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By Seth Olivier, CEO, Volco Power
The global, and local, natural gas and Liquefied Natural Gas (LNG) industries are changing.
The global influx of supply, lower prices and environmental benefits of natural gas are driving consumers to convert from other fossil fuels. Natural gas consumers on pipeline systems currently have the ability to benefit, but for those not connected, or what we call a “stranded market”, LNG may be the only opportunity to convert to natural gas.
As this market evolves, a unique opportunity is emerging for participants in the LNG market and could lead to a shift in business focus.
Traditionally natural gas has been used for heating, power generation and industrial process purposes. There has been limited use of natural gas in the transportation sector, but it has been localized and minor in relation to the overall trade. With the possibility of conversion to natural gas by consumers a new market is developing for both the traditional natural gas sector and LNG.
Given the increasing flexibility in its logistical chain, in combination with gas advantages such as environmental benefits and a large and growing resource base, LNG is a natural choice to help meet the world’s growing energy needs, the permanence of the LNG market as a major contributor to the global energy balance is evident.
The growth of the global natural gas market, and in particular the distribution of LNG to smaller and smaller end users, has provided access to natural gas to wide range of energy consumers.
While relatively small in comparison to the volumes traded within the traditional LNG value, the volumes traded within the “virtual pipeline” LNG value chain have allowed consumers to take advantage of new possible solutions to meet their energy needs. Building upon decades of safe, reliable, and efficient transportation, LNG is shipped all over the world, making it a truly global resource.
Early adopters have already started to capitalize on the availability of LNG to make a fuel switch to natural gas.
Commercial and Industrial users who are not connected to pipeline networks can now move away from the historical use of petroleum-based fuels and can install LNG storage and re-vaporization facilities to serve their energy needs
As the use of LNG increases in the transportation, marine, and commercial and industrial markets many others are realizing the benefits and investigating ways to utilize LNG in their applications.
Natural gas is expected to continue to be a major fuel source for the foreseeable future driven by a combination of cost, environmental benefit, and abundance.
Therefore, LNG is posed to play an important role in the expansion of the traditional uses of natural gas, and in the challenge of reducing over-dependence on petroleum-based fuels.
The commercial case for LNG rests on a number of economic and regulatory factors. Economic factors include the price differential, or spread between fuels compared to the additional investment, capital cost of equipment and infrastructure, availability of LNG supply and increase in demand that will determine not only the growth of the local market, but the value to participants.
LNG will have its own end users, require new infrastructure, and be subject to unique pricing and market dynamics. The LNG market will attract new participants and encourage existing participants to expand their services into this area. As with any new market, uncertainty and challenges will exist.
The traditional LNG chain consists of several stages. It starts with exploration & production, where the natural gas is extracted from the wells. To facilitate its transport, it is turned into liquid phase in a liquefaction plant. LNG is then loaded on LNG tankers which then transport it to LNG receiving terminals where it is eventually re-gasified and sent into local pipelines for distribution to end users as vapour or loaded for transport aboard cryogenic ISO containers in liquid form.
Additional value can be derived for end users as LNG has potential environmental benefits that reduce local emissions, while avoiding complex operational and commercial measures associated with emission control processes.
Pollutant emissions from the industrial sector and electric utilities contribute greatly to environmental problems. The use of natural gas to power both industrial boilers and processes and the generation of electricity can significantly improve the emissions profiles for these two sectors.
Natural gas, as the cleanest of the fossil fuels, can be used in many ways to help reduce the emissions of pollutants into the atmosphere. Burning natural gas in the place of other fossil fuels emits fewer harmful pollutants, and an increased reliance on natural gas can potentially reduce the emission of many of these most harmful pollutants and can reduce CO2 emissions by up to 50% over other fuel sources.
Natural gas, because of its clean burning nature, has become an extremely popular fuel for the generation of electricity. In the 1970s and 1980s, the choices for most electric utility generators were large coal or nuclear-powered plants. However, due to economic, environmental, and technological changes, natural gas is becoming the fuel of choice for many new power plants.
There are many reasons for this increased reliance on natural gas to generate electricity. While coal is the cheapest fossil fuel for generating electricity, it is also the dirtiest, releasing the highest levels of pollutants into the air. Regulations surrounding the emissions of power plants have forced electric generators to come up with new methods of generating power, while lessening environmental damage. New technology has allowed natural gas to play an increasingly important role in the clean generation of electricity.
