BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm Page 10

Cool future for g

Liquefied natural gas (LNG) is on the threshold of its second age, as demand
from new markets, combined with advances in process and related technologies,
are stepping up competition around the globe. Terry Knott reports

10 Frontiers December 2001

 BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm Page 11

e for gas
Frontiers December 2001 11
BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm
atural gas currently accounts for
N about one quarter of total primary
energy consumption, with forecasts
indicating that world gas demand could
double by 2010 from today’s figure of 2400
billion cubic metres per year. Last year,
natural gas was the fastest-growing fuel
as world consumption rose by 4.8%, the
highest rate since 1996. At this pace, gas is
expected to overtake coal – which currently
holds second place in world energy usage
after oil – either this year or next.
Within this growth picture, international
trade in natural gas, either through pipelines
or as liquefied natural gas (LNG), has also
been steadily increasing, growing by about
9% per year for the last twenty years.
The trend is expected to continue as general
energy demand rises and shifts toward
environmentally friendly natural gas and
its derivatives as a cleaner fuel (REview,
August 2000).
At present, almost one quarter of gas
consumed in the world crosses an
international border. In situations where
the economics of major gas transmission
pipelines are not viable – primarily across
oceans – LNG comes into its own, reducing
natural gas to one six-hundredth of its
volume by cooling to –161˚C until it becomes
liquid, thus making LNG transportable by
specialised tanker ships. Last year’s LNG
movements are estimated to total 104
million tonnes – a quarter of all international
gas trade – of which BP’s equity share is
some 7 million tonnes.
‘Currently, BP’s LNG production equates
to about 10% of the company’s equity gas
production,’ says Mark Howard, BP’s global
technology team leader for LNG and gas
LNG from well to market
Natural gas is extracted from At the liquefaction plant, the gas is turned
the reservoir and piped to an into a liquid by cooling it to –161˚C and is
onshore liquefaction plant then stored in tanks to await shipping
Page 12
processing. ‘While our gas sales are
projected to grow at around 9% per year, it
is likely that LNG will grow faster, and could
account for up to 25% of equity gas
production by 2010.’
He points to several driving forces which
are propelling LNG into what he refers to as
its ‘second age’.
Markets around the
world are deregulating,
offering more
Several forces
opportunities to supply are propelling
LNG into nation states,
alongside which demand LNG into its
for more efficient and
cleaner energy is on the second age
rise. A key player in this
respect is North America, which consumes
about one third of all natural gas produced
and is calling for more energy to meet its
needs – in the US, recent disruptions caused
by power shortages in California have
brought energy supply issues sharply into
focus. Other markets enjoying economic
growth, for example southern Europe, are
also seeking more energy, notably in the
form of natural gas for firing combined cycle
power plants (Frontiers, September 2001).
Emerging economies in the Far East,
including China, India, Taiwan and the
Philippines, and in South America, are adding
to the potential demand.
Almost all of the world’s LNG is currently
supplied from 14 multi-train liquefaction
plants spread around the world, with Far East
producers Indonesia, Malaysia and Brunei
dominating the supply sector with 47% of
the market. But existing facilities in the
Middle East, Nigeria, Australia and Trinidad
are expanding rapidly, with potential new
entrants in Angola, Bolivia, Egypt, Iran,
Indonesia’s Irian Jaya, Russia’s Sakhalin
Island, the Timor Sea and Venezuela.
Changing markets
Although the first natural gas liquefaction
plant was built in 1941 in Cleveland, Ohio,
it was not until the mid-1960s that large-
scale LNG trading began
between Algeria and Europe. But
today’s global industry was really
founded in the 1970s on Japan’s
need for secure energy supplies,
being a country lacking in
sufficient indigenous energy
resources. Currently Japan and
South Korea together take 66%
of all LNG produced, with LNG producers
in the Far East and Australia serving as their
key suppliers. LNG accounts for one third
of Japan’s primary energy needs.
However, according to Howard, the
supply and demand equation is changing as
new suppliers and consumers enter the arena.
‘The US offers huge potential for taking
LNG supplies – at present less than 1% of
its energy comes from LNG. Of the four LNG
import terminals in the US, three are now in
operation, with Elba Island in Georgia re-
opening in just the last few weeks, and the
fourth terminal at Cove Point, Maryland –
mothballed in the 1980s when the gas
bubble burst – also being opened up again.
And there are at least twenty new terminal
projects being considered for the US, with
BP heading up one of these at Tampa in
Florida and exploring at least two others. In
practical terms, when the US market really
begins to take in LNG, it will be almost like
an infinite sink for the foreseeable future.’
The liquefied gas is transferred to a purpose-
built double-hulled tanker and shipped at
atmospheric pressure. The LNG is kept
at –161˚C by an auto-refrigeration process
BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm
Hoping to benefit from US demand is
BP’s LNG plant in Trinidad – strategically
located close to both North and South
American markets – supplied by very large
offshore gas fields developed by BP.
Operated by Atlantic LNG, a joint venture
between BP, BG, Repsol, Tractabel, and the
National Gas Company of Trinidad and
Tobago, the Trinidad plant produces some
3 million tonnes per annum (tpa) of LNG
from a single process train, commissioned
in 1999. Two other trains are being built to
add a further 6.6 million tpa, which should
come into operation in 2002 and 2003, with
the possibility of a fourth train coming on
stream – if approved – in 2004 to add another
4.8 million tpa.
In addition to Trinidad, BP’s other interests
in existing LNG facilities include stakes in
Das Island offshore Abu Dhabi, Bontang
in Indonesia and the North West Shelf of
Australia. Looking ahead, new plants already
planned for Tangguh in Indonesia, and
opportunities for BP in the Middle East and
Bolivia, could effectively see BP benefiting
from the output from a new LNG train each
year for several years, bringing the
company’s LNG production up to as much
as 13 million tonnes by 2005.
‘Another factor in the supply and demand
equation is the way LNG contracts are
operated,’ adds Howard. ‘Up until now,
justification of the billions of dollars of
financial investment needed to build a new
LNG plant and the associated dedicated
supply chain, has required the security of
long-term point-to-point supply contracts in
order to get oil companies, the supplying and
receiving countries, and financial investors
to commit to LNG developments.
The liquefied gas is transferred to a purpose-
built double-hulled tanker and shipped at
atmospheric pressure. The LNG is kept
at –161˚C by an auto-refrigeration process
Page 13
LNG supply chain costs
2.00
1.80
Note: Feed gas cost is excluded
1.60
US$ per million British thermal units
1.40
1.20 3200 km
1.00
0.80
0.60
0.40
0.20
0.00
Gas Liquefaction Fuel, utilities, Storage Project costs Shipping Import
processing operations and and export common to terminal
maintenance liquefaction
and export
The above graph shows indicative costs of each stage of the LNG supply chain. Basis: 4.5 million tonnes
per year export and import, with 3200 km one way trip, over a 20-year period
‘But we are seeing the beginnings of by at least another 25 vessels which are
a spot market developing in LNG, as well being built now, three of which are for BP.
as shorter term contracts and new types
of supply deals. One example is a contract Building blocks
signed earlier this year, the first of its kind, As for any other commodity or product, the
between BP and the Dominican Republic for price of LNG in the market place must be
“branded LNG”; that is to say, LNG supplied correctly set to maintain a sound business
by BP from an unspecified source.’ operation, a price influenced by the several
In order to accommodate the rapid operational stages – the building blocks
growth projected for LNG, and for a spot of the LNG supply chain.
market to have flexibility of supply, more This chain begins with the natural gas
marine tankers will be needed to transport source, which may require treatment for
LNG to a variety of markets. The current removal of constituents corrosive to
world fleet of 126 ships is being boosted equipment, such as sulphur, carbon dioxide >>
At the regasification terminal, LNG is pumped from the
ship to onshore storage tanks. It can then be returned to
its gaseous state and distributed onwards by pipeline
BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm Page 14

