Estimating Capital Cost of Small Scale LNG Carrier

M. Habib Chusnul Fikri1∗ , Jooned Hendrarsakti1 , Kriyo Sambodho1 , Frengki Mohamad Felayati2 ,
Nilam Sari Octaviani2 , Mohamad Jeffry Giranza3 , and Gregorius Andrico Hutomo3
1 Faculty of Mechanical and Aerospace Engineering, Institut Teknologi Bandung, Indonesia
2 Faculty of Marine Technology, Institut Teknologi Sepuluh Nopember, Surabaya, Indonesia
3 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 m3 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 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
In Indonesia, according to National Gas Balance is- economic LNG supply chain model for east Indone-
sued by Ministry of Energy and Mineral Resources, sia. However, until today there is common method
the demand of LNG as primary energy source is pro- to estimate small scale LNG infrastructure, except by
jected to be increase up to 8,000 to 9,000 mmscfd looking at market price, quotation or looking at pre-
(General Directorate of Oil and Gas Resources Min- viously done project which is very rare in Indonesia.
istry of Energy and Mineral, 2016). The problem is, There is only one small scale LNG Terminal in In-
in most places in Indonesia, the demand locations are donesia which is Benoa LNG Terminal, Bali. But, the
scattered and requires small scale LNG carrier to dis- information about the price and cost of those utilized
tribute the LNG. SSLNG or small scale LNG carri- units are limited as well.
ers are defined as vessels with a LNG storage ca-
pacity of less than 30,000 m3 (Hekkenberg, 2014). In conventional LNG trading and LNG shipment,
The emerging market for LNG, especially new build typical cargo capacity of 125,000 m3 up to 145,000
power plants that going to be on-stream at the year of m3 is referred as standard of one cargo LNG ship-
2019 – 2021 are the main of market shift from con- ment. In 1978, LNG several carriers with 125,000 m3
ventional or big scale LNG shipment into small scale cargo capacity start its service to deliver LNG from
LNG shipment. The problem is, there are no previous Indonesia to Japan. One of them, LNG Aquarius, is
similar supply chain model or cases, which can be still in service to deliver LNG from Tangguh LNG to
taken as a benchmark example for small scale LNG FSRU Nusantara Regas, one of the FSRU in Indone-
market in Indonesia. On other hand, the stakehold- sia. In 1990s, Hyundai Heavy Industries in Korea,
ers and especially the government itself and investors today is world’s largest shipbuilding company, start
still in the problem to estimate and determine the most to build LNG carrier with capacity up to 138,000 m3
economic LNG supply chain model for east Indone- with 280 m in length, 43 m in width and 26 m in depth

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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
Copyright c 2020 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
SENTA 2018 - The 3rd International Conference on Marine Technology

or height of the LNG ship. Those sizes of LNG car- 3 MARKET ANALYSIS
rier are historically used to transport large portion of
LNG volumes under long-term and fixed destination In this paper, new build cost estimation of small scale
contracts. LNG carrier is done by considering various param-
In recent years, there is new trend of LNG trad- eter such as weight of steel, volume of cargo tank,
ing which is conducted in smaller scale and shorter capacity of the particular equipment and also princi-
contract. Over the past decade, a growing number of pal particular of the ship itself such as length, width
cargoes have been sold under shorter contracts or on and height of the ship. This study will estimate three
the spot market. This “non long-term” LNG trade has size types of the ship which are 7,500 m3 ; 22,500 m3 ;
been made possible by the proliferation of flexible- and 30,000 m3 based on the data availability. As men-
destination contracts and an emergence of portfolio tioned before, the estimation method requires specific
players and traders. These market changes are the re- technical information of the LNG carrier.
sult of mainly two key factors: (i) The growth in LNG Therefore, the study is limited according to data
demands with destination flexibility, which has facil- availability. The methodology is using empirical
itated diversions to higher priced markets, (ii) The equation to estimate the overall ship construction cost.
increase in the number of exporters and importers, The ship structural weight, outfitting weight, diesel
which has amplified the complexity of the industry engine weight and remainder weight. After that, the
and introduced new permutations and linkages be- cost of the ship construction is estimated using weight
tween buyers and sellers. based estimation. The cargo tank cost is estimated us-
Such as in Indonesia, emerging and immature ing volume based estimation. The cargo pump is es-
markets joining the global LNG market requires cre- timated using six-tenths rule (Tractebel Engineering
ative supply solution. Smaller and multi-destination S.A, 2015). The cargo piping is estimated using per
characteristic of LNG market in Indonesia, creates meter per inch based estimation.
such a challenging problems which has never been The main propulsion system and power generation
before. Small scale LNG supply therefore is need to system on-board, are estimated using per kW or per
be accurately and efficiently developed. There is very kVA based estimation. The bilge and ballast system,
litter publicly available data about small scale LNG which contributing in a lot of piping construction, the
carrier moreover is information about new building cost is estimated using per meter of ship length basis.
cost. The cost of mooring gear is estimated as per m3 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.
2 INVESTMENT ANALYSIS

