LNG Terminal Logistics (Part 1)

Today, we’ll have a look at why LNG terminal logistics is important, and why it is going to be even more important in the future. In Part 2 of this article, we’ll look at some very basic mathematics explaining the logistics of a multi-user terminal. In Part 3, we’ll take a look at slot management and how this puzzle can cause headaches.

Historically, LNG trades were predictable point-to-point trades where one company controlled the whole supply chain. Today, the LNG marked has become much more liquid, with many more players, and with much greater demand for flexibility. And flexibility has a flip side; it’s called congestion. Effective logistics management is how you offer the flexibility, yet avoid the congestion. It is easier said than done.

Let’s just take a look at a few long term trends in the LNG industry:

• LNG export terminals are moving offshore and getting smaller
• LNG import terminals are moving offshore and getting smaller
• LNG carriers are getting bigger
• Import terminal capacity is split among several capacity holders

All these four trends have one thing in common; they are drivers for increased pressure on logistics throughout the LNG supply chain; Bigger ships taking LNG from smaller export locations to smaller import locations is a recipe for trouble. What to do when a ship is late and the export terminal is fully loaded? Who pays for demurrage when the import terminal can’t accommodate the entire cargo from the ship that had a legal right to a specific slot?

Over the past 5 to 10 years, many LNG import terminals are set up for capacity sharing and multiple users, but their maximum capacity has hardly been tested. As we all know, import terminals in the US are not tested at all. In Europe, there have been much more import capacity than actually imported volumes, and some of the new multi user terminals have operated with very low throughput only. The real test of maximum capacity will come when all users want to utilise their contracted volumes over an extended period of time. Rest assured, this time will come.

This article was initially posted in DNV GL’s blog and is reproduced here with the author’s kind permission.

 ABOUT THE AUTHOR

Lars Petter Blikom is Segment Director for LNG at DNV GL. His role has a global responsibility for business development within the LNG industry, covering both classification of ships, and advisory services. Lars Petter started his career as a Navy Officer in the Norwegian Navy, then studied for a MSc degree in marine technology before joining DNV GL , where he started in the consulting arm and focused on the energy industry.