Hainan LNG Project - Sustainability Challenges Experienced in the Advancement of the Project - Term Paper Example

Hainan LNG Project Student’s name Code & Course Professor’s name University City Date Abbreviation LNG: Liquefied natural gas CNOOC: China national Offshore Corporation CO2: Carbon Dioxide N20: Nitrogen Dioxide List of tables Table 1: The table present priority policy. Table 2: LNG Emission Calculator Table 3: China’s natural gas supply and demand balance Table 4: Risks List of Figures Figure 1: Global LNG capacity and demand Contents 1.0 Background 4 2.0 Sustainability Challenge 4 3.0 Critical Analysis 5 3.1Contextual Issues 5 3.2Emerging Industry Trends 6 3.4Comparison study benchmark 8 3.5Partners 9 3.6Challenges Experienced in the Advancement of the project 9 3.6.1 Design failure 9 3.6.2 Application Challenges 9 3.6.3 Limited Experience 10 3.6.4 Language Barrier 11 3.6.5 Lack of Government Support 11 3.7Amount of Carbon Dioxide and Electricity Saving Estimation 11 3.8Risks 12 4.0 Conclusion 13 Reference List 15 1.0 Background Global warming, CO2 emissions, increased energy consumptions, and the creation of green circular economy not only satisfies the needs of the market economy but also presents the demand of the world’s sustainability development and social responsibility. As such, it is imperative to integrate sustainable economic development in effectively utilizing available resources to fully satisfy the human socio-economic needs. The successful integration of Hainan LNG cold energy recovery program will not only reduce the greenhouse gasses emission, but also result to the potential increase in economic gains upon its commercial exploitation. Its commercial exploitation will emanate from the sale of LNG cold energy to the available market. The market for LNG cold energy has increased given the need to use clean cheaper energy (Duanz, 2010). Its commercial exploitation will have a significant economic impact inChina, compounded by the demand for this energy (Casey, 2011).The demand for cold energy is expected to grow continually over the years. The integration of the project will successfully mitigate the environmental impact of global warming witnessed by the deposition of carbon emissions into the atmosphere. In 2012, global emissions increased by 1.1 %, where China experienced an unprecedented increase by2.5 % of carbon emissions (UNFCCC, 2013). . 2.0 Sustainability Challenge CNOOC’s Hainan terminal is one of the largest state owned Oil Company in China. The company was founded as a leading company in LNG business in China given the construction of its instrumental LNG receiving terminals. Tentatively, SinoView is one of the largest project management and Investment Company. SinoView has realized the potential business opportunity at the terminal, given the viability of the cold energy. Chinais typified by a low LNG cold energy utilization rate of about 5 %.Given the low usage rate, SinoView has embarked on a continuous pursue business opportunity through the consolidation of its robust relationship with CNOOC in engaging CNOOC’s Hainan LNG utilization projects.As a result of its location in the petrochemical industrial area, it considers applying for the liquid LNG for an initial electricity generation. Secondly, it will use the liquid LNG to cool the industrial waters released from the refinery. Presently, the project is in it negotiations stages, where a working group has been establishedin this respect. The overall sustainability challenge is, therefore, to develop a business case that exploits cold energy utilisation that has a sustainability benefit and promote sustainable leadership in the industry. As such, this analysis used a combination of existing literature and selected interviews in obtaining key issues and recommendations, pertaining the challenge. This retrospect paper seeks to present; i. The sustainable challenge relatingto theexploitation of cold energy utilisation; ii. Challenges faced in the implementation process; iii. Possible recommendation in mitigating these challenges. 3.0 Critical Analysis of the challenge ISWM (Integrated Sustainable Waste Management) presents an equal weight to the elements of waste minimization, reuse, and composition. Various models have been created in achieving sustainability inmultidisciplinary sectors. Sustainable frameworks have been developed (Nasr, 2011; Shuaib, 2011) in creating an optimized tools (Jayal, 2010). Harland (2008)advocatesthe environmental health and safety engagement model which proposes the potential success and advantages of sustainability objectives. A long term commitment into the complete development cycle is imperative in integrating sustainability in any company (Harland, 2008). 