LNG PLANT COSTS: PRESENT AND FUTURE TRENDS

COUTS DES INSTALLATIONS DE GNL: TENDANCES

ACTUELLES ET FUTURES
Robert N. DiNapoli
Vice President
Merlin Associates
Atlanta, Georgia 30356 U.S.A
Charles C. Yost III
President
Merlin Associates
Houston, Texas 77069 U.S.A.

ABSTRACT
New LNG projects are underway in Qatar, Oman, Trinidad and Nigeria. These projects are the first greenfield projects built in nearly 10 years. Contrary to past experience,
capital investment per unit of production is 25 - 30% less, on a constant dollar basis, than
previous projects.
Cost reduction has been the subject of considerable discussion during past conferences
with varying views of where and to what degree cost savings might be realized. The more
cost effective designs currently being offered, however, are not the result of any single improvement or innovation but a combination of factors realized through the joint efforts of
project sponsors, liquefaction process vendors, equipment suppliers and EPC contractors.
Principle among these are the following:

Maximizing of individual liquefaction train production for available refrigeration

power in put and related equipment characteristics.

Reduction in the amount of over-design allowed for engineering unknowns and production/performance guarantees.

More cost effective arrangement and layout of equipment within the confines of established safety practices and code compliance.

Renewed competition among process licensors and a more competitive bidding climate
involving an increased number of qualified EPC contractors.

A quantitative measure of cost reduction is offered for each of these factors based on
comparisons with past projects. The paper also presents an assessment of savings for new
projects which can realistically be expected in light of further cost reduction efforts and
the need to maintain current levels of project reliability, operational flexibility and safety.
7.41

RESUME
Des projets d'installations de GNL sont en cours au Qatar, Oman, dans l'le de la
Trinit et au Nigria. Ce sont les premiers projets entirement nouveaux entrepris depuis
presque 10 ans. Par rapport aux projets antrieurs, ils se caractrisent par un
investissement de capitaux par unit de production infrieur de 25 30 % en dollars
constants.
La rduction des cots a fait l'objet de nombreuses discussions au cours des congrs
passs, divers points de vue ayant t exprims sur les possibilits d'conomie et l'ampleur
de ces conomies. Les projets plus conomiques proposs actuellement ne rsultent
cependant pas de la mise en oeuvre d'une seule et unique amlioration ou innovation mais
de la combinaison de plusieurs facteurs raliss grce aux efforts communs des
promoteurs de projets, des fournisseurs de procds de liqufaction et d'quipement et des
entreprises d'ingnierie. Parmi ces facteurs, nous retiendrons:

Maximisation de la production des trains de liqufaction en fonction de la capacit des

installations frigorifiques disponibles et des caractristiques des quipements connexes.

Rduction du degr de surconception autoris pour parer aux impondrables

dtingnierie et satisfaire aux garanties de production/performances.

Disposition et agencement plus conomiques de l'quipement dans les limites des

pratiques de scurit tablies et conformment aux codes en vigueur.

Regain de concurrence au sein des donneurs de licences de procds et comptition

accrue au niveau des appels d'offres mettant en jeu un plus grand nombre d'entreprises
dtingnierie qualifies.

Le prsent article donne une mesure quantitative de la rduction de cot associe

chacun de ces facteurs, base sur des comparaisons avec des projets passs. Il prsente en
outre une valuation des conomies qu'il serait raliste d'envisager pour les nouveaux
projets en rduisant davantage encore les cots, et traite de la ncessit de maintenir les
niveaux actuels de fiabilit, de souplesse oprationnelle et de scurit des projets.

