Estimating Capital Cost of Small Scale LNG Carrier

M. Habib Chusnul Fikri

1∗

, Jooned Hendrarsakti

, Kriyo Sambodho

, Frengki Mohamad Felayati

Nilam Sari Octaviani

, Mohamad Jeffry Giranza

, and Gregorius Andrico Hutomo

Faculty of Mechanical and Aerospace Engineering, Institut Teknologi Bandung, Indonesia

Faculty of Marine Technology, Institut Teknologi Sepuluh Nopember, Surabaya, Indonesia

Faculty of Earth Science and Technology, Institut Teknologi Bandung, Indonesia

Keywords:

Capital cost estimation, LNG transportation

Abstract:

While the LNG industry has traditionally focused primarily on development of ever increasing plant capacities,

the maturity of the technology has allowed development of technologies applicable for small volumes to be

competitive and potentially economically attractive. The main challenge for small scale LNG applications is

therefore not technical but economic. In Indonesia, the demand for small scale LNG transportation is entering

a new phase of market trends, especially in East Indonesia. In East Indonesia region, there are a lot of planned

location for new natural gas fuelled power plant. The demand for each location is relatively small, mostly

around 1 to 10 mmscfd. However, such locations scattered around East Indonesia, creating new challenges

for small scale LNG distribution solution. This paper provides an estimating method of capital cost for small

scale LNG carrier around 7,500 – 30,000 m

cargo capacity. The estimating method veriﬁed by comparing two

different approach; (i) regression method using market price data of new built LNG Carrier and (ii) estimating

each cost for ship steel weight, outﬁtting weight, machinery weight and self-supporting LNG tank capacity.

The result shows that the difference is below 10%.

1 INTRODUCTION

In Indonesia, according to National Gas Balance is-

sued by Ministry of Energy and Mineral Resources,

the demand of LNG as primary energy source is pro-

jected to be increase up to 8,000 to 9,000 mmscfd

(General Directorate of Oil and Gas Resources Min-

istry of Energy and Mineral, 2016). The problem is,

in most places in Indonesia, the demand locations are

scattered and requires small scale LNG carrier to dis-

tribute the LNG. SSLNG or small scale LNG carri-

ers are deﬁned as vessels with a LNG storage ca-

pacity of less than 30,000 m

(Hekkenberg, 2014).

The emerging market for LNG, especially new build

power plants that going to be on-stream at the year of

2019 – 2021 are the main of market shift from con-

ventional or big scale LNG shipment into small scale

LNG shipment. The problem is, there are no previous

similar supply chain model or cases, which can be

taken as a benchmark example for small scale LNG

market in Indonesia. On other hand, the stakehold-

ers and especially the government itself and investors

still in the problem to estimate and determine the most

economic LNG supply chain model for east Indone-

sia. To accurately estimate the costs of LNG supply

chain and logistic is the one of key factor that should

be needed in order to estimate and determine the most

economic LNG supply chain model for east Indone-

sia. However, until today there is common method

to estimate small scale LNG infrastructure, except by

looking at market price, quotation or looking at pre-

viously done project which is very rare in Indonesia.

There is only one small scale LNG Terminal in In-

donesia which is Benoa LNG Terminal, Bali. But, the

information about the price and cost of those utilized

units are limited as well.

In conventional LNG trading and LNG shipment,

typical cargo capacity of 125,000 m

up to 145,000

is referred as standard of one cargo LNG ship-

ment. In 1978, LNG several carriers with 125,000 m

cargo capacity start its service to deliver LNG from

Indonesia to Japan. One of them, LNG Aquarius, is

still in service to deliver LNG from Tangguh LNG to

FSRU Nusantara Regas, one of the FSRU in Indone-

sia. In 1990s, Hyundai Heavy Industries in Korea,

today is world’s largest shipbuilding company, start

to build LNG carrier with capacity up to 138,000 m

with 280 m in length, 43 m in width and 26 m in depth

Fikri, M., Hendrarsakti, J., Sambodho, K., Felayati, F., Octaviani, N., Giranza, M. and Hutomo, G.

Estimating Capital Cost of Small Scale LNG Carrier.

DOI: 10.5220/0008542102250229

In Proceedings of the 3rd International Conference on Marine Technology (SENTA 2018), pages 225-229

ISBN: 978-989-758-436-7

225

or height of the LNG ship. Those sizes of LNG car-

rier are historically used to transport large portion of

LNG volumes under long-term and ﬁxed destination

contracts.

