SGS - LNG Accuracy Measurement

How accurate is the Shipboard Custody Transfer Measurement system? An independent research by SGS.

AUTHOR: Gerrit Vermeiren, Manager Oil, Gas & Chemicals – Benelux CO-AUTHOR: Sven Lataire, LNG Business Development Manager

No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system, without prior written permission of SGS.

© Gastech 2005

1. SGS and LNG SGS (Société Générale de Surveillance) has been involved since many decades in the measurement, quantity and quality control of Liquefied Natural Gas movements. SGS is represented in over 120 countries, with a network of 1000 offices and world class laboratories and a professional staff of more than 39000 people. The SGS Oil, Gas and Chemicals (OGC) division is a world leader in inspection, measurement and testing and a full range of technical services to the petroleum, chemical and gas industry. SGS surveyors are inspecting LNG shipments in order to establish, as an independent and impartial party, the facts and details ‘Custody Transfer’ operations of a wide range of petroleum products, chemicals and liquefied gases. SGS OGC developed a number of independent specific services to assist clients in the safe and economic transfer of LNG, from the loading port to the final port of destination. LNG - Liquefied Natural Gas - is by far one of the most difficult commodities to transport because of its characteristics and physical property regarding its extreme low temperature. LNG is transported at ‘fully refrigerated’ conditions at a temperature of -161.5°C (at boiling point) for the economical reason of transporting LNG as a liquid. At these low temperatures, measuring, sampling, quantification and testing of LNG is therefore the work of experts. Due to this low temperature, the measurement and sampling creates a number of practical problems, and the accuracy of the obtained results under these circumstances requires expert intervention. This should not be underestimated. LNG is presently shipped in vessels with an average capacity of 138000 m³, containing about 64000 tons of liquid product and expressed in energy terms it contains about 3200000 MMBTU’s. The full load of one shipment represents a cargo value of about 21 mio US $, or 16 mio Euro. In case of the trade of normal liquids, like oils, chemicals, etc.the highest accuracy or precision measurement experts hope to reach varies between 0.2 to 0.3 % accuracy. If we could consider this as the overall accuracy of an LNG transfer then these ‘high’ precision levels are still representing a cargo value uncertainty of about 43500 - 65300 US $ and this is regarded using present measurement techniques, as the best that can be achieved. Systematic errors, built into the system, higher than these ‘ideal’ values (e.g. 0.5 %) can lead to a yearly revenue losses of more than 3,3 mio US$, considering that a normal LNG carrier can do some 30 voyages per year. And what about the loss or gain over a contract period of 20 years! Spurious errors or obvious mistakes can even result in higher inaccuracies and consequently be the cause of more considerable cargo losses and subsequent claims. The cargo value is based on following measurement parameters: ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾

Level Pressure Temperature Volume calibration Sampling Gas testing Cargo (vapour/liquid) remainders Vapors displaced/boil-off

Measurement of each of these individual parameters is the potential origin of uncertainty and consequently can lead to over- or underestimation of Bill of Ladings for the cargo shipped. If these test parameters are not adequately measured and, if measurement instruments are not properly calibrated under the expert eyes of an independent party the chances of having an accurate overall measurement and energy quantity, expressed in MMBTU’s, is going to be very doubtful and could result in unsatisfied LNG customers (buyers) claiming for so-called losses of financial damages Throughout the years we have been supervising and monitoring LNG cargo shipments and based on this experience we would like to give you some of our findings and conclusions in relation to LNG measurement.