The Liquefin process for LNG

Dry sweet
natural gas

Heavy mixed refrigerant Air

cooling circuit coolers

Air
coolers

Heavy ends
removal column

Gas
Compressor turbine

Light mixed refrigerant

cooling circuit
C3+ sent to
fractionation

Gas
Compressor turbine

LNG for storage

and shipping

Cold box containing

plate fin heat exchangers
Liquid
turbine

Power

Two key elements characterise the Liquefin process and provide advantages
over existing alternatives, namely, the use of dual mixed refrigerants and
high efficiency modularised plate fin heat exchangers (PFHEs).
Incoming natural gas is first cooled in a cold box by a heavy mixed
refrigerant stream, containing ethane and propane. This pre-cooling step
reduces the temperature of the natural gas to around –60˚C, enabling
heavier components from the gas stream to be liquefied and removed. In
addition, pre-cooling reduces the load on the second stage cold box of the
liquefaction process, where a second, lighter mixed refrigerant containing
nitrogen, methane, ethane and propane, is used to bring down the natural
gas temperature to –161˚C and produce LNG.
The cold boxes consist of banks of aluminium PFHEs, each containing
multiple internal flowpaths, carefully designed to ensure controlled flow
distribution specifically to match the cooling curve of natural gas in the
Liquefin process. Compared to the more conventional spiral wound heat
exchangers used in most LNG plants, PFHEs have more heat exchange
area per unit volume and result in lower pressure drops, saving on
recompression energy.
The two cooling circuits can be designed such that the refrigerant
compressors are of the same power using two similar gas turbines as
drivers. This balancing of power avoids the need to ‘power share’ between
the cooling circuits, leading to a less complex process.
Combining these advantages results in the liquefaction process being
around 15% more efficient than current commercial processes. This can
be translated into producing 15% more LNG for the same installed power
generation capacity. The overall process can be scaled up by adding
additional cold box modules, and could deliver up to 6 million tonnes per
annum of LNG from a single train.