7.42

LNG PLANT COSTS: PRESENT AND FUTURE TRENDS

INTRODUCTION
Liquefaction segment capital costs represents a significant portion of the total LNG
delivery chain capital cost. They typically can account for 35 - 40% or more of the total
gas production-liquefaction-shipping-regasification project investment. The authors have
published extensively on the subject since the early 1970s. During that period the LNG
industry has benefited from the dramatic worldwide growth in natural gas consumption.
LNG plant costs over the period have also risen substantially.
With the stabilization of crude oil prices in the 1980s, maturing of primary Far East
markets and the increasing competition of pipeline supply of natural gas, LNG projects
have come under increasing pressure to reduce capital investment as a means of remaining
competitive within the framework of prevailing fuel prices. Reduction of LNG project cost
has been the subject of considerable discussion throughout the industry. Panels on cost
reduction are commonplace at most international natural gas forums including this conference. Efforts to reduce plant costs are now being realized as new greenfield projects under
construction in Qatar, Oman, Trinidad, and Nigeria are being built for a capital investment
per unit of production 15 - 35% less than projects built 10 - 15 years ago. Contrary to
what many may think, however, these new, lower cost projects are not the result of any
single technical innovation or design improvement but a combination of factors realized
through the joint efforts of project sponsors, liquefaction process vendors, equipment suppliers and EPC contractors.

HISTORICAL LNG PLANT COSTS

Before discussing the principle factors contributing to LNG plant cost reduction a discussion of major cost elements which make up total LNG plant cost investment cost and
the historical trend in these costs over the past 30 years is useful in understanding how
LNG plant costs have evolved to their present level.
LNG Plant Project Cost Buildup
Table 1 shows the general distribution of major component costs as a percentage of
total project costs for a typical greenfield, two train LNG plant installation. Important
project variables which influence these costs are also noted in Table 1.

7.43

Table 1. Liquefaction Plant

Major Project Cost Components

Major Project Variable

% Cost
Design/ Site
Site/Project Project
Distribution Capacity Labor
Related
Execution
Liquefaction Trains
34 - 38
X
X
Utilities
12 - 16
X
X
LNG Storage & Loading 10 - 15
X
X
Buildings & Misc.
3-5
X
EPC Contractor
14 - 16
X
Marine Related
3-6
X
X
Infrastructure
0-6
X
X
Other Project Related
10 - 12
X

EPC related costs which typically involve the feed gas pretreatment, liquefaction, utilities and offsites, LNG storage and loading and marine facilities represent only about 80 85% of the total plant capital cost. Permanent infrastructure (housing community and support for operating personnel and marine support services) accounts for an additional 34%. The remaining 12 - 16 % accounts for Owner project management and start-up costs,
CAR insurance and project venture costs. Project venture costs are substantial and include
expenditures for pre-project feasibility and basic engineering studies, development of project specifications, and EPC bid evaluation. Venture costs also include expenditures for
post-operational expenses for plant staffing, training, technical support services and related corporate expenses and typically can involve total expenditures of $100 to 200 million.
In comparing project costs, particularly costs reported in trade journals and other publications, it is not always evident what, if any, costs outside of the EPC contract costs are
reported. This can lead to erroneous conclusions regarding the competitive nature of one
project vs. another. Total project cost should be considered in evaluating alternative project concepts.
Another important fact to note is that for a worldscale size LNG plant less than 50%
of the total LNG plant project cost is capacity related. These capacity related costs involve
the liquefaction trains and supporting cooling system and a portion of the plant utility requirements. LNG storage costs are a function of tank design (the choice of containment
system) and storage volume which is set primarily by shipping considerations (ship parcel
size, and shipping schedule/delays etc.).
Although emphasis is rightly given to processing and design related improvements as a
means of reducing LNG plant costs, much of the cost of an LNG liquefaction project is
beyond the influence of the design engineer and is mainly a function of site related conditions and project development and project execution efforts. Costs for the loading jetty
7.44

and related marine facilities, plant infrastructure, owner project management and venture
costs are basically fixed for a given location regardless of the project size.
Historical LNG Plant Cost Trends
Figure 1 shows the historical trend on a unit capital cost basis (US$/tonne per year) of
the 17 greenfield LNG projects in operation or under construction. Cost data is also included for the Arzew, Algeria plant which was the first base load LNG plant constructed
but which is no longer in operation. Capital cost data in Figure 1 is expressed as US dollars of the day at the year of initial start-up. If start-up was delayed for more than a year,
capital cost is expressed as dollars of the day at the year of construction completion.

Historical Cost of LNG Plants

US$ of the day per TPY
Greenfield Projects

US$/TPY

1000

100

10
1960

1970

1980

1990

2000

Year of Start-up

Figure 1
Figure 2, an update of cost trend data published at the LNG 8 Conference, is a similar
plot of greenfield project costs on an inflation adjusted, current (1998) dollar basis [1].
Inflation adjustments are derived using the Nelson Refinery inflation index.