© Gastech 2005

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2. International developments As you all know LNG has now been shipped worldwide for several decades. The number of ships and their sizes increased with the years. In the past, most shipments were based on long-term, bi-lateral contracts for 10 to 20 years. The traditional trade consisted of, what we call a dedicated trade pattern, whereby between the load-and discharge port the same vessel was transporting LNG for the same parties involved and this for many years. Usually the basis of such contracts was the guarantee of the energy supply to certain countries/parties. That’s why many contracts were partly set up with political interests and at government to government level. The political influences were such that energy delivery as alternative fuel to oil, was often overruling economical considerations. The fact that countries were able to receive alternative fuels at a much lower price was the primordial goal for this trade. As long as this ‘cheap’ flow of energy could continue, less or no consideration was given to the accuracy of the quantity of energy transferred. A few MMBTU’s more or less was not the key issue. A sustainable supply at low prices was the main objective. Also the fact that the same vessel was used for a long-term period, to transport these shipments during consecutive voyages from the same load terminal to the same discharge terminal did not alarm parties to the potential inaccuracies in the system. In this consecutive trading environment any ‘systematic errors’ would probably not be identified and one was only interested or alarmed for the occasional one time error of a measurement or test result. Over the past years the economical picture in LNG world changed dramatically. Although long-term contracts are still predominating, a more commercial environment is created, due to the growing short-term market conditions. The tremendous increase in the global supply of LNG together with the considerable growth of the number of vessels, and taking into account the ever increasing oil prices and dollar decline, changed the entire custody transfer methodology. Parties (supplier, buyer, charterer) are now fully aware that every molecule of cargo counts. That’s why the original trade has evolved to a really commercial trade whereby the parties’ main goal is not to secure a steady energy supply but to make money! The vast increase International projects and the number of supply - as well as delivery ports, combined with favourable dollar/oil prices ratio, are rapidly enhancing the trading of this commodity. And, as with other petroleum products, LNG is now more frequently traded for ‘short-term’ periods as well as ‘spot trades’. These phenomena created a drastic change in the ascertainment of quantity and quality of LNG movements. Parties now require more and more accurate and reliable figures on every LNG shipment. There is no acceptance anymore for mistakes nor for ‘build-in’ inaccuracies due to systematic errors. Every error is one too many and if differences occur, parties will have to know and will have to be advised what the exact reason and cause is of this discrepancy or error. Therefore they usually trust the findings and comments of an independent party, who will supply them with all the facts and findings and so guarantee an ‘economical transfer’ of the product – based on sound knowledge, experience and expertise. 3. International standards Throughout the years a number of international standards have been introduced. The publication in 1985 by the N.B.S. of its study ‘LNG measurement’ was the first attempt to standardise LNG measurement. Many LNG suppliers and receivers originally used their own methods and standards to establish the quantity and quality of LNG. A group of major international LNG buyers and sellers have made a common guideline for themselves called ‘LNG Custody Transfer Handbook’ in which they have tried to incorporate the ’NBS 1985 study’ as well as the ISO 13398:1997 standard ‘LNG procedure for custody transfer on board ships’. SGS fully supports this initiative for this common approach to reach some form of standardisation. However although the basic principles are given in this document we noted that there is still a wide interpretation and unclear view on the accuracy of the applied parameters, physical constants, numbers of measurement and samples as well as different procedures for calculation, interpolation of results and rounding-off rules. The aforementioned document is a good guideline but Standardisation is far from established, we therefore urge the G.I.I.G.N.L. group (International Group of Liquefied Gas Importers) to continue to strive for a unique standard procedure covering all aspects of measurement, calibration, testing and value computations. SGS is willing to assist with its global experience, if required. From all the International methods SGS, as well as G.I.I.G.N.L, recommend the ISO standards as the main documentation and guideline for measurement, quantity, sampling and testing. Equivalent alternatives from other institutes, such as GPA, IP or ASTM, can also be used but only if parties, at both ends of a specific trade, agree to use exactly the same method and physical constants. Otherwise differences resulting from the use of different standards/constants at load-end discharge point will take place and no one will be able to judge the true story or value as both will not be based on one reputable International Standard. Not doing so will introduce un-reconciled ‘paper’ variances. © Gastech 2005

