Copyright 2006, Offshore Technology Conference

This paper was prepared for presentation at the 2006 Offshore Technology Conference held in
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Abstract
Compressed Natural Gas (CNG) marine transportation is
poised to be a viable solution to bring natural gas supplies to
new markets or provide a solution for monetizing stranded
gas. This is being driven in large part by high liquid fuel
energy prices. CNG marine transport has a market niche
between the volumes and distances that pipelines and LNG
can economically transport. TransCanadas Gas Transport
Module (GTM)
1
a lightweight pressure vessel, has been
developed to specifically address this market.

CNG marine transportation in large volumes is not
presently utilized anywhere in the world, though bulk
transport by truck is well proven. Due to the reluctance by
many parties to be the first mover, TransCanada has
embarked on the development of a small, simple compression
loaded barge based CNG marine transport project that will
provide a demonstration platform for the GTM technology.
The small size and resulting minimal capital outlay will
provide a much needed working commercial scale model
while minimizing the risks and financing problems associated
with many proposed large scale projects.

This paper will present details of the project, its
development timetable and address the development process
necessary to make CNG marine transportation a viable reality.

Introduction
CNG transport is not new nor are the technologies being
introduced to CNG transport, but what is new is the
application of these technologies into a CNG marine based
system and the increased volumes of CNG proposed to be
transported. TransCanadas Gas Transport Module (GTM)
technology is well positioned to become the CNG transport
market leader due to the competitive advantage of the
lightweight GTM, commercial availability of the GTM
product, long standing TransCanada reputation as one of the
worlds leaders for advances in pipeline technology and ability
to finance project development. CNG provides TransCanada
with a third method for transporting natural gas for its
customers along with LNG and traditional pipeline options.
TransCanada also had previous CNG experience as it operated
a fleet of CNG road trailers known as Nova Pressure
Transport in Alberta, Canada during the 1980s.

Initially, TransCanada faced skepticism by potential
customers for untried or unproven technology but all that
changed once the American Society of Mechanical Engineers
(ASME) approved TransCanadas code case in 2001 for the
Gas Transport Module (GTM) pressure vessel and also
obtained the American Bureau of Shipping (ABS) approval
for a CNG river barge design in 2001. Lloyds Register gave
its Approval in Principle for ocean going vessels in 2002.

TransCanada has further relieved potential customer
concerns about manufacturing capability by awarding a
manufacturing license for the manufacture of GTM pressure
vessels to the Floating Pipeline Company (FPC) of Halifax,
Canada. The state of the art facility provides for quick project
implementation and as well as provides a high degree of cost
certainty for the CNG containment system, the GTM pressure
vessel.

Many projects have not proceeded past the screening
phase because gas producers and users cannot agree on supply
agreement terms and conditions, market or supply risks,
counterparty, geopolitical or currency risks. Length of supply
agreement term is another major issue because gas producers
want the shortest term contracts possible but gas users need
longer contracts to recover the cost of conversion to gas
equipment and the gas transporters need longer term contracts
to recover the capital invested in the CNG project.
Transporters may be unable to finance the capital expense of a
CNG project if the supplier or user cannot underpin the
expenditure with a long term contract. In many cases, the gas
transporters and their financial backers are unwilling to accept
the commodity risk of the gas over the term of the
transportation contract therefore the gas supplier and the user
must have a supply and use agreement in place before
negotiating a transportation contract.

Transportation contracts can be very complicated but
need not be if simple principles are applied. TransCanada has
over 50 years experience in negotiating pipeline gas
transportation contracts and recommends that contracts

OTC 17780
CNG Marine TransportDemonstration Project Development
G. Stephen and G. Cano, TransCanada CNG Technologies Ltd.
2 OTC 17780
include the following details:
volumes, energy content, receipt and delivery pressures, term,
provisions for take or pay, fees, escalation factors, operations
and maintenance issues and take or put options for the
system at the end of the term.

State owned energy companies and governments who are
looking at CNG as a replacement for expensive liquid fuel for
power generation also have raised a number of issues,
especially with respect to local material sourcing and job
creation.

Given the number of issues, risks and concerns, it is
important in the development of the initial demonstration
project to rely on simple, proven processes and equipment in
similar operating environments. Minimizing or mitigating the
uncertainty of as many processes and equipment as possible
based upon operating experience should alleviate most
customer concerns and permit the staged development of a
project.