7.45

Escalated LNG PLANT CAPEX

1998 US$/TPY
Greenfield Projects

US $/TPY

1000.

100.
1960

1970

1980

1990

2000

Year of Startup

Figure 2
Cost trends shown in Figure 1 & 2 reflect the following evolution in plant design philosophy:

The earliest LNG plants used variations of the classical cascade refrigeration cycle for
natural gas liquefaction. Engineering/design technology is borrowed from experience
in air separation, helium recovery, and oil refinery design. Capacities were small, on
the order of 1 million tonnes per year (MMTPY). Cost are low for these plants which,
for a variety of reasons, are not representative of succeeding LNG projects.

Plants built in the early 1970s (Libya, Brunei, and Algeria) were considerably larger
than the first plants in Arzew and Alaska and utilized variations of the mixed refrigerant process in an effort to reduce project capital investment. Because of design and
operating problems several of the projects failed to achieve design LNG production
capacity. Design problems also led to significant cost overruns in a number of projects.

The late 1970s and very early 1980s saw the emergence of the Air Products &
Chemical, Inc. (APCI) developed propane precooled, mixed refrigerant (P-MR) process as the preferred liquefaction technology for use in large, multi-train processing
configurations. Refrigeration compressors were steam turbine driven and basic plant
design was robust with a large degree of built-in over capacity to insure security of
supply. From the early 1970s through the end of the 1980s, inflation adjusted unit
LNG plant costs reached a peak due in large part to the effects of high worldwide inflation, a reimbursable bidding strategy utilizing EPC contractors with proven LNG
experience, and a conservative design philosophy to insure integrity of supply.

Further increases in train capacity using the now proven APCI P-MR liquefaction
technology occurred in the mid to late 1980s. A major shift in plant design technology
also occurred during this period with gas turbines becoming the preferred choice as
drivers for the main refrigeration compressors. Air-fin cooling at the Northwest Shelf
7.46

Project in Australia proved to be a viable option to once-through seawater cooling or

a closed loop cooling system..

CURRENT LNG PLANT DESIGN SITUATION

As can be seen from Figure 2 unit capital costs for projects currently under construction have been reduced by 25 - 35% from the peak costs experienced in the mid-1970s to
mid-1980s. Table 2 shows the distribution of typical cost savings for a new two train 6.6
MMTPY LNG project using technology typical of plants now under construction compared to a three train, 6.6 MMTPY project using older, 1980s technology.
Significant cost savings are achieved with the current plant designs in the liquefaction,
EPC, and miscellaneous support service cost categories. Infrastructure and owner cost
show somewhat less of a reduction in cost.
Table 2. LNG Plant Cost
Variation of Cost between Older and Current Basis of Design
Basis: 1980s Design Plant Cost = 100
1980's
1990's
Variance
Design
Design
(1990's/1980's)
No. Trains
3
2
Train Capacity - MMTPY
2.2
3.3
Plant Capacity - MMTPY
6.6
6.6
Liquefaction
33.19
20.88
0.629
Utilities
12.01
10.26
0.854
LNG Storage & Loading
5.84
4.87
0.834
Buildings & Misc.
6.90
4.31
0.625
EPC
21.72
8.97
0.413
Subtotal
79.66
49.29
0.619
Marine
Infrastructure
Subtotal
Owner
Total

3.68
4.15
7.83

2.49
4.13
6.62

0.677
0.995
0.845

12.51
100.00

9.77
65.68

0.781
0.657

Economies of Scale
Economies of scale as a result of both larger individual train capacities and larger total
production have had a major impact on reducing LNG plant capital costs. Train LNG capacities have steadily increased from 2.0 - 2.5 MMTPY for plants built in the 1980s using
the APCI liquefaction process to about 3.3 MMTPY for the Oman LNG plant which are
the largest trains currently under construction.
7.47

