Liquefied natural gas (LNG) has become a very promising alternative fuel technology for long-distance transports in the last years as it causes 20% less CO2, 80-90% less NOx and almost zero PM and SOx emissions compared to diesel. Many fleet operators in North America, China and parts of Europe are already successfully demonstrating the viability of the technology. However, large areas of Central Europe are still lacking the infrastructure which would be necessary to stimulate the widespread application of LNG in this region. Only recently, the very first LNG refueling station has been opened in Germany in June 2016. In countries like Austria, the Czech Republic, Slovakia or Hungary there is still no infrastructure available.
The situation can be characterized as a chicken-and-egg problem where the necessary infrastructure is not provided because there is no demand for LNG signaled, but on the other hand potential users can not indicate their demand since the infrastructure for using LNG is missing. Consequently, there are two approaches to break this chicken-and-egg problem: first to establish the reliable supply of LNG in Central Europe so as to encourage pioneer users to introduce LNG as an alternative fuel for their fleet. And second to prove interest and willingness of potential customers to test LNG technology in order to demonstrate the feasibility of constructing LNG infrastructure in Central Europe. According to this, the following article will give an overview of possibilities how to provide Central Europe with LNG and thereafter describe potential users’ attitude towards introducing LNG in Central Europe.
Supply of landlocked countries as a barrier
One reason why Central Europe is lagging behind the current small scale LNG developments is that LNG supply is quite complex for landlocked countries. Most of the coastal countries have easy access to LNG due to the presence of large LNG import terminals. Consequently, these are also the countries where a number of LNG refueling stations are already in operation, e.g. in the United Kingdom, Spain, Sweden and the Netherlands. At the moment, there are about 50 LNG fueling stations in operation in Europe as well as about 35 L-CNG stations (so-called liquefied-to-compressed-natural-gas stations which use LNG to produce CNG) .
In case of using LNG as a fuel for heavy duty vehicles, it will not be regasified and fed into the local pipelines after being shipped to the import terminals, but it will rather be kept in its liquid state to distribute it to the filling stations in the hinterland. This is practical for the aforementioned countries where there are already LNG stations since the distances to the import terminals are not too long. Nevertheless, the situation is quite challenging for the landlocked countries in Central Europe like Austria. The nearest LNG terminals for Austria are the Gate terminal in Rotterdam/the Netherlands and the Fluxys terminal in Zeebrugge/Belgium, but the distance to both terminals is about 1,000 km from central Austria.
A development which facilitates solving this issue is the trend towards small scale applications. Previously, only the large scale section of the LNG value chain has been focused on which includes large liquefying facilities in export countries and the transport of LNG in huge ocean-going tankers and subsequently the regasification of LNG at the place of destination. In contrast to this, so called small scale LNG projects have been emphasized recently.These projects comprise of small liquefaction plants, whereby a capacity of less than 0.68 Mtoe per year is considered to be small scale . Furthermore, LNG gets transshipped from large tankers to smaller vessels and trucks, which is also called breaking bulk. The storage of LNG as well proceeds insmaller units which are called satellite stations. The small scale market is quite new and still in a stage of development .
Ways to provide Central Europe with LNG
Landlocked countries can benefit from this advancement of small scale projects because the distributed LNG volumes become smaller which makes it practical to distribute limited amounts of LNG to remote customers like fleet owners in Austria. For example, a truck can be chartered to carry several tons of LNG to a refueling station in a landlocked area. This is especially important because it can be assumed that in these new markets for LNG the initial demand will be rather low and the required amounts of LNG will be smaller at the beginning.
It has to be mentioned that there is also the possibility to produce a countries’ own LNG by liquefying pipeline gas, howeverthis requires a very high investment and the liquefier is also the most complicated part of the supply chain. For this reason it will be a better idea for newcomers in the LNG business to arrange the transport of LNG from an import terminal to the hinterland in order to establish oneself in LNG application. LNG from the import terminals will most likely come from the largest countries exporting LNG which are are Qatar, Malaysia and Australia. For Europe, Algeria and Nigeria are also very important supplying countries. Basically there are three possible means of transport to distribute LNG to landlocked regions, namely by truck, by train or by inland waterway vessel.
Truck transports are environmentally and economically feasible only for limited distances. Anyway, It is currently the easiest and most viable possibility to transport LNG. Almost any transport service provider offers shipping LNG by truck. Road transport is very convenient because the trucks can be directly loaded at the respective LNG terminal aand be driven straight away to their destination. Either tank trucks or specific ISO containers with tractor units can be used for this. The service of truck loading is possible at many European LNG terminals.
