ANALYSIS OF LNG DISTRIBUTION STRATEGIES

Abstract

In this thesis, we look at three alternative distribution strategies that could be employed in liquefied natural gas (LNG) shipping. Together with the most commonly preferred distribution method adopted presently in the industry, these strategies are analysed and the feasibility of implementing the alternatives are looked into. Currently, deliveries of LNG tend to occur on a direct service basis where only one regasification terminal is visited during a single voyage. In other words, LNG unloading mainly takes place on a full shipload basis. It is possible to visit consecutive ports and unload partially but for such deliveries, the maximum number of ports is capped at two. Thus, one of the alternatives will challenge the conventional way of delivering LNG by modelling a direct service distribution scenario where singular tank unloading occurs as frequently as possible and more than two regasification terminals can be visited during a single voyage. Additionally, two types of transhipment methods are proposed. In contrast to direct service, transhipment involves consolidating shipments at a regional hub before shipping the cargo to the demand ports via a feeder system. This part of the study will provide insight as to whether transhipment can be a viable option for LNG distribution. To do the analysis, feasible routes and delivery schedules for the four distribution strategies are obtained by modelling these strategies using simple approaches that at the same time accounts for the unique characteristics of LNG shipping. With this information, the costs incurred by the different players in the LNG supply chain are calculated. In particular, we analysed these systems based on the production, in-transit inventory and inventory holding costs that arise in the supply chain. A sensitivity analysis by varying the unit inventory holding cost is carried out as well. Based on our findings, the direct service alternative tends to outperform the current distribution method by incurring less overall costs. This strategy seems promising and should be considered for implementation in practice.