Apr-2023

Monetisation gas resources through LNG, hydrogen, and ammonia

Capturing profitability in the downstream hydrocarbon processing industry’s transition to net zero emissions weights heavily on leveraging natural gas resources.

Rene Gonzalez
Editor, PTQ

Article Summary

LNG opportunities: The global LNG market is expected to reach US$66.13 billion by 2027, at a CAGR of 6.92% during 2022-2027. Most capacity comes from mega-LNG facilities, while certain niche margin opportunities comes from small-scale liquefied natural gas (ssLNG) operations. Overall, LNG markets beyond 2023 are expected to grow and evolve as the industry matures and new technologies and applications emerge, with Qatar, Australia, and the US becoming the largest natural gas producers. 

Industry forecasts expect LNG demand to reach 650 to over 700 million tonnes a year by 2040. More investment in liquefaction projects is required to avoid a supply-demand gap expected to emerge by the late 2020s. Diverse new technologies to reduce emissions from gas and LNG supply chains will help consolidate its role in the energy transition. There is a growing industry focus on the development and deployment of decarbonised gases, including renewable natural gas, hydrogen, and ammonia, to deliver more sustainable energy security in the future.

Due to well-acknowledged reasons ranging from low cost and emissions reductions, LNG from natural gas resources is rapidly taking a larger percentage of the energy mix options. For example, the IMO 2020 bunkering market (less than 0.5 wt% sulphur) has generated worldwide interest in supplying this market with LNG’s near-zero sulphur content, preferably from facilities strategically positioned to serve LNG-powered container ship bunkering operations.
In remote areas, island nations, and regions where intense mining operations are occurring to supply precious metals for the electric vehicle market, small-scale facilities linked to microgrids are preferred as they require much less time for construction than mega-LNG facilities. Besides, the mega-LNG owners could be more exposed to price sensitivity with regard to long-term contracts and other tolling agreements.

LNG technology enablers
These bespoke developments are enabled by technological improvements at every stage across the natural gas value chain. Take, for example, one of the world’s largest oil and gas companies and a major player in the LNG industry. Shell has been exploring the potential of artificial intelligence (AI) to improve the efficiency and safety of its operations, including applications at its existing LNG plants.

One example of Shell using AI in its LNG operations is its partnership with technology firm C3.ai. Together, the companies have developed an AI-based predictive maintenance system for Shell’s Prelude floating liquefied natural gas (FLNG) facility, located off the coast of Western Australia. The system uses AI algorithms to analyse data from thousands of sensors throughout the facility, detecting anomalies or potential issues before they can cause serious problems. By proactively identifying and addressing maintenance needs, the system can help to reduce downtime and improve the overall efficiency of the facility.

LNG projects require complex technologies (see Figure 1) and related infrastructure against a moving target of constantly changing regulations. According to a report by Wood Mackenzie developed during the onset of the global pandemic in 2020, the new bar for future LNG projects is around $4/MMBtu, or even lower. The report also mentioned that the cost of new LNG projects had fallen due to technological advances and supplier competition.
In another report by Rystad Energy in 2021, it was mentioned that the cost of LNG projects had fallen to around $450 per ton of LNG produced, equivalent to $4.04/MMBtu based on an assumed energy content of 22.6 MJ/kg. The report stated that the cost reduction was due to the adoption of standardised designs, the use of modular construction techniques, such as with the new ssLNG plants serving the Caribbean Basin’s maritime shipping industry, remote mining operations in northern Canada and Africa, and the application of digitalisation and automation technologies.

Therefore, based on these industry reports, it can be assumed that the new bar for future LNG projects is around $4/MMBtu, or even lower. A recent PwC study noted that by 2030, if the price of LNG costs between $3 and $4 per mmBtu with oil above $90 a barrel, LNG demand will increase more than four times what it would be if LNG cost more than $9 per MMBtu, with oil between $50 and $60 a barrel. To better monetise these differentials, competitive LNG producers are well into the development of fuelling solutions of all scales and scope. For example, new crude supply tankers, cruise ships, and passenger ferries are being built to run on LNG instead of low-sulphur fuel oil.

Ammonia
Fertiliser production is already in short supply, leading to impending global food shortages. With the world’s population expected to reach 9 billion people by 2050, the problem is not going away soon. Natural gas is a common feedstock for the production of ammonia, which is primarily used in the production of fertilisers. Traditionally the process of producing ammonia from natural gas involves three main steps:
• Steam methane reforming (SMR): The conversion of natural gas into a mixture of hydrogen and carbon monoxide (CO) using steam and a catalyst carried out at high temperatures and pressures and further discussed in PTQ Gas 2023
• Gas shift reaction: In this second step, the mixture of hydrogen and CO is treated with steam and a catalyst to undergo the gas shift reaction. This reaction converts the CO into CO2 and additional hydrogen
• Haber-Bosch process: The final step involves the synthesis of ammonia from hydrogen and nitrogen, produced by air separation units. This process occurs at high temperatures and pressures in the presence of an iron catalyst.

Benefits
The process of producing ammonia from natural gas can be made highly energy-efficient, as it involves the use of waste heat and the recovery of excess energy. Throughout the global market, natural gas is widely available, and there are established infrastructure and distribution networks that make it easy to transport and use as a feedstock. The ammonia produced using natural gas as a feedstock is of high purity and quality, making it ideal for use in the production of fertilisers. Nevertheless there are challenges:
• CO2 impact: The production of ammonia from natural gas plants generates significant greenhouse gas emissions, which contribute to climate change.
• Safety considerations: The Haber-Bosch process is carried out at high temperatures and pressures and can pose safety risks if not properly managed.
• Market volatility: The cost of natural gas can be volatile, impacting the cost-effectiveness of ammonia production.

Alternatives
As the world continues to seek sustainable solutions to meet the growing demand for fertilisers and other ammonia-based products, the industry will need to address these bespoke challenges and find ways to improve the sustainability of ammonia production from natural gas plants. Utilising refinery byproducts could serve as a supplement or alternative to ammonia production from natural gas. Refineries produce a variety of byproducts, such as the hydrogen and nitrogen used as inputs for the ammonia production process.