Mitsubishi Heavy Industries Technical Review Vol. 53 No. 2 (June 2016)19

Offshore Deployment of LNG supply chain- Floating LNG Infrastructure -MASARU OKA*1

TARO WADA*2

HIDEAKI KANEKO*3

MASAYUKI KATO*3

Natural gas is just as an important primary energy source as petroleum and coal. Due to its
abundant reserves and cleanness of combustion gas discharged into the environment, no one could
argue with the presumption that its position will last into the future. In Japan, natural gas isimported as LNG and the vaporized gas accounts for the largest part of the electricity and heat
supply. The gas supply chain for LNG has supported Japan’s industrial infrastructure for over 40
years. The LNG supply chain will also be expanded into new markets including emerging countries
with rapidly increasing electric power demand because of the growing supply and falling price as
new natural gas resources will be tapped more. This report assesses the future LNG supply chain
based on our experiences in the LNG/gas businesses in which we have been involved.

|1. Introduction
LNG and natural gas are environmentally friendly fuels, because sulfur contained in LNG or
natural gas is removed in the production process, and in their use as fuel in internal combustion, thegeneration of nitrogen oxides and soot and dust in the combustion gas can be reduced to an
extremely low level. Natural gas is produced on a large scale in many places around the world andtraded through pipelines or in the form of LNG among many countries. Since Japan is located far
away from the major production fields, transportation in the form of LNG has almost been the only
choice for us. Under such circumstances, Japan has long been the world's largest LNG importing
country and has developed facilities and technologies for the infrastructure for the supply chain of
LNG production, transportation, storage, regasification and gas-fired power generation, and soforth.
Lately, in many countries throughout the world, such as advanced industrialized countries
making earnest efforts to preserve the atmospheric environment, countries wanting an energy
transportation system barely affected by geopolitical risks and emerging countries with a rapidly
growing electric power demand, the need for LNG is rapidly increasing. In the shipping field, too,
the demand for LNG is increasing, and mainly because environmental measures for controlling
atmospheric pollution of coastal countries are increasing, use of LNG as ship fuel is being
promoted. The rise in the demand for LNG for the medium and long term is supported by theincrease of production capacity on the supply side typified by the development of shale gas andsubmarine gas fields off the African coast. Japanese industries that have led the way in the use of
LNG have the potential to produce and foster new businesses under the circumstances where
supply and demand are increasing.

*1 Manager, Ship & Ocean Engineering Department, Shipbuilding & Ocean Development Division, Commercial Aviation & Transportation Systems*2 Chief staff manager, Enterprise Business Department No.1, Marketing & Innovation Headquarters*3 Ship & Ocean Engineering Department, Shipbuilding & Ocean Development Division, Commercial Aviation & Transportation Systems

Mitsubishi Heavy Industries Technical Review Vol. 53 No. 2 (June 2016)20|2. New deployment of supply chain
2.1

Conventional supply chain

Conventionally, natural gas resources unevenly distributed in areas away from major
consuming regions were transported through ground or submarine long-distance pipelines or in theform of LNG. The LNG transportation method requires a larger investment in the supply chain
compared to transportation by gas pipeline, and so it is adopted in consuming regions wherelong-distance transportation by sea is more advantageous or laying of gas pipelines comes at ahigher cost. As of 2015, LNG accounted for about one third of total gas consumption.1
Figure 1 shows the supply chains of natural gas, including LNG. The left shows the present
status and the right colored part indicates the expected deployment in the future. In the case ofnatural gas, mined source gas is refined and then distributed, while in the case of LNG, natural gas
is liquefied by refrigerating equipment and transported to consuming regions by special cargo ship.
(In transportation to inland regions, vehicles are used, but on a small scale.)
For primary transportation of LNG, an LNG special cargo ship2 with an insulating containerof 100 thousand to 200 thousand m3 is used. LNG is off-loaded in a liquid state with a nearlyatmospheric pressure (about -160°C), stored, re-gasified and consumed as power generation fuel orcity gas as appropriate. Large-scale urban power generating facilities (e.g., power station
complexes with gas turbines and steam turning-GTCC) efficiently consume a large amount of gas.
So, such facilities are generally set up adjacent to an LNG receiving base, and gas is fed tosmall-volume gas consumers by the city gas pipeline network. In some cases, LNG is transported
as is in small volume to a satellite facility. For a transportation volume of over several hundred
cubic meters, a small LNG ship is used, and for several tens of cubic meters, a tanker truck is used.
Recently, however, for transportation of an intermediate volume (several thousand to several
tens of thousand cubic meters), use of LNG as ship fuel has received a lot of attention.