TransCanada feels that its lightweight GTM pressure
vessel provides a competitive advantage for a tug/barge CNG
transportation system and four customers agree as
TransCanada is working on four small volume power plant
fuel replacement projects utilizing tug/barge systems. These
projects are ideal for tug/barge systems as they take gas from
the gas supply dock to a market dock in benign sea states,
have 1-3 year payback periods and have acceptable
counterparty risk with supply and use agreements in place.
Due to confidentiality agreements and the status of work in
progress, the authors will describe in general terms, one of the
projects, which will provide an ideal demonstration process
for a CNG transportation project.

Project Development Process
Over the years and through many capital extensive energy
infrastructure projects, TransCanada has developed a Project
Development Process for Greenfield projects. The process
divides the development of a project into five phases each
with defined activities, approvals and check points or stage
gates before entering the next phase. The purpose of the
process is to plan a project from the conceptual phase in
logical, measured steps while identifying and mitigating risk
factors as the project enters various progressive project phases,
to a fully executed and operations phase which is on schedule
and on budget.

The five phases of our project development process are
the Prospecting Phase, Proposal Phase, Definition Phase,
Execution and Commissioning Phase and Operations Phase.

The authors will describe the demonstration project
through each of the project development phases.

Prospecting Phase
TransCanada has been involved in dozens of potential marine
CNG studies and investigations, worldwide, dating back to the
1980s and extensively with the GTM development during the
past 7 years. During this Prospecting Phase, gas producers
who have stranded gas and are looking for customers or
customers that would like to replace expensive liquid fuel with
gas, usually contact TransCanada. Initially, it is imperative to
investigate all alternative methods of fuel delivery and
determine whether CNG marine transport can compete with
pipelines, LNG or alternative fuels. A rule of thumb graph,
represented in Figure 1, is used to determine if CNG is in the
competitive sweet spot. The graph is based upon a generic
set of parameters and represents all capital and operating costs
including loading compression, gas treating,
loading/unloading and shipping over a 15 year transportation
contract. As with all rule of thumb graphs, care must be
taken when interpreting results because specific projects have
unique items such as gas composition, pressures and
temperatures, fuel pricing, contract terms, pipeline routing and
cost issues and financing and tax rates which can dramatically
affect the resulting transportation toll.
2


Once comfortable with the rule of thumb and
preliminary project studies, TransCanada prepares a screening
study for these clients and includes market studies,
competitive analysis of CNG costs compared to LNG or
pipelines, multiple scope concepts, conceptual design,
preliminary process design along with identification of
schedule, milestones, stage gates and risk points. The
preliminary screening study can be performed quite quickly
once the customer supplied specific project input data is
received because we have developed a very comprehensive
cost database and economic tolling model based upon our
extensive natural gas transportation experience. The model
optimizes the capital and operating costs of the complete CNG
system from the supply to the market. Stakeholders are also
identified at this phase along with the development of various
strategies such as stakeholder engagement strategy, regulatory
strategy and the Engineering Procurement Construction (EPC)
strategy. A fatal flaw analysis, competitor analysis and
qualitative risk assessment is also performed at this time.

The conceptual cost estimate for this preliminary
screening study is a rule of thumb, Class 5 estimate with a
level of accuracy of approximately +/-35%.

At this milestone or stage gate, if the commercial viability
of the project has been validated, the customer may
contemplate proceeding to the next phase of the project but
other issues must also factor into the decision such as
regulatory, commercial or political issues. TransCanadas
criteria to proceed to the next phase include customer
acceptance to proceed, stakeholder support of the project and
preliminary commercial commitments such as memorandums
of understanding or letters of intent for gas supply and gas use
agreements.

For the demonstration project, the customer requested a
screening study to investigate the feasibility of implementing a
CNG delivery transportation system to replace liquid fuel at a
power plant with storage options. The customers power plant
required an average initial delivery rate of 3 million standard
cubic feet per day (mmscfd), escalating to reach 35 mmscfd
after the 1
st
year with the potential escalation to 240 mmscfd
OTC 17780 3
over the 20 year period. The gas supplier offered to supply
gas from both an offshore and onshore location some 280
nautical miles distant. Gas heat content is approximately 1050
British Thermal Units per standard cubic foot (Btu/scf) and
dehydrated as per TransCanadas GTM specifications.

The rule of thumb chart shown in Figure 1 indicated that
a tug/barge system could provide a reasonable CNG
transportation solution for the customer. The CNG tug/barge
transportation system was designed to provide a continuous
flow of gas from the supply to the delivery point. To ensure
continuous flow, there is an overlap such that as a barge is
leaving the supply or delivery, there is already another barge
waiting to load or unload, to create a seamless switchover.

