Capital Efficiency

Capital Efficiency

In the modern world, in which there is an ever-growing focus on energy efficiency and environmental responsibility, the time couldn’t be better for a business to offer value through the delivery of safe, reliable and energy–efficient, mid-scale natural gas liquefaction to customers, all at the industry’s lowest full cycle cost and with a minimal ecological impact.

Liquefied Natural Gas Limited’s mission is to deliver highly efficient, low cost, mid-scale liquefied natural gas projects to the international energy market. Based in Perth, Western Australia, LNGL has its main operating office in Houston, Texas, and regional project offices in Lake Charles, Louisiana and Halifax, Nova Scotia. At this moment in time, LNGL is developing LNG export terminal projects in the United States, Canada and Australia, with a combined aggregate design production capacity of 20 mtpa, with further expansion options.

Laying down a marker

The immediate goal of the company is to firmly establish its presence in the LNG market in the United States, and for Greg Vesey, Managing Director and Chief Executive Officer, who can call on a rich history of working in the LNG space, to drive the company forward.

“I was involved in LNG marketing for Chevron as well as spending five years as President of Chevron Technology Ventures, which really gave me the experience that I feel will directly benefit me in my role with LNG Limited,” he says.

As the Vice President of Chevron Gas Supply and Trading, Vesey was responsible for Chevron’s Global LNG, natural gas and natural gas liquids marketing and trading activity based in Houston. One advantage that he has been able to call upon is instant recognition of his work prior to moving to LNG Limited in 2016, especially when seeking out potential clients and long term deals.

“With Chevron I was engaging with customers across the globe in the LNG space, and now it is not unusual for me to go into a meeting with customers who will stop and do a double take and say, aren’t you the Chevron guy?” says Vesey.

Establishing a presence is not a task that Vesey can complete alone. Another key driver for the business is John Baguley, Chief Technology Officer, who has experience in the successful delivery of both front end engineering and EPC projects for major LNG plants and projects worldwide during a 33-year career with KBR.

As with Vesey, the recognition of years of successful operation in this space has been key in taking LNG Limited forward.

“I think what adds to a sense of gravitas for LNG Limited, particularly when engaging with new customers, is the wealth of experience in our staff,” says Vesey.

“We have me [Chevron], John [KBR], our CFO Mike Mott [BG Group], our Chief Commercial Officer AG Gelotti [Chevron, Shell] and General Counsel Kinga Doris [Pacific Drilling] – these are big, internationally renowned firms. When customers engage with us and see that we’re industry experienced people, we already have their trust from the beginning,” he says.

Technically speaking

LNGL is not the only player in the liquefied natural gas space and for Vesey, there is one key element in which LNG Limited can stand tall above its competitors - technology.

“Our technology does give us an edge over other competing projects as it allows us to deliver a plant which is both highly energy efficient as well as cost efficient,” says Baguley.

LNG Limited designed and patented the optimised singled mixed refrigerant (OSMR®) natural gas liquefaction process; a low cost, highly efficient, environmentally-friendly, robust and low risk technology. It is this patented technology that Baguley believes propels LNG Limited ahead of its competitors.

Through OSMR®, we are able to produce LNG while generating fewer carbon dioxide emissions than any other facility. But it’s not solely the significantly reduced environmental signature of OSMR® that will allow LNGL to succeed. Baguley believes the industry to be at a key turning point, one that will favour the company.

“The LNG industry has been in its present form for around 30-40 years, with the very first large-scale LNG project coming to market in the mid to late 70’s. The one common challenge that the industry has faced is finding commonality and consistency,” says Baguley.

Power in portfolio

LNGL possesses a strong portfolio of assets, with two of its arguably bigger assets being the Magnolia LNG eight million mtpa export terminal in Louisiana and Bear Head 8-12 mtpa LNG export terminal in Nova Scotia.

“When we build our Magnolia LNG project, it will be remarkably similar to our Bear Head project. As we are both the technology provider and the developer, it places us in a unique position to achieve replication among the facilities which provides high reliability,” he says.

Technology is “central” to the corporate mission. LNG as an industry has been around for over 40 years, and Baguley feels this has created a “static” mindset with regards to the design of facilities.

“Look at other industries, telecommunications, automobiles – what people are building today is remarkably different to what was being built 40 years ago. With LNG, much of it is built the same as it always has been,” he says.

But while the technology is key, there is also the value of the way in which LNGL executes the projects that are embedded with its technology.

“It’s as much how we are delivering the technology as it is as what we are delivering,” says Baguley. “Sure, our technology is better, but our means of delivering it are also better, and I don’t think there are many organisations that could shift the way they do business to the extent that they could exploit what it is we’re able to do with this technology.”

There has been a noticeable shift in industries around the world to put a sharper focus not only on energy efficiency, carbon footprints and environmental accountability, but capital efficiency as well.

“We are right in the middle of that shifting focus,” says Vesey.

Challenging change

As with any industry, the financial climate of the LNG space is in a state of constant flux, and LNG Limited must respond to those changes.

“Looking back two and a half years, prices for LNG were forecasted to be very attractive and that made the economics very easy. Now that those prices have dropped dramatically, we need to show that our process is much more capital efficient,” he says.

“You may find other businesses out there who are more efficient from a capital standpoint, or someone who is more efficient from an operations standpoint – but there is no one who can match LNG Limited when it comes to pulling it all together.”

The focus on mid-scale liquefaction is a trend that is shared across the industry, and Baguley believes this is a movement that was perhaps started by LNG Limited. Historically in the LNG business and other petrochemical industries, there is often the choice of very expensive facilities that are highly energy efficient, or very inexpensive facilities that have poor energy efficiency. LNG Limited has “cracked that paradigm.”

“We can deliver a leading low-cost facility that has unprecedented high levels of energy efficiency,” says Baguley. “I’ve spoken with representatives from the Environmental Protection Agency (EPA), and they were very on board with what we are trying to achieve. This is something that is done for the economic benefit, which also results in a huge environmental benefit – the holy grail for those seeking to minimize environmental impacts.”

Site selection is also a key aspect in generating this environmental efficiency and unlocking the capital efficiency.

“Because our technology is mid-scale and because the physical footprint of our plants is smaller, we're able to select sites which are optimal for building,” says Vesey. “Looking at Magnolia, or Bear Head (the Nova Scotia project), it is evidence that we can build an entire facility on the US Gulf Coast or the Canadian east coast, for what it takes to build only the shipping facility in, say, Australia. It's a remarkable difference.”

To the future

Looking to the future, Vesey has ambitions of expanding the asset portfolio beyond Magnolia and Bear Head, with additional project sites all around the world as both a technology licensor and equity participant.

“I’d like to see our technology licenced to projects around the world so we continue to prove how much of an advantage it is,” he says.

For Baguley, finalising a new project will be the key turning point in the company’s history.

“We have something that is substantially better than anything else that's available on the market,” he says. “We need to get one of them up and running  so we can demonstrate these benefits; with that I think the world's going to beat a path to our doorway, and it's very exciting to have an opportunity to be involved in something like this from the ground floor.”

Greg Vesey