Figure 1

2.2

Supply chain of natural gas focusing on LNG

LNG as alternative ship fuelCurrently, ship fuel is heavy oil, which is produced as residue generated from the crude oil
refining process. Along with the increasing awareness of environmental preservation, regulations
for exhaust gas emissions from ship engines have been enacted, and now a drastic review on theuse of heavy oil as fuel is required. Various measures such as reduction of sulfur content in heavy
oil and installation of an exhaust gas scrubbing device in engines have been tried. Use of LNG is
one of the alternative measures. LNG as a fuel for ships has been studied for various types ofvessels, and actually, some small ships for which LNG can be fed by truck have begun to appear.
Also, there are a number of projects for larger ships planned to be equipped or that it isassumed they will be equipped in the future with LNG fuel facilities, but they are awaiting
emerging LNG bunkering points, that is, LNG bunker ships and their related infrastructure. A
bunker ship, which is similar overall to a small LNG ship, needs to have the facility and function todeliver LNG to various types of ships. At present, bunker relay terminals and LNG bunker ships
are being constructed mainly at the same sites as ship fuel supply bases. The world's largest bunker
base in Singapore is planned to start supply of LNG at the beginning of 2017.

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On the other hand, there is a possibility that the establishment of secondary transportation
technologies for LNG will be useful not only in the use of LNG bunker ships but also fortransportation within regions limited to emerging countries (regions).

2.3

Measures for demand in emerging countries

LNG calls for capital expenditure larger than that of other fuels. Now we specifically propose
a "local supply chain" for which investment is limited so as to make use of LNG sustainable evenin small cities (regions). This proposition is promising in emerging countries showing remarkableindustrial development, particularly in Southeast Asia, South Asia and Central and South America,
and we also expect it to help industrial development in Africa.
These regions seek the rapid and low-cost securement of electric power. Because theseregions are in the process of development, however, at the onset, the power demand starts at a low
level, but establishment of the local supply chain in a short period is required.
The proposal to form a local supply chain with the introduction of floating-type production
and receiving facilities allows stepwise expansion in investment starting with small-scale
investment and completion in a short period.

2.4

Offshore deployment of LNG supply chain

An LNG delivery station and an LNG receiving station positioned at both ends of the supply
chain are located in coastal areas for connection with shuttle ships, and so the conditions forconverting them into offshore facilities have been met. There have already been many actual
examples of Floating Storage and Regasification Unit (FSRU) and Floating Storage Unit (FSU)
which are offshore receiving stations. Also for production of LNG at the upstream end, there aremany projects for LNG Floating Production, Storage and Off-loading facilities (LNG FPSO,
generally referred to as FLNG). Some FLNGs are expected to begin operation sometime around2017. For example, Shell, an oil and gas major in Europe, is undertaking the development of asubmarine gas field in Western Australia, although no FLNGs have started operation as of April
2016.3
It is expected that the construction trend of floating an LNG production unit will be further
promoted by subsea mining of gas resources. The existing offshore facilities are intended mainly
for a global supply chain whose annual output greatly exceeds one million tons. Some facilities aredesigned for small- and medium-sized LNG floating production units3, but generally, such a scaleis regarded as being economically difficult to realize. This restriction in terms of the scale due toeconomic difficulties must be overcome. The small- and medium-sized gas fields dotted about
Southeast Asia and the Caribbean Sea have middle-sized emerging city-type consumption areas intheir vicinity. By forming an independent chain connecting such gas fields and consumption areas
by a set of floating units and shuttle ships, the possibility of redevelopment will be increased. In
addition, these emerging consumption areas require a supply of electric power first and foremost in
many cases, and it’s even convenient and efficient if the vessel supplies electric power to the shore
instead of supplying gas to the power system onshore.