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Even if parties agree on using the same ISO norm as their measurement standard, there might be potential conflict of interest if at load port one party is using e.g. ISO 6976 ‘calculation of calorific values, density, relative density and Wobbe index from composition’ and at discharge port ISO 6578 ‘static measurement – refrigerated hydrocarbon liquids – calculation procedure’. Similar standards might give on first sight identical values for certain constants; molar mass, compression factors, calorific values, etc. but a close look at these, so called ‘similar or identical’ method shows that many values are different and given in varying significant digits or round-off figures. Knowing that a minor change or difference in these parameters and values might have a serious impact on the total energy transferred, we can only plead for a far better and more detailed standard and procedures manual to be adopted. As an example SGS can demonstrate for instance that a density calculated with the revised Klosek Mc Kinley might give a value of 464.269 kg/m³ but under the same conditions this density calculated with ISO 6578 will give 464.230 kg/m³. On a total cargo load this minor difference represents about 6 tons of cargo having a value of 1840 US $. An alternative is to use the same method and the same physical and measurement constants, carefully monitored and controlled by the same independent inspection company at load-and discharge port. Any reputable independent inspection company will also calculate the cargo at load-and discharge port with its own ‘unique’ measurement standard so that in case customers are using their contractual agreed method, which is possibly different at both ends, one can verify if differences are due to the use of different methods/standards. Then it is unto the independent specialist to inform the parties involved. Therefore the parties to the LNG sale/purchase contract should instruct this independent survey company to use, next to the contractual method, the independent ‘in-house’ standard rather than forcing them to use the standard of the buyer and/or seller only which might be incomplete and probably different when used at load- or discharge port. In inspection terms this verification is called the ‘Ullage’ calculation! 4. Losses due to measurement ignorance In my introduction I have highlighted the difference between: ¾ Spurious errors: obvious mistake or misreading And/or ¾ Systematic errors: build into the measurement concept In this section I would like to review some of the obvious errors SGS encounters regularly. Spurious errors and straight mistakes or misinterpretations; ¾ ¾ ¾ ¾

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use of different standards and/or edition date for gas chromatographic analyses, density and gross heating values at load-and discharge port (see also item 3) use of the same standards but different applications for physical constants, interpolation procedures, number of digits used and rounding-off practices use of the same physical properties but at different conditions; e.g. standard (15°C) or normal (0°C/25°C) temperature, gross heating value, gas density, … measurement of the same volume in the same tank but by using different level gauges (automatic/manual) and the freedom of applications and averaging of the temperature indicators. The use of different instruments may generate different values. What about the impact of one temperature sensor (out of order) – reading 150°C and five others indicating -162°C. The cargo value difference between a cargo calculated at an overall average temperature of -162°C and conversely a calculation at a temperature of -160°C (average of 5 times -162°C and one time -150°C) is approximately 131 kUS$. Wrong or inadequate sampling techniques can lead to important errors amounting up to ± 1%. The procedure for sampling but above all the installation, location and set up of the sampling system is of crucial importance. In case the location of the sampling system is wrong, e.g. too close to a pipe elbow, the gross heating value will be under-or overestimated. Not taking into account of quantities remaining (ROB) or displaced (vapour) on board is a very common mistake, as parties seem to ignore these quantities. Here below we have calculated the value of these amounts, in order to estimate the impact of the occurred losses on an average LNG shipload. o o o

Full or empty liquid lines on board ( before versus after loading/discharge) Average vessel: 46 tons → 15935 US$ Vapour phases accounted before/after discharge/loading Difference: 192 tons → 59370 US$ Gas boil off (vapour return) during loading Estimated 300 tons → 92765 US$

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Gas received by LNG carrier when unloading Estimated 192 tons

→ 59370

US$

--------------------------------→ 227440 US$ All the above mentioned cargo quantities and subsequent energy values are in many cases not accounted for and surprisingly ‘ignored’? The only value in this context, parties are concerned about, is the ‘boil-off’ percentage of ± 0.15 % per day, but this is not the complete picture and of less value if the above quantities are not taken into account. 5. Losses and/or discrepancies due to measurement errors 5.1.

