Project Title

APEC Study on Small-Scale Shallow Draft Liquefied Nitrogen Gas (LNG) Carriers and Floating Storage Regasification Units 

Project Year

2018   

Project Number

EWG 9 

Project Session

Session 2   

Project Type

Standard 

Project Status

Project in Implementation   
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Project No.

EWG 11 2018A 

Project Title

APEC Study on Small-Scale Shallow Draft Liquefied Nitrogen Gas (LNG) Carriers and Floating Storage Regasification Units 

Project Status

Project in Implementation 

Publication (if any)

 

Fund Account

APEC Support Fund 

Sub-fund

ASF: Energy Efficiency 

Project Year

2018 

Project Session

Session 2 

APEC Funding

100,000 

Co-funding Amount

Total Project Value

100,000 

Sponsoring Forum

Energy Working Group (EWG) 

Topics

Energy 

Committee

SOM Steering Committee on Economic and Technical Cooperation (SCE) 

Other Fora Involved

 

Other Non-APEC Stakeholders Involved

 

Proposing Economy(ies)

United States 

Co-Sponsoring Economies

Chile; Japan; Chinese Taipei; Thailand 

Expected Start Date

01/11/2018 

Expected Completion Date

30/11/2019 

Project Proponent Name 1

Sam Beatty 

Job Title 1

Oil and Gas Analyst 

Organization 1

US Department of Energy 

Postal Address 1

1000 Independence Ave., SW, Washington, DC 20585, USA 

Telephone 1

(1-202) 5866814 

Fax 1

Not Applicable 

Email 1

samuel.beatty@hq.doe.gov 

Project Proponent Name 2

Not Applicable 

Job Title 2

Not Applicable 

Organization 2

Not Applicable 

Postal Address 2

Not Applicable 

Telephone 2

Not Applicable 

Fax 2

Not Applicable 

Email 2

Not Applicable 

Declaration

Sam Beatty 

Project Summary

With continued projected energy demand growth in the Asia-Pacific region, development and trade of natural gas resources is key to APEC’s regional energy security agenda. However, existing infrastructure for liquefied natural gas (LNG) in particular is insufficient to meet the increasing demand for LNG in the region. This project proposes a study on the optimal use of small-scale shallow draft LNG carriers and Floating Storage Regasification Units (FSRUs), particularly in the APEC region.  Small-scale shallow draft carriers are efficient for regional island-to-island, shallow coastal, and river LNG transport.  FSRUs are moveable from one location to another to meet demand needs.  Both can be optimized in hub-and-spoke scenarios with large-scale LNG imports.  With an increasing number of APEC economies seeking to rely on LNG to meet natural gas demand, this study would also potentially supplement the findings of APEC# 217-RE-01.9, Natural Gas Security in APEC.

Relevance

Relevance – Region: With continued projected energy demand growth in the Asia-Pacific region, the development and trade of natural gas resources is key to APEC’s regional energy security agenda. Many APEC economies have plans to expand their energy matrix by importing LNG. The existing infrastructure for certain areas in the APEC region, however, is insufficient to accommodate the planned LNG imports. 

Optimizing small-scale shallow-draft LNG carrier and Floating Storage Regasification Unit (FSRU) use as part of individual and regional economies’ efforts to increase the amount of LNG in their energy mix can bolster gas supply security, an important element of APEC’s overall energy security priority.  Among APEC economies, especially in Southeast Asia, there is a growing list of FSRU proposals, which, if they came to fruition, could substantially boost APEC economies’ use of FSRUs..  Small-scale shallow-draft LNG carriers could be used to serve FSRUs located in shallow water coastal areas, in harbors, and in rivers.  In areas with no onshore regasification or storage facilities, FSRUs could serve as part of a virtual pipeline linked to on-shore vehicles transporting gas to residential, commercial, and industrial end-users. The FSRUs would facilitate energy access through island-to-island, shallow coastal, and river LNG transport for areas in the APEC region that lack expansive LNG infrastructure for large LNG imports.  This project will support APEC Leaders’ goals for promoting energy-related trade and enhancing access to reliable, efficient and clean energy sources. 