The complete CNG delivery system was designed to
assume a 95% reliability of the mechanical delivery systems,
based upon TransCanadas experience with similar
compression and CNG road transport systems.

Weather is a key factor that affects reliability of a marine
CNG transportation system. Weather data from various
sources including the National Weather Centers Hurricane
website was evaluated. This determined that a storage volume
equal to 1 to 2 days of gas use would be sufficient to ensure
reliability.

A docked barge can be utilized for some of the storage
requirement purposes and can be utilized as a transportation
barge during class inspections on the barges. The
Classification Societies inspections are required every five
years and require the barges to be out of service during this
inspection. The addition of storage capacity results in a
change to the toll, capital costs, and operating costs of the
scenarios but ensures essentially 100% reliability.

Various tug/barge combinations and sizes were also
examined to determine the optimum solution. One criterion
that had to be considered was limiting port traffic because the
customer only wanted one tug/barge in the harbour once per
day. The barges were designed to carry at least one days
volume of gas which resulted in a lower frequency of
tug/barge traffic.

Compression facilities are included at the loading dock
and offloading dock. Facilities at the unloading dock consist
of a small compressor, JT valve, heating and measuring
equipment. A simplified schematic of the GTM CNG
transportation process is shown in Figure 2.

While the screening study with several iterations, only
took several weeks to perform, negotiations to proceed to the
next phase of the project took many months with numerous
meetings, discussions and many scenario iterations and
modifications.

Proposal Phase
The proposal phase of a project can take anywhere from 1
month to 36 months depending upon how serious the customer
is to proceed. During this phase of the project, there will be
additional fine tuning of the Prospecting Phase activities.
Commercial discussions concerning more in-depth studies,
preliminary engineering and scope and alternative solution
definitions, schedule, maintenance and operations issue
identification are discussed with the customer and other
stakeholders. Depending upon the project, a public
announcement may be made at this stage, but our experience
has been that most projects are kept confidential during this
phase. Stakeholders support for the project has been
established and stakeholder engagement strategies can now be
developed. Project meetings are held to exchange information
and further define project details. The EPC contracting
strategy is developed with feedback from stakeholders and
regulatory permits requirements are identified. More detailed
project information will also be reflected in the cost estimate
for this preliminary screening study, which is a Class 4/5
estimate with a level of accuracy of approximately +/-25 to
30%.

At this milestone or stage gate, the project will be once
again reviewed and if the commercial viability of the project
has been validated by the customer, support from stakeholders
has been secured and commitments of gas supply/use are in
place, the project proceeds to the Definition Phase

Definition Phase
The Definition Phase of the project can be complete within 3-
4 months on a smaller, simpler project such as this
demonstration project. During this phase of the project, the
Front End Engineering and Design (FEED) studies will
commence along with detailed process flow calculations and
project scope definition. The FEED study will provide a
comprehensive, integrated and robust development plan with
sufficient cost and project detail to provide a fixed cost for all
the major components of the marine CNG transportation
system through a competitive tender process.

Depending upon the project, a public announcement may
be made at this stage, because major capital commitments are
made for engineering services. Stakeholder engagement
implementation is underway and EPC contracts are
bid/negotiated/awarded. Project meetings take place as the
project team is recruited and managed. Permits and regulatory
issues are submitted and approvals received. The FEED study
results in a binding tender process for all equipment and
services required for the project and a Class 3/4 cost estimate
with a level of accuracy of approximately +/-5 to 10%. A
binding customer commitment for the gas supply must occur
at this time. At this milestone or stage gate, the project will be
once again reviewed and if satisfactory, the customer will
proceed to the execution phase of the project.

The FEED study for the demonstration project which
began in February 2006 will take about 4 months to complete
and work has progressed though various stages of increasing
scope such as a screening of gas transportation options,
concept selection, concept description, detailed design and the
bid/negotiate/award process for all major CNG marine
transportation system equipment and services.

4 OTC 17780
A multidisciplinary project team consisting of
TransCanada CNG design and operations experts, CNG
process engineers, GTM Manufacturer and GTM barge
installation experts, metallurgists, welding engineers, NDT
and acoustic emission experts, naval architects and engineers,
Tug/Barge Operator, risk analysis experts and classification
societies representatives has been assembled to perform
engineering analysis and to work with the customer and gas
supplier during various stages of the FEED study. It is very
important from a safety and operations point of view to
involve and receive input from the potential operator of the
marine system and the Tug/Barge Operator and gas operations
experts from TransCanada, early in the design process.