The increase in train capacity in plants using the P-MR liquefaction technology has
been achieved by the use of large, single shaft gas turbines previously used in electric
power generation service [2] [3]. Earlier gas turbine driven LNG plants used smaller, dual
shaft gas turbines as compressor drivers. The 28 MW ISO rating of the GE Frame 5 gas
turbine, the largest proven, dual shaft turbine available, limited maximum possible train
capacity to about 2.7 MMTPY without resorting to the installation of more costly multiple
compressor-drivers in parallel. LNG train production of 3.3 MMTPY for the P-MR liquefaction process is possible with the use of a GE Frame 6 gas turbine (ISO Rating of
38.5 MW) as driver for the propane refrigeration cycle compressor and a GE Frame 7 gas
turbine (ISO rating of 80MW) for the mixed refrigerant compressor driver.
Maximum economies of scale as far as train capacity is concerned is achieved by
maximizing production for available installed gas turbine power. With the use of the large
GE Frame 7 single shaft gas turbine as the driver for both the both P-MR refrigeration cycle compressors individual train production capacity in excess of 4.0 MMTPY is possible.
APCI reports that fabrication technology and manufacturing capabilities exist for construction of spiral wound heat exchangers in this size range [4].
Since only about 50% of the cost of an LNG plant is truly capacity sensitive the total
cost of a two train plant producing 8.0 MMTPY is not significantly greater than a two
train plant producing 6.6 MMTPY. Since installation of at least two trains is desirable
from a plant reliability standpoint, maximum economies of scale on a total plant basis are
achieved by increasing individual train capacity. LNG plant cost studies performed by
Merlin Associates indicate that a two train 8.0 MMTPY plant can be built for about 10 15% more than the cost of a two train 6.6 MMTPY plant. Unit cost per tonne basis for
the larger plant is nearly 15% less than that for the smaller capacity project.
Operating costs are also less for a larger train size, larger total production capacity
plant on a unit cost ($/TPY) basis. Operating labor costs for a two train plant are essentially fixed regardless of the train capacity. Maintenance charges vary as a function of total plant capital cost. Other costs such as marine and harbor operation, technical support
and administration services are essentially fixed for a worldscale size plant.
Another important advantage of building a two train plant compared to a three train
plant is the reduction in the EPC completion schedule. A two train plant can be completed
3 - 6 months earlier than a three train plant with significant savings in EPC contractor
costs and field erection cost.
Reduction in Over-design & Design Factors
The current LNG plant design basis represents a joint understanding on the part of
both producers and buyers regarding security of supply, reliability, and assurance of
meeting contractual obligations. It has evolved from more than thirty years of engineering
design and plant operational experience. This has led, particularly in the early years when
technology was largely unproven, to a generally conservative design philosophy stressing
ample design margins, proven technology, and some degree of redundancy. Since the long
term reliability of LNG supply is now a proven fact, the need for large over-design margins and an overly conservative design philosophy no longer exists.
7.48

Although design margins have been gradually decreased as the technology has matured
a certain degree of design margin is still needed to account for:

Equipment and process performance guarantees.

Variations in feed gas and processing conditions over the life of the project.

Expected variations in ambient air and water temperatures.

General design uncertainties and equipment sizing restrictions.

Design margins for these purposes typically amount to 8 - 12% of design capacity.
It is difficult to quantify the impact of reduction in design margins on total project
cost. However, it is apparent that project sponsors are not pre-paying for excess capacity
with the current basis of design. The newer gas turbine driven LNG plants have tended to
maximize train production for the installed turbine power utilizing, in some instances,
available power in starting turbines and motors to supplement main turbine power output.
With this design approach there is very little excess capacity available through simple debottleknecking. Capacity increases of more than 7 - 10% require substantial significant
expenditures. The older steam turbine driven plants, on the other hand, had built-in overcapacity margins of as much as 35 - 40%. This earlier excess capacity, once demonstrated,
was readily purchased by the original buyers eager to meet increasing market demand from
a proven source of supply. Sales efforts for new projects now focus on selling full design
output. Incremental production often must now be sold on a spot or short term basis until
sufficient long term demand is created.
Engineering Design Standards & Plant Layout Consideration
The original engineering and design specifications used for LNG plants were adapted
from specifications developed for older hydrocarbon processing industries - primarily oil
refineries and petrochemical plants. As LNG-specific experience was accumulated, these
older specifications were modified by adding to them while not fully deleting non-LNG
specific elements, leading to increasingly more rigorous and all inclusive design standards.
These standards are now undergoing an intensive review with the objective of achieving
more cost effective designs while still maintaining a high level of safety and reliability. A
major part of this effort has been a more realistic approach to hazards associated with
LNG fires. This fact allows a reduction in spacing between major plant areas and reduction in the amount of fireproofing required within the process areas. The result has been a
significant reduction in the footprint of the liquefaction train with a corresponding reduction in bulk material requirements i.e. piping, valves, structural steel etc., fireproofing and
related material expenses, project management and erection labor costs. Estimated cost
savings from these redesign efforts are on the order of 9 - 13% in bulk materials and erection labor costs equivalent to savings of several hundred million dollars for a worldscale
size LNG plant. It is important to note that cost reductions as a consequence of reevaluation of design standards, fire and safety philosophy and design margins has been
achieved without compromising plant safety and integrity.