Relevance – Eligibility: This project fits the eligibility criteria of the EELCM sub-fund by supporting APEC Leaders’ goal to reduce aggregate energy intensity by 45% by 2035 as increased access to LNG will provide a low carbon energy option to help address APEC’s growing energy demand.  It also supports capacity building needs, particularly for APEC developing economies that seek to enhance their LNG infrastructure to increase imports, and particularly for those with island populations.  The study also has relevance for building partnerships with the private sector as it could serve as roadmap for discerning future commercial opportunities in the APEC region. 

Relevance – Capacity Building: This project will help build capacity for all APEC economies. It will particularly benefit developing economies who seek to improve their LNG infrastructure for the purpose of increasing access to LNG, thus contributing to energy access and energy security. There is keen interest in APEC and non-APEC economies in South and Southeast Asia, in particular, for FSRUs.  In fact, there are existing FSRU proposals in APEC economies, including Australia, Thailand, The Philippines, and Indonesia, and in neighboring non-APEC economies, including India, Pakistan, Bangladesh, and Myanmar.[1] Many Asian economies have an inadequate amount of experience importing LNG, and therefore, it is a new challenge.  There is a dearth of expertise to operate and manage LNG imports both in industry and government.  The expected recommendations and guidance on utilizing small-scale shallow draft LNG carriers and FSRUs will help economies understand these commercial aspects of LNG trading that must be captivated in order to efficiently utilize the LNG infrastructure and access LNG to meet their import needs. This study will support their energy security, energy access and low-carbon goals.


[1] IHS Markit, Floating Regasification Outlook, 07 February 2018

Objectives

The primary objectives of this study are to 1) assess the practicality of small-scale shallow draft LNG carriers and FSRUs in the APEC region and demonstrate their efficiency for regional island-to-island, shallow coastal, and river LNG transport and 2) develop considerations and recommendations for decisionmakers in APEC economies so they can tactfully introduce this LNG infrastructure into their markets. The studies explanatory information about the benefits of shallow draft carriers and FSRUs as well as practical considerations will enhance the knowledge of key decisionmakers in further developing their LNG markets. In order to further facilitate building capacity and providing guidance to APEC economies based on the study’s findings, economies may also consider holding workshops by the study’s author(s) on an applicable economy-by-economy basis, or a regional workshop could be considered as a follow-on APEC project.

Alignment

Alignment - APEC:  By developing recommendations for enhancing LNG imports, this study will support the Leaders’ 2017 priorities “to facilitate energy-related trade and investment, enhance access to affordable and reliable energy, and promote sustainable, efficient, and clean energy sources.” This also supports the Energy Ministers’ 2010 (EMM9) instructions to the EWG “to evaluate the potential of unconventional resources and to recommend cooperative actions which could…boost natural gas trade and use” and the 2012 Energy Ministers (EMM10) priority for “to evaluate the production, trade potential and environmental impact of shale gas and other unconventional natural gas resources, as well as promote steady investment in natural gas infrastructure, including  liquefaction facilities, for increasing energy security and economic growth in the APEC region” and instructed EWG to “to review the current state and prospects of the energy markets of the APEC region, with emphasis on the role of natural gas in the total energy balance.” 

Alignment – Forum: This project also directly supports APEC’s LNG Trade Facilitation Initiative, endorsed by Energy Ministers in 2014 to further LNG trade in the region by means of knowledge sharing, public-private partnerships and cross-cutting dialogue. The project also directly supports the EWG Strategic Plan for 2014-2018, which seeks to “Continuously assess fossil fuel resources in the APEC region and assist economies in effectively bringing those resources sustainably to market” and “1) evaluate the potential of unconventional resources in these economies; and 2) to recommend cooperative actions that could increase natural gas output, boost natural gas trade and use, and moderate the volatility of natural gas prices to the extent appropriate both for producers and consumers.”

TILF/ASF Justification

Not Applicable.