General

The value of the cargo is based on the measurement and quantity computation of the cargo on board of the vessel. The vessel in fact becomes the measurement object. This is very unusual as in the modern trade of many commodities; oil, chemicals, fertilizers; the cargo value or quantity is expressed in ‘shore’ figures. These shore based calculations are usually the official basis for quantity transfer and the cargo invoice. Most shore tanks are in these circumstances certified and controlled by an official state/government certified body (calibrated tanks and/or volume meters). When such shore based measurement devices (tanks/meters/instruments) are used under ideal circumstances, the shortterm accuracy varies between 0.12 and 0.15 % absolute, whereby the long-term accuracy can go up as high as 0.3 %. But this is achieved under ideal ‘shore based’ circumstances with products handled at normal temperature and pressure (1 bar abs.). Compared to a fully certified and controlled shore based system what can we expect from the estimated measurement accuracy from a floating measurement object (vessel), which is not necessarily calibrated according an official method, nor by an independent calibration institute? Next to these considerations, we still have to realise that the extreme low temperature condition will have an important impact on the accuracy of the overall measurement of the vessel. In the normal trade of liquid products one has sufficient data to verify the various floating measurement objects (vessels) against the shore based measurement objects (tanks and/or reading meters). By comparison, evaluation of voyage data and multiple sets of measurements one can get a historical differentiation of each vessel measurement performance against the official or accredited shore based systems. By this the so called ‘Vessel Experience Factor’ ( VEF) is determined indicating the overall inaccuracy of the vessel against accredited (official) shore based systems. For most vessels (oil tanker/product tanker/chemical carrier) the VEF ranges between 0.2 and 0.5 % which again illustrates the poor performance and high inaccuracy of the vessel as measurement object. Professional operated terminals as far as measurement is concerned can reach better accuracies below 0.2%. 5.2. Shipboard measurement – calibration tables The basis factor for any reliable shipboard measurement is the ships calibration (volume) table. This table gives the measurer the possibility to derive the actual liquid volume (at the actual liquid temperature) for each measured liquid level (height) or vapour space height (Ullage). Most LNG carriers are officially calibrated by a standard method such as ISO8311, ISO9091 – 1, ISO9091 – 2, etc. However ship owners tend to ignore that a calibration table should be reviewed regularly, and checked. If necessary the tank should be recalibrated every ten years and in case modifications have taken place to tanks, piping, pumps, membranes, etc…the calibration should be done instantly! Several LNG carriers have been operating for more than 10 years and in some cases even above 20 years without any form of re-check or re-calibration. However the European directive with regard to this point is very clear. Tanks used for the official custody transfer and quantity determinations should be re-calibrated every 10 years. Instrumentation used on board like; level, pressure and temperature indicators should be re-calculated and certified after every 2 years. Considering the importance of accuracy of the calibration table SGS has adopted the standard method ISO8311 and ISO2550 section 7 and 8a and over the years modified and upgraded this method to a higher level of accuracy. SGS is able to guarantee its clients an overall accuracy of ± 0.05 % on tables provided by us, whereby the most common accuracy guaranteed by other methods or other calibration institutions is usually ± 0.2 %. If tanks have been damaged or where changes and modifications to the tanks have taken place such as newly installed piping and pumps or membranes (altering tank volume) over the years, as mentioned above, the calibration table inaccuracy might be higher then 0.5 %. © Gastech 2005

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5.3. Shipboard measurement - Level/Temperature/Pressure ¾

Level: commonly used on board is an independent set of level gauges, installed (minimum 2) per tank. One is the primary and the other is the secondary. On many vessels it is not clear however which one is the primary and which one the secondary. Both level gauges are usually of a different type and frequently one is based on a mechanical float gauge principle and one on an automatic gauging principle (capacitance, radar, microwave). The LNG industry considers the accuracy of level gauges to be good at ± 7.5 mm. For your reference the error of ± 7.5 mm on a fully loaded tanker represents 11 tons and has a cargo energy value of about 3800 US $. We believe however that most level measurements under real testing conditions, in a floating measurement object (vessel) and with a constantly ‘boiling’ cargo will produce a much greater error in the order of ± 1 to ± 2 cm. The latter represents a difference in tonnage of 15 to 30 and a cargo value of 5000 – 10000US$. The overall accuracy on the volume assumed by the industry is +/- 0.21 %. Our experience is that this is not better than ± 0.3%.

