Cleaning Up Liquid Natural Gas Supply Chain

Air Liquide (AI:  Paris) recently stepped up marketing and sales efforts for liquefied natural gas (LNG) equipment used in ocean transport.  The company’s patented equipment helps conserve LNG cargo and reduces greenhouse gas emission during transport.  Air Liquide claims an installed base of fifty systems that collectively have had the potential to reduce carbon dioxide emissions by 240,000 tons per year.

Ordinarily a big player like industrial gas supplier Air Liquide would not be a subject for a column devoted to small cap companies.  However, the success of Air Liquide’s marine transport equipment could ripple down the LNG supply chain, improving the contribution of natural gas as a near-term substitute for nastier fossil fuels like coal and oil.  This has implications for some of the smaller companies participating in the LNG supply chain.

U.S. developers in particular are keen on natural gas.  When coal is burned it releases 228.6 pounds of carbon dioxide for every million British thermal units of energy it produces.  For diesel fuel it is 161.3 pounds per BTU and natural gas 117.0 pounds per BTU.  Natural gas is still a fossil fuel, but when put into play as a replacement for coal and diesel fuel it offers an immediate reduction of CO2 emissions.

Unfortunately, natural gas is difficult to transport and store.  Conversion to liquid form is an attractive option and is particularly helpful in solving the problem of stranded natural gas.  Cryogenic technology called turbo-Brayton, which was originally developed to handle biological samples at the International Space Station, is used to chill and store natural gas in its liquid form.   To export natural gas in liquid form to a distant buyer it must be moved on specially designed ocean-going vessels with large containers effectively functioning like big thermoses to keep the liquid gas cool during shipping.  If the liquid warms up too much it starts to ‘boil’ over during the trip. 

Air Liquide has patented an improvement to the turbo-Brayton cryogenic technology, making it perfectly suited for LNG carriers.  Air Liquide’s system uses subcooling to reliquefy gas that might otherwise boil off.  This conserves the LNG in the storage units.  This means shippers will get to market with more LNG volume.

LNG carriers using Air Liquide’s system can save in a second way.  Historically tankers have been powered with steam turbines driven by methane- or oil-fired boilers fueled.  Any gas produced in a boil-off of natural gas is typically diverted to the boilers as supplemental fuel.  With the boil-off reduced carrier owners can switch to slow-speed diesel or electric propulsion systems that cause lower greenhouse gas emissions.      

The first LNG vessel Methane Pioneer went into service in 1959, carrying LNG from Louisiana in the U.S. to the United Kingdom.  Today there are about 550 LNG tankers navigating the globe. The MOZAH vessel of Qatar is the world’s largest LNG carrier today with capacity of 266,000 cubic meters.  It is about the size of four football pitches.  Air Liquide’s system can be retrofitted onto any of these existing vessels as well as installed on new LNG carriers. 

Several of the carrier fleets are owned by the public companies listed below.  These smaller companies are the big winners from Air Liquide’s technology that leads to more efficient use of resources. 

 

LNG Shipper	Sym	Price	Market Cap	Revenue Mil	Forward P/E	Dividend Yield
Dynagas	DLNG	$1.77	$62.8 M	$127.6M	na	14.29%
GasLog LP	GLOG	$5.74	$460.2M	$664.4M	11.17	10.7%
GasLog Partners	GLOP	$3.94	$191.9M	$379.7M	na	13.19%
Golar LNG Ltd.	GLNG	$12.80	$1.16B	$448.8M	22.88	na
Golar Partners	GMLP	$4.27	$284.8M	$299.7M	17.62	39.34%
Heogh LNG	HMLP	$12.90	$551.0M	$145.4M	11.30	14.83%
Navigator	NVGS	$9.29	$696.2M	$303.6M	na	na
StealthGas	GASS	$2.77	$144.6M	$144.3M	na	na
Teekay LNG	TGP	$12.63	$1.0B	$601.3M	na	6.05%

     

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.