2014_2 why lng represents a true paradigm shift master

Why LNG represents a true paradigm shift

In addition to being the fastest-growing sector in fossil fuel, natural gas is also the fossil fuel that causes the least environmental impact. Liquefied natural gas (LNG) is currently the main driver of the globalisation of the gas market, says Torstein Indrebø, secretary general of the non-profit International Gas Union (IGU).


Indrebø points out that gas was traditionally traded through pipelines. “LNG has revolutionised the way in which it is transported and distributed – linking remote reserves with markets, as well as remote markets with reserves. This is one of the main reasons why LNG is growing more rapidly than the average gas market,” he says.

General consensus says demand for natural gas will grow at a steady rate over the coming years. Experts predict a compound annual growth rate (CAGR) in the region of at least 2 percent. In its World Energy Outlook 2013 report, the International Energy Agency projected a 50 percent rise in demand for gas between 2010 and 2035.

The Gas Is Greener


Two crucial factors drive the adoption of gas as a fast-growing fuel – economics and environment. The price relative to oil products is clearly favourable. While coal continues to be more competitive in the power sector both in Asia and Europe, gas should become more competitive as shale gas becomes gradually more available outside North America. In terms of sustainability, clean burning gas produces significantly fewer emissions than oil and coal.

Of all fossil fuels, LNG is by far the fastest growing. It is also the most sustainable, producing 25 percent less carbon when used in the power sector compared with fuel oil and 50 percent less carbon compared with coal, 99 percent fewer particulates, 99 percent less sulphur oxide (SOx), and 85 percent less nitrogen oxide (NOx) than traditional fossil fuels.

“LNG is currently experiencing a global year-on-year increase in trading of 6-8 percent. This is resulting in a significant expansion in shipping, LNG receiving terminal capacity and general LNG infrastructure,” explains Tore Lunde, Managing Director, Wärtsilä Oil&Gas Systems.

“As we are all aware, production is typically not where consumers receive delivery of the LNG. The lack of regional and local LNG distribution explains why the marine sector has been slow to switch to LNG as fuel,” he adds. 

2014_2 why lng represents a true paradigm shift 2

Infrastructure for a new era


However, according to Lunde and his colleagues at Wärtsilä, the situation is quickly changing and a global LNG infrastructure is rapidly taking shape.

“Two millennia ago, shipping migrated from oar to sail,” says John Hatley, Vice President, Americas, Wärtsilä Ship Power. “Two centuries ago it moved from sail to steam, a century ago from steam to diesel – and now we are entering a new era for gas.” 

“It’s safe, clean, and inexpensive – representing a rare win-win opportunity, in which OPEX savings complement emissions reductions,” Hatley adds.

Lunde says the infrastructure needed to support the growth of LNG is not yet in place, but it is improving. The global liquefaction capacity needs to develop further to meet growing demands, as does the infrastructure required to distribute the LNG.

“This year, the global LNG carrier fleet reached 400 vessels – an increase of 38 vessels since last year,” he says. “Industry forecasts suggest that, by 2025, 15 percent of the world’s natural gas exports will be exported in its liquid form on board carriers – the rest will be transported as natural gas in pipelines.”

Hatley explains that nowhere in the world is the LNG shift more apparent than in North America. The “shale gas revolution” has made gas suddenly abundant and affordable. 

Increasingly stringent emission standards are also behind the shift, as they are enforced both on land and at sea. When the North American Emission Control Area (ECA) was introduced in 2012 it brought stricter controls, rigourously limiting emissions of SOx, NOx and particulate matter in Canadian and US coastal areas. 

Asia drives demand


“LNG contains no sulphur, far fewer particulates and less carbon, making it one of the fuels that complies with the limits enforced by the ECA,” Hatley says, adding that the combination of low cost and economic savings are the main drivers for the adoption of LNG fuel in the United States.

At present, the Middle East and Australia produce most of the LNG, alongside countries in Africa and Asia, as well as Russia. Top import markets are Asian countries such as Japan, Korea and China. Increased diversification of LNG supply sources supports the globalisation of the gas market. At present, the US remains a net importer of energy but it is projected to become one of the major exporters within the next five-to-ten-year period.

“Gas is currently three times more expensive in Asia than in the US,” Torstein Indrebø says. “However, the discovery of North American shale gas opens the door to gas exports and a new indexation of energy in Asia, which could make LNG more competitive and attractive in future.”

Europe, meanwhile, finds itself in a different situation. In the EU, where the price of natural gas is lower than in Asia, but higher than coal, the transition is being driven by governmental programmes that promote the use of renewables through subsidies or favourable tax incentives. 

Indrebø notes that, to date, European policy has led to an increase in the use of coal while gas demand has declined. 

“It is economically more attractive to produce power from coal as the penalty for polluting the environment is far too low,” he says. “It is currently one of the IGU’s key objectives to encourage the European Commission to put policies in place to make cleaner fuels, such as gas, more competitive in Europe – both as an independent fuel and as a complement to renewable energy.

