Last Updated: December, 5 2019 08:50:39 PM
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Gas & LNG
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The Global Small-Scale LNG Market is projected to grow from 30.8 MTPA in 2016 to 48.3 MTPA by 2022, at a CAGR of 6.7% between 2017 and 2022. The small-scale LNG market across the globe is driven by their increasing LNG demand from remote locations by applications, such as industrial & power, and the ability to transport LNG over long distances without the need for heavy investment such as pipelines. By terminal type, regasification terminal is expected to grow at a highest CAGR between 2017 and 2022. The increasing demand for LNG from the remote locations and global commoditization of LNG are some of the major factors that are driving the demand for small-scale LNG in this segment.

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The Linde Group (Germany), Wärtsilä (Finland), Honeywell International Inc. (U.S.), General Electric (U.S.), and Engie (France), among others are the leading companies operating in the small-scale LNG market. These companies are expected to account for significant shares of the small-scale LNG market in the near future.  

Critical questions the report answers:

Growth Drivers are : 

  • Energy cost advantage of LNG over alternate energy sources for end users
  • Environmental benefits
  • Fiscal regime and subsidies

small-scale-lng-market-226707057

Energy cost advantage of LNG over alternate energy sources for end-users

Heavy duty transport companies save approximately 30% on fuel costs on LNG-fueled trucks, compared to diesel fueled trucks, and produce 30% lower emissions. Air pollution from diesel engines is one of the biggest concerns, especially in areas that struggle to meet air-quality standards. On the other hand, natural gas causes complete combustion and fewer emissions than diesel. It is estimated that increasing environmental concerns from the utilization of diesel vehicles is likely to increase the adoption of green fuel technologies such as natural gas. In the case of electric power generation, natural gas engines below 150 KW are more cost effective than oil fueled engines. Fuel cost is one of the major cost for road transportation, which is strongly subject to excise taxation. Typically, an LNG-fueled Volvo FM truck can travel up to 600 km with LNG. With an additional 150 litres of diesel, it can travel up to 1,000 km without refuelling. Thus, reducing the cost of travel. With additional LNG liquefaction capacity expected to come online in the next few years, an oversupply of LNG is expected, which will drive the price of LNG further lower. Considering all these factors, both developed and developing countries are undertaking feasibility studies to recognize the techno-economics of shifting their economies from diesel to natural gas. Therefore, the cheap price of small-scla LNG over others alterantive fuels will drive the growth during the forecast period. 

Small-scale LNG terminals are regarded as facilities, including liquefaction and regasification terminals, with a capacity of less than 1 million tons per annum (MTPA) within the scope of this study. It includes the LNG produced from small-scale liquefaction terminals and regasified at small-scale regasification terminals for catering to applications such as LNG-fueled heavy-duty transport, LNG-fueled ships, and industrial & power generation. 

North America small-scale LNG market is projected to grow at the highest CAGR during the forecast period.

The North America small-scale LNG market is projected to grow at the highest CAGR during the forecast period. In North America, most of the small-scale LNG demand in industrial & power applications is met through peak shaving facilities. The peak shaving facilities are used to meet adequate supply of LNG to address the peak demand. In 2015, there were more than 100 peak shaving facilities in the U.S., among which one-half of the peak shaving facilities were located in the Northeast, while a quarter of them were located in the Midwest. Currently, the U.S. has among the highest number of peak shaving plants. However, less than 10% of them are available for any other use due to the current electricity demand. The commissioning of small-scale liquefaction plants can expand the peak shaving capacities in the region.

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Major Market Developments: 

  • In December 2016, SkanGas AS signed an agreement with Statoil ASA, an oil and gas company in Norway for the reloading of small-scale LNG at Klaipeda LNG Terminal in Lithuania
  • In November 2016, Wärtsilä signed a Memorandum of Understanding (MoU) with ENGIE, a French multinational company to develop services and solutions in the small-scale LNG sector. The agreement includes LNG distribution in remote areas and islands, LNG for ships, small-scale LNG and bio-liquefaction, and LNG to power stations
  • In October 2016, GAZPROM announced to develop a program for a small-scale LNG production, which includes a list of gas distribution stations and liquefaction technologies for LNG production. The program involves the construction of mobile LNG filling stations and cryogenic filling facilities.
  • In June 2014, The Linde Group developed a small-scale LNG technology namely StarLNG™ for the integration into natural gas liquids (NGL) plants. Some of the benefits of this technology includes zero impact on the reliability of the NGL plant production and monetizing the stream of the residue gas through small-scale LNG.

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LNG Small-Scale LNG Market Small-Scale LNG Market Growth Small-Scale LNG Market Demand Small-Scale LNG Market north America Small-Scale LNG Market APAC
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Royal Dutch Shell Poised To Become Just Shell

On 10 December 2021, if all goes to plan Royal Dutch Shell will become just Shell. The energy supermajor will move its headquarters from The Hague in The Netherlands to London, UK. At least three-quarters of the company’s shareholders must vote in favour of the change at the upcoming general meeting, which has been sold by Shell as a means of simplifying its corporate structure and better return value to shareholders, as well as be ‘better positioned to seize opportunities and play a leading role in the energy transition’. In doing so, it will no longer meet Dutch conditions for ‘royal’ designation, dropping a moniker that has defined the company through decades of evolution since 1907.