7.49

Competitive Technology and EPC Contractor Considerations

EPC contracting strategy has had a significant impact on final LNG project cost. It influences the overlay project execution duration, scope and cost of the Front End Engineering Design (FEED) work, EPC contract selection, responsibility for performance
guarantees and cost and scope of the Owner project management effort.
A lump sum bidding strategy involving 3 or 4 qualified bidders typically results in the
lowest cost project. Initial attempts with the use of lump sum contracts for greenfield
LNG projects, however, were not very successful. Limited contractor experience coupled
with high inflation during the 1970s, when several LNG projects were started, led to significant cost overruns and completion delays. These early projects also did not have the
benefit of a strong and technically competent international oil company to function as
project technical leader.
This early experience led to a choice of reimbursable type contracts administered by
the project Operating Companys project management team. This approach allowed the
developed of LNG specific basic design concepts and detailed design practices as a joint
Owner/EPC contractor effort but at some additional engineering cost. The contractor responsible for the FEED was usually awarded the EPC contract providing a continuity of
effort. This approach allows acceleration of project completion by pre-ordering critical
items of equipment during the FEED phase while shifting some finalization of design until
the EPC execution phase.
As noted earlier significant reduction in EPC contractor costs is possible with a two
train plant compared to a three train plant. Engineering and procurement cost are less due
to fewer items of equipment, a reduction in the number of layout and piping drawings, and
reduced field construction supervision.
As LNG plant engineering and construction techniques matured and design bases better defined, both owner/operators and EPC firms became more inclined to structure LNG
construction projects on a lump sum basis. The development of comprehensive LNG Project Specifications now allows a widening of qualified EPC contractors beyond the limited
number with specific LNG construction experience. The combination of LNG-specific
Project Specifications and engineering design practices together with increased competition among EPC contractors and a reduction in the number of trains to produce a given
annual quantity of LNG has led to a reduction of several hundred million dollars in liquefaction plant EPC costs in recent years.
A more competitive situation is also developing regarding selection of liquefaction
process technology. The recent selection of cascade liquefaction technology developed by
Phillips Petroleum Co. for the Trinidad LNG project is the first use of liquefaction technology other than the P-MR process since the early 1970s. Black & Veatch Pritchard is
marketing an improved version of the all-mixed refrigerant technology used in earlier
plants built in Algeria. BHP and others are also offering alternative liquefaction technologies each claiming cost advantages over existing technology. In general, efforts to reduce
costs by simplifying processing configuration are made at the expense of lower thermodynamic efficiency. From a total LNG plant cost perspective the impact of liquefaction technology is relatively small, as is discussed later. A competitive environment for liquefaction
7.410

technology, however, should encourage more cost effective designs and provide the opportunity to tailor liquefaction process selection to fit non-traditional project requirements.
Summary of Cost Reduction Efforts
Table 3 shows Merlin Associates estimates of distribution of capital cost reduction for
a 2 train plant producing 6.6 MMTPY based on current design technology compared to a
3 train plant producing 6.6 MMTPY based on technology typical of LNG plants built in
the 1980s. Estimate basis is the same as used to develop comparative cost data shown in
Table 2.
Table 3. Distribution of LNG Plant Capex Reduction