Beneficiaries and Outputs

Outputs: This project’s output is a published study on the optimal use of small-scale shallow draft LNG carriers and Floating Storage Regasification Units (FSRUs), particularly in the APEC region.  The study’s focus, recommendations, and guidance will address the applicability and efficiency of small-scale shallow draft carriers for regional island-to-island, shallow coastal, and river LNG transport, as well as the mobility of FSRUs from one location to another to help meet APEC regional and individual economy energy demand needs.  Both can be optimized in hub-and-spoke scenarios with large-scale LNG imports. 

With an increasing number of APEC economies seeking to rely on LNG to meet natural gas demand, this study would also potentially supplement the findings of APEC# 217-RE-01.9, Natural Gas Security in APEC by expanding upon a key recommendation in that report.  APEC# 217-RE-01.9, Natural Gas Security in APEC[1], noted that: “The development of the FSRU may also contribute to promoting linkages (not only internationally but domestically). An FSRU can be moved easily to a place where there is high demand for regasification of LNG, and get it to market faster. Likewise, an FSRU costs less than building an onshore regasification facility or a pipeline. The only drawback of a FSRU is that it has less capacity compared with a conventional onshore facility.”  This project expands upon that recommendation with further analysis and could potentially be added as in-depth supplement of potential FSRU use in APEC economies to APEC# 217-RE-01.9, Natural Gas Security in APEC.  Also, in order to facilitate building capacity and providing guidance to APEC economies based on the study’s findings, workshops by the study’s author(s) can be considered on an applicable economy-by-economy basis or as a regional workshop in a follow-on project.  This project will not stop with publication of the strategy study that is the primary output of the project.  The output is not merely a study, but a strategy for taking the next steps toward successful implementation and outcomes.  A primary objective of the strategy study is to provide comprehensive information necessary to help stakeholders draw the conclusion that implementation will be successful and to facilitate their role as active participants in financing and implementing the strategy.  The strategy study will also develop the design for individual and regional economies, including identifying which parties need to be at the table from each stakeholder segment. 

Desired contractors to author the study will have extensive global LNG market research (quantitative and qualitative data collection and interpretation experience) capabilities and a background in addressing economies’ strategic, operational, policy, and regulatory challenges related to LNG as a component of their energy mixes. 

The contractor selected (through competitive RFP process) will be an expert in all aspects necessary to develop a strategy for public-private finance and implementation of small-scale shallow-draft LNG carriers and FSRUs.  The selected contractor will demonstrate previously-gained expertise in financing, the LNG industry and economic markets, the technical details of systems for LNG infrastructure operating in developing economies, organizing public-private alliances, and summarizing findings and strategies in compelling written reports. 

The completed study will be published on the APEC website to broadly disseminate findings and share key considerations and recommendations.

Outcomes: The study will identify economy-specific and regional recommendations for optimal use of small-scale shallow-draft LNG carrier and Floating Storage Regasification Units (FSRU) as part of APEC economies’ efforts to increase the amount of LNG in their energy mix in order to bolster their gas supply security. With many economies in this region having little to no experience importing LNG, and an ever growing market that is becoming more cost-competitive, it will be economically beneficial to increase usage of LNG.  Economies in the Asia-Pacific region are already expanding their LNG demand and are expected to continue to do so.

The APEC Leaders’ goal to enhance access to reliable, efficient, and clean energy sources, as well as a lack of public acceptance of coal fired power plants, has promoted LNG as a favorable source of energy.  Optimizing small-scale shallow-draft LNG carriers and FSRU’s use makes it easier to increase LNG imports and expand into new markets. Additionally, this LNG infrastructure is a cost-effective solution to obtaining these goals. They remove the upfront costs of land and on-site construction and are thus a less expensive and potentially a more feasible option.

Many Asian economies lack experience in importing LNG.  While adoption of the study’s recommendations is on a voluntary basis by individual economies, the study will help build capacity to help decision-makers develop strategies for enhancing LNG infrastructure to expand LNG imports.  This study will improve the commercial, financial, and economic understanding of the benefits that a more liquid LNG market would bring as a result of additional infrastructure.

Beneficiaries: 
This project has several beneficiaries and stakeholders, including:

·   Government policymakers and regulators (e.g., Minister and Vice-Minister levels and their staffs at Ministries of Energy, Natural Resources, Power, Industry, and Commerce): The study can inform decision-makers in the formation of their individual economies’ natural gas strategies and be used for the development of collective regional natural gas integration strategies.

