Sparks

How water and energy mix

 By Nicholas Newman

Today, water is not only used to drink, it is used to move large quantities of energy in tankers along world’s rivers, canals, coastal water and oceans in a variety of vessels from ocean-going oil tankers that cross the seas from Australia to Japan to canal barges that transport LNG to customers along the River Rhine in Europe. Nicholas Newman takes a look at the various vessels that transport energy around the world and the impact that investment of such projects as the widening of the Panama and Suez Canals is having on the global movement of energy…

Water is not just a liquid for drinking, washing and cooking; it is also a prime means of moving liquid energy. Every day, large quantities of oil and liquid natural gas (LNG) are carried in dedicated vessels across oceans and in barges along Europe and America’s major rivers and canals. Innovations in design and the creation of new types of such water-borne carriers have enlarged and multiplied the markets for oil and gas and enabled a burgeoning of new sources of supply.

Inland oil shipments by barge

There is a long history of moving oil by river or canal barge. For instance, before the arrival of the railway, oil prospectors in Pennsylvania used barges towed by paddle steamers to transport crude oil to refineries downstream along the Mississippi River system. Barges remain an important means of transporting crude and refined products. Self-powered or towed barges carrying oil and refined products still ply along North American waterways, including the Great Lakes and the Intracoastal Waterway, which runs along the US Gulf and Atlantic Coasts.

They are also a common sight along the major rivers, canals and coastal waterways of Europe, such as the Rhine, Danube and Baltic. This form of water carriage remains important because of economics—a river barge can hold up to 30,000 barrels of oil. Two or three barges tied together in a single tow can carry as much as 90,000 barrels in one shipment. In comparison, a long, 47 tanker-wagon freight train can only fill the equivalent of just one 30,000-barrel barge. An average of 781 million metric tons of oil products was moved by barge in Europe 2015.

Inland waterways of the United States

The impact of shale oil discoveries on barge transport

In North America, the explosion in shale oil and gas production has overpowered existing pipeline and rail capacity, necessitating construction of new pipelines. They remain the dominant transportation mode but have also revitalized barge traffic. US crude oil barge traffic increased from 148,206 Mbbl (thousand barrels) in 2010 to 282,923 Mbbl in 2015.

For example, oil from Albertan oil sands and the Bakken oil play spanning North Dakota and East Montana is moved south by train to the river port in Caruthersville, Missouri, where it is loaded onto barges for the journey south to Gulf Coast refineries. Alternatively, Bakken and Albertan crude is sent east by train (80-120 cars) to Albany in New York, where the crude is loaded onto barges that travel down the Hudson River and the Intracoastal Waterway to East Coast refineries.

LNG – Fueled barges

The upsurge in US shale gas has also prompted interest in developing LNG-fueled barges that might also carry a cargo of LNG. LNG America plans to use LNG tanker barges able to carry up to 3,000 cubic meters of LNG for delivery ship-to-ship or to Marine depots at river ports for onward delivery to vessels and trucks. Already, LNG America has signed a deal to supply LNG by barge to Scandrill offshore oil rigs in the Gulf of Mexico to replace diesel as the fuel of choice for operating rig generators.

Barges have long dominated Europe’s river traffic. Today there are around 1,200 tanker barges in Northwestern Europe focused on the Amsterdam, Rotterdam Antwerp (ARA) refinery region. LNG-fueled barges, while in a minority, represent a trend away from diesel-fueled barges. Leading the field is Shell, which currently operates 17 modern 2,877 DWT LNG-fueled barges. Other operators such as Marine Services GmBh Hamburg, have designed various sizes of LNG-fueled power barges to provide electricity to supply ships in port or grid networks with low-emission energy.

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Oil shipments by ocean-going tanker

Ludwig Nobel of Sweden was responsible for the design and construction of the world’s first oil tanker, the Zoroaster. On its maiden voyage in 1877, the vessel carried 242 metric tons of kerosene about 600 miles from Baku in Azerbaijan, across the Caspian Sea to Astrakhan in Russia.

In August 24, 1892, the Murex, commissioned by Marcus Samuel and ship-owner Fred Lane, became the first tanker to pass through the Suez Canal. In 2015, a large amount of the world’s oil, some 1872 million metric tons, was transported by around 3,500 purpose-built oil tankers sailing the world’s major shipping routes through the Strait of Hormuz, the Strait of Malacca and the Suez and Panama Canals.