Natural gas is becoming an increasingly important fuel in the generation of electricity. As well as providing an efficient, competitively priced fuel for the generation of electricity, the increased use of natural gas allows for the improvement in the emissions profile of the electric generation industry.
Natural gas can be used to generate electricity in a variety of ways. The most basic natural gas-fired electric generation consists of a steam generation unit, where fossil fuels are burned in a boiler to heat water and produce steam that then turns a turbine to generate electricity. Natural gas may be used for this process, although these basic steam units are more typical of large coal or nuclear generation facilities. These basic steam generation units have fairly low energy efficiency. Typically, only 33 to 35 percent of the thermal energy used to generate the steam is converted into electrical energy in these types of units.
Gas turbines and combustion engines are also used to generate electricity. In these types of units, instead of heating steam to turn a turbine, hot gases from burning fossil fuels (particularly natural gas) are used to turn the turbine and generate electricity. Gas turbine and combustion engine plants are traditionally used primarily for peak-load demands, as it is possible to quickly and easily turn them on. These plants have increased in popularity due to advances in technology and the availability of natural gas. However, they are still traditionally slightly less efficient than large steam-driven power plants.
Many of the new natural gas fired power plants are known as ‘combined-cycle’ units. In these types of generating facilities, there is both a gas turbine and a steam unit, all in one. The gas turbine operates in much the same way as a normal gas turbine, using the hot gases released from burning natural gas to turn a turbine and generate electricity. In combined-cycle plants, the waste heat from the gas-turbine process is directed toward generating steam, which is then used to generate electricity much like a steam unit. Because of this efficient use of the heat energy released from the natural gas, combined-cycle plants are much more efficient than steam units or gas turbines alone. In fact, combined-cycle plants can achieve thermal efficiencies of up to 50 to 60 percent.
Natural gas fired reciprocating engines are also used for on-site electric generation. These types of engines are also commonly known as combustion engines. They convert the energy contained in fossil fuels into mechanical energy, which rotates a piston to generate electricity. Natural gas fired reciprocating engines typically generate from less than 5 kW, up to 7 megawatts (MW), meaning they can be used as a small-scale residential backup generator to a base load generator in industrial settings. These engines offer efficiencies from 25 to 45 percent and can also be used in a combined heat and power system to increase energy efficiency.
Until recently, methods of generating power have been discussed in the context of large, centralized power plants. However, with technological advancements, there is a trend towards what is known as ‘small-scale’ or ‘embedded generation’. Embedded generation refers to the placement of individual, smaller sized electric generation units at residential, commercial, and industrial sites of own use. These small-scale power plants, which are primarily powered by either diesel or natural gas, operate with small gas turbine or combustion engine units.
Embedded or small scale generation can take many forms, from small, low output generators used to back up the supply of electricity obtained from the electric utilities, to larger, independent generators that supply enough electricity to power an entire factory. Embedded generation also allows for increased local control over the electricity supply, and cuts down on electricity losses during local power outages.
Considering the current South African power supply crisis and the need for dispatchable power to stabilize the electrical grid, natural gas to power plant solutions are expected to be favourably considered by the Department of Mineral Resources and Energy (DMRE), Eskom and other role players.
South Africa is facing a growing energy crisis. In the absence of significant proven gas reserves, it will need to import LNG to support the development of the natural gas market, and in the case of the proposed gas-to-power programme the power generation capacity. With the growth in worldwide LNG supply, now is the optimum time for South Africa to launch into the LNG market.
With LNG to industrial – and power applications of all sizes available within relatively short time frames, and mobile solutions available for rapid deployment, Volco Power is ready to provide industry with tailor-made solutions, including complete “end-to-end” off-grid power solutions and services, the supply of natural gas and power generation units of all sizes to comprehensive service contracts, emergency Power Gen – 1 to 2 months, small Power Gen up to 10MW – rapid deployment 3 to 6 months, large Power Gen – 12 to 18 months and LNG for logistics applications.
Volco Power is in a unique strategic position to enable the supply of LNG to power solutions in South Africa within relatively short times frames and, while Eskom is in urgent need of dependable, dispatchable power to stabilise the grid and to allow them to carry out their continued rolling maintenance programmes, Volco Power is currently the only company with all the necessary licences and approvals for the importation of LNG in the country.
