Ministry of Commerce & Industry Government of India Standards and Conformance Cooperation Programme Interactive Session on US-India Cooperation in Standards & Conformance in LNG, LPG & CNG Equipment 15 February 2010: New Delhi BACKGROUND PAPER Blank Contents Introduction 1 LNG Operations Safety and Regulations: A Case Study of the US Industry 2 LNG Operations: History And Reliability 2 Safety Hazards from LNG Terminals 3 Hazards of LNG 4 North American Safety Regulations and Standards 5 Indian Natural Gas Landscape: Emerging Opportunities 6 LNG Import and Storage Terminals 7 Existing LNG terminals 8 Expansion of existing terminals 9 LPG Storage Terminals 12 LPG Import Terminals 12 Crude Oil Storage: An Overview 15 The Key Oil Players In India 17 Safety Standards and Regulations in the Indian Context 20 Conclusion 23 Blank Introduction The Standards Conformance and Cooperation Programme (SCCP) between India and US aims at diluting the roadblocks to cross-border trade and infusing harmony in the standards of trade between the two countries. The SCCP is an initiative taken by the US Trade and Development Agency (USTDA) in conjunction with the American National Standards Institute, the Confederation of Indian Industry (CII) and the Bureau of Indian Standards (BIS), to tackle the non-tariff barriers to trade on various products. In this regard, the Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG) sector has been identified as a critical sector for bilateral trade between India and US. The SCCP will work towards sustaining a dialogue and finding solutions to complex issues faced by exporters from both countries in this sector. The meet is expected to give an overview on the US experience in safe practices in the LNG, LPG and CNG industry. With this in view, this background paper is being put together that captures through case studies US industry’s experiences and learnings in safe practices as an 1 overall view of the Indian natural gas industry and the storage needs and opportunities. Even though in the Conference we will discuss about the natural gas industry as a whole, for purpose of an in depth study, this paper takes the case of US LNG operations. LNG Operations Safety and Regulations: A Case Study of the US Industry Liquefied natural gas, or LNG, is natural gas that has been cooled to minus 160° C (minus 260° F) at atmospheric pressure and reduced to a liquid state that is 1/600th its original volume. LNG is clear, colourless, odourless, non-corrosive and non-toxic. The potential hazards of LNG are the result of its basic properties -- its cryogenic nature and dispersion and flammability characteristics. Due to its cryogenic nature, LNG will freeze any material it comes in contact with. As a liquid, LNG cannot explode and is not flammable. It's only when LNG is warmed and returns to its gaseous state and comes in contact with an ignition source, that the mixture become flammable. However, the LNG industry uses advanced safety technologies and procedures. These are enforced and maintained through numerous standards, codes and regulatory supervision. Worldwide, very few countries viz. EU, US and Canada have their own LNG standards. In US, LNG standards are made by the Technical Standard Committee of NFPA (National Fire Protection Association) which is recognized by various US state governments. LNG Operations: History And Reliability The first LNG plant was built in West Virginia in 1912 and began operations in 1917. In January 1959, the world's first LNG vessel, the Methane Pioneer, delivered an LNG cargo from Lake Charles, Louisiana to the United Kingdom. Worldwide, there are over 30 LNG export (liquefaction) 2 Background Paper terminals with liquefaction capacity exceeding 250MTPA , 55 LNG import (re-gasification) terminals with total regasification capacity of around 500MTPA, and more than 300 LNG vessels (including Coastal Carriers) in operation. Since the industry's inception in 1959, there is commendable safety record in this industry in port or on the high seas. LNG vessels, which are double hulled and specially designed for storage in special containment systems a, have made more than 80,000 LNG shipments worldwide, covering more than 160 million kilometres. Safety Hazards from LNG Terminals The safety hazards associated with LNG terminals have been debated for decades. A 1944 accident at one of US’s first LNG facilities which killed 128 people, initiated public fears about LNG hazards and these persist even today. Technology improvements and standards since the 1940's have made LNG facilities much safer, but serious hazards remain since LNG is inherently volatile and is usually shipped and stored in large quantities. A January 2004 accident at Algeria’s Skikda LNG terminal killed and injured over 100 workers and has added to the current debate over the safety of LNG facilities. 