“Gas is key to supporting and facilitating the use of renewables,” continues Indrebø.”In Europe, wind power typically only works about 30 percent of the time, while solar power can only be generated 15 percent of the time. However, people need energy 24/7. Gas is very reliable and flexible, it can easily be switched on and off, making it an excellent back-up system for the less predictable renewables.”

Read more about the latest trends in the global LNG market here.

Wärtsilä to supply Finnish LNG terminal

Wärtsilä has been named the supplier to a new LNG terminal to be built in northern Finland’s Tornio, located on the Bay of Bothnia.
In January 2014, Wärtsilä signed a turnkey contract to supply Tornio Manga LNG Terminal, which will be built in Tornio in the north of Finland. The contract, valued at approximately EUR 100 million, has been made with Manga LNG Oy, a joint venture between the Finnish companies Outokumpu Group, Ruukki Metals Oy, Gasum Oy, and EPV Energy Ltd. The contract is conditional on receipt of investment support and Manga LNG Oy’s contracts with other parties, including the gas suppliers.
The terminal will primarily provide natural gas to the Outokumpu Tornio steel mill, but it will also serve industries, mines, and other potential gas consumers in the region. Going forward, it may also supply LNG to ships operating in the Bay of Bothnia.
“The Tornio Manga LNG terminal is a long-term infrastructure investment programme. The beneficiaries include shipping and road transportation companies, power and heat utilities, as well as other industrial and mining companies in northern Europe. We appreciate Wärtsilä’s participation as a valuable partner in this project with special value-adding capabilities in this field,” says Pekka Erkkilä, Chairman of the Board, Manga LNG Oy.

Wärtsilä product range supports shift to LNG

With its gas and dual-fuel (DF) engines, Wärtsilä has been one of the companies paving the way for the rise of gas fuel for many years. However, for this transition to become a true paradigm shift, it will require more than engines. In response to the growing global demand for gas-powered applications, Wärtsilä has developed a portfolio of products and solutions that cover the entire gas value chain.
“LNG is without question the fastest growing fossil fuel in the world today,” says Tore Lunde, Managing Director, Wärtsilä Oil&Gas Systems. “Production is increasing in response to demand and that, in turn, is resulting in a need for an expansion of the LNG receiving terminal capacity and infrastructure, including carriers, as well as storage and regional and local distribution.”
Wärtsilä has products and solutions that play a part in the various stages of the gas chain – from the initial gas exploration and drilling processes, to the production and liquefaction of LNG, which then has to be transported to receiving terminals and distribution facilities, and, finally, to the end users, who utilise LNG in their operations. Aside from its well-established gas and DF combustion engines, Wärtsilä also delivers small-scale LNG liquefaction, reliquefaction, regasification, marine and bunkering solutions and a variety of LNG fuel systems.


Wärtsilä has developed innovative LNG production plant solutions suitable for small- to medium-sized liquefaction capacities. The first free-standing, small-scale LNG plant in Northern Europe was the Snurrevarden facility in Norway, supplied by Wärtsilä. Since then the company has delivered several complete onshore LNG production facilities.


Typically, large LNG carriers transport LNG from the points of production to consumption locations. Since the first Wärtsilä DF engines were introduced for LNG carriers, 65 percent of all new LNG carriers have been fitted with this technology. In total, some 1000 Wärtsilä DF engines have been sold for both marine and land-based applications, accounting for more than 9.5 million running hours. 

Storage & distribution

Wärtsilä offers both onshore and on-board floating terminals. In recent years, the market has shifted more towards is the ship-based option, or floating storage and regasification unit (FSRU). An FRSU is essentially an LNG carrier using cargo tanks as on-board storage, with re-gas facilities that send gas into a pipeline. Wärtsilä has a market share of about 40 percent in floating LNG terminals.
Meanwhile, most receiving terminals are still built with onshore storage and Wärtsilä, having already delivered a system of this kind to a receiving terminal in Malaysia, has the know-how and capability to supply smaller and medium-sized terminals. This is further illustrated by its turnkey contract to supply a liquefied natural gas (LNG) receiving terminal to be built in Tornio, northern Finland. The project has been awarded to Wärtsilä but is still conditional upon receiving investment support

Exploration & drilling

Offshore oil and gas drilling projects demand state-of-the-art vessel propulsion and positioning systems and Wärtsilä has extensive experience in providing both. Wärtsilä Ship Design develops vessel designs and integrated on-board systems, specifically geared towards supporting the optimal use of LNG as fuel. 

End users

These days, LNG is increasingly viewed as a viable alternative for most types of vessels. Wärtsilä has extended its portfolio of dual-fuel engines to include low-speed, 2-stroke DF engines. Wärtsilä has made this possible by extending its portfolio of dual-fuel engines to include low-speed, 2-stroke DF engines, which are Tier III compliant in gas mode, to complement its well-established 4-stroke, medium-speed DF engine technology.
“Wärtsilä is uniquely positioned to play a key part in supporting the entire LNG supply chain,” adds Lunde. “Backed by our people, products and experience, it is our intention to continue to expand our activities in this growing market.”

Leave a comment

Load more comments