A SSLNG carrier’s investment cost is higher per ton 4 WEIGHT ESTIMATION OF

LNG compared to large scale LNG vessels. For ex- LNGC SHIP
ample, the investment cost (CAPEX) for a 215,000
m3 LNG carrier is approximately USD 250 million, a
135,000 m3 LNG carrier is approximately USD 170 4.1 Structural Weight
million, and a 28,000 m3 LNG carrier is approxi-
mately USD 80 million. This relates to a capital ex- Lloyd Equipment Number is a dimensionless param-
penditure for SSLNG ships to be typically in the range eter used to determine the size and number of anchors
of 5 – 15 thousand USD/ton, while large conventional and chain cables for a new ship. The Lloyd’s equip-
shipping is 2 – 5 thousand USD/ton (Hekkenberg, ment numeral (E) of 1962 is no longer in use for the
2014). Another rough cost estimation for a SSLNG determination of ship’s anchors and cables, hawsers
carrier about 6,000 m3 is USD 45-55 million (Inter- and warps; it was replaced in 1965 by a new numeral,
national Gas Union, 2015), about 12,000 m3 is USD which is now common to all classification societies
50 million and about 30,000 m3 is USD 105 million having been agreed to be a more rational measure of
(Kanfer Shipping, 2014). Keppel Shipyard which is the wind, wave and current forces which act on a ves-
located in Singapore, acquired new build order of two sel at anchor. The new numeral, however good it is
7,500 m3 LNG ships with each cost about USD 37 for its primary purpose, is not a suitable parameter
million (Regan, 2017). Based on current ongoing against which to plot steel-weights, but the reasons
project run by the author, estimated new build cost given for the use of the old numeral still stand, the use
of 22,500 m3 LNG carrier is USD 80 million.. of Lloyd’s equipment numeral of 1962 was advocated

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 Estimating Capital Cost of Small Scale LNG Carrier

Figure 1: Definition of l1 ; h1 ; l2 , and h2 (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. Figure 2: A Type C tank being installed.

E = L(B + T ) + 0.85L(D − T ) + 0.85(I1 h1 )

(1) also engine MCR represented by following formula
+ 0.75(I2 h2 )
(Turton et al., 2012).
where l1 and h1 = length and height of full width
erection; l2 and h2 = length and height of houses. Fig- Wr = 0.72MC0.7 (5)
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).
5 COST ESTIMATION OF LNGC
Wst = KE 1.36 [1 + (Cb − 0.70)] (2) SHIP
4.2 Outfitting Weight 5.1 Cargo Tank
To estimate the outfitting weight for a new merchant One distinctive difference between small and large
ship was by proportioning the outfit weight of a sim- scale LNG carriers is the allowable pressure in the
ilar ship on the basis of the relative “square num- ship. There are two main types of LNG cargo stor-
bers”, i.e., LxB, B, and then making corrections for age tanks: (i) membrane tank and (ii) self-supporting
any known differences in the specifications of the “ba- tank. As a general rule, the main selection criterion to
sis” and “new” ships (Turton et al., 2012) . For typical choose one or the other is the volume of LNG to be
tanker, the value for outfitting weight is estimated by stored. For larger LNG volumes, membrane tank is
following empirical equation. the optimum solution, due mainly to their great vol-
Wo ume efficiency characteristic. Figure 2 shows the pro-
= 0.23 (3) cess of installing the pre-fabricated IMO type C LNG
LB
tank on the hull of LNG ship.
4.3 Diesel Engine Weight For small volumes the IMO type C insulated tanks
are the best option for several reasons : short delivery
The base parameter used is the maximum torque rat- time, can be built in the workshop (maximum vol-
ing of the engines as represented by MCR or RPM, it ume of per unit of 1,000 m3 ), simpler and less ex-
was commented that most of the current engines con- pensive foundation system, allows modular and se-
formed remarkably closely to a mean line represented quential construction and lower boil-off gas genera-
by following formula(Turton et al., 2012). tion from heat ingress.
The small scale ships often have IMO type C tanks
MCR(kW ) 0.84
 