3.0 Critical Analysis 3.1Contextual Issues Thisproject has a profound effect on the environment, society and economy as a whole. The project has estimated an unprecedented 47 % reduction of the greenhouse gases (UNFCCC, 2013). Although its utilization has a limited effect on temperature change, the discharge of waste into the sea will affect aquatic life to a certain level. Nevertheless, the ecological modernization perspective suggests a mitigating approachwhere resources are made less wasteful and more sustainable, whilst retaining the primary capitalist consumption and production (Jaber, 2008). The ecological Modernization Theory (EMT), advocates that manufacturers can overcome a number of barriers to innovation through complementing technological change and exploring strategic and operational improvement (Mol, 2002). In this reverence, the project will has employed an innovative approach in capturing cold energy and harnessing its power. The sustainable modernization theory, on the other hand, suggests the need to include and weigh additional social metrics and influences pertaining to a sustainable approach (Mol, 2002). This project will have a profound effect on the society. The construction of such a plant will create job opportunities for the residence within the region. Tentatively, the citizens of China, as the immediate market, will benefit from the potentially cheap LNG cold energy. From an economical perspective, the project will result to an increased economic gain from the sale of the product. By 2025, the global market for LNG product should create a room for all projects that are presently referred to as “possible” (Refer to table 1). Nevertheless, unless there is a sustainable growth in LNG demand, the construction of “speculative” projects will project the increased supply-side competition (International Energy Agency, 2012). 3.2Emerging Industry Trends LNG demand is anticipated to increase, particularly through to 2020. A broad understanding of the industry projects an annual growth in demand of about 5 % per year (Deutsche Bank Market Research, 2012). LNG cold energy is expected to increase albeit a slower pace as the market shifts to a more price sensitive buyers (International energy Agency, 2012). The present Five Year Plan in gasifying its economy necessitated an increased energy mix from 4 % in 2010 to about 8 % by 2016 (Duanz, 2010). Figure 1: Global LNG capacity and demand Source: EY assessment of data from different sources (Macquarie Equity research Global, 2012) Table 3: China’s natural gas supply and demand balance Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Demand 112 134 162 182 203 225 240 270 310 355 370 Supply Conventional 91 100 115 118 126 137 140 142 150 153 158 Shale 0 0 1 3 4 5 8 12 27 44 67 LNG imports to balance 14 18 20 24 21 28 37 44 46 65 79 LNG imports (mtpa) 10 13 14 17 15 20 27 33 36 48 59 Regas capacity (mtpa) 11 14 18 27 39 43 44 53 59 64 68 Source: Deutsche Bank Market Research, Gorgon & Global LNG Monster, 2012 Table 1: The table present priority policy. Residential Sector Power Sector Chemical feedback Industrial Fuel Priority City residential Combination of power system and coal Allowance Centralized air conditioning and heating Peak shaving power Low economical hydrogen projects Substitution of projects with environmental and economic benefits Confined Non-essential load power generation Exploitation of ammonia projects Prohibited Methanol exploitation Source: NDRC 3.4Comparison study benchmark Osaka Gas LNG Terminal As a leading company in LNG cold energy utilization, Osaka gas has championed in harnessing coldenergy. It has applied LNG croyogenic energy which has achieved large energy savings as opposed to its primary process (Osaka Gas, 2014). Through its sustainable approach,it has considerably reduced the amounts of fuel consumed of about 1000Kl per year. Consequently, it has sustainability reduced carbon emissions by 50,000 t CO2 annually (Osaka gas, 2014). In Japan, about 25 % of the LNG cold energy was incorporated and records an increased usage of cold energy (Osaka gas, 2014). British Sugar British Sugar’s factory at Wissington has effectively captured waste heat from the animal feeds and reusing in producing bioethanol energy. The company initiated its first bioethanol plant in 2007, which produces 70 million litres of biofuels per year (Alberici, 2014). Such realization has improved its sustainability approach in effective utilization of the bio-waste (Alberici, 2014). 3.5Partners As one of the potential partners, SinoView acts as an advisory to CNOOC’s Hainan LNG project in making proffered analysis, suggestion and action plan for the existing problematic LNG projects. CNOOC aims at using SinoView as its future contractor in future projects. As part of the SinoView team, I am tasked with finding technical solutions in mitigating CNOOC previous design failures that had hindered the successful implementation of the project. 3.6Challenges Experienced in the Advancement of the project 3.6.1 Design failure CNOOC Gas and Power Co altered its facility.Therefore, the company built the Hainan LNG site to act as China’s internal storage hub. Hence, the overall layout of the project was tremendously adjusted. As a result of the design flaws, most of the cold energy was wasted. A substantial amount of landwas used for construction of the contractor’s camp in facilitation of the terminal’s construction. A number of design flaws were witnessed in different applications. 1. Cryogenic Power Generation was not considered in the design phase. Hence it is increasingly difficult to alter its design changes and conversion in suiting some of its operational needs. 2. Cryogenic Pulverization of plastic waste: Recycling channels for such waste have not been standardised. The inefficiency of the recycling systems and reduced demand for the product has result to reduced economic viability of recycling the plastics. 3. Transportation of cold energy from the site is challenging as a result of inadequate transport infrastructure in the region given the site’s geographical inaccessibility 4. Ice making: The ice making project has suffered considerable inefficiency and has faced limited use given its relatively reduced demand for the product. 