LNG comes to Gibraltar [NGW Magazine]
Early next year the Anglo-Dutch major Shell will deliver the first cargo to a virgin LNG market – the British Overseas Territory of Gibraltar. It will mark the culmination of five years of work to develop a gas-fired power station capable of supplying all the Rock’s electricity demand for the foreseeable future.
The big prize for Shell, however, will be a first-mover position in what is expected to become a major LNG bunkering location. Every year thousands of ships call at the port of Gibraltar. It is popular stop for large passenger cruise liners, which bring in revenue not just from bunkering but from tourism too.
“The strait of Gibraltar, because of its geographical location, is one of the busiest shipping traffic locations in the entire world,” says Markus Hector, general manager of market development at Shell LNG Marketing and Trading. “The port has a liquid diesel and fuel oil bunker volume of around 10mn metric tons/yr of LNG equivalent. So while the power demand is very small the potential for LNG in that location is very large.
“So we entered into discussions with the government of Gibraltar to form a partnership to see if we could bring competitive supplies to power customers like these – because there are many in the world, it’s not just about Gibraltar.”
No more monkeying about with power
The 35,000 people of Gibraltar have long been putting up with dirty, expensive power generating facilities running on fuel oil that frequently break down. As long ago as 1999 a strategic review of the electricity system concluded that the generation sets at the main power station, Waterport, would need replacing by 2009/10. As a stopgap solution, several temporary Caterpillar generating sets were installed. They are still in use today.
All that will change next year when a new dual-fuel power station – capable of running on natural gas or light fuel oil – starts up at North Mole. Despite the dual-fuel capability, the goal is to run the power station on LNG as much as possible, using fuel oil only when absolutely necessary, during maintenance for example.
It was in the middle of 2014 that the chief minister Fabian Picardo announced during a budget speech that the government had decided to proceed with a new gas-fired power station, abandoning the previous administration’s proposal for a diesel-fired one. Some months later, having satisfied itself that LNG could be safely delivered and stored in Gibraltar, the government awarded a turnkey engineering, procurement and construction (EPC) contract worth €100mn ($113mn) to Bouygues Energies and Services.
‘Micro’ scope
In what has been described as a “micro LNG-to-power project”, LNG delivered by a small carrier will be unloaded into five “bullet” storage tanks, each with capacity of 1,000 m³, that form part of the power station’s regasification facility. Waste heat from the power station will be used to regasify the LNG. The terminal will be operated by Shell’s Gasnor subsidiary, a specialist in small-scale LNG activities.
The power station consists of six 14-cylinder reciprocating engines supplied by MAN Diesel & Turbo. All six can run on gas and three can also burn fuel oil. Each gen set has nameplate capacity of 14.7 MW. Peak electricity consumption in Gibraltar is around 45 MW, so the 88 MW of capacity allows for plenty of future demand growth. There is scope to add a seventh gen set.
Shell has contracted to deliver LNG as required, and estimates that volumes will amount to around 50,000 mt/year. LNG will come from the Gate terminal in Rotterdam, using a 7,500 cm carrier called Coral Methane, owned by Anthony Veder and chartered to Gasnor. The carrier is being modified to allow it to conduct bunkering operations.
There is an airport close by to the north and a cruise liner terminal just to the south. Offloading will therefore take place at night and not when there is a cruise liner in port. Shell has also been required to construct a physical barrier wall to protect the cruise terminal and a nearby road from fire scenarios.
There is nothing particularly new about the various components that make up the LNG-to-power chain, says Hector. The double-walled, vacuum-insulated storage tanks have been used in other Gasnor projects, the carrier has been in service for some time, and Gasnor has delivered LNG into power before.
“But,” he adds, “the combination of things makes it unique – so it was a prototype and there were challenges throughout in getting the project operational.”
Between a Rock and a hard place
The challenges were not just technical. The concept of importing LNG led to a long-running political battle between the government – an alliance of the Gibraltar Socialist Labour Party (GSLP) and the Liberal Party of Gibraltar (LPG) – and the opposition, the Gibraltar Social Democrats (GSD).
On one side, the government accused the GSD of having failed to invest in new electricity infrastructure while it was in power, up until the election of 2011. On the other, the GSD started fuelling fears about the safety issues raised by the introduction of LNG to a territory with a land area of just 6.7 km2 – much of that home to the Rock’s famous Barbary Macaques, the only wild monkeys in Europe.
Responding to what it described as the GSD’s “deliberate resort to the politics of fear”, the government said: “The type of catastrophe that the opposition describes belongs in a science fiction movie.”
There was political wrangling too about the concept of LNG bunkering and whether the onshore storage tanks for the power station would be involved in that. The government reassured the public that they would not, adding: “Any move to LNG bunkering by Shell or any other operator would require, and the government is fully committed to, a full and quite separate assessment of any potential project from both a HAZID (hazards identification) and an environmental point of view.”
November 2015 saw a general election in which the incumbent parties increased their lead and the wrangling subsided. Nevertheless, a clear lesson was that it is important not to underestimate the political sensitivities of importing LNG into a new location. Fortunately for Shell, its client was a determined government entity with strong popular support.
Bunkering ahoy!
Concurrently with the development of the micro LNG-to-power project, the government, the Port of Gibraltar and Shell have been working to establish the framework that will allow LNG bunkering to begin, as soon as demand starts to materialise – which could happen as soon as early 2019.
In 2016 Shell and the Gibraltar Port Authority (GPA) announced they had signed a bunker market development agreement. In a joint statement they said: “This project will be subject to the government’s policy of going through stringent environmental processes and studies, including Environmental Impact Assessments (EIAs) and Control of Major Accident Hazards (COMAH) procedures.”
Shell agreed to participate in a development study dealing with the regulatory framework, and safety and technical standards.
In October 2018 a bill to introduce bunkering in the port was published in the Gibraltar Gazette. It would amend the Port Operations Act to define LNG bunkering specifically, along with the existing bunkering operations involving oil-derived fuels. That will pave the way for the GPA to issue LNG bunkering licences.
“The port itself will not be delivering bunkering,” says the port captain Manuel Tirado. “What we have been preparing is the legal framework to issue the licence to an operator to supply the LNG. We are intending that LNG will be delivered by barge. The bunkering operation itself will be very similar to what we see today in the bay. It’s expected that demand will pick up very quickly.”
As to opportunites elsewhere, Hector says: “There are quite a number of customers globally who burn heavy fuel oil or diesel and where this type of facility can help us to add new demand. And the synergy that we have in Gibraltar between the power supply and the bunkering potential that we have in the bay is also something that exists in many places.
“In ten years we’ll look back and we’ll have lots of these facilities, and lots of vessels that use LNG as a fuel – and it will be normal.”