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    Fluxys: "Let There Be Demand" (And There Was Demand)



Fluxys' Rudy Van Beurden says that while Fluxys does not sell gas, it is in the company's interest that there be natural gas demand.

by: Drew S. Leifheit

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Natural Gas & LNG News, News By Country, , Belgium, Liquefied Natural Gas (LNG), TSO, Top Stories

Fluxys: "Let There Be Demand" (And There Was Demand)

In his speech on Carving Out a Key Role for Gas And Gas Infrastructure in Tomorrow’s Low Carbon Energy Mix at Flame in Amsterdam, the Netherlands, Rudy Van Beurden, Communications Manager at Belgian TSO Fluxys SA, showed delegates a number of demand scenarios as to what the future of gas would be, noting that the forecasts were pretty much in line with each other.

Of Fluxys, he offered: “We are also convinced that we need gas in the future and it is part of our vision.”

Mr. Van Beurden said as a fuel gas was not a product of the past but a fuel for the future, showing a map of NOx levels in Europe, indicated by red areas.

“If you would change over, let's say from diesel fuel, gasoline, replacing them with natural gas, you would solve almost immediately all the problems. And you would have, not only a reduction in CO2, but also in NOx and particulate matter, which is a health issue; CO2 is an environmental issue,” he said.

Given this, he said Fluxys was promoting LNG as a green energy. “We see, for example, that there's a lot of effort in Europe to stimulate electrical vehicles, which is a solution for a certain part of the market. But today, because of the issues we have with storing electricity – we cannot store it a long time – it's quite expensive. And it's not for bigger users like vessels or big trucks, so we should really consider bringing natural gas into the market,” he said.

He reported that in a recent trip to Los Angeles, California he had witnessed that the city's entire fleet of over 2,000 busses was powered by natural gas, both CNG and LNG.

Mr. Van Beurden noted the emissions standards that were set to come into force in 2015, especially in the sulfur emission control areas (SECAs): the North Sea and the Baltic Sea in Europe.

“This is a given and something we have to consider, at least the fleet owners must consider this. In 2015 you can only use fuels in those areas which have less than 0.1% of sulfur, which is impossible with heavy fuel,” he explained.

According to him, there were basically three solutions for this. The first was continuing with low-cost heavy fuel. “The problem with this is, you would have to install scrubbers – it's a superstructure on the vessels and a change in the center of gravity on your ship, so it's more dangerous, but also only solves one of the issues – reduction of the sulfur emissions." Scrubbers, he said, did not eliminate particulate matter. In the longer-term, the best option was to go for LNG, he added.

“You could, in the meantime, use marine diesel, but diesel fuel is quite expensive, heavy. LNG is just a good option price-wise. It gives you more potential for the future if you just switch to LNG,” he explained, acknowledging that the shipping world had been enduring difficulties in the economic crisis, meaning it was pushing back a bit on the new regulation. Still, it was a requirement, he said, and would be binding in 2015.

Fluxys, said Mr. Van Beurden, clearly saw this use of LNG as an opportunity for developing a new market, but there was a bit of a “chicken and egg problem” involved. “Because you need infrastructure in place to be able to deliver the fuel, so we're working together on a European level, but also we have done in-depth studies in the Belgian market to look into different options to bring LNG to ships.”

Also, he reported, last year an agreement had been signed between the Belgian port of Zeebrugge and Singapore to facilitate LNG, because Belgium needed to establish an LNG supply chain. He explained, “Singapore is the world's largest bunkering port, so it's good that we can work together, not just with partners in Europe.”

Today, the Port of Zeebrugge was capable of delivering LNG directly to ships, but the objective was to enable it to also receive smaller bunkering vessels that could go directly to other seagoing ships or to a bunker terminal for inland fueling.

Mr. Van Beurden said that while Fluxys was not selling gas, it was in the company's interest that there be natural gas demand. “Without demand there's no need for infrastructure and there would be a very low load factor. In the end, everyone would pay the price, so it's in everyone's interest to use the pipes and thus lowering the tariffs for pipeline infrastructure.”

He recalled that the company's efforts had begun by delivering LNG to trucks, later going to UK, Germany, Netherlands and Poland, providing LNG to locations unconnected to a grid or to small buffer storage facilities, used as fuel for trucks or for truck-to-ship bunkering.

Fluxys was now considering expanding this capacity, which had already expanded from 800 to 2,000 trucks. This, he said, was a good sign that there was an interest in LNG.

One obstacle for LNG terminals in Europe, said Mr. Van Beurden, was their low usage of 30%. “In Zeebrugge it's higher, because there are multiple agreements between the shippers and the users of the terminal and their suppliers. Other terminals around us have a load factor which is much lower.”

Still, interest in LNG was picking up, he said. He showed a seagoing vessel – a tugboat - built in Turkey for Norway. “On its way there it stopped in Zeebrugge where it was filled with LNG coming from the LNG terminal and by truck, so this is a solution which can be immediately adopted without having other infrastructure,” he explained, to have intermediate storage in place.

Another project he showed involving new jetties would allow the Port to receive bunker vessels down to 2,000 cubic meters, offering a lot of flexibility to do ship-to-ship transfers, and tank-to-ship. Those facilities, he said, would be operational next year.

Fluxys was also working together with the Port of Antwerp, he reported, undertaking safety studies to find possible locations for storage of LNG.

The company was also looking into LNG for trucks, according ot Mr. Van Beurden, who said, “It has similar advantages of course in terms of emissions by using CNG or LNG. We'll have less CO2, but sulfur is also eliminated and noise levels are reduced.”

While the price of LNG, he admitted, may be high compared to coal, it was not compared to diesel fuel. He remarked, “There's even an economic advantage of switching.”

Again, noted Mr. Van Beurden, there was a chicken/egg problem as no one was buying LNG trucks because there were no LNG filling stations and vice versa. To address this, he said Fluxys had made a decision to invest in a second LNG/CNG filling station, which was scheduled to open this summer in Belgium near the French border. Fluxys would not be selling the gas but would command a fee for the infrastructure.

“We are involved because we want this to be a business which is sustainable and also safe,” he explained. “We will use the experience we are gaining to propose standards, because a lot of things have to be done in Europe, as well as in Belgium, with regard to specifications. It's about engineering, technology, permitting... all these issues we are now discovering but are in the first station.”

All this went towards rolling out LNG as a fuel of the future in a safe way.

Mr. Van Beurden said Fluxys had experience connecting markets. The differences among regulatory systems, he said, made things challenging, but there were a lot of lessons learnt on both the capital and the regulatory and legal sides of the equation.

In May, he reported, Fluxys had recently signed an agreement with Creos in Luxembourg, the first time two countries had integrated their markets. Of this, he commented, “We talk about integrated markets, but someone has to do it. This is the first step toward integrated EU markets. Maybe the Grand Duchy is not the biggest market in Europe, but if you combine the markets you have double the market: about 20 BCM/annum.”

While the agreement had the support of both governments, Mr. Van Beurden said the biggest challenge would be to work together with the two regulators, which would require some adaptations and maybe even one single balancing company.