5. Refrigeration & Cold Storage The project is located in the chemical industry . Hence, it might not be suitable to construct a cold storage and refrigeration for frozen foods. 3.6.2 Application Challenges i. Different consumption pattern between cold energy use and LNG Given that the regasification of the station is not attuned to the downstream gas users’ demand, consumption is subject to vary according to the cold user demand (Citation manager). The main types of fluctuations are seasonal fluctuations and daily rhythmic fluctuations. The fluctuating demand is affected by the market such that, an increased demand implies an increased distribution for the product. The non-synchronous time is attributed to the lack of sufficient land for docking, storage tanks and gasification facilities. ii. Security, costand load regulation ofdistant, cold energy utilisation The resultant usage of the available land has resulted to the increased construction costs, partly from the increased pipeline construction cost. The increased construction cost has challenged the development of the project given the alteration of variables accompanying the implementation of the project. These changes raise two pertinent questions; load regulation and security. Pipelines are susceptible to vandalism both on the transported product and the pipeline’s infrastructure, thus increasing the maintenance cost (Bello, 2007). LNG gasification operation are monitored from a control station. It is, therefore,difficult to disperse such services over a longdistance (Foss, 2012).Such an operation will result in theoperation deficiency in supporting multiple cold energies (Foss, 2012). Eventually, the project will be rendered inefficient given the services it offer to its consumers. An increased transportation distance of the product could potentially damage the product (Foss, 2012). Foss (2012) articulates that since the gas is transported under extreme pressure, longer distance will reduce the pressure that may affect its distributed volume and increase the product’s temperatures. iii. Synchronisation disparity between LNG gasification operation and users of cold energy. The regasification terminal has been designed to consider the volumetric sizes of the LNG storage tanks and vaporisation facilities, it, therefore, does not occupy a large area. Nevertheless, these facilities are not synchronised with the terminals. These terminals comprise of the downstream user namely ASU, cold storage, waste tire and cryogenic grinding which require larger storage capacity. 3.6.3 Limited Experience SinoView Company has limited knowledge in the field of LNG cold utilization technology (Citation manager). As such, it lacks an extensive experience in the technology, given its partial understanding of the technology to pursue CNOOC’s project. It is paramount for a company to obtain substantial experience in the industry, in order to effectively undertake such a project (Citation Manager). The technicalities involved in LNG project articulates the need to understand the operation and fundamental principles pertaining to LNG technologies. 3.6.4 Language Barrier Language barrier is problematic given that SinoView does not have fluent English speaking engineer (Citation manager). English Proficiency is key in creating an understanding within the operating teams in developing a strategic approach for the project. Communication is key to any organisation in conveying intended information (Gopinath, 2000). An understanding and inputs from different department is significant in creating efficient solutions (Gopinath, 2000). Language barrier will further hamper the speedy understanding of CNOOC’s existing strategic plan and present the relevant recommendation to affectedpartners. 3.6.5 Lack of Government Support Evidently, there is a lack of support for the LNG projects by affiliated government entities. China’s central government energy authority is drafting policies with regards LNG cold utilization project which impose tax incentive, land prioritization, and price subsidization (Duanz, 2010). Such impositions are not garnered towards the economic viability of the project. 3.7Amount of Carbon Dioxide and Electricity Saving Estimation Harnessing the cold energy can substitute electrical power that accounts for about 95 % of China’s energy usage (Stanley, 2013). As a substitute, the cold energy can be commercially exploited against the population and effectively used in generating viable income for the state. The LNG project’s worth can be estimated at 375 million Yuan/year at a price of 0.5 Yuan/kilowatt (Citation manager). Upon commercial exploitation, the projectexpects toproduce in excess of LNG 300 tons /year, the equivalent of about 250 Kilowatts of electrical power (750 million kilowatts per year) (CHP Emissions Calculator, 2014). 750 million kilowatts of power translates to about 570, 075 tonnes worth of carbon emission (CHP Emissions Calculator, 2014). Thisemission can be likened to 108, 876 vehicles carbon emissions; 58, 193, 232 gallons of the consumer gasoline and 555, 492, 213 pounds of burned coal (UNFCCC, 2013). Theapplication of Hainan’s cold energy will save 285, 037. 