14 Frontiers December 2001

BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm
>> and mercury, and the removal of water
and heavier hydrocarbons which could freeze
in the subsequent liquefaction process and
block process plant.
In the liquefaction process, the treated
gas is cooled to –161˚C, at which its main
component, methane, forms a liquid at
atmospheric pressure. Several proprietary
processes exist to achieve the production of
LNG, but in essence these work much like a
domestic refrigerator, whereby a pressurised
mixture of gases, known as a multi-
component or mixed refrigerant, is rapidly
reduced in pressure to lower its temperature
by being flashed through a partially open
valve. This cooling process is known as the
Joule-Thompson effect. The resulting
refrigerant stream is then used to cool the
incoming natural gas by passing the two
streams through heat exchangers. The
refrigerant gases are then recompressed,
cooled and the cycle repeated.
LNG, a colourless, odourless, non-toxic
liquid, is stored at –161˚C at atmospheric
pressure in insulated cryogenic tanks, often
more than 100,000m3 in size and capable
of maintaining the gas in liquid form, even
in the world’s hottest climates. Purpose-built
ocean-going cryogenic tankers, with
capacities ranging up to 138,000m3 convey
the LNG to market, during which time a
small quantity of the LNG is allowed to boil
off as vapour, which is then used to power
the ship’s engines.
Once the tanker arrives at its destination –
the import terminal – LNG is pumped ashore
to storage tanks similar to those at the
liquefaction plant. To convert LNG back to its
gaseous state to meet local energy demand,
LNG is vaporised, or regassified, by heat
exchange – generally with seawater. The
quality specification of the resulting gas is
set by pipeline transmission companies and
end users, and distributed by conventional
gas pipelines.
To make the economics of the supply
chain viable, its components must all be
large scale. A typical single LNG process
train producing 3 to 4 million tpa of LNG
requires a gas source of around 85-115 billion
cubic metres – a very large gas field. The first
LNG train may take up to five years to design
and build, and could cost around $1 billion
including its infrastructure; plus a further
$200-300 million for the import terminal, and
a fleet of three to six tankers – depending on
the distance to market – each perhaps
costing $175 million. For an LNG supply
chain spanning 3200-4000km, the overall
cost could typically be around $1.8 per
million BTU (British thermal units) of energy
Page 15
supplied to the customer, on top of the price
paid for natural gas at the receiving plant
(see graph on page 13). If all of BP’s LNG
production and import terminal projects now
under consideration come to fruition, capital
expenditure will be over $10 billion.
‘With long-term contracts historically
dominating the industry and creating a
somewhat conservative approach, there has
not been the same drive to push down costs
as in other sectors,’ says Howard. ‘But that’s
where we’re headed now.
In BP we have set ourselves
the task of becoming the The Liquefin
lowest cost supplier of LNG
with a target of reducing the
process is 15%
cost of the LNG supply chain
by 25%, in readiness for
more efficient
several projects which could
be entering the detailed
than commercial
design stage by the end of competitors
2002. Technology and scale
are the keys to this, but you can’t achieve
such a significant reduction by tackling any
single cost lever in the chain – you have to
attack on several fronts.’
Technology focus
The potential for capital cost reduction
and therefore lower market prices is made
apparent by BP’s recent experiences in
Trinidad as a partner in Atlantic LNG.
Prior to the first Trinidad LNG train
coming into action towards the end of 1999,
the capital costs of new ‘greenfield’ LNG
facilities lay in the range of $300-400 per
tpa of LNG production. Trinidad set a new
benchmark for the industry of $200 per tpa.
‘The breakthrough was achieved through
a novel project management and contract
execution strategy, rather than new
technology,’ explains Murtaza Khakoo,
one of BP’s senior process engineers for
global gas technology. ‘This indicates that
there remains considerable potential to push
the costs down even further. The challenge
now is to lower LNG production costs to the
point where LNG can compete directly with
pipeline gas. We have set a target of $150
per tpa for greenfield plants, which must
achieve higher output efficiencies per train
and also reduce carbon dioxide emissions.’
Among BP’s cost reduction initiatives
across the LNG supply chain, three key
areas are receiving particular attention for
introducing innovative technology solutions:
the liquefaction process, cryogenic
storage, and the loading and unloading
of LNG tankers.
Currently, there are three major LNG