Tanker types

Today there are two main types of oil tankers: crude carriers for unrefined products and product carriers for refined products. Crude tankers are generally large, ranging between 55,000 DWT up to around 450,000 DWT and are mainly used for the deep-sea transportation of crude oil from production sites in the Middle East and West Africa to refineries in Asia, Europe and the USA. Smaller are the product tankers, ranging in size from 5,000 DWT to around 80,000 DWT used to transport refined oil products (gasoline, diesel, kerosene, jet or fuel oil) to markets.

One traditional trading route for product tankers is between North America and Europe—gasoline is carried to the US and diesel fuel is transported back to Europe. A typical vessel can carry between 345,000 barrels and 615,000 barrels of gasoline or between 310,000 barrels and 550,000 barrels of light sweet crude oil.

Inside oil tankers

LNG Tankers

Natural gas or shale gas has to be cooled and liquefied to 1/600th of its volume before it can be economically stored and transported by sea or river in a dedicated LNG carrier. LNG tankers are different in design from oil tankers in that their cargo, LNG, must be cooled to extremely low temperatures (-260°F) and it is less hazardous than oil or diesel. LNG tankers use multiple, separate holds or compartments—each carrying up to 888,867 cubic feet of LNG. Storage compartments in traditional oil tankers typically hold only one-tenth as much.

In recent years, the size and capacity of LNG carriers has increased greatly. Since 2005, Qatargas has pioneered the development of two new classes of LNG carriers, referred to as Q-Flex and Q-Max. Each ship has a cargo capacity of between 7,400,000 and 9,400,000 cubic feet and is equipped with a re-liquefaction plant. Today, new LNG tankers have an average capacity of three billion cubic feet and cost around $260 million each.

Last year, 34 countries imported LNG and 19 exported LNG. The global trade last year reached around 244.8 MT in volume and was valued at around $120 billion. As a result of the shale boom, the US is poised to become a major player in global LNG markets as increasing shale-gas supplies exceed domestic demand. US, Australian and new supply from Mozambique, scheduled for the early 2020s, could see a continuation of the supply glut and low prices. Worldwide demand for LNG is expected to double by 2025, due to its lower price, availability and increasing affordability.

For example, South Africa is in the process of inviting bids to construct LNG re-gasification facilities to supply gas-to power projects. It is estimated that another 180 LNG vessels representing $37 billion in investment will be needed by 2020 to carry increased supplies from a growing number of suppliers to many more and smaller markets.

Layout of an LNG tanker

Impact of Suez and Panama Canals on oil tankers  and LNG carriers

Work to upgrade and widen the Suez and Panama canals was initiated at a time when oil and gas prices were high. To recoup the investment, the tariff to pass through was necessarily set high at $300,000 to $1 million per vessel by the Suez Canal and up to $300,000 for passage through the Panama Canal. Now, with the cost of oil being so low, oil tanker owners prefer the long route, adding 4,708 nautical miles and an extra 20 days passage around South Africa on trips from the Persian Gulf to the East Coast of America and Europe.

Expanded Panama Canal reduces travel time for shipments of U.S. LNG to Asian markets

In contrast, the improved Panama Canal will transform prospects for US LNG exports to Asia. Now able to accommodate 90 percent of the world’s current-sized LNG tankers and cutting 11 days and a third off the cost of the typical round trip to Asian markets like Japan, South Korea and China—the Panama Canal has secured its future.

The round trip from Cheniere Energy Inc.’s Sabine Pass export facility in the U.S. Gulf Coast to Asia is now about 20 days compared with 31 days through the Suez Canal or 34 days around Africa’s Cape of Good Hope. The first US LNG carrier, the 289-meter Maran Gas Apollonia, passed through the Panama Canal on July, 2016. By late September, Cheniere Energy had sent 17 out of 33 LNG tankers from its Sabine Pass terminal to South America. Nine that went to Chile passed through the Panama canal, cutting the travel time by about 11 days. Three each were destined for Europe, India and the Middle East, one to China and two to Mexico and the Caribbean.

Water-borne transport of oil, oil products and LNG has facilitated the creation of a world market in oil and is well on the way to enabling a shift from purely regional gas markets to global-scale markets. The key to this major transformation is the sheer universality of water, whether in canals, rivers, small seas or the major oceans.

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide. https://nicholasnewman.contently.com/