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The role of small scale LNG in business

This opinion editorial was co-authored by Bernadett Györfi, MVM CEEnergy .

Introduction of ssLNG

Nowadays, the question of liquefied natural gas (LNG) and its inherent possibilities attract some of the biggest attention and interest in the energy market. Yet, in most cases, large-scale business comes into the spotlight while the smaller volume area, small-scale LNG (ssLNG), does not receive recognition. In fact, this is a major problem, because it is the potential offered by ssLNG that can fulfil all the flexibility and environmental protection expectations our world is seeking to address today.

Even though a much lower amount of LNG is traded through ssLNG activity than the quantities shipped between continents on large LNG tankers, still – as a result of decarbonisation efforts – it plays an increasingly important role in reducing the emission of carbon monoxide, nitrogen oxide and particulates.

LNG can be produced in plants, generating several million tonnes of LNG per year. Yet, when covering local needs with ssLNG, it is more cost-effective if LNG is produced in smaller-scale plants closer to the consumer.

The location of the production site and its connection to the infrastructure determine the way of transporting LNG to customers. Obviously, the customers’ access to LNG is also essential in this regard. SsLNG can be transported by special ships, trucks or in railway wagons.

By courtesy of MVM CEEnergy.

In order for the ssLNG sector to be able to live up to its substantial growth potential, it has to deal with two significant but opposing issues (similar to the chicken and egg problem). The first is that LNG storage facilities with sufficient capacity should be established and made available at the terminals or in their vicinity since without them, the demand based on continuous contracts cannot be met. However, the second problem is precisely that the investors are not willing to invest until they are convinced that their investment will pay off: although ssLNG as an average profitable business has relatively lower investment cost requirements compared to the traditional LNG sector, the provision of basic activities (storage, shipping) is already capital intensive (because of the need for special material).

Market trends in general

The use of LNG as a transport fuel is expanding worldwide: Asia (especially China and India) and Europe have already started installing LNG-powered trucks, especially for long-distance freight transport. This is mainly due to government policies and regulations on decarbonisation and emission control, such as China’s VI and the European Green Deal. According to the European commitment, Europe must be carbon dioxide neutral by 2050, in which LNG will play a prominent role as a fuel for trucks and ships.

In terms of ssLNG, LNG is primarily used to fuel trucks and ships due to its economic and environmental advantages over diesel and fuel oil. As LNG is non-corrosive and non-toxic, it can extend the life of a vehicle up to three times. In addition, because LNG has an extremely low boiling point, very little heat is needed to convert it into a gas at high pressure with negligible mechanical energy. This makes LNG an efficient fuel for transport. However, handling LNG is a difficult task, as even the slightest temperature difference can cause the fuel to boil and vaporize, which in turn leads to fuel wastage. Therefore, this makes its use by passenger cars much less viable than by heavy vehicles, such as commercial vehicles, thus limiting LNG utilisation in the transportation segment.

Practical application of ssLNG in MVM CEEnergy’s strategy

SsLNG has many ways of application, such as bunkering, ship-to-ship or industrial use, but the most important area for MVM CEEnergy is the gas-to-car transport (ship-to-truck) business. The value of this is that the reduction of noise and the resulting inconvenience to the population, combined with the improvement of local air quality and the possibility of CO2 reduction, makes LNG a promising alternative fuel for meeting increasingly strict environmental protection goals, whether for (especially long-distance) freight transport or for local or transit public transport.

With LNG transported by road, using tankers, natural gas can be supplied to target consumers who themselves function as LNG fuel distributors, industrial sites that are not directly or narrowly connected to the transmission network, or end consumers for whom LNG is the alternative, supporting (quasi-secondary, local “within the fence”) energy security option.

Position and vision of ssLNG in Krk Terminal

The small-scale LNG service of the Krk LNG Terminal started in April 2022, within the framework of which it is possible to contract Ship to Ship (StS bunkering) and Ship to Truck (StT) slots. This was an important milestone because when the terminal was launched, the role of ssLNG was not in focus and thus only later, when the need emerged, it was included among the services offered as a technical extension of the terminal.

MVM CEEnergy was the first natural gas and LNG trader who utilised the new services and sold LNG quantities for ssLNG purposes.

A prominent part of MVM CEEnergy’s regional strategy involves the strengthening and development of the StT business, and this is reinforced by the fact that several market players in the region are intensely interested in and initiate cooperation. Considering the region of focus for MVM CEEnergy’s activity, one can say that although the ssLNG market is currently small, the interest in this product and the related logistics services are constantly expanding.

The increase in regional demand is primarily driven by the reduction of harmful emissions undertaken by the EU, since comparing to traditional fuels, LNG is much less harmful to the environment. In this regard, MVM CEEnergy finds that the demand – or at least the underlying interest – is growing rapidly, which is generated on the one hand by increasingly strict environmental protection regulations, and on the other hand by the flexibility of the price of energy used. Therefore, MVM CEEnergy’s view is not only to maintain but increasingly support the needs of our Partners we manage by generating continuous leads, thereby promoting the focus and launch of ssLNG activities in the region. The launch and use of the service provide an opportunity to cooperate with partners who would regionally rely on or expand with LNG purchased from MVM CEEnergy.

Since the demand for ssLNG is growing significantly, the central idea for MVM CEEnergy is to keep in mind the possibilities offered by the ssLNG area, even though ssLNG cannot be considered commercially profitable at the moment and there is still plenty of room for further growth in terms of the number of units delivered. However, factors such as MVM CEEnergy’s established network of contacts and the industrial know-how acquired in ssLNG present us with opportunities that MVM CEEnergy is counting on and focusing on in its future.

Sponsored by MVM CEEnergy.

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