(pressure vessels). So far, recent small LNG carriers
Wd = 12 (4)
RPM are all designed with type C tanks. The advantage of
type C tanks is that there is limited or no need for boil-
4.4 Remainder Weight off gas management within specified duration. For
example, the BOG will be contained within the tank
Remainder things are such installations of engine resulting in rise of pressure and temperature until it
room required such as piping, floor plates, ladders, reaches the designed relieving pressure of the tank.
gratings, vent trunks, etc. The base parameter used is Disadvantages of Type C pressure tanks are reduced

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SENTA 2018 - The 3rd International Conference on Marine Technology

volumetric efficiency, limited tank size and increased Propulsion: For the determination of the cost of
weight compared with atmospheric tanks. Cost of the propulsion system several rules of thumb exist.
LNG Storage is roughly 1,600 to 2,000 USD/m3 for According to previous projects done, typical value
volume 1,000 m3 to 15,000 m3 and 1,000 to 1,300 of main engine is about USD 350 per kW. For pro-
USD/m3 for volume 15,000 m3 to 30,000 m3 (Wat- pellers, shafting and attached hydraulics (if any) is 55
son, 1998). EUR/kW for a fixed pitch propeller at 100 rpm and
65 EUR/kW for a fixed pitch propeller at 250 rpm.
5.2 Cargo Pump and Piping For the gear box, values are not quoted in terms of
EUR/kW, but as 15-25 EUR/kg of gearbox weight.
For cargo pump, the most common simple relation- When a weight 2 kg/kW is assumed as a standard
ship between the purchased cost and an attribute of gearbox weight, this brings cost of the gearbox to
the equipment related to units of capacity is given by roughly 40 EUR/kW.
following relation. Electrical System: The cost of electrical system
 n is hard to estimate, especially since it interacts with
Ca Aa virtually all other systems and is, therefore, very ship-
= (6) specific. Generator sets are cost is estimated at 175
Cb Ab
EUR/kW, while the cost of the total electrical system
where A = equipment cost attribute, C = purchased (including gensets) is estimated at 500 EUR/kVA.
cost and n = cost exponent. The equipment cost at- Bilge and ballast systems: Bilge and ballast sys-
tribute is the equipment parameter that is used to cor- tems are related to vessel length and are estimated to
relate capital costs. The equipment cost attribute is cost EUR450 per meter of ship length.
most often related to the unit capacity, and the term Mooring gear: The cost of mooring gear is esti-
capacity is commonly used to describe and identify mated at 13 EUR/m3 of LBT, based on a quotation
this attributes. Some typical values of cost exponents and the reasoning that L, B and T of the vessel all af-
are given by reference (Tractebel Engineering S.A, fect the forces on the anchors.
2015). The value of cost exponent, n, used varies de- Outfitting: Outfitting cost, being generally recog-
pend on the class and type of the equipment. How- nized as one of the most difficult and design specific
ever, if such a value is not known, the value of n for factors to calculate, is determined as a function of out-
different items of equipment is often around 0.6 pro- fitting weight to the 2/3 power both by Watson (1998).
vides the relationship referred to as the six-tenths rule Based on the reference, the cost of outfitting is esti-
(Tractebel Engineering S.A, 2015). Some cost data mated at EUR40000*W 2/3 , with W, expressed in ton
of LNG cargo system and its technical specification of outfitting weight, subdivided in The coefficient of
is available as private documentation from previous 40000 is again provided by reference.
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.
6 RESULTS AND DISCUSSIONS
Table 1: Results of Cost Estimation
LNGC (m3 ) Market Price Estimated Price Dev. In this paper, the study estimates three size types of
7,500 $ 37,000,000 $ 36,011,533 2.7% the ship which are 7,500 m3 ; 22,500 m3 ; and 30,000
22,500 $ 80,000,000 $ 75,649,529 5.4% m3 based on the data availability. As mentioned be-
30,000 $ 105,000,000, $ 97,737,663 6.9% fore, the estimation method requires specific technical
information of the LNG carrier. Therefore, the study
is limited according to data availability.
5.3 Others Approximate Cost Data The results show that the estimated price deviation
from the market price is about 2% - 7%. The discus-
Hull Cost: The cost estimate of cost of the ship’s sion will talk about some factors in this study, which
hull can be estimated in various ways. Commonly affect pricing of LNG carrier.
accepted values are in the range of 2.5 to 3 EUR/kg. Risk Margin: The purpose of having a risk mar-
The second main aspect of the cost of the hull, being gin is to ensure the attainment of the specified dead-
the cost of the purchased materials, is directly related weight even if there has been an underestimate of the
to the amount of steel that is used to build the hull lightweight or an overestimate of the load displace-
structure. Multiplying this weight with the steel price ment. The size of the margin should reflect both the
per ton will result in an acceptable first estimate of the likelihood of this happening and the severity of the
material cost of the hull. penalties which may be exacted for non-compliance.

