HOUSTON ̶ LNG America President and CEO Keith Meyer thinks that a bridge can be built across the gulf that exists between large-scale LNG development plans and small-scale aspirations. Historically, he said, LNG has been more focused on the large scale, and it has been moving that way for some time. He wanted to ask if it might be possible to steer the industry in a different angle, however.

“Can we make that link, that bridge, between the large-scale and the small-scale as a way to help that small-scale get developed?” he asked the audience at Hart Energy’s recent World LNG Fuels Conference.

Acknowledging the advent of the “shale nation,” Meyer referred to data from the U.S. Energy Information Administration that pointed out that if we only counted the U.S. in terms of shale gas production, it would still rank as the third most productive nation in the world.

All of that natural gas can be used in a very attractive high horsepower (HHP) market here in the U.S. By his estimates, the potential market for HHP is larger than for most states, in terms of natural gas consumption. The market could support as much as 6.7 trillion cubic feet of natural gas. Marine vessels could consume 933 billion cubic feet (Bcf); rail, 413 Bcf; trucking, 4.8 Tcf; mining, 281 Bcf; and oil and gas, 231 Bcf.

“It’s a significant market to go after,” he said.

Significant challenges face this attractive market, however. Meyer said it was a “disaggregated, heterogeneous market.” The marine industry has to have specific bunker vessels developed, while exploration and production companies want special mobile rigs. Rail needs a national network, as does trucking. Mines are generally in remote sites, so you have to have a way of getting the LNG there.

“They’re not all the same,” Meyer remarked. “There are companies taking on that challenge, but the point is addressing this HHP market is not by a single solution.”

Another significant divide between the large-scale and small-scale LNG liquefiers are different commercial terms. Contract terms for large-scale LNG projects are often 20 years or more; in the HHP market, those contracts are often less than five. In the same way, the two sides differ in traditional order quantities. A traditional LNG tanker can take on 42 million gallons of LNG at one time, while the HHP market’s various modalities, trucking, locomotive or marine, may only need 200 gallons to 500,000 gallons at a time.

What one loses in flexibility at the large end of the spectrum is gained in unit cost. Benefitting from larger and longer contracts, buyers and sellers at the large-scale facilities can often enjoy lower invested capex per unit and lower unit price. Small-scale facilities usually cannot benefit from such arrangements.

The answer for small-scale, according to Meyer, is in utilizing the excess capacity that is traditionally built into liquefaction plants.

“That excess capacity may be too small for a large-volume customer, but if you take that capacity and put it in the small-scale world all of a sudden it becomes very material.”

The final obstacle Meyer sees for utilizing the large-scale plants to benefit small-scale users and distributers is physical constraints. That is, world-scale plants were simply built to accommodate world-scale tankers. LNG America is currently developing a bunker barge vessel that would be capable of storing only 1/53 of the capacity of a typical LNG tanker. In order to match the volume of the largest tanker, the Q-Max, you would have to use 88 bunker barges.

But even here Meyer sees some progress being made. He noted that several European terminals, including Rotterdam’s Gate terminal, and Zeebrugge, a port located in Belgium, are developing small-scale LNG infrastructure. Of 22 ports surveyed by Lloyd’s Register, 59% said they had plans for developing LNG infrastructure, and 11 ports in the Baltic Sea signed a resolution agreeing to construct LNG bunker fuel infrastructure. Hamburg, Antwerp and Valencia have chimed in, offering their willingness as well. Meyer called this “very proactive port management.”

“This is the kind of thing we want to foster here. They [the world ports] want to see the region cleaned up. The governments want to see the region cleaned up, and the ports are looking at that as a way to maintain competitiveness as well.”

Meyer said, in answer to a question, that it might encourage ship owners to feel more secure in switching to LNG because of the potential universal availability of fuel.

In addition to maintaining a competitive edge in infrastructure, Meyer thinks it will help keep the ports clean, provide a good display of corporate citizenship, and that it will be lucrative as well.

“The world market may go up and down, but if you’ve got that domestic market growing, that’s a nice little edge to have. Therefore, connecting a large-scale facility with a domestic service provider makes good business sense.”