·   Women and children: The study can be used as guidance for individual regions to deploy LNG infrastructure, which may increase natural gas access for household use. This could be valuable to women and children since LNG could substitute for traditional energy sources such as coal and firewood, thus potentially reducing indoor pollution and illness within the household.

·   Industry: The study can inform strategic planning for APEC economies’ domestic and international natural gas industry players through an increased understanding of the benefit LNG imports will have on their economy. Additional knowledge of the LNG infrastructure and how to optimally make use of it will also lessen the obstacles that industry players would face when introducing new infrastructure into the market.

·  International fora active in this topic area:  The study can inform other actors focused on increasing the global utility of natural gas.

·  Emerging markets: The study can inform emerging markets of the benefits of LNG infrastructure and its role in increasing natural gas usage in their energy mixes.  Deploying this technology offers a flexible, cost-effective solution for smaller or seasonal markets, and can be developed in less time than an onshore facility of comparable size. It can also serve as a temporary solution while permanent onshore facilities are constructed, and an FSRU can be redeployed elsewhere once construction is completed.  Floating regasification is likely to remain a preferred technology option for emerging markets because of its flexible deployment capabilities, smaller capacities, quick start-up, and relatively low costs compared with those of onshore terminals.

·  Institutes and academia:  The study can provide institutes with data so they can better formulate policy positions on this topic.  Institutes and academia can use this information to formulate their positions and grasp a better understanding of the subject matter, which could encourage further development of LNG infrastructure in the APEC region.


[1] APEC# 217-RE-01.9, Natural Gas Security in APEC, https://aperc.ieej.or.jp/file/2017/7/25/Final_Natural_Gas_Security_in_APEC.pdf, page 69

Dissemination

The project will produce one report to be published on the APEC website which will identify economy-specific and regional recommendations for the optimal use of small-scale shallow-draft LNG carriers and  FSRUs in the APEC region. The study will be in English and adhere to the Guidebook on APEC Projects, the APEC Publication Guidelines and the APEC Logo Guidelines. The study’s contractor terms of reference will state that the study will be presented in a level of English fit for publication and require no further copy-editing by the APEC Secretariat.  If the contractor is unable to fulfill this requirement, a copy editor will read and edit the study, especially the final study which is to be published on the APEC website. This will ensure that language nuances are checked and the quality is within the APEC standard. 

The primary target audiences for the report include:

1) government officials from energy, natural resources, power, and trade ministries and regulatory bodies;

2) domestic and international natural gas industry representatives; and

3) international organizations, institutes and academics engaged in natural gas development and trade.

Other potential distribution sources could include the U.S. Departments of Energy and Commerce through their representative offices in the APEC region and possibly shared at international conference related to LNG development.  There is no intention to sell this study.

Gender

If the study’s recommendations are implemented in a way that results in greater natural gas supplies for APEC economies, women may benefit from the increased availability of natural gas for daily household and commercial activities. In many developing economies, women are responsible for fuel collection and cooking. Fuel collection tends to be a time-consuming task, limiting women’s opportunities to improve their education or engage in income-generating activities. Increased access to LNG could potentially free up time that could be used for more productive purposes such as these. Women in developing economies also suffer from indoor air pollution because of the many hours spend cooking around fires that create smoke within the home. LNG is also a cleaner form of energy, and could thus improve women’s health.

Work Plan

December 2018 – January 2019

PO to develop parameters of study

January – February  2019

Draft and issue RFP / Select consultant

March-July 2019

Consultant to begin study on:

·  Long-term strategic analysis with an understanding of APEC economies’ natural gas market fundamentals; and

·  Capability to develop a full LNG value chain analysis with the primary focus being the optimal use of small-scale shallow draft LNG carriers and FSRUs in the APEC region.

August 2019

Draft report completed and circulated for comments among the EWG members (including co-sponsoring economies).

September 2019

EWG member comments to be incorporated into final report.

October 2019

Final report submitted to the EWG for final review and endorsement.

