Who is hungry for LNG?

In early 2000s, gas markets were flooded with optimism towards what was then called ‘the golden age of gas’. The rising demand in East Asian markets alongside high prices on long term contracts spurred enthusiasm amongst venture capitalists. This stopped abruptly in 2012-2013 when coal underwent an unexpected ‘renaissance’, displacing gas in power generation across a number of domestic markets. The cheap and plentiful US coal supplies took advantage of the ETS’s (EU carbon permits trading scheme) collapse, which allowed for CO2 to be emitted without being taxed. Currently gas markets are experiencing hard times with LNG (liquefied natural gas) suffering most.

LNG demand is barely staying afloat. In the past 3 years demand for LNG has been flat whilst prices have been steadily going down. For example, Japan the largest LNG importer, was paying at the beginning of 2015, the lowest price level since 2010. It is indeed a ‘golden age for gas’, but for gas consumers rather than producers. The newest exploitation projects of Exxon Mobil and Shell are meagerly holding up to the expectations of their venture capitalists. Since 2014 LNG market response was close to an anxiety attack, which lead to stalling all near future investments projects.

Looking ahead, the sector doesn’t look particularly dependable across a number of regions, as challenges abound. Political instability, the most critical of risks, is present in a number of LNG prospective regions across the globe. In these areas, political regimes are deemed unstable or the tactical political forces have the potential to derail the market. One such example comes from the US market where in 2012 governmental intervention temporarily limited LNG exports under claims that it negatively impacts domestic gas prices. Besides political challenges, logistics have been posing difficulties for LNG project developers. Industry history of construction delays and cost overruns have become the norm rather than the exception. This often happens because of insufficient tanking infrastructure and/or skill labour market tightness, which often push construction costs higher. An independent study by Ernst and Young (EY), a consultancy firm, argued that besides political and logistic challenges, LNG developments are vulnerable to legal ambiguities. Emerging markets are often confronted with immature legal and fiscal systems, which render the first years in the project development highly litigious.

Despite the general pessimism in the air, LNG is projected to see better days, even ‘golden’ ones by some forecasts. In 2014, EY published an extensive report on the future of LNG markets, advocating for the golden future of the fossil fuel. International Energy Agency (IEA) is sympathetic to this forecast, which projects that LNG demand will near 500 mtpa by 2030, almost double compared to the demand level of 2012. This begs the question, in this pessimistic energy climate who is hungry for LNG?

EY LNG forcasted demand

EY LNG forcasted demand

The projections indicate that LNG markets are to undergo a transformation rooted in market behaviors. There are two scales at which changes are to unfold. The first scale is national markets, and the second is international industry sectors.

A wind of change is blowing in international LNG trade. Countries such as Russia, which has maintained a strong position in LNG supply is planning to consolidate that even further till 2030. The 2014 Russian-Chinese deal to export 38 bcm/yr, alongside the investment-exploration project with the French firm Total, will tap closely to its goal of controlling almost a fifth of global LNG supply. The US, which until a few years back was building import capacity at the Louisisana LNG terminal, is now planning to use it for LNG exports. Projections are that operations will start in 2016, and the export capacity will near 75bcm/yr by 2018. Across the globe LNG terminals are planned ahead. The IEA projects that from the number of nations holding LNG facilities will almost double by 2020, reaching 50 from 29 in 2012. Among the latest nations added to the list are Israel, Singapore and Malaysia, but Poland, Croatia, Indonesia and Algeria are moving fast to catch up.

An indication of where the LNG demand is nested comes firstly from nations that are building LNG terminals, such as Indonesia, Singapore and China. In the case of Indonesia, currently a LNG exporter, supply is slowly decreasing at a time when the nation is struggling to keep up with the surging power demand. The government is pushing forward ambitious plans to build the necessary import infrastructure while at the same time ensuring long term supply contracts with the US and Eastern African nations.

The example of Indonesia is not singular in the region. Other nations, such as Singapore, Malaysia and China, are confronted with similar issues. The highest LNG imports in the region will continue though to be absorbed by Japan, who uses the fuel to compensate for its inactive nuclear capacity. This is projected to stay flat, as long term supply contracts are due to run till 2020.

Elsewhere in the world, appetite is building up. Europe is expected to gradually shift to LNG in case Russian gas threatens to run short. Lithuania, which is struggling to free itself from overpriced Russian pipeline gas, as bought a floating regasification terminal. With this, the nation paid itself for fruitful bargaining power, and other nations as such should follow. And other nations are following. Poland and Croatia are prospecting LNG terminals in the future which can bring a breath of fresh air for security of gas supply in the region.

