Game changer through innovation in LNG trade

Commemoration of Tiger Bintulu’s Maiden Call to Bintulu Port.

AS the world of LNG witnesses a resurgence of the demand for the precious supercooled fuel and the prices of the commodity are shooting up to the roof in Europe on the back of pipeline gas shortages following the Russia-Ukraine war, the port of Bintulu, located in Sarawak, Malaysia recently announced the onset of an innovative and remarkable new way of marketing and selling LNG through break bulk method as opposed to traditional bulk method. Apparently, the parties have been quietly working on this game changing strategy the last few years and anticipating the need for a novel way to transport and distribute the fuel, in full earnest since 2017.

A simple ceremony to commemorate the maiden call to Bintulu Port of the aptly named vessel ‘Tiger Bintulu’ was held on 2 August 2022 at the Bintulu International Container Terminal (BICT) wharf.  The symbolic ceremony marked the historic occasion of the port call by the world’s largest and first dual-fuelled LNG ISO tank carrier whilst at the same time marked Bintulu port’s transition into an emerging hub for the trade of LNG in breakbulk form. Present at the ceremony were representatives from Petronas, the LNG producer, Tiger Gas, the LNG buyer and Bintulu Port, the operator of the LNG port.

Tiger Gas LNG Isotanks Vessel.

The 192-metre-long ship Tiger Bintulu with 400 empty LNG ISO tanks arrived at BPSB’s Bintulu International Container Terminal (BICT) on July 26.  Immediately upon arrival, filling operations were started and upon completion of filling at the Bintulu LNG ISO tank filling facility on Aug 1, a total of 402 units of Liquefied Natural Gas (LNG) ISO tanks were loaded onto the newly built vessel Tiger Bintulu bound for Port of Longkou in Shandong Province, China. Trial shipments on normal container ships and of lesser volumes were made previously, prior to this vessel call by the specially designed vessel.

Photo grab of headlines in paper ‘The Edge’.

The dynamic mix of Bintulu Port’s 39 years experiences in handling LNG, its location next door to the third biggest LNG terminal in the world in a single location, the presence of the BICT with reliable services, and coupled with a world that is gearing towards a future that is cleaner and greener, Bintulu Port is in the ideal location and well positioned to be an LNG ISO tank hub. 

The simple early August ceremony marked a significant shift in the marketing, handling and transportation of LNG from the traditional bulk method to a breakbulk method from the cape of Tanjung Kidurong, Sarawak on that beautiful morning of August 2, 2022.

Now, the LNG Isotanks carrying the supercooled gas can be sent to the remotest parts of the market. All that is needed is a port able to receive container ships and road links from the port to where the customer is.  For example, an LNG Isotank landed and delivered in Shanghai can now be shipped directly to Lhasa in Tibet by road, or to any other inland destinations as the case may be.

The key advantage of the breakbulk method of handling LNG is that it will enable the shipment and transportation of LNG to by-pass the LNG Import Terminal, Onshore Storage Tanks and the pipeline networks in the country of import. 

Theoretically, LNG can now reach Lhasa, in the Tibetan Himalayas, being delivered just via isotanks. Soon the ascetic monks will be doing their meditations and recitations in relative ease with natural gas being available to heat up their homes and monasteries!  The possibilities are endless, thanks to this new game of logistics.

For LNG producers, like Petronas, or other LNG sellers, they can now have two options to sell LNG: traditional bulk method or via Isotank (break bulk method). And for Bintulu Port, being located next to one of the largest LNG terminals in the world it is well positioned to serve the North East Asia premium market and perfectly positioned as a world class LNG Isotank hub.

Talking about the North East Asia market, it will continue to be a premier market for LNG for a long while.  Traditionally, the core LNG markets were Japan, Korea and Taiwan.  However, China has now caught up and has become the world’s biggest importer of liquified gas since last year, even though the import volumes have dropped somewhat this year. 

How did China overtake Japan, Korea and Taiwan as the main markets for LNG in North-East Asia?  About six years ago, China was hit by a severe natural gas shortage in the north, leading to blackouts and heating outages for millions of people. This was the result of a sudden shift of switching from coal to gas at a time when the gas transportation infrastructure and imports terminals were falling short of demand in the peak season. The situation has now changed.

View from the Deck.

China now has 22 LNG terminals along its coastal areas with a total import handling capacity of 88.6 million tpa. The existing LNG import terminals are operating on the traditional bulk method of massive LNG import and storage terminals with natural gas pipelines linkage to major demand centres. With the latest innovation of importation of LNG via Isotanks, China’s LNG market can only grow. 

In terms of LNG prices, it is important to understand that prices are driven by the forces of supply and demand, with demand being heavily influenced by the weather.  For example, a cold spell could suddenly boosts demand on the onset of the winter months, or where the summer becomes abnormally hot, demands for air-conditioning will push up gas consumption. 

We all know that cold spells are not unusual during the winter or heat waves in the summer. That is the nature of the seasons.  But there is also another element which can influence the current behaviour of Chinese LNG buyers. From the LNG producers’ perspective, it is an even riskier factor than counting on a mild winter or hot summer to trigger premium prices for their product.  This factor is a human factor or behaviour.

We know of China’s strict policy of zero tolerance towards COVID infection where the authorities will impose total lockdowns and restrictions of movements to contain outbreaks of COVID which will in turn keep the demand for energy in check. Just by fiat, demand of LNG will be indirectly affected as economic activities slow down as governmental measures are put in place to contain the spread of the disease. Whole cities or parts of cities will be put under lockdowns as what has happened in Shanghai not too long ago.

A Bird’s eye view of the laden LNG Isotanks on the vessel.

All forms of transporting LNG will be in high demand, both the traditional bulk method and the breakbulk method via special container ships and LNG Isotanks, irrespective of the demand and supply situation. Both approaches can supply the different market conditions, bulk and breakbulk. With the many roads available to market, resurgence in LNG demand will be the stimulus needed for new production capacity being put on stream.

In this journey, all the players need to be innovative in their approaches in order to ensure the delivery system is more efficient and that all the customers who may want the clean burning fuel to power their industries get their reliable and competitive supply of the fuel.

Being an early mover, Bintulu Port is well positioned to play a critical and strategic role in the global LNG business value chain by being strategically located in the premium North East Asia LNG market and having the capability of handling the precious commodity in both bulk and breakbulk forms.  Not many ports are in the same position of being in the seat of game changing innovation.

The views and opinions expressed in this posting are the writer’s own and do not represent or purports to represent the views of this newspaper.

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