5 Tonnes are worth of carbon emissions per year (UNFCCC, 2013). Table 2: LNG Emission Calculator Annual Emission Analysis Displaced electric Production LNG System Emission Fuel Reduction Percentage Reduction NOX 27.8 20.35 20.35 50 % SO2 167.11 0.13 167.05 100 % CO2 33,601 25,885 22.794 47 % CH4 0.965 0.049 0.761 61 % N20 0.538 25.910 0.517 91 % Total CHGs per year 33,788 25, 980 22,970 47 % Fuel Consumption 380,909 442,855 196,018 31 % Carbon 8308 6400 5636 47 % 3.8Risks The principal risk for the LNG demand emanated from the global and regional economies uncertainties and increased gas-on-gas competition (Alawode, 2011).As an emerging market, China has witnessed a restrained growth subject from the knock-on effects of advanced economies.Conventional expectation of China’s economy is stabilizing and growing more strongly.Nevertheless, the downside risks are significantly high, and with some risks, uncertainties in energy demand growth are expected to grow. Other risks Table 4: Risks Lack of information Technological barriers Overcoming Estimated energy systems High Cost of Pipelines Work Force Skills and training Performance Risk X Physical risk X Time Risk X Social risk X Psychological Risk Financial Risk X X X 4.0 Conclusion i. Exploit the untapped LNG market It is recommended, therefore that the company should effectively understand the dynamic nature of the energy market and create effective mitigating strategies in defying the economic risks associated with LNG. Itis advisedthat the company merges with other companiesin order to reduce the expenditures incurred, and investment risk compounded by the uncertainties in energy demand growth. A probable merge with a pipeline company will effectively reduce its start-up cost in laying the pipelines. The company should effectively tap the global market in maintaining or increasing its revenue base. The continuous growth in demand for cold energy has been witnessed in the global market for LNG cold energy. For instance, the UK market has potentially exploited the biofuel alternative, leaving out a great opportunity for LNG technology (Alberici, 2014).LNG technology can attract these market given its diversified usage. On the other hand, industrialized regions such as U.S offers a ready market for the products. The regional perspective has fuelled the strong demandby Asia, and an extensive perspective suggested by analysts at J.P Morgan referred to as investible, durable and politically charged themes (JPMorgan, 2012). These are; i. National energy Supply security, which oversees supply diversity and flexibility. ii. National energy infrastructure renewal, aimed at improving the system’s resilience to supply/demand shocks, reduce unemployment and stimulate investment. iii. Increased popular opposition to nuclear power generation. iv. De-carbonization of economic growth as a socio-economic imperative in displacing coal. ii. Strengthen Core Risk Management capabilities. The exploitation of the energy market demands an effectiverisk management plan. Allocation of resources that develop and maintain the capabilities of all the levels of the organisation are essential in the risk management cycle. The company should invest in R&D programs that can oversee the future insights of the energy market. R & D will create divergent approaches and increased product range of LNG. Uncertainties in the market can ultimately affect the company’s success. In this respect, a three step risk management analysis should can, therefore,be integrated; Step 1:Developing a list of trigger events that may affect the economic outlook of similar outcomes that could emanate from such trigger events. Each macro-economic world scenarios should be analysed, and its qualitative effects in the business assessed. This will help the managers think widely on the past threat and opportunities and build an understanding on the strategic priorities and outlook. Step 2: Developing the macro-world scenario to a set of economic forecast. Economic forecast emanates from the industries and geographies using econometric levels. It is important that SinoView uses an established econometric models since it will facilitate a follow-on-effect in the questioned economy. Step 3: Understanding the impact of economic forecast in the business performance. Macro-worlds can be linked to financial forecast through creating “value-driver trees” for the business and defining how these value drivers affect the macro-economic variables. iii. Monitor and Develop Proficient Inspection systems The subsequent implementationof proficient inspection systems will oversee the accurate design and development of facilities, supplemented by minimum standards for facility design. Its implementation will necessitate the need to create a design plan that will consolidate various operational aspects of Cryogenic power generator and ice making process. This approach will offer a comprehensive solutions of individual maintenance, repair and inspection services. Such a platform can be used in digitally capturing the inspection during design phase in managing multiple facility assessments. Assistance for the development and improved training of specialised services to the staff members will essentially help with the overall inspection process. The provision of interoperable and modern equipment training will increase and in-depth understanding of LNG technology. Training programs will potentially increase the company’s competitive advantage and increase its propensity to champion future CNOON’s project. 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