|3. Proposal of LNG floating facility
Our company has been heavily involved in the LNG supply chain business through thebuilding of LNG transportation ships and the construction of LNG receiving stations andgas-fueled power generation facilities. The examples of specific proposals for offshore deploymentof facilities constituting a supply chain and expansion of local supply chains based on thoseaccomplishments are introduced.

3.1

Advantages of floating facility

Figure 2 overlooks the whole picture of the proposed supply chain. For stepwise expansion
with limited initial investment, large secondhand ships conventionally used for transportation of
LNG or LPG are converted and used as FSUs for storage of LNG. Used ships such as bulk carriers(dry bulkers) are also converted for LNG production and regasification facilities. For an LNG
storage tank, a pressure container type (Type C specified by IMO) is used without any additional
requirements such as building of secondary revetments, which are used for additional storage
capacity, while FSU is used for the main storage capacity. Individual floating bodies are connectedby hard arms installed to fixed piers (jetties), which are proven as LNG or gas transfer facilities or
STS (Ship to Ship transfer) using flexible hoses. Modification of used ships can halve the timeMitsubishi Heavy Industries Technical Review Vol. 53 No. 2 (June 2016)22

required to newly build facilities.

Figure 2 The overall image of the supply chain

In addition, even in a region where the infrastructure around the site has not been fully
established and the offshore supply area becomes larger, a floating-type unit can be built together
with lifelines at a dockyard and then they can be carried in the site. As such, the floating type isadvantageous in deployment in emerging countries, which typically require stepwise enhancementof facilities through relocation or displacement, or in development of gas fields. The following
details the supply chain of our proposition.
(1) Floating-type LNG receiving facility
The central right view in Figure 2 is an LNG floating receiving facility consisting of
FSRU or FSU. LNG received from shuttle ships is stored in an FSU made utilizing a used LNG
ship, is transferred from the FSU to the adjacent FSRU and is turned into high-pressure gas fordelivery. FSRU is a barge-type floating body equipped with an LNG pressure container and aregasification facility. In this example, as a regasification facility, the MORV (Marine ORV) isused, which has been redesigned based on the ORV (Open Rack Vaporizer, which has been
adopted as the main vaporizer for onshore receiving facilities), so that it can be used in a
floating facility. MORV has a compact design and provides sufficient space for future
re-gasification capacity expansion. The storage capacity of FSRU is selected so that the total
storage capacity of FSRU and FSU becomes larger than the transportation capacity of a shuttle
ship. Since the capacity of LNG ships has been increased stepwise, the younger the age of theship, the larger the size of the ship. Thus, consideration must be given for the receiving capacityof FSRU.
(2) LNG floating power generation facility (FSRU, FPPU)
The foremost demand of emerging countries is electric power. So, it is more efficient toconvert LNG into electricity for supply than to deliver natural gas. The right-most view inFigure 2 is one example of an LNG floating power generation facility (FPPU) proposed by ourcompany. High-pressure gas received at FPPU from FSRU is consumed during power
generation. In the onboard power generation facility, the natural gas-fired Gas Turbine
Combined Cycle (GTCC), which has a high thermal efficiency, and also with consideration
given to environmental preservation, is used. It is estimated that the market demand for the
output range is from 100 to 300 MW/unit. For this range, among the gas turbines of proven
LNG thermal power generating performance, the H-series gas turbine made by Mitsubishi
Hitachi Power Systems is the most suitable.4(3) LNG floating production facility (LNG FPSO = FLNG)
It is projected that an LNG production floating body produces one million tons or less perline annually. For the liquefaction process of this scale, a steam turbine driven-type nitrogen
expansion cycle, which has a proven performance in actual use at the marine LNG re-liquefying
plant, is the most suitable. The liquefying plant with the combined use of the nitrogen
expansion cycle in a cascade manner, an off-gas combustion-type boiler and a reheating-type
steam turbine driver which is derived from marine propulsion use, exhibits a high operation
rate, low maintenance cost and less investment. At the same time, it realizes a high liquefaction