In recent years, there is new trend of LNG trad-

ing which is conducted in smaller scale and shorter

contract. Over the past decade, a growing number of

cargoes have been sold under shorter contracts or on

the spot market. This “non long-term” LNG trade has

been made possible by the proliferation of ﬂexible-

destination contracts and an emergence of portfolio

players and traders. These market changes are the re-

sult of mainly two key factors: (i) The growth in LNG

demands with destination ﬂexibility, which has facil-

itated diversions to higher priced markets, (ii) The

increase in the number of exporters and importers,

which has ampliﬁed the complexity of the industry

and introduced new permutations and linkages be-

tween buyers and sellers.

Such as in Indonesia, emerging and immature

markets joining the global LNG market requires cre-

ative supply solution. Smaller and multi-destination

characteristic of LNG market in Indonesia, creates

such a challenging problems which has never been

before. Small scale LNG supply therefore is need to

be accurately and efﬁciently developed. There is very

litter publicly available data about small scale LNG

carrier moreover is information about new building

cost.

2 INVESTMENT ANALYSIS

A SSLNG carrier’s investment cost is higher per ton

LNG compared to large scale LNG vessels. For ex-

ample, the investment cost (CAPEX) for a 215,000

LNG carrier is approximately USD 250 million, a

135,000 m

LNG carrier is approximately USD 170

million, and a 28,000 m

LNG carrier is approxi-

mately USD 80 million. This relates to a capital ex-

penditure for SSLNG ships to be typically in the range

of 5 – 15 thousand USD/ton, while large conventional

shipping is 2 – 5 thousand USD/ton (Hekkenberg,

2014). Another rough cost estimation for a SSLNG

carrier about 6,000 m

is USD 45-55 million (Inter-

national Gas Union, 2015), about 12,000 m

is USD

50 million and about 30,000 m

is USD 105 million

(Kanfer Shipping, 2014). Keppel Shipyard which is

located in Singapore, acquired new build order of two

7,500 m

LNG ships with each cost about USD 37

million (Regan, 2017). Based on current ongoing

project run by the author, estimated new build cost

of 22,500 m

LNG carrier is USD 80 million..

3 MARKET ANALYSIS

In this paper, new build cost estimation of small scale

LNG carrier is done by considering various param-

eter such as weight of steel, volume of cargo tank,

capacity of the particular equipment and also princi-

pal particular of the ship itself such as length, width

and height of the ship. This study will estimate three

size types of the ship which are 7,500 m

; 22,500 m

;

and 30,000 m

based on the data availability. As men-

tioned before, the estimation method requires speciﬁc

technical information of the LNG carrier.

Therefore, the study is limited according to data

availability. The methodology is using empirical

equation to estimate the overall ship construction cost.

The ship structural weight, outﬁtting weight, diesel

engine weight and remainder weight. After that, the

cost of the ship construction is estimated using weight

based estimation. The cargo tank cost is estimated us-

ing volume based estimation. The cargo pump is es-

timated using six-tenths rule (Tractebel Engineering

S.A, 2015). The cargo piping is estimated using per

meter per inch based estimation.

The main propulsion system and power generation

system on-board, are estimated using per kW or per

kVA based estimation. The bilge and ballast system,

which contributing in a lot of piping construction, the

cost is estimated using per meter of ship length basis.

The cost of mooring gear is estimated as per m

basis

of LBT of the ship. The total estimation of construc-

tion cost is then compared by actual price of similar

scale of LNG ship, obtained from market information.

4 WEIGHT ESTIMATION OF

LNGC SHIP

4.1 Structural Weight

Lloyd Equipment Number is a dimensionless param-

eter used to determine the size and number of anchors

and chain cables for a new ship. The Lloyd’s equip-

ment numeral (E) of 1962 is no longer in use for the

determination of ship’s anchors and cables, hawsers

and warps; it was replaced in 1965 by a new numeral,

which is now common to all classiﬁcation societies

having been agreed to be a more rational measure of

the wind, wave and current forces which act on a ves-

sel at anchor. The new numeral, however good it is

for its primary purpose, is not a suitable parameter

against which to plot steel-weights, but the reasons

given for the use of the old numeral still stand, the use

of Lloyd’s equipment numeral of 1962 was advocated

SENTA 2018 - The 3rd International Conference on Marine Technology

226

Figure 1: Deﬁnition of l

; h

; l

, and h

(source: private

document).

as a basis for estimating steel-weight in preference to

the numerals L × B × D or L(B + D) which were in

common use at that time.

E = L(B + T)+ 0.85L(D − T ) + 0.85(I

)

+ 0.75(I

)

(1)

where l

and h

= length and height of full width

erection; l

and h

= length and height of houses. Fig-

ure 1 gives a visual illustration of the parameter in the

Equation 1. The ship steel weight can be estimated

using following formula (Turton et al., 2012).

