A New Market for Downscaled LNG
August 2017
The recent announcement that Australia’s Pluto LNG would be expanded to meet the small scale onshore market via modular LNG trains, highlights the growing interest in small scale Liquefied Natural Gas (LNG) options. Small scale, modular LNG ranges in size from less than 0.250Mtpa up to 1.5Mtpa per train. What is interesting about Pluto is that the expansion will be situated at the existing Pluto LNG site, providing a number of synergies and infrastructure savings.

Given the current, plentiful supply of large scale LNG into world markets, we consider whether this model would be applicable as an add-on to global scale LNG projects.As in the case of Pluto, such an addition to a giant project could bring an added diversity of LNG. Unlike most large capacity projects, small-scale LNG projects have a number of key differences. 

  • Trains and storage tanks have a small capacity of 0.5Mtpa and, usually of no more than 1.5Mtpa.  In order to deal with this reduced operational scale, liquefaction technologies are generally of the simpler “Single Mixed Refrigerant” (SMR) type. An existing example is the 0.5Mtpa Karratha LNG in Western Australia.
  • The loading infrastructure is designed for loading into small-volume transportation tanks, usually a road-tanker, or passenger ferry, in the sub-1,000m³ class. As such, bespoke loading arms and terminals must be built to handle this reduced volume safely.
  • This reduced operational scale concept applies to the onshore mining market in places such as Western Australia. Facilities are is designed to match the loading cycle of this much smaller, road or rail based tankers, where cargoes are usually in the 4 – 100m³ range, as opposed to 80,000 to 225,000m³ sized, typical cargo of marine shipping from large-sized LNG terminals.
  • This small operational scale is also highly suited to the mid-sized inshore and coastal marine shipping, as a bunkering fuel. This is a growing market, as many near-shore zones are increasingly being declared to be ECAs (Emission Control Areas).  This market includes using LNG as a bunkering medium for passenger ferries, tugs and other commercial marine craft which operate in inshore-areas.

Even before the fall in oil prices, the profitability of several LNG projects was being squeezed by high construction costs and project delays. Large, uncommitted projects are being cancelled, as in the example of the US$35b (est.) Pacific Northwest LNG.  In this macro-economic context, modular LNG allows entry by smaller operators into LNG production at a fractional start-up cost, or a bespoke expansion at an existing plant to address the needs of a local market.  While this approach sacrifices some of the economies of scale advantage enjoyed by giant projects, it also serves to reduce funding hurdles associated with a large capacity project.

  • An example is Energy World Development’s Sengkang LNG, in Indonesia, which is being planned as a modular facility comprised of up to 4 trains, each with a 0.5Mtpa capacity. Sengkang will supply energy utilities in the Indonesian archipelago via medium sized cargoes and has the option of incremental capacity additions.

Given these factors, it becomes apparent that while there will be growth in the construction of small scale LNG facilities, the growth of small-scale offtake infrastructure will be mainly focussed on bunkering facilities that are tied to the downstream LNG import terminals at major, non-producing locations.

But the smaller operational scale and the market diversity this represents has its technical challenges, including the establishment of a common standard for the connective technologies that handle the loading and offloading of the liquefied gas. Adopting a uniform standard across regions and countries is seen as vital for the economic viability of this market. 

Europe is currently in the early stages of developing infrastructure for marine bunkering as well as supplying LNG to be used for land-based transportation and smaller industrial gas users.

  • The ISO standard for LNG bunkering, ISO 20519, was only released in early 2017
  • Most recently, Spain’s Enagás, along with 42 private and public partners, initiated a E33.3m (US$39.2m) pilot programme for development and testing an LNG adapted logistics chain, with a view to bunkering.\
  • Similar LNG transhipment and bunkering programmes are underway in Sweden, Cyprus, Malta Poland and Germany.
  • In July of 2017, Pitpoint.LNG, in a project underpinned by Royal Dutch Shell, announced the construction of Germany’s first LNG bunkering station in the port of Cologne. This follows a similar project in Rotterdam. The bunker stations will supply shipping on the Rhine River.
  • In Western Australia, LNG from the small-scale Kwinana and Karratha LNG trains is being distributed into remote mining operations.

The global LNG bunkering market is expected to grow between quickly up to around 25-30Mtpa by 2025, representing a CAGR of 60-70%. Growth will be driven by a combination of regulations and infrastructure investment. In this regard, port operators in the US and in particular, in Europe are installing LNG bunkering stations.



  • The US market for LNG as transport fuel could account for around 4Mtpa over the next decade and will be driven by low natural gas prices from shale production.
  • Europe is set to dramatically ramp-up LNG as a fuel source due to its near-shore and inland shipping lanes. Growth in this zone is being mostly driven by emission control regulations.
  • East Asian markets in China and Korea also have bunkering infrastructures, but growth is anticipated only after the introduction of stricter regulations. The indicative timeframe for significant growth in LNG bunkering is from 2019.
  • LNG consumption will also be driven by demand coming from remotely situated power utilities and industrial users. This is typical in dispersed markets such as Indonesia.