 November 2019

Completion report submitted to Secretariat

May – November 2020

Participation in the Long Term Evaluation of APEC Projects conducted by the Secretariat, as required by all APEC funded projects

Risks

The risks associated with this project are relatively low.  APEC economies including Australia, Thailand, The Philippines, Indonesia, and Malaysia have shown interest in strengthening LNG infrastructure.[1] Especially given that shallow-draft carriers and FSRUs hold much promise for island and coastal communities, we believe the information and recommendations to be provided by the study will be of great benefit to APEC economies more broadly. The main risk is not attracting bidders with solid understanding of shallow-draft carriers and FSRUs or the unique environment in APEC to provide sound recommendations for their efficient implementation. Other possible risks could be delays or untimely preparation of the final report. To mitigate these risks, the PO will set clear eligibility criteria for the RFP to ensure the strongest technical qualifications will be considered. The PO will also keep in close contact with the contractor on a monthly basis and require monthly reporting throughout implementation to ensure the report remains on track.  The contractor will be required to present an interim progress assessment to the EWG.


[1] IHS Markit, Floating Regasification Outlook, 07 February 2018

Monitoring and Evaluation

Interim progress on the work plan by the contractor will be assessed, in part, through the number of stakeholder interviews conducted by the contractor, the diversity of potential members engaged during development of the study, and the on-time completion of the study and its recommendations that are based on the feedback and guidance provided through the interviews. 

Progress and quality will also be monitored via a multi-stage process toward publication of a final strategy report.  The contractor will provide a partial (draft) report to, and receive feedback from, the Project Overseer (including review by expert staff of the U.S. Department of Energy’s Office of Oil and Natural Gas); the same process will be followed for a full (final draft) strategy report.  Then we will obtain comments on the full (final draft) strategy from key stakeholders and APEC economies, incorporating their feedback into the final strategy report before publishing it through APEC. 

Impact will be assessed, in part, through feedback on the draft final strategy report from stakeholders, with respect to whether they feel the report provides all information necessary for them to conclude that implementation of the small-scale shallow-draft LNG carriers and FSRUs will be successful.  Then once the final report has been published, we will look for similar feedback from a larger group of readers/stakeholders.  We will listen for feedback that they want to be active participants in financing and implementing the strategy.  When we present the report’s findings and next steps toward assembling a public-private alliance, we will again listen for feedback on whether the report provides all necessary information and the member economies represented want to be active participants in financing and implementation. 

Following publication of the report, the ultimate indicators of the project’s success will be whether:

1) public-private alliances are formed to finance and implement the report’s strategy;

2) the findings of the study result in APEC economies’ greater use of small-scale shallow-draft LNG carriers and FSRUs; and

3) there is an increase in APEC economies’ LNG imports resulting in an expanded natural gas market within the APEC region.

Linkages

This study would supplement the findings of APEC# 217-RE-01.9, Natural Gas Security in APEC, which found: “The development of the FSRU may also contribute to promoting linkages (not only internationally but domestically). An FSRU can be moved easily to a place where there is high demand for regasification of LNG, and get it to market faster. Likewise, an FSRU costs less than building an onshore regasification facility or a pipeline. The only drawback of a FSRU is that it has less capacity compared with a conventional onshore facility.”  This project provides a more detailed analysis of that recommendation and could be added as in-depth supplement of potential FSRU use in APEC economies to APEC# 217-RE-01.9, Natural Gas Security in APEC.  The study will be shared with the EWG Expert Group on Clean Fossil Energy and APERC to complement and benefit from the work of those two groups, including in the review process and through publication on the APEC website along with reports by those two groups.

The study also directly supports the EWG’s APEC LNG Trade Facilitation Initiative by enhancing knowledge sharing, public-private partnerships and cross-cutting dialogue. The findings on the optimal use of small-scale shallow draft LNG carriers and FSRUs will not only benefit the APEC region, but broad dissemination of the report would share these lessons to benefit partners globally, potentially opening up opportunities for cross fora collaboration through future work. Since APEC is the preeminent organization in the region focused on trade, and energy-related trade and investment as well as energy security are major priorities of the region, APEC is the perfect platform in which to pursue such a study focused on enhancing LNG imports. The study directly supports the criteria of the APEC sub-fund and will be used to the benefit of APEC economies, particularly developing economies.  In order to facilitate building capacity and providing guidance to APEC economies based on the study’s findings, workshops by the study’s author(s) can be considered on an applicable economy-by-economy basis.