The first month of the FEED study has been spent
refining the pre-screening study by updating data, evaluating
the sensitivities of the transportation cost and optimizing
available storage volumes, loading rates, barge size, number of
tug/barge combinations and other value chain components.

All components and systems required for the
transportation system, from the gas production flange at
source to the point of entry into the onshore gas distribution
system and storage system have been evaluated and designed.

All operating costs have been evaluated including labour
rates and material costs typical for the supply and market
locations. Any premiums associated with local construction,
material supply and/or import duties are identified for the
capital and operating cost estimates.

The detailed capital cost for each component of the gas
supply system, with appropriate breakdowns to evaluate local
input will be provided and the operating and maintenance
costs for each component of the gas supply system will also be
base-lined.

As part of the cost estimate development, an analysis of
potential opportunities for local engineering, manufacturing,
integration or operations will be evaluated. Local consultants
will identify realistic local labour and services opportunities
for those who could supply services based upon fair and equal
access. Potential impacts on the costs and schedule of the
project will be presented for evaluation and discussed with the
customer.

The operation of the overall CNG transportation system
including such items as marine operations, loading and
unloading procedures, sparing philosophies and schedule
coordination with details of the staff training program for all
operations personnel will be developed and analyzed.

The project implementation plan, complete with all
required pre-commitment milestones, regulatory timeframes
and construction schedules will be developed through
feedback from stakeholders.

Safety/risk and operational assessments and mitigation for
all components including weather conditions will be
developed by the team along with a preliminary hazard
identification analysis on all components of the value chain.
Hazards will be identified, documented and mitigation
scenarios evaluated. As part of the mitigation measures, a
description of the maintenance and testing procedures for all
components of the systems will also be completed.

A detailed description of the design codes, standards and
guidelines to be followed for all components of the gas
transportation system will be presented. Required exceptions
or deviations from the codes will be presented along with a
work plan and process to address these issues and receive
approval for the system.

The commercial or business model will be developed
together with the customer, and include the various value
chain components. Various commercial options, such as time
charters, toll based take or pay contracts similar to pipeline
contracts or combinations of several models will be
considered.

The detailed engineering design and analysis of the three
main components of the transportation system - land based
loading system, unloading system and the marine
transportation system take the most effort and coordination.
The analysis includes site visits and analysis and thorough
project coordination of activities, especially the interfaces
between land based and marine systems.

The gas supplier identified a couple of potential locations
for supplying gas for the project. Both locations require
evaluation before the specific loading system and equipment
requirements are defined. The gas supplier and customer must
then review and approve before capital and operating costs can
be determined. Use of an existing dock/jetty if available, can
reduce the capital required for a new installation but in this
case, an offshore loading option must also be evaluated.

At the customer receipt location, an existing jetty is
available, so studies were undertaken to determine suitability
including water depth at jetty, existing users, suitability for off
loading equipment and piping and distance to customer
infrastructure. Designing the connection systems, loading and
unloading compression systems, dehydration and connecting
pipeline systems are fairly straight forward for this project
because many of the items are standard equipment.

The marine transportation system accounts for 80% of the
cost of the CNG transportation system and in turn, the CNG
containment system including the GTM pressure vessels,
piping, controls system and all barge based equipment
comprises approximately 80% of the marine transportation
system. Similar percentages of time were spent during the
FEED study on the marine transportation system.

The naval architects, with assistance from the Tug/Barge
Operator, will lead the marine transportation or shipping
component of the FEED study and will work in conjunction
with the TransCanada CNG containment design team and
operations, GTM manufacturer and GTM installer, to ensure
an integrated system solution. The marine study will build
OTC 17780 5
upon the pre-screening study with further investigation of
local marine facilities, local weather and waves spectra
including tidal issues, local currents, upset conditions such as
hurricanes, local ecology, geographical and marine features
impinging on vessel design to ensure optimum commercial,
technical, environmental and safety criteria are met.

Once the marine studies scope and recommendations for
the marine transportation system have been accepted by the
customer, then the detailed tug/barge design will commence.
This detailed tug/barge design includes development of vessel
structural design, vessel stability and damage stability
assessments, and if necessary the implications of allowing
barges to sit on the sea bed at load and unload facilities if
needed.

Fatigue and stress analysis of the barge and tug structures
and of the GTM support structures based on a 40 year life in
the projected trading environment will be reviewed.

Detailed design of proposed cargo piping system to allow
optimum loading and unloading of the barges and cargo
segregations within the barge will be analyzed. This study
will include detailed fatigue and stress analyses of piping
systems, production of detailed manufacturing and material
specifications along with manufacturing tolerances.