Basis: 6.6 MMTPY Plant Capacity

Millions 1-1-98 US$

Liquefaction
Utilities
LNG Storage &
Loading
Buildings & Misc.
EPC
Subtotal

S.E. Asia Location

Design
OverTotal
Standards & Capacity & Competitive
Capex
Economies
Basis of
Safety
EPC Bidding
Reduction*
of Scale
Design
Factors
Strategy
285
80
180
25
40
5
30
5.
25
60
295
705

25
50

90

285

35

295
295

Marine
Infrastructure
Subtotal

25
1
26

25
1
26

Owner

65

40

10

796

130

321

Total

15
35

310

Note:* Two train 1990's design vs. 3 train 1980's design

Referring to Table 3, engineering design standards and layout considerations and competitive EPC bidding strategy considerations each account for some 40% of the total cost
reduction with an additional 16% due to benefits of larger train size. The remaining 4%
can be attributed to reduction in design safety factor margins. The substantial reduction in
EPC cost is not only the result of a more competitive bidding environment but the evolution in quality of the bid specification package to the point where contractors have a firm
and equal basis for developing lump sum bidding and a reduction in the EPC completion
schedule.
7.411

Cost reduction as a result of revised design standards and more cost effective equipment layout has a substantial impact on bulk material requirements and supply and erect
subcontracts. Erection labor costs are also reduced.

FUTURE TRENDS IN COST REDUCTION

In Merlin Associates judgment additional capital cost reductions of the magnitude realized for the plants now under construction cannot be realistically expected for projects in
the foreseeable future. A substantial portion of the cost reductions discussed in this paper
are one time savings relating to more realistic and cost effective design standards and fire
and safety analysis and a more competitive EPC bidding climate.
Larger Train Sizes
Some further cost reduction through economies of scale will be realized. As noted
earlier, single train sizes in excess of 4 MMTPY are possible using the P-MR process and
two frame 7 gas turbine driver. Reductions on the order of 15% on a unit cost basis are
thought possible by increasing plant production capacity by increasing individual train size.
Further increases in train capacity for the P-MR process approach limits in shipping
considerations for the large spiral wound heat exchanger and in being able to match maximum gas turbine power availability to compression requirements. Design studies have
been undertaken utilizing a single large turbine (GE Frame 9 size) as a single driver for all
liquefaction cycle compressors (precoooling and mixed refrigerant) as a means of reducing
equipment (and cost) while maximizing power utilization [5]. Additional power and hence
production capacity can be achieved through use of larger turbine starter motors which
would then be used as driver helper motors.
One downside to larger train sizes is that larger trains bring larger increments of product to the market place. In the past it has not been unusual for a single buyer to contract
for the full production from a train to be delivered to a single market. The current train
size has increased by nearly 75% from 1985 to 1996 and is now probably too large to be
utilized in a single market growth step. This significantly increases marketing complexity
for new projects particularly for the multi-train arrangement desirable from a supply security standpoint.
Another drawback to larger train sizes and total project capacity is the increasingly
larger gas reserves required in a single location to support the project over the life of the
sales contract. Newer sales contracts may be for as long as 25 years compared to 20 years
for earlier contracts. Reserve requirements for an 8 MMTPY project over the longer, 25
contract life amount to about 300 Bcm (10.5 TCF). This is a sizable gas reserve and there
are only a limited number of undeveloped fields of this magnitude in the world today.
Alternative Liquefaction Processes
Some further cost reduction as a result of alternative liquefaction process selection
may be possible, although, in Merlin Associates opinion, this has yet to been demonstrated. The magnitude of potential savings is limited, however, since compression related
equipment costs represent nearly 40% of the total liquefaction train cost of approximately
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$200 - 250 million and there is no substantial difference in thermodynamic efficiency