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Temperature: Most LNG carriers are equipped with a number of temperature gauging devices. These devices are built into the cargo tanks in thermo wells or installed as single probes on the inner or outer shell of the tank. The probes are evenly mounted at regular interval heights. Usually 5 or 6 probes are designed to give a single readout or an average per tank. The temperature gauges are mostly of a ‘resistance’ type – PT 100 system. The accuracy is said to be as good as ± 0.3°C. We believe however that due to the practical working conditions the single accuracy of each probe might be in this order but the overall average measurement of the liquid and or vapour temperature is about ± 0.75°C. This error results on a loaded vessel in a difference of cargo quantity of 150 tons, representing a cargo value of 52 kUS$.

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Pressure: Pressure readouts are important for safety reasons and for monitoring the boil-off process. Considering the cargo is transported at or close to its boiling point, the measured pressures are small (millibar) and do not represent a major error in the custody transfer measurement system. The accuracy of pressure readouts is about ± 1% of full scale.

6. Losses and/or discrepancies due to wrong sampling Sampling is the most sensitive part of the ‘custody transfer measurement system’. Based on an AVERAGE and INDEPENDENT sample of the cargo loaded or discharged the value (Bill of lading) and invoice of the cargo transferred is defined. Following important parameters are calculated from the samples composition: ¾ ¾ ¾

Density Calorific values – gross/net (higher/lower) Wobbe index

If the sample is not truly representative for the entire cargo volume, then differences and errors will be found in the determination of the above mentioned parameters. Accurate and high precision sampling can only be achieved if one can obtain and secure: ¾ ¾ ¾ ¾

Repeatable samples Reproducible samples Fixed sampling conditions and parameters Standard procedures

Most loading terminals have throughout the years investigated these various parameters and have developed systems and procedures to increase the accuracy of the sampling method. On loading terminals these investigations, combined with historical data research, have lead to reasonable accurate systems and procedures. The main parameter affecting the accuracy of the sample is the control of a constant and steady flow of LNG through the piping system. These constant set conditions together with the very carefully planned location and type of sampling system, is due to the nature of the operation far better achieved at load port than at discharge. At discharge the vessel is not able to operate under the same steady and regulated flow engineered conditions and therefore the accuracy of the sample at a discharge port will obviously be lower than at an equivalent load port. © Gastech 2005