But why this and why now?

There is a complex web of reasons why, some internal and some external but the ultimate reason boils down to improving growth sustainability. Royal Dutch Shell was born through the merger of Shell Transport and Trading Company (based in the UK) and Royal Dutch (based in The Netherlands) in 1907, with both companies engaging in exploration activities ranging from seashells to crude oil. Unified across international borders, Royal Dutch Shell emerged as Europe’s answer to John D Rockefeller’s Standard Oil empire, as the race to exploit oil (and later natural gas) reserves spilled out over the world. Along the way, Royal Dutch Shell chalked up a number of achievements including establishing the iconic Brent field in the North Sea to striking the first commercial oil in Nigeria. Unlike Standard Oil which was dissolved into 34 smaller companies in 1911, Royal Dutch Shell remained intact, operating as two entities until 2005, when they were finally combined in a dual-nationality structure: incorporated in the UK, but residing in the Netherlands. This managed to satisfy the national claims both countries make on the supermajor, second only to ExxonMobil in revenue and profits but proved to be costly to maintain. In 2020, fellow Anglo-Dutch conglomerate Unilever also ditched its dual structure, opting to be based fully out of the City of London. In that sense, Shell is following the direction of the wind, as forces in its (soon to be former) home country turn sour.

There is a specific grievance that Royal Dutch Shell has with the Dutch government, the 15% dividend tax collected for Dutch-domiciled companies. It is the reason why Unilever abandoned Rotterdam and is now the reason why Shell is abandoning The Hague. And this point is particularly existentialist for Shell, since its share prices has been battered in recent years following the industry downturn since 2015, the global pandemic and being in the crosshairs of climate change activists as an emblem of why the world’s average temperatures are going haywire. The latter has already caused the largest Dutch state pension fund ABP to stop investing in fossil fuels, thereby divesting itself of Royal Dutch Shell. This was largely a symbolic move, but as religious figures will know, symbols themselves carry much power. To combat this, Shell has done two things. First, it has positioned itself to be at the forefront of energy transition, announcing ambitious emissions reductions plans in line with its European counterparts to become carbon neutral by 2050. Second, it is looking to bump up its dividend payouts after slashing them through the depths of the Covid-19 pandemic and accelerating share buybacks to remain the bluest of blue-chip stocks. But then, earlier this year, a Dutch court ruled that Shell’s emissions targets were ‘not ambitious enough’, ordering a stricter aim within a tighter timeframe. And the 15% dividend tax remains – even though Prime Minister Mark Rutte’s coalition government has been attempting to scrap it, with (it is presumed) some lobbying from Royal Dutch Shell and Unilever.

As simplistic it is to think that Shell is leaving for London believes the citizens of the Netherlands has turned its back on the company, the ultimate reason was the dividend tax. Reportedly, CEO Ben van Buerden called up Mark Rutte on Sunday informing him of the planned move. Rutte’s reaction, it is said was of dismay. And he embarked on a last-ditch effort to persuade Royal Dutch Shell to change its mind, by immediately lobbying his government’s coalition partners to back an abolition of the dividend tax. The reaction was perhaps not what he expected, with left-wing and green parties calling Shell’s threat ‘blackmail’. With democracy drawing a line, Shell decided to walk; or at least present an exit plan endorsed by its Board to be voted by shareholders. Many in the Netherlands see Shell’s exit and the loss of the moniker Royal Dutch – as a blow to national pride, especially since the country has been basking in the glow of expanded reputation as a result of post-Brexit migration of financial activities to Amsterdam from London. The UK, on the other hand, sees Shell’s decision and Unilever’s – as an endorsement of the country’s post-Brexit potential.

The move, if passed and in its initial stages, will be mainly structural, transferring the tax residence of Shell to London. Just ten top executives including van Buerden and CFO Jessica Uhl will be making the move to London. Three major arms – Projects and Technology, Global Upstream and Integrated Gas and Renewable Energies – will remain in The Hague. As will Shell’s massive physical reach on Dutch soil: the huge integrated refinery in Pernis, the biofuels hub in Rotterdam, the country’s first offshore wind farm and the mammoth Porthos carbon capture project that will funnel emissions from Rotterdam to be stored in empty North Sea gas fields. And Shell’s troubles with activists will still continue. British climate change activists are as, if not more aggressive as their Dutch counterpart, this being the country where Extinction Rebellion was born. Perhaps more of a threat is activist investor Third Point, which recently acquired a chunk of Shell shares and has been advocating splitting the company into two – a legacy business for fossil fuels and a futures-focused business for renewables.

So Shell’s business remains, even though its address has changed. In the grand scheme of things, never mind the small matter of Dutch national pride – Royal Dutch Shell’s roadmap to remain an investment icon and a major driver of energy transition will continue in its current form. This is a quibble about money or rather, tax – that will have little to no impact on Shell’s operations or on its ambitions. Royal Dutch Shell is poised to become just Shell. Different name and a different house, but the same contents. Unless, of course, Queen Elizabeth II decides to provide royal assent, in which case, Shell might one day become Royal British Shell.

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