A few months ago I met with a group of industry folks to discuss LNG supply, infrastructure (storage), finance, and transportation. I have summarized from my notes of that meeting what are salient points of interest to most readers of Fuel Oil News.
For the purposes of this article and the possibility of you getting into the LNG business, we are talking about commercial and industrial users of fuel, not light commercial or residential users.
If your company already has a significant “transport business” with heating oil, propane or motor fuels, then the “transport aspect” of the LNG business should be nearly second nature to you.
Most may already know that LNG is created using a process called “liquefaction;” which is the physical conversion of a gas into a liquid state, and this happens when natural gas is cooled to a temperature of about -260° (minus 260 degrees) Fahrenheit at atmospheric pressure.
Given that liquefaction reduces the volume of natural gas by approximately 600 times, LNG becomes more economical to transport. LNG is converted back to gas (vapor) by warming the liquid to a temperature above -260° Fahrenheit.
Other than being odorless, non-toxic, non-corrosive and less dense than water, LNG is essentially the same as natural gas use to heat and cool, but in a liquid state.
LDCs, or Local Distribution Companies, such as your local natural gas utilities, generally have liquefaction facilities, and these plants cost in the “tens of millions of dollars” to design and build. In the Northeast, the number ranges from $30,000,000 to $100,000,000 for a liquefaction facility.
Recently, a major New England employer and manufacturer announced its intention to pursue conversion of its existing fuel oil-burning facilities to LNG. The company will construct eight 15,000 gallon LNG tanks at its site to allow acceptance of trailer deliveries of LNG from a source just north of Boston. The company will spend upwards of $10 million before the project is done. Someone in accounting obviously did the math. Management obviously believes the numbers.
Depending on where you are, sourcing of LNG supply is fairly straight forward. For instance, transportation of LNG from Everett, Massachusetts (just north of Boston) to your new LNG customers is also fairly straight forward. Sourcing from LNG supply points in Canada is also an option.
Worth mentioning: LNG trailers generally have capacities of 13,000 gallons, and unlike propane, are filled to 97-98 percent of capacity. LNG is a cryogenic liquid, and end-user tanks are typically 30,000 gallon if they are horizontal and 15,000 gallon if they are vertical. LNG tanks differ from propane tanks in that LNG tank walls are thicker (6 inch is typical) and are insulated (the thickness is due primarily to insulation). LNG tanks can be buried, yes, many industry folks say they preferred vault-buried tanks vs. direct-buried tanks. LNG tanks will require some manner with which to relieve vapor pressure in the tank; on the order of 0.0015 of the tank capacity to “boil off” the vapor, per day. The so-called “boil-off” might not need to happen for a couple of weeks from the time the LNG is delivered, but will have to happen thereafter. LNG tanks in their steady state are typically at a pressure of 1 to 2 pounds per square inch (above atmospheric pressure).
With sourcing and transportation under control, identify the potential LNG customer, sell them on “the math” of conversion, and last but not least, figure out who is going to make the investment in infrastructure necessary to complete the equation.
Consider, for instance, that a 30,000 gallon LNG tank constructed at the end-user’s site can run $400,000.
In plain English, you can source LNG; you can get someone to haul your LNG, and once you settle the question of the infrastructure, you can sell LNG.
Shane Sweet is in management with a major Northeast marketer of heating oil, propane and motor fuels. From 1993 to 2007 he served as executive VP and lobbyist for the Vermont Fuel Dealers Association and from 2007 through 2010 was president & CEO of the New England Fuel Institute. He lives in Manchester, Vermont and can be reached at firstname.lastname@example.org