Secondly it is, it is also possible to transport LNG by rail. In Japan, this economic and ecological mode of transport regarding LNG is already very common, much more than in Europe. For large volumes, this is certainly the better solution compared to trucks. However, the supply chain becomes more complex in this case, because there is no LNG terminal in Europe offering rail loading at present . For this reason, LNG has to be transported by truck first and then reloaded to the train. Of course, the extra transshipment to allow transportation by rail is inconvenient and costly. Hence, rail loading will only pay off if a block train and not just single wagons are used. Like with truck loading, either tank wagons or ISO containers could be theoretically employed, an appropriate rail tank car has recently been developed by VTG and Chart Ferox.
Finally, there is also the option to transport LNG on inland waterways. This is certainly the most sustainable way of moving LNG. The Rhine-Main-Danube-axis connects the landlocked countries of Central Europe with the North Sea on one hand and the Black Sea on the other hand. For the purpose of shipping LNG on vessels, the LNG terminals need to offer reloading or transshipment. Transshipment is the direct transfer of LNG from one vessel into another. A lot of terminals currently offer or consider reloading LNG into vessels but only two terminals, Montoir de Bretagne (France) and Cartagena (Spain), offer transshipment presently . Unfortunately, transport service providers are actually restricted in offering this solution because of legal issues. The European Agreement concerning the International Carriage of Dangerous Goods by Inland Waterways (ADN) forbids the transport of LNG via inland waterway tankers at this time. Furthermore, European law prohibits LNG as a fuel for inland vessels at present because it has a flashpoint lower than 55 °C (the flashpoint of LNG is just about -187 °C). Nevertheless, there are some barges operating successfully with a certification of exemption between Rotterdam and Basel. Moreover, several freight forwarders announced that they would offer inland waterway transports in the future when the regulatory issues would be clarified.
Interest in LNG present but depending on profitability
There are already several studies which examined the demand for LNG in various regions of Europe. One of them is the LNG Masterplan, a project running from 2013-2015 which delivered a set of feasibility studies, technical concepts and pilot deployments of terminals and vessels. Part of this initiative was also to assess the market potentials of LNG as a fuel for inland vessels and road vehicles and as an alternative energy source for industries in the Danube region. Potential LNG customers were identified and interviewed regarding their requirements. The results showed that above all LNG demand is heavily dependent on the price gap to conventional fuels and to overall profitability of using the technology. Fleet operators are indeed open-minded and interested in trying LNG but only if the investments pay off on the whole. At present, investment costs for LNG technology are significantly more expensive than diesel for example. This higher capital expenditures need to amortize to make LNG an applicable option. Since the profit margins in the logistics sector are very narrow, fleet operators have to calculate precisely and decide thoroughly if an investment should be made. It can be concluded that subsidies will be necessary to ensure certainty of investment for the first pioneer customers. After some time, when the production volumes of LNG trucks etc. are probably rising, this problem will not be as severe anymore.
The reliability of LNG supply is another factor influencing the demand for LNG significantly. Some fleet owners would not use LNG fueled vehicles because of the insufficient network of filling stations. Although the number of stations in Europe is constantly rising, logistics companies have to plan their route carefully when they need to ensure LNG provision for their trucks. The range of LNG fueled trucks becomes quite competitive compared to their diesel equivalents, so that longer distances can be covered. The Spanish forwarder Transordizia was the first one to navigate an LNG truck straight across Europe from Madrid to Hamburg. They used the new Iveco Stralis NP (‘Natural Power’) which was released in 2016 and offers a range of 1,500 km . This leads us to another relevant prerequisite for fleet owners introducing LNG: The technology must be available and mature. Trucking companies want to use well-engineered and field-tested equipment. Some of them fear risks related to boil-off gas when storing LNG, or other safety hazards. The past few years however yielded an increasing number of successful pilot applications demonstrating the viability of the technology.
Public engagement crucial for comprehensive implementation
As discussed above, the economic and political framework is decisive for the introduction of LNG. A rise in diesel price or tax benefits for users of LNG can facilitate the use of this alternative fuel. Also other privileges like access to restricted areas of town centers could be incentives to switch to LNG. There are already countries where these kind of mechanisms work (e.g. the Netherlands or China).
In the transport fuel market interest for LNG is generally good but missing infrastructure and high supply chain costs are crucial obstacles for the current start-up phase especially in the landlocked countries of Central Europe. In many cases the shippers are the ones driving innovation, for example large corporations like Unilever or IKEA focus closely on green logistics and push their trucking companies to switch to LNG. A stronger engagement of the public authorities comparable to north-west Europe is needed to support these initiatives and create favorable framework conditions to tap the potentials of the alternative fuel LNG. This way, the chicken-and-egg-problem could be solved in the near future.
Acknowledgement: This work has been partially funded by the Austrian Federal Ministry for Transport, Innovation and Technology (bmvit) in the “Mobilitaet der Zukunft” programme under grant number 850299 (Study ‘LiquID’).