Zeus Virtual Energy Library - LNG Analysis: Cost of Liquefaction, Afterward

Cost of Liquefaction, Afterward

Zeus Liquefied Natural Gas Report
January 13, 2010

To complement our three-part series on liquefaction costs, Heinz Kotzot, technology manager of LNG within KBR's Gas Monetization Development unit, offered two technical papers1,2 that address discrepancies between liquefaction plant costs.


	Click to enlarge Figure 1

In the papers,^1,2 KBR defined and estimated costs for six plant designs of varying complexity to illustrate the significance of site-specific costs. See Figure 1.

"The primary drivers for the capital cost of an LNG liquefaction facility are site specific in nature," Kotzot reported in the first paper. "Surprisingly, less than 50% of the LNG plant cost is capacity related."

The first plant design in the paper, the base case, is a barebones unit that assumes feedgas needs no pretreatment and utilities are provided from an offsite utility, similar to what one might expect when liquefying boiloff gas. This design is assigned an index of 100.

The most sophisticated design (the sixth) adds extensive pretreatment systems, including CO2 and sulfur recovery, onsite utilities and maximum natural gas liquids recovery. It would require nearly four times as much equipment and cost 2.75 times the base case.

To compare plants on a $/ton-year of capacity across these vast differences in designs, KBR argues that liquefaction facilities should be categorized by revenue, not LNG output. Revenue includes condensate, natural gas liquids, and other byproducts. The cost in tons per year would be determined by dividing total revenue by the average price of LNG to give an LNG-equivalent capacity. Thus, a plant that liquefies a ton of LNG and a ton of LPG, would be classified as a 3-ton plant, if the LPG were sold at twice the price of LNG.

"Increasing LPG recovery increases plant cost," Kotzot argues. "The LNG plant economics should be based on a combination of LNG plus NGL to give an LNGL-equivalent."

The chart in Figure 2 illustrates how this approach expands the capacity for three proposed projects. The chart assumes LNG prices of $4/MMBtu, LPG of $400/ton, and condensate of $70/barrel. The reader will note how cost per ton-year changes using the KBR method. High-cost plants that are built as much to produce condensate and LPG as natural gas compare more sensibly with low dollar per ton-year plants.


	Click to enlarge Figure 2

¹ Kotzot, H., et al. “LNG Liquefaction – Not All Plants Are Created Equal.” LNG15 Conference, Barcelona, 2007. Pages 1-19.
²Kotzot, H., et al. “LNG Liquefaction – Not All Plants Are Created Equal, the Sequel.” GasTech conference, Abu Dhabi, 2008. Pages 1-28.

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