Sustainability

This project will not stop with publication of the strategy study that is the primary output of the project.  The output is not merely a study, but a strategy for taking the next steps toward successful implementation and outcomes.  A primary objective of the strategy study is to provide all information necessary to help stakeholders draw the conclusion that implementation will be successful and they want to be active participants in financing and implementing the strategy.  The strategy study will also develop the design for individual and regional economies’, including identifying which parties need to be at the table from each stakeholder segment.  As a result, this project could facilitate formation of a public-private alliance that uses the study’s findings and strategy as a basis for implementing greater small-scale shallow-draft LNG carrier and  FSRU use in the APEC region.

A first step toward formation of the alliance could be taken by presenting the study’s findings and gauging APEC economies’ levels of interest in the study’s strategy.  Feedback from APEC economies is crucial to confirm that the study provides all necessary information and that member economies want to be active participants in implementing the study’s strategy.

Progress toward medium-term outcomes and impacts could be measured through metrics including the diversity of stakeholders engaged, the amount of funding and financing made available by members, the number of small-scale shallow-draft carriers and FRSUs installed, the extent to which they are utilized, and the greenhouse gas emissions avoided from an increased use of LNG.

Project Overseers

The Project Overseer, Mr. Sam Beatty, is an Oil and Gas Analyst in the U.S. Department of Energy’s Office of Oil and Natural Gas Mr. Betty will manage the project with input from experts on staff of the U.S. Department of Energy’s Office of Oil and Natural Gas (https://www.energy.gov/fe/science-innovation/oil-gas-research).  The Office of Oil and Natural Gas supports research and policy options to ensure domestic and global supplies of oil and natural gas.  Mr. Beatty will also consult with other U.S. DOE staff in the Office of International Affairs with broad experience on implementing APEC projects.

Cost Efficiency

Not Applicable.

Drawdown Timetable

Not Applicable.

Direct Labour

Contractor selected (through competitive RFP process) will be an expert in all aspects necessary to develop a strategy for public-private finance and implementation of small-scale shallow-draft LNG carriers and FSRUs.  The selected contractor will demonstrate previously-gained expertise in financing, the LNG industry and economic markets, the technical details of systems for LNG infrastructure operating in developing economies, organizing public-private alliances, and summarizing findings and strategies in compelling written reports. 

At an estimated rate of $125 per hour, $90,000 of APEC funding could pay for up to 720 hours of the contractor’s labor.  However, the APEC funding total of $100,000 would also need to cover the contractor’s travel for in-person research, in-person interviews, etc.; the exact amount of funding needed for the contractor’s travel will depend on the selected contractor’s previous experience and knowledge of the topic and on the selected contractor’s location.

Waivers

Not Applicable.

Are there any supporting document attached?

No 
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Project No.

Project Title

Project Status

Publication (if any)

Fund Account

Sub-fund

Project Year

Project Session

APEC Funding

Co-funding Amount

Total Project Value

Sponsoring Forum

Topics

Committee

Other Fora Involved

Other Non-APEC Stakeholders Involved

Proposing Economy(ies)

Co-Sponsoring Economies

Expected Start Date

Expected Completion Date

Project Proponent Name 1

Job Title 1

Organization 1

Postal Address 1

Telephone 1

Fax 1

Email 1

Project Proponent Name 2

Job Title 2

Organization 2

Postal Address 2

Telephone 2

Fax 2

Email 2

Declaration

Project Summary

Relevance

Objectives

Alignment

TILF/ASF Justification

Beneficiaries and Outputs

Dissemination

Gender

Work Plan

Risks

Monitoring and Evaluation

Linkages

Sustainability

Project Overseers

Cost Efficiency

Drawdown Timetable

Direct Labour

Waivers

Are there any supporting document attached?

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Secretariat Comments

Reprogramming Notes

Consolidated QAF

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PD Sign Off

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Monitoring Report Received

Completion Report Received

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