Canada to ship containerized LNG to China instead of Hawaii

by Michael Hansen, Hawaii Shippers Council, July 20, 2019

FortisBC issued on July 16, 2019, a press release, “FortisBC secures first export contract for Tilbury LNG facility,” announcing a new Transpacific trade in liquified Natural Gas (LNG) is ready to launch using International Standard Organization (ISO) containers.

This announcement was widely covered in the maritime and business press and has an interesting connection to Hawaiian Electric Industries Inc. (HEI) / Hawaiian Electric Company Inc. (HECO) efforts to import containerized LNG in the 2014 – 2016 time frame.

The supplier of LNG is FortisBC Energy Inc., a regulated natural gas utility operating in British Columbia, Canada. They operate the Tilbury LNG Plant located on Tilbury Island, in Delta, British Columbia, which is situated on the Fraser River near metropolitan Vancouver.

The Tilbury Island facility, built in 1971, is primarily a peak shaving plant which allows FortisBC as a gas utility operator to meet short-term surges in customer demands with minimal infrastructure. Surplus gas is liquefied and stored for peaks in demand, which are handled by drawing gas from LNG storage.

The trading company purchasing the LNG from FortisBC and arranging the logistics and sales in China is Top Speed Energy Oversea Corp Limited (TSE), which is registered in Hong Kong and mainly operates LNG ISO tank containers and related logistics services. TSE’s CEO is Chen Jianrong.

The FortisBC press release stated, “The two-year agreement will see 53,000 [metric] tonnes of LNG a year or about 60 ISO containers (standard-sized shipping containers) a week shipped from Tilbury to China by the summer of 2021.”

Further, “This term supply agreement is an unprecedented development in Canada’s LNG export industry and was made possible by the completion of the Tilbury LNG expansion project in Delta, B.C. earlier this year.” The FortisBC website states the $400 million expansion project began on October 21, 2014.

The press release explained the advantage of containerized LNG shipments for Chinese customers, “Shipping LNG by ISO container helps meet the energy demands of industrial and public utility customers in China who are not connected to a pipeline network as the containers can be transported virtually anywhere and don’t require large regasification terminals to convert the LNG back into natural gas.”

On August 8, 2014, HECO signed a natural gas liquefaction agreement with FortisBC to liquefy natural gas and load out containers at their Tilbury LNG Plant.

To accommodate this new business, FortisBC announced at the time they would expand the capacity of their Tilbury plant by a $400 million project with the addition of one storage tank and associated liquefaction equipment. The project was scheduled for completion by late 2016. Apparently, FortisBC didn’t complete this expansion project until early 2019.

The kind of containers required for the ocean transportation of LNG are highly specialized cryogenic tank units typically 40 feet long and meeting ISO criteria. The pricing for these forty-foot units is approximately U.S. $200,000.00 each.

These LNG containers are essentially like a very large thermos bottle and not refrigerated. The LNG containers are able to maintain LNG cargo at minus 260° Fahrenheit for what is known as the “hold time” typically from 50 to 65 days. This is sufficient time to allow for the ocean transit time and shore handling.

The LNG containers do vent through a design feature very small amounts of what are known as “boil off gas” (or, BOG) as the LNG in the container slowly warms and a minuscule fraction becomes gaseous. Venting is necessary to avoid build-up pressure in the container. Although the loss of gas is not great as a result of the boil off and venting, this does prevent the LNG containers from being carried under deck on board ship and must be deck loaded.

The HECO containerized LNG program would have required approximately 252 ISO LNG containers 40’ per week to supply a single electrical generation plant on Oahu Island such as the Kalaeloa Partners LP facility in Campbell Industrial Park.

This would have been about 4 times the volume that is currently being projected for shipment to China over two years beginning in mid-2021. While the HECO containerized LNG program was intended to supply a large electrical generation plant, the TSE business plan is to provide a handy supply to a variety of smaller off--pipeline users.

The HECO LNG plans were abandoned after their proposed merger with NextEra Energy, Inc. (NEE) headquartered in Juno Beach, Florida, was disapproved by the Hawaii State Public Utilities Commission (PUC) on July 15, 2016, and the two parties decided not to pursue an appeal. HECO and NEE announced their plans to merge in December 2014.

As a result of the cancelled merger, NEE paid a U.S. $90 million breakup fee and approximately another $5 million in reimbursable expenses to HECO. 

There are several containerized LNG supply operations utilizing ocean shipping in a employing a similar modality to the FortisBC / TSE venture including two which have been in operation for much of the current decade.

Carib Energy (USA) LLC began shipping containerized LNG from the U.S. Gulf Coast to Caribbean Island destinations in late 2012 typically to customers at destinations couldn’t justify or didn’t have the facilities to physically accept larger bulk shipments by specialized tankers known as LNG Carriers. Crowley Maritime Corporation acquired Carib energy in May 2013 and expanded shipments to businesses on Puerto Rico which needed natural gas but were not able to access it by pipeline.

The Gas Company Ltd. d.b.a. Hawaii Gas began importing containerized LNG in April 2014 to supplement their production of Synthetic Natural Gas (SNG) from naphtha at their Campbell Industrial Park (CIP) in West Oahu Island, Hawaii. Hawaii Gas supplies a mixture of SNG and natural gas (NG) by utility pipeline along the south Coast of Oahu Island from Koko Head to Kalaeloa Barbers Point. In May 2016 Hawaii Gas concluded an agreement with Clean Energy Fuels Corp. to supply containerized LNG from their Boron, California, liquefaction plant, to be shipped on containerships from Los Angeles / Long Beach, California, to Honolulu Harbor. By the end of 2017, Hawaii Gas completed a purpose built-regasification facility at their Campbell plant that will handle approximately 30% of their SNG / NG volume requiring around two 40’ LNG containers per day.