= KE

1.36

[1 + (C

− 0.70)] (2)

4.2 Outﬁtting Weight

To estimate the outﬁtting weight for a new merchant

ship was by proportioning the outﬁt weight of a sim-

ilar ship on the basis of the relative “square num-

bers”, i.e., LxB, B, and then making corrections for

any known differences in the speciﬁcations of the “ba-

sis” and “new” ships (Turton et al., 2012) . For typical

tanker, the value for outﬁtting weight is estimated by

following empirical equation.

= 0.23 (3)

4.3 Diesel Engine Weight

The base parameter used is the maximum torque rat-

ing of the engines as represented by MCR or RPM, it

was commented that most of the current engines con-

formed remarkably closely to a mean line represented

by following formula(Turton et al., 2012).

= 12



MCR(kW)

RPM



0.84

(4)

4.4 Remainder Weight

Remainder things are such installations of engine

room required such as piping, ﬂoor plates, ladders,

gratings, vent trunks, etc. The base parameter used is

Figure 2: A Type C tank being installed.

also engine MCR represented by following formula

(Turton et al., 2012).

= 0.72MC

0.7

(5)

5 COST ESTIMATION OF LNGC

SHIP

5.1 Cargo Tank

One distinctive difference between small and large

scale LNG carriers is the allowable pressure in the

ship. There are two main types of LNG cargo stor-

age tanks: (i) membrane tank and (ii) self-supporting

tank. As a general rule, the main selection criterion to

choose one or the other is the volume of LNG to be

stored. For larger LNG volumes, membrane tank is

the optimum solution, due mainly to their great vol-

ume efﬁciency characteristic. Figure 2 shows the pro-

cess of installing the pre-fabricated IMO type C LNG

tank on the hull of LNG ship.

For small volumes the IMO type C insulated tanks

are the best option for several reasons : short delivery

time, can be built in the workshop (maximum vol-

ume of per unit of 1,000 m

), simpler and less ex-

pensive foundation system, allows modular and se-

quential construction and lower boil-off gas genera-

tion from heat ingress.

The small scale ships often have IMO type C tanks

(pressure vessels). So far, recent small LNG carriers

are all designed with type C tanks. The advantage of

type C tanks is that there is limited or no need for boil-

off gas management within speciﬁed duration. For

example, the BOG will be contained within the tank

resulting in rise of pressure and temperature until it

reaches the designed relieving pressure of the tank.

Disadvantages of Type C pressure tanks are reduced

Estimating Capital Cost of Small Scale LNG Carrier

227

volumetric efﬁciency, limited tank size and increased

weight compared with atmospheric tanks. Cost of

LNG Storage is roughly 1,600 to 2,000 USD/m

for

volume 1,000 m

to 15,000 m

and 1,000 to 1,300

USD/m

for volume 15,000 m

to 30,000 m

(Wat-

son, 1998).

5.2 Cargo Pump and Piping

For cargo pump, the most common simple relation-

ship between the purchased cost and an attribute of

the equipment related to units of capacity is given by

following relation.





(6)

where A = equipment cost attribute, C = purchased

cost and n = cost exponent. The equipment cost at-

tribute is the equipment parameter that is used to cor-

relate capital costs. The equipment cost attribute is

most often related to the unit capacity, and the term

capacity is commonly used to describe and identify

this attributes. Some typical values of cost exponents

are given by reference (Tractebel Engineering S.A,

2015). The value of cost exponent, n, used varies de-

pend on the class and type of the equipment. How-

ever, if such a value is not known, the value of n for

different items of equipment is often around 0.6 pro-

vides the relationship referred to as the six-tenths rule

(Tractebel Engineering S.A, 2015). Some cost data

of LNG cargo system and its technical speciﬁcation

is available as private documentation from previous

projects. For cargo piping system and the available

data from previous projects, typical insulated cryo-

genic piping cost is around 1,000 USD/meter/inch.

Table 1: Results of Cost Estimation

LNGC (m

) Market Price Estimated Price Dev.

7,500 $ 37,000,000 $ 36,011,533 2.7%

22,500 $ 80,000,000 $ 75,649,529 5.4%

30,000 $ 105,000,000, $ 97,737,663 6.9%

5.3 Others Approximate Cost Data

Hull Cost: The cost estimate of cost of the ship’s

hull can be estimated in various ways. Commonly

accepted values are in the range of 2.5 to 3 EUR/kg.

The second main aspect of the cost of the hull, being

the cost of the purchased materials, is directly related

to the amount of steel that is used to build the hull

structure. Multiplying this weight with the steel price

per ton will result in an acceptable ﬁrst estimate of the

material cost of the hull.

Propulsion: For the determination of the cost of

the propulsion system several rules of thumb exist.

