Mcilvaine Insights

No. 102   April 26, 2019

WELCOME

Weekly selected highlights in flow control, treatment and combustion from the many McIlvaine publications.

• LNG is a Most Profitable Market for CFT Suppliers
• Eliminating Silos can Increase Profits in Air, Water and Energy

LNG is a Most Profitable Market for CFT Suppliers

Combust, flow, and treat (CFT) products are important components in liquefaction of natural gas, the transport of those liquids by ship or land and their regasification prior to use. It is desirable for a CFT supplier to assess this opportunity based on the basis of the profit which can be obtained by pursuing it. This Most Profitable Market (MPM) can be defined as the market which yields the highest profit given the resources available.

 The LNG market creates high profit opportunities for CFT companies due to

·       High growth

·       Challenging applications

·       Relative few decision makers

·       Purchaser desire to buy based on lowest total cost of ownership

·       Ability to validate lowest total cost of ownership

High Growth:  High growth markets have less competition and a bigger profit opportunity.  LNG  will be experiencing rapid growth. Over the next few years the U.S. will lead in liquefaction construction. Regasification facilities will be constructed in many countries. LNG represents just under 10 percent of the global gas supply. LNG continues to be the fastest-growing gas supply source. The expected world compound annual growth rate is 4 percent a year between now and 2035.  However growth in the next 5 years will exceed 7 percent.

2018 liquefaction capacity was 370 million tons per annum (mtpa).  875 mtpa of new liquefaction capacity is proposed.  92 mtpa is under construction. Global regasification capacity is 851 mtpa.  There are 478 LNG vessels with more than 20 new vessels per year being commissioned. In 2023 Australian capacity will exceed 80 mtpa compared to 100 mtpa in Qatar and 65 million mtpa in the U.S.  The U.S. will experience the fastest growth from a base of 20 mtpa in 2017.

Challenging Applications: The CFT opportunity is more than $3 billion per year. Of this total more than 60 percent of the applications are considered high performance. These are components  subject to severe or critical service.

Relatively Few Decision Makers:  Frequently a sale can exceed $20 million with very few decision makers.

Purchaser Desire to Buy Based on Lowest Total Cost of Ownership:  Due to the severity and criticality of the service there is a big incentive to buy the product which is not necessarily lowest in cost to handle the extreme requirements surrounding cryogenics, thermal dynamics and velocity control. 

Ability to Validate Lowest Total Cost Of Ownership:  Due to the need for high performance it is relatively easy to engage decision makers in discussions relative to cost of ownership. However a convincing case has to be made based on evidence not only of a product’s cost saving features but, on its performance, relative to competitor options.

The LNG market will be a Most Profitable Market for many CFT suppliers due to its size, rapid growth and challenging applications. A relatively few decision makers are incentivized to select products with the lowest total cost of ownership. They have the background evidence to evaluate the conflicting claims of various suppliers. The result is that they are willing to pay higher prices for the better products. This in turn results in greater profits for the supplier.

The Most Profitable Market Program is described at www.mcilvainecompany.com

LNG projects and markets are  continuously analyzed at N049 Oil, Gas, Shale and Refining Markets and Projects

Market reports on specific components and systems are described at http://home.mcilvainecompany.com/index.php/markets

Eliminating Silos can Increase Profits in Air, Water and Energy

The Most Profitable Market Program is a business strategy which quantifies the opportunities to increase profits through sale of products with a lower total cost of ownership than presently available. This program will accelerate progress in the air, water, and energy markets through the following: 

·       Identify new profit opportunities

·       Spur R&D

·       Result in new products with lowest total cost of ownership

·       Reduce costs for operators

The identification of new profit opportunities requires

·       Detailed knowledge of specific processes

·       Performance of products in those processes

·       Elimination of silos between industries. Geographies, and technologies

·       Insights to global developments  and needs

The silos between industries need to be penetrated and collaboration among disparate suppliers encouraged. A good case in point is the use of resin bonded sand for hydraulic fracturing. Dow Chemical introduced a new resin for sand coating in 2014. The polyurethane offers more elasticity than phenolics. As a result the fractures do not collapse. Collapsing leads to sand particles in the product. As the product is transported by the electric submersible pump, the sand abrades the impellers. Pumps with an initial cost of over $100,000 can experience life cycles measured in months.

This life has been extended when resin coated sand is utilized. The overall cost of oil extraction is lessened. With lower feedstock costs, the resin is less costly to manufacture. This can lead to lower resin prices and give even more reason to select resin coated over uncoated sand. Suppliers of pumps, frac sand plants, resin, friction reducers and other products need to understand the relationship between products.

The need for breaking down silos between technologies is exemplified in rare earth extraction.  DOE and the Chinese government are pursuing a technology which micronizes flyash from landfills and then adds hydrochloric acid.  There is already a free rare earths feedstock in a 30% acid stream available as explained at
HCl Scrubbing and Rare Earth Recovery from Coal-Fired Power Plants and Gasifiers are the Perfect Marriage

For more information on the Most Profitable Market Program click on  www.mcilvainecompany.com  Bob McIlvaine can answer your questions at rmcilvaine@mcilvainecompany.com or 847 226 2391.