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The ups and downs of running an LNG terminal

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In its four years of operation, Europe’s youngest land based large LNG regasification terminal Gate has seen the LNG market change drastically and rapidly.

Gate’s commercial manager Stefaan Adriaens explains: ‘One of the most drastic market changes happened just before we became operational. The unfortunate tsunami that hit Japan in 2011 resulted in the country idling all its nuclear power plants. Gas fired power plants had to increase their output and in Japan gas means LNG as the country for geographic reasons imports all its gas in liquid form.’

Combined with increasing LNG demand in various Asian countries this resulted in spot LNG prices rising to twice the level of European gas prices. This negative margin meant that all over Europe customers tried to minimise the imports of LNG especially as gas demand was low due to slow economic growth and the success of renewables in the power sector.

An LNG terminal needs a minimum level of LNG ship arrivals to keep the installations in cold (-163°C) working conditions. ‘During construction together with our customers we recognised the value of flexibility and optionality. Therefore we modified the terminal from a baseload import terminal into a flexible terminal requiring only 1-2 ships a year to keep installations cold, instead of the typical 12.

‘This helped our customers through a difficult trading environment. But more was needed to make the terminal a success. As small-scale LNG markets, where LNG is used as a fuel for trucks and vessels or to supply off-grid industry, started to emerge we managed to leverage our strategic location with its traditionally good logistical connections by ship, rail or truck to the rest of Europe. We invested in modifying our jetties to accept small LNG ships and to perform new operations such as gassing up/cooling down and reloading. This resulted in Gate, located at the entrance of the continent’s largest port Rotterdam, becoming a regional LNG hub where customers offer LNG to nearby countries.’

Trucks now transport LNG out of Gate all over Europe from Norway to Italy and from the UK to Poland. Through short sea shipping LNG is already transported to Sweden and Norway. Occasionally Gate does a large scale LNG reload and the LNG is then transported by standard size LNG carriers all over the world from Japan to Argentina. Gasunie and Royal Vopak, the shareholders in Gate Terminal keep investing in further improvements of its operations and announced last year FID on a dedicated small scale LNG breakbulk facility to further facilitate the LNG bunkering and short sea shipping market.

As part of this Gate is building a new quay with a loading point for smaller tankers and bunker vessels to facilitate the small-scale distribution (up to approx. 20,000 m3 per ship) of liquid natural gas. Construction work has started and will be complete by the end of 2016.

The LNG market again seems to be going through another cyclical change with lots of LNG supply on the horizon, also from US. Gate currently has three LNG tanks, which a permit for a fourth. This is substantial for an LNG terminal but limited if compared to its neighbours where you can find 39 crude oil tanks. But with enough land to develop its capacity the terminal is likely to grow in the very near future.