges, we are now seeing that commercial issues are the only hurdle between us and a project moving forward. And these are really focused on the gas off-take agreements. No one is challenging the technology.” The SEA NG technology is unique to the emerging industry in that it is based on coiled X80 piping (10 miles [16.09 km] of 6-in. coiled piping per “Coselle” to be exact), which facilitates the use of less steel that is also more readily available.

EnerSea Transport. Paul Britton, managing director, is leading his company’s aggressive positioning in the emerging marketplace. Unique to EnerSea’s design is the concept of refrigerating the natural gas to -23.09ºF (-30ÞC) as well as the use of a displacement fluid to maintain constant pressures. The former reduces the storage pressure considerably and thus requires less steel in the manufacture of the pressure vessels, while the latter system prevents the dramatic temperature fluctuations that can occur with pressure changes. However, this does mean a ship operator needs to control two additional systems, but from the onset EnerSea has engaged Hyundai Heavy Industries (the shipbuilder) and K Line (the fleet operator) who among many have become very comfortable with the technology. EnerSea’s technology has also been approved in principal by ABS of Houston.

CETech. If one were considering a joint venture to develop a new technology, the partnership comprising Statoil, Hoegh LNG and TeeKay Shipping through CETech is a very strong consortium. CETech’s general manager, Alf-Petter Olsen, has more than 20 years experience in the ship building industry and leads the team developing the only vessel concept with a horizontally-placed storage system. Olsen recently confirmed that his joint venture is focused on finalizing the technology and remains on schedule for commercialization.

TransCanada. TransCanada owns and operates more than US $24.9 billion in assets consisting of over 36,639 miles (59,000 km) of high pressure gas pipelines transporting more than 15 Bcf/d and gas storage capacity of over 350 Bcf. The Calgary-based company developed Gas Transport Modules (GTM) for transporting CNG. These light-weight, composite-reinforced pressure vessels position TransCanada to provide a cost-effective transportation and storage solution. At a meeting of industry players in June 2007, Greg Cano, director, CNG Technology, unveiled the partnership of TransCanada and OSG, representing the second largest publicly traded tanker company in the world, christening it TransCNG International. Cano stated that TransCNG will execute definitive agreements for a project before the end of 2007 with initial gas deliveries scheduled for late 2009 or early 2010.

Knutsen. The Norwegian maritime experts at Knutsen look to introduce the technology at a small scale and in familiar geography. Knutsen intends to refurbish existing ship hulls, install fabricated CNG storage cylinders and engage in coastal trade by bringing gas from Western Norway to the East coast. Originally anticipated to have been sanctioned in the second quarter of 2007, the Knutsen project will likely be advanced before year’s end upon resolution of some Norwegian energy policy issues.

Industry buzz continues to build over marine CNG. While those of us who follow the industry have witnessed several false starts over the past 3 years, optimism remains high.
Whether it was the proposal to use CNG to ship gas from Myanmar to India (China outbid GAIL); Offshore Newfoundland to the US Northeast (delineation program extended); or Colombia to Panama (choice of fuel under review) — there has never been a marine CNG project not proceed because of technical or economical reasons. The proponents continue to be engaged by interested parties, with new projects constantly emerging.

Editor’s Note: In 2003, the Centre for Marine CNG Inc. was established in St. John’s, Newfoundland, Canada. The Centre was assigned a mandate of promoting the development of the emerging marine CNG technology by providing technical and analytical support, consulting services and international advocacy. The Centre will host the Third Annual Marine CNG Standards Forum in St. John’s in October. Please see www.cmcng.com for more information.

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