An assessment of valve and safety valve sizing will be
included with the complete piping system design based around
using Techlok
3
connections to the GTM and piping headers.
The control systems will be designed to allow safe and
efficient cargo handling while at the same time addressing
issues in terms of the local environment.

Development of safety systems and safety issues
including fire and flooding assessments will be carried out
using the risk assessment study and hazard identification
processes.

Design of all onboard equipment such as power
requirements, including pumping and bilging arrangements
will be determined for both tugs and barges. The use of
natural gas or diesel as propulsion fuel for the tugs will be
assessed and the cost implication evaluated.

For this project, the Classification Society is empowered
to act on behalf of the customer Flag State for all aspects of
vessel design, construction, safety issues, local shipping rules
and regulations and, as necessary the application of the
International Gas Code. Achieving Approval In General for
the CNG containment/cargo system/tug/barge system for this
project will be obtained through one of the major
Classification Societies and be completed during the FEED
study.

Results of the FEED study will be to produce a complete
set of tender documents for bid of major components which
will incorporate functional design specifications, including all
relevant drawings, calculations, equipment and material
supplier information and listings for the loading, unloading
and marine transportation system. This process will also
include an assessment of and prequalification of potential
shipyards, equipment manufacturers, service providers, steel
plate, pipe, piping and steel head manufacturers.

An assessment procedure, both technical and commercial,
will be developed for evaluation of proposals and bids.
Included in the evaluation will be the identification of
potential benefits of local labour and material suppliers along
with the impact on schedule and cost for benefits as part of the
proposed solution. Tender documents will be sent to qualified
suppliers and returned within four weeks for evaluation and
analysis.

Development of a final, detailed report giving a full
commercial and technical assessment of bids received and
recommendations including firm fixed price quotes for
construction, outfitting and delivery of the complete CNG
marine transportation system components will enable
TransCanada to provide a firm transport service commitment.

It is important to note that the quotes for goods and
services are typically only valid for up to 60 days after tender
submission so it is imperative that the customer makes the
decision to proceed to the execution and commissioning phase
of a project as quickly as possible.

Execution and Commissioning Phase
Depending upon the scope of a project and long lead material
and equipment deliveries, this phase can last 12-18 months for
a CNG barge based project and 24 to 36 months for a CNG
ship project. For the demonstration project, TransCanada
expects to commence the execution phase by July 2006 with
the first gas deliveries planned as early as September 2007
subject to acceptable tender pricing for goods and services and
customer approval.

Operations Phase
Despite the fact that the operations phase does not commence
until late 2007, TransCanada prepares for operations early in
the project development process with input from operations
personnel during the FEED studies.

Safety is one of the cornerstones of TransCanadas
operating philosophies therefore safety is also incorporated
early in the design of all our operating systems. CNG will be
no different. As one of the largest pipeline operators in the
world, TransCanada has developed a first class safety,
operations and maintenance personnel training program that
will be customized for operations personnel for this specific
demonstration project. The Tug/Barge Operator and staff will
also incorporate marine safety and operations with the gas
safety, gas handling and gas operations and maintenance. The
technical, theoretical and hands-on training program will be
carried out at a TransCanada facility in Canada.

6 OTC 17780
Conclusion
At press time, the authors are involved in the FEED study and
the CNG demonstration project is scheduled to proceed to the
execution and commissioning phase by July 2006. The
project economics are sound, the gas supply and use
agreements are being finalized and are backed by the supplier
and user and their respective governments, rules and
regulations are in place for the gas export and import, projects
risks have been mitigated and the first gas should be delivered
to the customer sometime in 2007.

References
1. GTM

- Manufactured under license from NCF Industries, Inc.

US & Foreign Patents Issued & Pending
2. Cano, G. and Stephen, G.L.: CNG Marine Transport A Gas
Transportation Company Perspective, paper 17171-PP presented
at the 2005 Offshore Technology Conference, Houston, TX.
USA, 2-5 May 2005
3. Techlok Manufactured by Vector International, UK




Figure 1 Rule of Thumb CNG Transport Conditions



Economic Volume and Distance for CNG Transport
0
500
1000
1500
2000
2500
0 100 200 300 400 500 600 700 800
Volume (mmscfd)
D
i
s
t
a
n
c
e

(
n
a
u
t
i
c
a
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m
i
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e
s
)
CNG Ships
LNG
CNG Barges
Pipelines
OTC 17780 7



Figure 2 - Typical Process Schematic