According to previous projects done, typical value

of main engine is about USD 350 per kW. For pro-

pellers, shafting and attached hydraulics (if any) is 55

EUR/kW for a ﬁxed pitch propeller at 100 rpm and

65 EUR/kW for a ﬁxed pitch propeller at 250 rpm.

For the gear box, values are not quoted in terms of

EUR/kW, but as 15-25 EUR/kg of gearbox weight.

When a weight 2 kg/kW is assumed as a standard

gearbox weight, this brings cost of the gearbox to

roughly 40 EUR/kW.

Electrical System: The cost of electrical system

is hard to estimate, especially since it interacts with

virtually all other systems and is, therefore, very ship-

speciﬁc. Generator sets are cost is estimated at 175

EUR/kW, while the cost of the total electrical system

(including gensets) is estimated at 500 EUR/kVA.

Bilge and ballast systems: Bilge and ballast sys-

tems are related to vessel length and are estimated to

cost EUR450 per meter of ship length.

Mooring gear: The cost of mooring gear is esti-

mated at 13 EUR/m

of LBT, based on a quotation

and the reasoning that L,B and T of the vessel all af-

fect the forces on the anchors.

Outﬁtting: Outﬁtting cost, being generally recog-

nized as one of the most difﬁcult and design speciﬁc

factors to calculate, is determined as a function of out-

ﬁtting weight to the 2/3 power both by Watson (1998).

Based on the reference, the cost of outﬁtting is esti-

mated at EUR40000*W

2/3

, with W, expressed in ton

of outﬁtting weight, subdivided in The coefﬁcient of

40000 is again provided by reference.

6 RESULTS AND DISCUSSIONS

In this paper, the study estimates three size types of

the ship which are 7,500 m

; 22,500 m

; and 30,000

based on the data availability. As mentioned be-

fore, the estimation method requires speciﬁc technical

information of the LNG carrier. Therefore, the study

is limited according to data availability.

The results show that the estimated price deviation

from the market price is about 2% - 7%. The discus-

sion will talk about some factors in this study, which

affect pricing of LNG carrier.

Risk Margin: The purpose of having a risk mar-

gin is to ensure the attainment of the speciﬁed dead-

weight even if there has been an underestimate of the

lightweight or an overestimate of the load displace-

ment. The size of the margin should reﬂect both the

likelihood of this happening and the severity of the

penalties which may be exacted for non-compliance.

SENTA 2018 - The 3rd International Conference on Marine Technology

228

When the design is well detailed and clearly speciﬁed

and the light-weight has been calculated by detailed

methods, the margin should in principle be reduced.

When the ship type is novel or the design and/or the

speciﬁcation are lacking in precision, larger margins

are appropriate.

The proﬁt margins raise the question of how much

a customer or shipyard is willing to pay for a cer-

tain probability of project success. In most ship con-

struction contracts at least parts of the risks are trans-

ferred to the shipyard in order to give the right incen-

tives by means of contract penalties for failure to meet

all speciﬁcations. Given competitive pressures to bid

with a small and therefore cheap ship design, the ship-

yard needs to balance construction cost against the

risk of having to pay penalties. Lowering margins

for example would lower construction cost because of

the size reduction of the vessel but also increases the

yard’s exposure to the risk of potentially paying high

penalties or even having the customer refuse the ship,

which could put the shipyard into ﬁnancial distress.

For the customer, the question is whether they

are willing to accept higher bids from shipyards be-

cause of his stringent performance requirements even

though missing those requirements by small amounts

does not have a very signiﬁcant impact on general re-

quired result.

Emerging small scale market: With the LNG

product market expected to remain over supplied,

low prices could motivate more small-scale LNG to-

power projects. Power producers will get access to a

potentially cheaper and cleaner fuel, while LNG sup-

pliers will have new downstream markets to supply.

The development and maturation of LNG technol-

ogy is seen as the key enabler to give more efﬁcient

and cost-effective small scale LNG supply chain pro-

cesses altogether with other technologies are being

developed and market for LNG as transport fuel is

rapidly developing.

7 CONCLUSIONS AND

RECOMMENDATIONS

In this paper, a method to estimate the building

cost of small scale LNG carrier was presented. Fur-

thermore, this method was used to derive easier-to-

use rules of thumb for the cost of small scale LNG

ship for which only cargo volume, engine power,

length, width height and draught of the ship are

known. The method has been validated for a three

size of ships with particular main dimensions. There

is however still signiﬁcant room for improvement in

the underlying data of the model and its validation.

It is, therefore, recommended to continue to gather

information on the building cost of small scale LNG

ships in the future and to use this information for fur-

ther ﬁne-tuning and validation of the method.

The aim of this paper is to introduce a method of

small scale LNG ship capital cost estimation which is

still rare and not widely known. Especially in Indone-

sia which the LNG market is shifting into new pattern

of supply chain, the method in this paper should be

able to be used as an initial estimation of small scale

LNG ship capital cost.

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