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 Estimating Capital Cost of Small Scale LNG Carrier

When the design is well detailed and clearly specified It is, therefore, recommended to continue to gather
and the light-weight has been calculated by detailed information on the building cost of small scale LNG
methods, the margin should in principle be reduced. ships in the future and to use this information for fur-
When the ship type is novel or the design and/or the ther fine-tuning and validation of the method.
specification are lacking in precision, larger margins The aim of this paper is to introduce a method of
are appropriate. small scale LNG ship capital cost estimation which is
The profit margins raise the question of how much still rare and not widely known. Especially in Indone-
a customer or shipyard is willing to pay for a cer- sia which the LNG market is shifting into new pattern
tain probability of project success. In most ship con- of supply chain, the method in this paper should be
struction contracts at least parts of the risks are trans- able to be used as an initial estimation of small scale
ferred to the shipyard in order to give the right incen- LNG ship capital cost.
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- REFERENCES
yard needs to balance construction cost against the
risk of having to pay penalties. Lowering margins General Directorate of Oil and Gas Resources Ministry
for example would lower construction cost because of of Energy and Mineral (2016). Indonesia Gas Balance
the size reduction of the vessel but also increases the 2016 – 2035. Technical report, Indonesian Government,
yard’s exposure to the risk of potentially paying high Jakarta, Indonesia.
penalties or even having the customer refuse the ship, Hekkenberg, R. G. (2014). A building cost estimation
which could put the shipyard into financial distress. method for inland ships. In European Inland Waterway
For the customer, the question is whether they Navigation Conference.
are willing to accept higher bids from shipyards be- Kanfer Shipping (2014). A unique small & medium scale
cause of his stringent performance requirements even LNG Distribution & Terminal Solution for Industry and
though missing those requirements by small amounts Marine Purposes.
does not have a very significant impact on general re- Regan, T. (2017). Small Scale LNG: Emerging Technolo-
quired result. gies for Small-Scale Grids Keppel to build South East
Emerging small scale market: With the LNG Asia’s first LNG bunkering vessel.
product market expected to remain over supplied, Tractebel Engineering S.A (2015). Mini and Micro LNG
low prices could motivate more small-scale LNG to- for Commercialization of Small Volumes of Associated
power projects. Power producers will get access to a Gas. In Mini and Micro LNG for Commercialization of
Small Volumes of Associated Gas.
potentially cheaper and cleaner fuel, while LNG sup-
pliers will have new downstream markets to supply. Turton, R., Bailie, R., Whiting, W., Shaeiwitz, J., Bhat-
The development and maturation of LNG technol- tacharyya, D., and Safari, a. O. M. C. (2012). Analy-
sis, Synthesis, and Design of Chemical Processes, Fourth
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Ocean Engineering Series.
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.

229