Mitsubishi Heavy Industries Technical Review Vol. 53 No. 2 (June 2016)23

efficiency comparable to larger plants for onshore use. Together with the pressure vessels forprovisional storage tanks, it is modularized by each train, considering installation at the time ofmodification of a used ship such as a bulk carrier.
(4) Small shuttle ship, LNG bunkering ship
For a secondary transportation ship such as a shuttle ship only for the local chain and a
supply ship for an LNG fuel ship (LNG bunkering ship), it is not sufficient that it has only areduced transportation capacity compared to that of a large LNG ship employed in primarytransportation.
It is regarded as more economical, depending on the cargo capacity, to use, as a cargotank of the secondary carrier, a pressure vessel (IMO Type C) than a large container vessel(IMO Type B, etc.).5 Our company proposes use of a Type C pressure tank for a small ship
having a cargo capacity of 30 to 40 thousand m3 or less. The inside pressure can be set so thatboil-off loss of cargo LNG will not occur, and an additional refrigerating unit can be installed
for reducing LNG temperature. On this ship, cargo LNG can be used as propulsion fuel in
addition to fuel oil. Such LNG fuel supply package is already on the market, as you see on an
example of our marine machinery product MHI-GEMS.6

3.2

Advantages of one-stop supply

To realize a facility like FLNG in which all the functions are complicated, a number ofcompanies such as shipyards that build ship bodies, EPC companies that coordinate LNG-related
facilities (top side) and process licensers must cooperate in operations. Those organizations(companies) that have different specialties are involved in their own parts of the work. Ambiguityof the scope of responsibility at the boundary of each work area is unavoidable and any risk arisingfrom such ambiguity must be borne by the customer side.
Our company owns shipyards and affiliated companies such as EPC and related equipment
manufacturing companies, and we can receive orders for the floating facilities described above andoffer one-stop operations as a business unit. Customer's risks and burdens as described above canbe minimized through expansion of our supply area.

|4. Conclusion
In the LNG floating facilities of the supply chain introduced in this report, the important
points are not only building the ship’s body and supply of shipboard instruments/equipment but
total engineering for understanding the closely related facilities as a whole chain and provision of
one-stop services.
Our company provides one-stop solutions for LNG infrastructure based on our experiences
and technologies fostered through the marine business including LNG shipbuilding and sale ofmarine gas facilities (MHI-GEMS), the gas fuel power generation business and the LNG plantbusiness including EPC of receiving facilities.
We hope that the technologies and businesses introduced in this report will be of some help
to customers who develop new businesses in the fields of LNG production, receiving, storage,
power generation, and so forth.

References
1.
2.
3.
4.
5.
6.

BP Statistical Review of World Energy June 2015, p.29
Sato et al, Design of the evolutionary LNG Carrier “SAYAENDO”, pp.2-3
The Latest Development of Floating LNG (FLNG), JOGMEC topics, September 2015
World’s Largest Class High-efficiency Dual-shaft H-100 Gas Turbine, Mitsubishi Heavy Industries
Technical Review Vol. 52 No. 2 (2015)
Dr. K. D. Gerdsmeyer (TGE Gas Engineering), Economic Design Concept for Small LNG CarriersOka, M. et al., Development of LNG Facility for Marine Applications: MHI-GEMS, Mitsubishi Heavy
Industries Technical Review Vol. 50 No. 2 (2013)