3 Hazards of LNG Natural gas is combustible, so an uncontrolled release of LNG poses a hazard of fire or, in confined spaces, explosion. It is also hazardous because it is so cold. While questions remain about the credible impact of specific LNG hazards, there appears to be consensus as to what the most serious hazards are: Pool Fires: If LNG spills near an ignition source, the evaporating gas in combustible and will burn above the LNG pool. The resulting “pool fire” would spread as the LNG pool expands away from its source and keeps evaporating. A pool fire is intense and burns more hotly and rapidly than oil or gasoline fires, and may injure people and damage property a considerable distance from the fire itself. It cannot be extinguished — all the LNG must be consumed before it goes out. Many experts agree that a large pool fire, especially on water, is the most serious LNG hazard. Other Hazards: LNG spilled on water could (theoretically) regasify almost instantly in a “flameless explosion,” but an Idaho National Engineering Laboratory report concluded that “transitions caused by mixing of LNG and water are not violent.” LNG vapor clouds are not toxic, but they could cause asphyxiation by displacing breathable air. Such clouds may begin near the ground (or water) when they are still very cold, but rise in air as they warm, diminishing the threat to people on the ground. Extremely cold LNG could injure people or damage equipment through direct contact. However, the extent of such contact is likely be limited as a major spill would result in a more serious fire. The environmental damage associated with an LNG spill would be confined to fire and freezing impact near the spill as LNG dissipates completely and leaves no residue. Terrorism Hazards: LNG tankers and land-based facilities could be vulnerable to terrorism. Tankers might be physically attacked in a variety of ways to destroy their cargo — or used as weapons against coastal 4 Background Paper targets. LNG terminal facilities might also be physically attacked with explosives or through other means. Some LNG facilities may also be indirectly disrupted by “cyber attacks” or attacks on regional electricity grids and communications networks which could in turn affect dependent LNG control and safety systems. North American Safety Regulations and Standards The Department of Transportation (DOT) and the Federal Energy Regulatory Commission (FERC) are the federal agencies primarily responsible for the regulation of onshore LNG facilities in the US. Codes related to LNG such as for storage facilities (example: NFPA 59A) have been developed by the National Fire Protection Association (NFPA). These are technically balanced, open consensus standards, representing technical input from the following groups: Special experts, regulators/enforcers, insurance industry, manufacturers, users, (import terminals, peak shavers, base loaders), fire fighters, builders and non-pipeline LNG users and, the public. NFPA 59A is a Living Code. This standard is constantly revised, so it represents the best technology, performance and safety requirements. It represents a balance between cost, engineering excellence, risk and regulations. The code is updated, every 3-5 years. 5 The Canadian Standards Association (CSA), a national standards organization for developing public safety standards in Canada, has a specific standard for LNG production, storage and handling (CSA Standard CAN/CSA Z276-01). This standard establishes essential requirements and minimum standards for the design, installation, and safe operation of LNG facilities. The Lempert-Keene-Seastrand Oil Spill Prevention and Response Act of 1990 was formulated to regulate marine facilities in order to minimize the possibility of discharge of oil, and to protect public health, safety, and the environment. The authority for this regulation is contained in Sections 8755 and 8756 of the California Public Resources Code. This act defines “oil” as any kind of petroleum, liquid hydrocarbons, or petroleum products or any fraction or residue thereof, including but not limited to, crude oil, bunker fuel, gasoline, diesel fuel, aviation fuel, oil sludge, oil refuse, oil mixed with waste, and liquid distillates from unprocessed natural gas. This act also provides for the regulation of marine facilities that are used for the offloading, storage, or processing of Liquefied Natural Gas (LNG). Indian Natural Gas Landscape: Emerging Opportunities In India, it is a commodity in short supply. Natural, considering its demand has been growing in India. As domestic gas production falls short of demand, India has set up elaborate infrastructure for the import and storage of Liquified Natural Gas (LNG), Liquified Petroleum Gas (LPG), crude oil and petroleum products. India has emerged as a substantial Asian consumer of LNG and presently in fourth position after Japan, Korea and Taiwan. If you refer to the Natural Gas future scenario in the country as projected by the Ministry of Petroleum and Natural Gas, you will easily find that inspite of Reliance major gas find (80 mmScd), there will be substantial shortfall between Natural Gas demand 6 Background Paper in the country in the future years which can only be made up by LNG import.