The additional LNG demand is argued to serve nations chiefly for power generation, but sectorial dynamics are bubbling up. The most significant one is the shipping industry which is making efforts to green itself. Maritime transport could greatly benefit from GHG emission cuts by replacing the heavy fuel oil with cleaner LNG. A first notable attempt in this direction comes from the CLEANSHIP project, a Baltic Sea shipping group which pleads for a switch in shipping fuel.

In conclusion, future LNG demand is rooted in Asia, but Europe and African nations could account for a portion of the additional demand if the political climate alters security of supply for oil, and the infrastructure developments incur some degree of urgency. Until then, Asian nations are prone to bring about most of the additional LNG demand. It is reckoned that the fuel will be mainly used for power generation, but also the shipping industry could slowly shift gears to replace oil for LNG as fuel.

Despite all this I reckon that there are important aspects two aspects to be aware of when looking forward at LNG markets. First is that although the share of LNG in natural gas trading has increased in the past decade, the fuel is still mostly traded in long term contracts. For this commodity to start running a viable market there is an increased need for spot trading, as volume is already catching up. Second aspect relates to the over optimism of the forecasts in some markets such as Japan. It is my opinion that some shadow should be casted on the Japanese LNG demand forecasts, as the nation has recently announced that it is planning to soon restart some of its cheap nuclear capacity.

The Battery Support

The pervasive issue with renewable energy sources such as solar and wind is that their abundant availability trips on intermittency. Storing the excess energy from solar and wind requires large storage capacities at cost competitive levels. It is safe to state that there is currently no fully commercial battery technology capable of meeting the demanding performance requirements of the grid, namely the high power, long serving lifetime and low cost, despite the compelling need for such technology. This means that grid level storage if solved could revolutionize the energy transition of our generation.

In a 2012 TED talk, Prof. Donald Sadoway of MIT revealed how could the grid level battery look like in the future. He reckoned that his battery story “is more than an account of inventing technology, it is a blueprint of inventing inventors” as the development process tracked un-conventional wisdom full spectrum. The inovative technology made of a three-layered battery using liquid metal is claimed to empirically suited to shut-up the clamor around the solar and wind intermittency.

The humble beginnings of battery technology are attributed to A. Volta who pioneered the field of electro-chemistry and brought about a new technology – electroplating. The first battery was made of a stack of zinc and silver coins separated by cardboard soaked in brine. This was the starting point for designing a battery. Two electrodes – in this case metals of different compositions – and electrolyte – in this case salt dissolved in water. The science is that simple!

Prof. Sadoway found inspiration for the liquid metal battery in a modern aluminum smelter. In the cell house of an aluminum smelter shelters roll after roll of cells are aligned inside a long room. The inside of these rolls resemble Volta’s battery with some important differences. Volta’s battery works at room temperature, is fitted with solid electrodes and an electrolyte that is a solution of salt and water. The aluminum smelter operates at high temperature (a temperature high enough that the aluminum product is liquid). The electrolyte is not a solution of salt and water, but molten salt. This combination of liquid metal, molten salt and high temperature allows us to send high current through this thing.

In economic terms currently virgin metal from ores can be produced at a cost of less than €1/kg. This economic miracle of modern electro-metallurgy compelled the inventor’s motivation to take advantage and encapsulate the technology driven economy of scale for the liquid metal battery.

Prof. Sadoway succeeded in doing so by making both metals liquid and using molten salt for the electrolyte. He put low density liquid metal at the top, a high density liquid metal at the bottom and molten salt in between. The choice of metals was carried out to meet:

(i) the constraints of Earth abundance,

(ii) different opposite densities,

(iii) high mutual reactivity.

He felt the thrill of realization when coming upon the answer. Magnesium (Mg) for the top layer and Antimony (Sb) for the bottom layer.

Design Liquid Metal Battery   - AMBI -

Design Liquid Metal Battery
– AMBI –

To produce current Mg looses 2e to become Mg ion which migrates to the electrolyte where it accepts 2e from Sb and mixes with it to form an alloy. The electrons go to work in the real world powering devices. To charge the battery, the technology needs to be connected to an energy source which reverses the current and thus forces Mg to de-alloy and return to the upper electrode restoring the initial constitution of the battery. The current passing between the electrodes generates enough heat to keep it at temperature.

