A ground-breaking initiative marks the first time that Wartsila has brought together its renowned marine business and its equally well-established power division, writes
“It’s a solution, not a product.”
That’s how Nicolas Leong of Wartsila describes the company’s LNG-to-power concept.
The initiative marks the first time that Wartsila has brought together its renowned marine business and its equally well-established power divisions.
And Leong believes that being able to provide a “complete value chain” solution is what will make LNG-to-power a success.
The idea is simple but ambitious: Wartsila will provide a power plant that can run on LNG: it will provide the infrastructure for the ships delivering the fuel – and it will also design those vessels.
It’s a completely bespoke service, because those LNG vessels will need to be designed to be able to berth in potentially quite shallow waters.
Leong, who is Business Development Manager, Sales, for South East Asia & Australia at Wärtsilä Singapore, says: “Within Wartsila we have marine solutions, which has designs for small LNG carriers: we have all the equipment for those and we know all the shippers and chartering companies.
“And on the energy solutions side, we have Wartsila development and financial services, which can arrange financing – which is the first step. Then we have the technology: we can establish which is the best option and also how to arrange the shipping and logistics. We have the EPC team that can build the plant, and then we have the operations team. We can do everything, whereas some of our competitors only focus on a segment.”
Having started to put the LNG-to-power plan together in 2013, Wartsila first rolled out the initiative in its home country of Finland.
Now it is ready to take it to an international market, and a region that Wartsila believes is ripe with opportunities is Asia.
“It’s a solution that is particularly suitable for the Asia market,” says Frederic Carron, Regional Director, Sales, for South East Asia & Australia at Wärtsilä Singapore. “In that region, a lot of heavy fuel is being burnt and everyone is looking for options to turn to gas.
“Or in many places gas is not available, so companies are looking for LNG. This is the transition in Asia.”
And even if gas – LNG or natural – is not available in a particular area, Carron says a customer can still push ahead with the project by utilizing one of Wartsila’s engines that can run on diesel or dual fuel.
“The dual fuel solutions are perfect for those who want to get into it, but they are waiting, so they have the possibility of going with dual fuel first until gas is available.”
Leong highlights that Wartsila has deals in Indonesia “for close to 900 MW and most of them are using dual fuel engines running on heavy fuel oil. But they can switch to LNG once it comes.”
Carron says there is “a lot of interest” in the LNG-to-power solution in Asia: “People want to be prepared for the day when LNG is available.”
But why opt for LNG?
“It’s the environmental aspect,” says Carron. “Nox, sox, particles – they are all reduced. CO2 is also reduced. You also get less maintenance costs from a gas engine than from a heavy fuel oil engine. It runs cleaner. It requires less maintenance. Efficiency is improved – you use less fuel. When you add all those up, LNG will be a clear leader.”
But more importantly it comes down to straightforward logistics and energy needs. “Take two countries,” says Leong. “Country A and B. Country A produces gas and has a surplus; country B needs power and they need gas. That’s why we have LNG. To move gas from a country that produces it to a country that needs it. That’s what you can see in Myanmar now.
“That’s what the whole concept is about. In Asia there are so many islands, so LNG by ship or by barge is the best option.”
Again, he cites as an example Myanmar, which wants gas and has discovered new fields, but will not be able to realize the potential of those finds until around 2025.
“So, until then, they can have LNG. The Philippines and Indonesia have a similar appetite for gas.”
Carron says that although Asia is the biggest importer of LNG today, the dynamics of energy in the region are changing and this is true of the way LNG is distributed and utilized. In the past, this would have involved floating storage and regasification unit vessels, but he explains these ships “are huge so they need a minimum of a 1 GW plant behind it”.
“Gone are the days in Asia when you have these 1000 MW CCGTs. Now you have distributed generation across small islands.
“And in Asia people are taking a cautious approach to new investments – they think, ‘let’s start with 50 MW or 100 MW’.”
Carron says a challenge of the LNG-to-power concept in Asia is that in many cases Wartsila is contracted to use local contractors for some of the work, particularly on the shipbuilding side of a project. But with that challenge comes an opportunity to extend the local value chain.
“Shipyards are hungry for business,” says Carron.
The LNG-to-power concept is attracting a lot of interest and gradually that interest is being converted into hard cash. How does Wartsila see the strategy growing?
“In five years’ time, it will be a half a billion-dollar business for Wartsila,” says Carron.