liquefaction technologies available under
licence, which differ principally in the way they
each cool the incoming natural gas stream
using different refrigerant cooling cycles –
and the type of heat exchangers employed
The Prico process, licensed by Black and
Veatch Pritchard, uses a single mixed
refrigerant consisting of nitrogen, methane,
ethane, propane, butane and pentane,
passing through plate fin heat exchangers
(PFHEs) grouped together in a ‘cold box’.
A single driver compressor system is used
to recompress the
refrigerant, giving
a single process
train capacity of
approximately
2 million tpa of LNG.
The propane pre-
cooled multi-component
refrigerant process (C3-
MR), licensed by Air
Products and Chemicals
Inc (APCI), also uses a mixed refrigerant of
nitrogen, methane, ethane and propane, but
has an additional pre-cooling stage of the
natural gas in a separate propane chiller. In
this process, the main heat exchanger which
turns natural gas into LNG is a proprietary
APCI design, consisting of a large number
of small diameter, spiral wound tube bundles
housed in a tall tower. Two separate
compressor drives are required, one for each
cooling circuit. Current designs give LNG
outputs from a single train of around 4 to
4.5 million tpa.
The third process, known as Optimised
Cascade and licensed by Phillips Petroleum,
incorporates three separate cooling circuits,
each using a pure refrigerant, namely
propane, ethylene and a methane-rich
stream. A combination of conventional kettle
chiller heat exchangers and PFHEs is used in
two separate cold boxes, with a separate
compressor for each cooling circuit. Using
this process, some 3 million tpa of LNG is
currently produced by Atlantic LNG Train 1
in Trinidad, although larger capacities of
up to 5 million tpa are being considered.
The APCI C3-MR is the most widely used
LNG process – including those at the Das
Island, Bontang and North West Shelf plants
– followed by Phillips’ Cascade and the
simpler Prico process, which also tends
to be used for smaller, peak shaving duties.
BP believes the liquefaction process,
which accounts for almost 45% of production
plant costs, offers significant scope for
efficiency improvements and cost reduction.
In pursuit of this goal, for the past two years
BP has been working in conjunction with
Axens, a new company formed from the >>
Frontiers December 2001 15
BP3338 10-17 LNG/Viewpt 14/12/01 12:32 pm
The new GD/Marinex LNG
storage tank. Rolled aluminium
plates, initially curved, straighten
out as they cool to form a self-
supporting structure
>> industrial division of Institut Français du
Pétrole and its catalyst business Procatalyse,
in the development of Liquefin, a new
proprietary process for producing LNG (see
Liquefin process panel, page 14).
‘The Liquefin process uses two mixed
refrigerant circuits and PFHE cold boxes
designed to match very accurately the
cooling curve of natural gas,’ says Khakoo.
‘The refrigerant cycle is about 6-7% more
efficient than the C3-MR process, and still
more efficient than the other alternatives.
If you add to this the effectiveness of the
plate fin exchangers, which have a high
surface-to-volume ratio, lower pressure
drop than conventional units and efficient
heat transfer, the overall process is around
15% more efficient than the established
commercial competitors. Another way to
look at this is that you can get 15% more
LNG for the same power, or you can cut
your power generation cost by 15%, which
means you use much less of your natural
gas supply as fuel and generate
proportionately less CO2 emissions.’
He points to further practical and
commercial advantages arising from the
manufacture of the modularised PFHEs
which make up the cold boxes. Not only
are these relatively small – about 15m high
compared with a typical 60m high spiral
wound exchanger, making transportation
and pre-assembly much easier – they are
cheaper to manufacture and can be sourced
from a number of heat exchanger
manufacturers around the world. The overall
size of a Liquefin plant is not restricted by
any one component of the process – by
adding further PFHEs in the cold boxes and
larger refrigerant compressor drivers, the
overall output of LNG from a single train
could reach 6 million tpa, greater than any
current process and providing the all-
important economy of scale.
16 Frontiers December 2001
Page 16
Carbon dioxide emissions
could also be reduced, not only
from the more efficient
liquefaction cycle but also by
employing electric motor drives
for the compressors, using
power from centralised
combined cycle generating plant
which can be 55-60% efficient
compared with 30% for the
commonly used industrial gas
turbines. BP is reviewing this
large scale, low emissions
approach for its forthcoming
LNG developments as part of
the its ‘Big Green Train Project’
led by BP’s Houston-based LNG
and gas processing team leader, Jeff Sawchuk.