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Many factors are influencing the accuracy of the sample and although the sample station maybe constructed according specific International standards and operated by professionals, it’s of vital importance that an independent party checks and verifies all parameters affecting the accuracy of the sample and thereby can really certify the accuracy of the calculated values: density, heating values, etc… 7. Accuracy of gas analysis In addition to the importance of good sampling, the accuracy of the gas analysis will be the basis of the accurate density and calorific values computation. The testing standards for LNG gas provided by ISO, BS or GPA will all use the principle of ‘gas chromatography’ (ISO6974/GPA2261/…). Based on this technique LNG is analysed and its composition determined. Every official test method will provide the user with details of the accuracy obtained by the test method expressed in repeatability and reproducibility terms. The inaccuracy is related to the concentration of a component in the sample. Providing the method is precisely followed and the instrument professionally calibrated with a ‘high quality’ calibration standard, the total inaccuracy of the calculated gross calorific value is about 1% (relative) for concentrations between 110%, 10% (relative) for concentrations between 0.1-1% and below these concentrations the repeatability is around 30%. The above standard method precision limits are considered by the industry as ‘very’ inaccurate and therefore the industry and certain LNG producers, buyers have adopted their own ‘modified’ test methods which usually are giving a much higher accuracy compared to the standard (official) method. The basis of this increased accuracy is to be found not only in the testing technique used (GC column, detection system, etc…) but merely in the high precision calibration technique and use of reference standards. If LNG analyses are conducted without adequate and professional calibration, properly verified ‘under the careful eye of an independent specialist’, the accuracy and consequent value of the gas composition should be questioned and not be taken as basis for the total energy calculation delivered to the customer. We believe that many LNG cargoes in the today’s market are not properly tested and not professionally supervised when it comes to calibration. At many load-discharge ports the parties involved accept results from laboratories without appropriate and adequate independent calibration and verification. Usually the independent inspection task, ordered by the parties involved, is only a matter of monitoring and registration of data and events. Obviously under such circumstances Independent inspection companies cannot guarantee the measured and tested results and the impartial certification of the Energy transferred is questionable. 8. Overall inaccuracy of the Custody Transfer Energy Transfer measurement. Based on our global experience we are concerned about some of the measurement practices actually taking place at many load- and discharge locations. We know that the LNG industry tries to coordinate its efforts to come to global standards for measurement and computation of the cargo energy transferred. Despite these ongoing efforts, we notice that there is not enough concern about consistency and standardization demonstrated in the making of contractual agreements between buyers and sellers. We advise the industry to pay far more attention to the aspect of measurement accuracy, sampling and testing procedures in the preparation of their contracts, as this will be the basis of a mutual partnership aiming for economic correctness and trust in their future and hopefully long-term relationship. “Good friends make good contracts” Buyers and sellers of LNG are still considering LNG as a ‘low cost’ raw material whereby the accuracy of the Energy Bill is considered as less important and whereby mutual understanding is preferred (fixing) rather than having this based on true scientific evidence and independent certification. Here below we give you an overview of the overall inaccuracy of the various measurements as found by the LNG industry compared to our historical data and research. The total accuracy or inaccuracy, better defined as discrepancy, of an LNG Custody transfer can therefore amount to a substantial error or loss as shown below:

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VOLUME Liquid + vapour boil-off + vapour displaced DENSITY NBS estimate of uncertainty on computation method Gas analysis (NBS) Temperature measurement Overall density inaccuracy GROSS CALORIFIC VALUE Inaccuracy sampling (NBS) Calibration gas (NBS) (weighting process) GCV of the components (NBS) Overall GCV inaccuracy TOTAL INACCURACY OBTAINED FROM QUADRATIC COMBINATION OF THESE MEASUREMENTS

Industry perception of uncertainty

Real world uncertainty of measurement

± 0.21%

± 0.30%

± ± ± ±

± ± ± ±

0.10 0.09 0.15 0.27

% % % %

0.10 0.09 0.20 0.31

% % % %

± 0.3 % ± 0.03 % ± 0.04 % ± 0.35 %

± 0.3 % ± 0.1 % ± 0.04 % ± 0.41 %

± 0.49 %

± 0.60 %

In Energy value this inaccuracy represents according:

Inaccuracy Energy value in US$ Est. loss over 20 years contract

INDUSTRY ± 0.49 % 107 kUS$ 64 mio US$

REAL WORLD ± 0.60 % 130 kUS$ 78 mio US$

9. Conclusion and guidelines This measurement inaccuracy or risk is so substantial that parties should take a far better consideration to the various measurement parameters adding on to this inaccuracy/error of the LNG Energy Invoice. As said before special attention is to be given to: ¾ ¾ ¾ ¾

Vessel calibration tables accuracy Technical performance of the custody transfer measurement systems on board Sampling station – installation/procedures Gas testing and calibration

Al these parameters should have one thing in common to achieve the highest accuracy. Standard and trust (certitude) of these measurement aspects should be designed, controlled, maintained, calibrated and certified by Independent experts. The parties involved in the Custody transfer of LNG should agree and establish procedures and guidelines. This is the role, importance and responsibility of the Independent company whose only objective is to establish the true and accurate Energy quantity transferred. In this procedure it will be necessary to include the following instruction for this Independent party: ¾ ¾ ¾ ¾