among the commercially available liquefaction processes. Some cost differential may be
realized, however, as a result of the particular arrangement of compressors, number of
casings required and specific compressor design of each process. Of the remaining train
cost only about $60 - 120 million is liquefaction process selection sensitive. Even a 25%
reduction in heat exchanger related costs constitute a savings of only $15. - 30 million per
train or a maximum of 4% of total LNG project cost.
Single Train Projects
Single train projects are now under consideration for situations where there are not
sufficient proven gas reserves to support a worldscale size, multi-train plant and/or where
market demand will not initially support the full output of a multi-train plant. The need for
multiple trains in order to insure integrity of supply is of less importance now as long term
reliability of LNG plants has been demonstrated and annual availability can be reasonably
well predicted. Many LNG buyers now have a diversity of supply sources and are no
longer dependent on a single LNG plant for product.
Single train plants were considered for both the Oman and Rasgas LNG projects, for a
period of time, although both finally went ahead as two train projects after sufficient sales
contracts were secured to support installation of more than one train. The Trinidad project
is another example of a small (3 MMTPY) project sized to fit initial reserve estimates and
market demand. It is considered a one train project although the use of dual, 50% capacity
refrigeration compressors installed in parallel for each of the three refrigeration circuits
provides an annual availability comparable to a two train plant. Additional trains are now
being considered for the Trinidad project with the discovery of additional gas reserves.
A large, single train plant can now be built for a lower capital cost than a multi-train
plant of the same capacity built with older design technology. Total financeable cost is
lower for a smaller, single train plant than a larger project and can be brought fully onstream earlier. Project economics under these conditions can be competitive with larger
projects under certain circumstances.
Predictions for Future Cost Reduction
In Merlin Associates opinion continuing efforts in maximizing train capacity through
process optimization and combined gas turbine-motor drivers might result in a further 4 7% decrease in unit capital cost ($/TPY) basis. Alternative liquefaction technology may
offer some cost advantage for small capacity LNG projects (2 MMTPY max.) and/or
plants located offshore either on floating barges or fixed structures. Also use of simpler
but less efficient liquefaction processes may provide the incentive in terms of reduced
capital expenditure for developing gas reserves now considered to be uneconomic for
world scale size projects.
It should also be remembered that project sponsors, host countries, and LNG buyers
must commit to substantial capital outlays throughout the entire delivery chain to achieve
an economically viable project. Continuing efforts at cost reduction must not compromise
security of supply, reliability and assurance of meeting contractual obligations.
7.413

Cost reduction efforts will continue, however, as project sponsors now find that many
LNG projects, even if they must be initially constructed as one train facilities, can produce
an acceptable rate of return at prevailing market fuel prices.

REFERENCES CITED
1.

DiNapoli, R.N. Evolution in LNG Project Costs and Estimation Techniques for
New Projects, Eighth International Conference on Liquefied Natural Gas , Los
Angeles, June 1986.

2.

Nagelvoort, R.K., Poll, I., & Ooms, A.J., Liquefaction Cycle Development, Ninth
International Conference on Liquefied Natural Gas, Nice, October 1989.

3.

Liu, Y-N, Lucas, C.E., & Bronfenbrenner, J.C., Optimum Design of Liquefaction
Plants with Gas Turbine Drivers, Eleventh International Conference on Liquefied
Natural Gas, Birmingham, July 1995.

4.

Liu, Y-N, Edwards, T.J., Gehringer, J.J. & Lucas, C.E., Design Considerations of
Larger LNG Plants, Tenth International Conference on Liquefied Natural Gas,
Kuala Lumpur, May 1992.

5.

Salimbeni, A.B., & Camatti, M., Compressors for Base Load LNG Service, Eleventh International Conference on Liquefied Natural Gas, Birmingham, July 1995.

BIBLIOGRAPHY
DiNapoli, R.N., Estimating costs for base-load LNG Plants, Oil & Gas Journal, November 17, 1975.
DiNapoli, R.N., LNG costs reflect changes in economy and technology, Oil & Gas
Journal, April 4, 1983.
DiNapoli, R.N. Economics of LNG Projects, Oil & Gas Journal, February 20, 1984.
DiNapoli, R.N. & Yost, C.C., A Generic Cost Model for estimating LNG Plant Capital
Costs, Symposium on Liquefied Natural Gas - AICHE Meeting, Houston, TX.,
April 1991.
DiNapoli, R.N., Yost, C.C., & Nissen, D., Strategic Evaluation Central to LNG Project
Formation, Oil & Gas Journal, July 3, 1995.

7.414