(EnergyAsia, March 22 2011, Tuesday) — There is potentially large demand for liquefied natural gas (LNG) as fuel for power generation and shipping in Southeast Asia, according to a special study by a multi-national consortium.

The study examined the future LNG use in Southeast Asia as fuel for ship propulsion and as feedstock for small scale power production in off-grid island regions.

Initiated by Norwegian risk management experts Det Norske Veritas (DNV), the study’s other sponsors and supporters included Gazprom, Rolls-Royce, Wartsila, Hanjin Shipping, I M Skaugen, Keppel, The Linde Group, Trans LNG, DNV, BW Group, BBG, the Maritime and Port Authority of Singapore (MPA), National University of Singapore (NUS) and Nanyang Technological University (NTU).

DNV said the study forecasts that container feeders might be the first ship segment to adopt LNG for propulsion regionally, noting that about 20% of the regional container feeders are up for renewal by 2020. It added that local and regional ferries are also well suited to use LNG for propulsion in the longer term.

The study identified Singapore as the preferred site for future LNG bunkering due to large shipping volumes, calm seas and the fact that infrastructure for LNG bunkering is already under construction. With stricter requirements for environmental performance, and an increasingly competitive expected price for LNG as fuel for ships, a shift to LNG propulsion may have an exciting impact on Singapore as a bunkering hub.

Lam Yi Young, chief executive of the MPA, said:

“With the push towards cleaner fuel for ships, the results of this JIP are timely in evaluating the potential for LNG bunkering services in Singapore. LNG’s lower carbon dioxide emissions, minimal sulphur and nitrogen content as well as the abundant availability, allows it to be a viable alternative fuel source for ships, which is also in line with MPA’s commitment to promoting environmentally-friendly shipping.”

The study added that investments in infrastructure for small-scale LNG power production might be justified when the total demand for electric power exceeds 500 megawatts (MW) within a 120,000-square kilometre island region with no pipeline connection.

DNV said the study identified multiple island regions in Southeast Asia outside any pipeline grid where total demand for electrical power exceeds 500 megawatts (MW).

Eastern Indonesia, for example, might have a demand for up to 70 small-scale 50 MW power plants by 2020 and Southern Philippines could require up to 45 plants, while the estimated demand for Northern Vietnam might be seven small power plants. According to DNV, the distribution of LNG to these power plants would require close to 60 small-scale LNG carriers by 2020 if this number of plants is built.

With the price of crude oil rising faster than the price of natural gas, the financial incentives for using LNG for power generation are equally increasing with considerable environmental benefits to be gained from such a fuel switch, DNV said.

Bjorn Tore Markussen, managing director for DNV’s Clean Technology Centre in Singapore and head of the study, said:

“Substantial market opportunities will evolve throughout the small-scale LNG value-chain in Southeast Asia in the next decade. The companies who seize the opportunities early in these evolving markets will be well positioned for interesting growth if entry risks are managed properly.

“The consortium is eager to use the findings from the LNG study to build business for the participants and to inform regional stakeholders about the opportunities that lie ahead.

“DNV as a company has already decided to invest into a next phase of the JIP. We are now inviting old and new members to join the consortium and one or more of the many project streams that will be kicked off in April and May.”