The full control and supervision of all parameters and measurements (pressure, temperature, volume, etc…) Verification and certification of the calibration standards (tanks, gas testing, etc…) Independent verification and calculation of the quantity of energy transferred Full certification and consequent veracity of the cargo transfer

At the moment, this is not yet established. Today LNG is shipped from and to many terminals in the world and most of these shipments are indeed under the supervision of an Independent Inspection company. Without generalizing, SGS is of the opinion however, that the instructions given to the independent inspection companies and the role the industry gives to these inspection companies is limited, this under-rates the value that a professional inspection organisation can add. We recommend that you take a close look at the role of your inspection services supplier. The inspector must not be a passive ‘note taker’ or recorder of observations. To the contrary value can only be protected, risk managed and value added if the inspector is an expert technical participant.

© Gastech 2005

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LNG - MONITORING SGS’ observation is that the industry has been inadvertently drawn in to being comfortable with an inspection that is for the most part reduced to ‘monitoring’ the cargo transfer. Whereby, the inspection is effected by following the loading and or discharge process and recording all facts and findings as reported to them by the Captain of the vessel, the Laboratory technician, the terminal Manager, the measurement specialist, or other third parties. Rarely does the independent inspector intervene and independently verify the sampling and testing conditions. He or she will monitor the temperature and level measurement, but will not verify or calibrate these measurements. This is also the case for the reporting of the analytical composition and vessel measurement, whereby the calibration of GC analyzers, ship instrumentation/calibration tables is only a matter of reporting findings without actual verification, checking and proper calibration. The most the industry requires is that the inspector verifies that analyzers are in line with a standard gas tested. Often it is perceived that the Independent Inspection company report ‘certifies’ these findings. This cannot be the case. It is our opinion that no professional party can stand behind results or measurements as “true values” that have not be verified or ascertained by that party. If parties to the sales and purchase contracts are satisfied with this level of intervention, they should realise that in case there is potential for important errors, cargo disputes, or even cargo damage or claims and the values produced cannot be considered binding as they were simply noted following the actions of other parties. The only real value contained therein is that it will be low cost. The cost of the LNG surveyor is therefore reduced to the cost of manpower and that’s disproportionate to the potential savings in case of accurate measurement and overall reliable inspection. LNG – INSPECTION WITH VALUE ADDED Considering the magnitude for potential financial risk we can only advise industry to change its practices and to adopt a higher standard for ‘Independent Inspection’. This paper clearly illustrates what the problems are when LNG has to be measured, sampled, tested and quantified. By upgrading the inspection level and as such increasing the accuracy level of all custody transfer measurement parameters it is our opinion that the cost of the intervention will be an insignificant proportion of the value added and the risk reduced. The only limitation for the upgrade of this type of inspection is that you need to contract top-experts to supervise this type of operation. To meet the growing demand for LNG and the improved controls that will be required to protect our clients interests as the trade in LNG evolves, SGS has focused considerable resources on recruiting and training the necessary expertise and transferring expertise and knowledge throughout our network. We are proud of our leading technical position in this field and we recommend careful consideration of the impact on your business when you select your inspection supplier. If yours does not meet these criteria – SGS remains at your disposal. In addition, our global LNG Competence Centre based in Antwerp is at the disposal of our clients, for references, assistance, projects, problem solving, training and consultancy related to all aspects of measurement, sampling and testing of LNG. The International coordination, training and upgrading of our staff for the LNG is also governed by this centre. It provides a unique and coordinated approach to provide the LNG industry with the required global expertise. I trust that this paper has added to your appreciation of the complex requirement for quantification of LNG and the risk that might be associated with poor or inappropriate measurement. I hope that this translates into increasing demand for high level of professional expertise and a different attitude toward the added value that this service can bring when executed to the highest professional standards.

© Gastech 2005

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