Along the chain
Improving competition in the marketplace
is a primary goal in BP’s drive to reduce
LNG supply chain costs. The introduction of
another process licensor with an advantaged
liquefaction process will be a move towards
this, as Axens will hold the Liquefin licence
and will not be tied to any one contractor or
manufacturer for building plants or supplying
process equipment. Already that
competition is showing signs of paying off,
as BP concludes from its talks with a range
of construction contractors that Liquefin
offers the potential to reduce the capital cost
of an LNG liquefaction plant by 25%.
German process plant specialist Linde is also
developing a new liquefaction process which
employs three mixed refrigerant stages,
potentially bringing further
choice to the market.
But the liquefaction The US is calling
process is only one step
in the supply chain. BP
for more energy
is also evaluating new
techniques for storing
and offers huge
LNG. Safety and strength potential for taking
are primary requirements
for the cryogenic tanks LNG supplies
used to store LNG, which
must be designed to resist earthquakes
and high winds. The giant tanks, often
measuring up to 72m in diameter and
standing 45m high, typically have reinforced
concrete outer walls lined with carbon steel
to act as a vapour barrier, surrounding a thick
inner nickel steel tank containing the LNG.
Insulation, usually polyurethane foam,
between the carbon steel vapour barrier
and nickel steel inner tank, maintains the
subzero temperatures. Alternatively,
corrugated stainless steel membranes,
supported by rigid insulation systems fixed
to the concrete outer wall, are sometimes
used to build the inner tank.
The complex construction of such tanks
can require more than three years from
order to delivery, and they are costly
elements of the supply chain. By working
with General Dynamics of the US on the
design of a new style of tank, BP hopes
to cut tank costs by more than 30% and
reduce delivery time to less than 24 months.
The new containment system, referred to as
GD/Marinex, is based on a tank constructed
from a series of rolled aluminium plates
which although curved initially, straighten
out as they cool down to form a self-
supporting structure. The system offers
faster fabrication, employing shipbuilding
techniques, and can be used for both
onshore and offshore storage tanks, for
example on floating barges. GD/Marinex
may also be used on smaller, low cost
tankers with capacities around 70,000m3,
to service multiple small import terminals.
Transferring LNG between tankers and
shore facilities is another area of technology
focus within BP, as the company seeks
ways to reduce the high costs of civil and
marine facilities – the ports, jetties and
breakwaters – conventionally required to
handle the loading and offloading of LNG.
Experience from the upstream offshore
sector in the handling of crude oil through
flexible hoses and moored offshore loading
buoys is being brought to bear on the
challenge, which entails the development
of several new components suitable for
cryogenic service. BP is working with
Technip-Coflexip to
develop a cryogenic
flexible hose to
connect a tanker to
an offshore buoy, or
floating liquefaction
or regasification barge;
and with Advantica to
develop a subsea
cryogenic insulated
pipeline to carry LNG
between onshore and offshore facilities,
which should reach testing stage next year.
The target is to have completed systems
available for implementation by 2003.
‘By pursuing a range of technology
solutions across the supply chain, we intend
not only to introduce and benefit from
greater competition in an expanding LNG
market, but also to be a key player as the
lowest cost supplier of LNG,’ concludes
Howard. ‘By the middle of this decade
we fully expect to see this strategy working
to BP’s advantage.’ ■
Copyright and legal notice
Copyright in all published material including photographs, drawings and
images in this magazine remains vested in BP plc and third party contributors
to this magazine as appropriate. Accordingly neither the whole nor any
part of this magazine can be reproduced in any form without express
prior permission, either of the entity within BP plc in which copyright
resides or the third party contributor as appropriate. Articles, opinions and
letters from solicited or unsolicited third party sources appearing in this
magazine do not necessarily represent the views of BP plc. Further, while
BP plc has taken all reasonable steps to ensure that everything published
is accurate it does not accept any responsibility for any errors or resulting
loss or damage whatsoever or howsoever caused and readers have the
responsibility to thoroughly check these aspects for themselves.
Any enquiries about reproduction of content from this magazine
should be directed to the Managing Editor (email: knott@bp.com).