Atlantic, Gulf and Pacific Company's advanced modular infrastructure director Derek Thomas said that the licensing agreement his firm signed with Gaztransport & Technigaz (GTT) last week would enable developing economies to start the snowballing market that is small-scale LNG.

Indonesia, for example, has a huge demand and a mandate to move from using dirtier fuels to LNG and gas, and the only way they're going to achieve that is by having a network of smaller-scale delivery systems such as vessels, re-gasification terminals and smaller power plants.

"We're taking our capability to deliver modularisation and construction of projects which we've been doing all over the world, combining it with proprietary GTT technology and doing that better to deliver solution for assets and equipment that will enable the delivery of LNG energy into these regions which desperately need it," Thomas told Energy News on the sidelines of LNG18 in Perth.

The comment was prescient, given the top executives from Royal Dutch Shell, Chevron Corporation, Woodside Petroleum and even Gazprom expressed concerns about traders having a field day with the increasing prevalence of short-term contracts, which are in many ways more conducive to small-scale LNG.

To be clear, Thomas, who says he's an "integrative technologist", said small-scale LNG is generally considered anywhere up to one million tonnes per annum, but applies right across the supply chain.

Thomas affirmed Gazprom and Chevron's belief that long-term contracts would still remain prominent, mainly because major customers in South Korea, China and Japan still crave stability and producers love them because they help finance LNG projects which have typically been capitally intensive.

However, he said that, like other markets, LNG is evolving and maturing to become more open, and the process of what he believes will be a massive roll-out of small-scale LNG in South-east Asia amid a growing spot market is what he calls a "democratisation" of LNG markets.

"Shorter-term markets are going to be a fact of life, and the big boys are going to have to deal with it," Thomas said.

"Those that do embrace the short-term and the ability to deliver into those markets will do well. It's the same as oil and many other commodity markets where there is a mix, which is fine if you find a way to deal with it.

"There are going to be more and more smaller players, but if you group them together they're going to be buying a great deal of LNG, so they're very significant.

"Small-scale LNG probably does lend itself to short-term contracts given that the players involved are going to be non-traditional in many cases, and smaller, so they're not going to have to bankroll and credit to a 20-year, multi-billion dollar contract.

"But they are a good market, so both sides are going to have to find a way to deal with this. It's a fundamental change in the market. The LNG market is maturing as all markets do, and everyone is just going to have to deal with it.

"That will be a good thing because these [developing economies] are buying LNG and they want it right now."

Proliferation

What Big Oil won't like is that small-scale LNG is helping facilitate more small-scale LNG, which Thomas said was "proliferating basically everywhere - throughout North America where mining operations are using it for their equipment; throughout the Caribbean which is similar to Southeast Asia in that they have a whole bunch of islands that need energy and don't have the pipelines to deliver it".

Small scale includes upstream liquefaction, transport, regasification, including options to access gas from a large-scale source coming from Woodside or Gorgon, going into a large-scale import terminal in Singapore or Indonesia then breaking it down into cargoes which then tap into the smaller-scale network and have smaller-scale regasification terminals.

Woodside's chief operating officer Mike Utsler flagged such an opportunity when he inked a five-year charter contract with Siem Offshore to deliver Australia the southern hemisphere's first LNG-powered marine support vessel next year.

The Perth oiler believes the deal will open up duel fuelling business opportunities both on and offshore, with the prospect of supporting an external supply of LNG transport fuel for on-land, marine and rail transportation capabilities.

Sub-Saharan Africa also has a great need for energy but in many cases doesn't have the infrastructure in place.

Chinese opportunities

While China has long-term contracts, including equity in Queensland Curtis LNG, Australia Pacific LNG, Wheatstone and Gorgon, Thomas said there was more development in small-scale LNG in China than anywhere else in the world.

"China has gone from being dominated by an export economy to a consumer economy, and now it has smaller entities but many more of them, which ends up being an enormous market because of the numbers involved. That's what we're talking about now [in the small-scale LNG market]," Thomas said.

"So even though they're certainly building coal power plants, they are moving as aggressively as they can to using gas both domestic and imported."

To capitalise on these opportunities, Thomas said AG&P had some "very good" developing partnerships in China to leverage the firm's relationship with GTT to deliver cost-effective solutions into the Asian giant.