The theoretical model of this battery proved rather lengthy to implement and test in lab conditions. The technology initially set at 1Wh cell was perfected by operating more than 400 of them, refining their performance with the “plurality of chemistry” (currently is not just Mg-Sb). The model proved expandable at 20Wh cells and 200Wh with very encouraging results. The technology was proving itself to be robust and scalable.

Having a piloted idea seemed to be for Prof. Sadoway and his team insufficient to advance and commercialize the liquid battery technology. This prompted them to open a company (LMBC) and attract venture capital. The unit battery produced today at LMBC is .4m in diameter at a storage capacity of 1000 Wh (=1kWh). The next project on the horizon is a .9m diameter battery with a storage capacity of 4kWh.

Design of liquid metal battery scales - AMBRI -

Design of liquid metal battery scales
– AMBRI –

Further down the road, the company envisions that the 4kWh modules can be stacked in modules and aggregated in 40 foot shipping containers that can store up to 2MWh of energy. This represents the current average consumption of 200 American households.

This silent and emission free (when operational) technology can prove to be the support renewable energy technologies need to become competitive with fossil fuels. Besides the various environmental benefits that it offers, this technology addresses in a simple manner one of the most sensitive issues in the energy transition cost: this technology was designed to the market price without subsidy.

This ought to look sunny for the future of remote renewable power installations!

Enhancing our Future

Researchers are developing a new type of geothermal power plant which is claimed to lock away unwanted carbon dioxide (CO2) underground – and use it as a tool to boost electric power generation by at least 10 times compared to existing geothermal energy approaches.

The technology to implement this design already exists in different industries, so researchers are optimistic about the marketing prospects of this approach, aimed mainly at enhancing the use of geothermal energy not just by efficiency but also as scale. The new power plant design resembles a cross between a typical geothermal power plant and the Large Hadron Collider: It features a series of concentric rings of horizontal wells deep underground. Inside those rings, CO2, N and H2O circulate separately to draw heat from below ground up to the surface, where the heat can be used to turn turbines and generate electricity.

Jeffrey Bielicki, co-author of the study and assistant professor of energy policy in the Department of Civil, Environmental and Geodetic Engineering says about the new approach to enhancing the potential of geothermal resources uses CO2 and another fluid, to partly replace some of the water which is recycled in the system. This approach — using concentric rings that circulate multiple fluids — builds upon the idea to use CO2 originally developed by Martin Saar and others at the University of Minnesota, and can be at least twice as efficient as conventional geothermal approaches, according to computer simulations.

Scientists involved in this research believe that the resulting multifluid design will enable geothermal power plants to store energy away – perhaps hundreds of GWh – for days or even months, so that it is available when the electricity grid needs it. The underground geothermal formation could store hot, pressurized CO2 and N, and release the heat to the surface power plant when electricity demand is greatest. The plant could also suspend heat extraction from the subsurface during times of low power demand, or when there is already a surplus of renewable power on the grid.

In computer simulations, a 16-km-wide system of concentric rings of horizontal wells situated about three miles below ground produced as much as half a GW of electrical power – an amount comparable to a medium-sized coal-fired power plant — and more than 10 times bigger than the 38 MW produced by the average geothermal plant in the United States. The simulations also revealed that a plant of this design might sequester as much as 15 mil tons of CO2/year, which is roughly equivalent to the amount produced by 3 medium-sized coal-fired power plants in that time.

The information hereby provided comes out partly from an article published on RenewableEnergyWorld blog, for which one should chew it with a grain of salt. Technologic enhancements to existing energetic systems are good news, only that they usually apply to a handful of sites; which is also the case with the CO2 storage in geothermal reservoirs. Surely on a global scale the number of coal power plants outbids the number of geothermal sites in exploitation. That and the fact that the combination of the two technologies is unlikely to be found in a reasonable proximity to one another, would make the applicability of the  above described technology rather unlikely to be shrink by much the anthropogenic CO2 cloud.

In conclusion, the enhanced method to extracting energy from geothermal reservoirs is welcomed and might turn out beneficial. The more positive aspect of this development is the possibility of using the reservoir as battery with limited losses on reasonably large time scales. This in turn would incur the deployment of financial resources to build the required infrastructure, which would add up to the existing overcrowded system. Maybe it is time for a drastic change in the way we look at energy systems.