Liquefied natural gas
Encyclopedia
Liquefied natural gas or LNG is natural gas
(predominantly methane
, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless
, non-toxic
and non-corrosive. Hazards include flammability, freezing and asphyxia
.
The liquefaction
process involves removal of certain components, such as dust, acid gases, helium
, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed
into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa (3.6 psi)) by cooling it to approximately -162 °C.
LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density
of LNG is 2.4 times that of CNG or 60% of that of diesel fuel This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic
sea vessels (LNG carrier
s) or cryogenic road tankers are used for its transport.
LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicle
s, although it is more common to design vehicles to use compressed natural gas
. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.
expressed in MJ/L or the gasoline gallon equivalent expressed in BTU/ft3. The energy density of LNG is 2.4 times greater than that of CNG which makes it economical to transport natural gas by ship in the form of LNG. The energy density of LNG is comparable to propane
and ethanol
but is only 60% that of diesel and 70% that of gasoline
.
The density of LNG is roughly 0.41 kg/L to 0.5 kg/L, depending on temperature, pressure and composition, compared to water at 1.0 kg/L.
, carbon dioxide
and other components that will freeze
(e.g., benzene
) under the low temperatures needed for storage or be destructive to the liquefaction facility. LNG typically contains more than 90% methane
. It also contains small amounts of ethane
, propane
, butane
, some heavier alkane
s, and Nitrogen. The purification process can be designed to give almost 100% methane
. One of the risks of LNG is a rapid phase transition explosion (RPT), which occurs when cold LNG comes into contact with water
.
The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG train
s, each of which is an independent unit for gas liquefaction. The largest LNG train now in operation is in Qatar. Until recently it was the Train 4 of Atlantic LNG
in Trinidad and Tobago
with a production capacity of 5.2 million metric ton per annum (mmtpa), followed by the SEGAS LNG
plant in Egypt with a capacity of 5 mmtpa. The Qatargas II plant has a production capacity of 7.8 mmtpa for each of its two trains. LNG is loaded onto ships and delivered to a regasification terminal, where the LNG is allowed to expand and reconvert into gas. Regasification terminals are usually connected to a storage and pipeline distribution network to distribute natural gas to local distribution companies (LDCs) or independent power plants (IPPs).
Information for the following table is derived in part from publication by the US Energy Information Administration.
As most LNG plants are located in "stranded" areas not served by pipelines and the costs of LNG treatment and transportation are huge, development was slow during the second half of the last century. The construction of an LNG plant costs at least USD 1.5 billion per 1 mmtpa capacity, a receiving terminal costs USD 1 billion per 1 bcf/day throughput capacity, and LNG vessels cost USD 0.2–0.3 billion.
In the early 2000s, as more players invested, both in liquefaction and regasification, and with new technologies, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution, but increasing material costs and demand for construction contractors have driven up prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be USD 250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency, costs were reduced by 60%. Costs in US dollar terms also declined due to the devaluation of the currencies of the world's largest shipbuilders, Japanese yen and Korean won. Since 2004, ship costs have increased due to a large number of orders which have increased demand for shipyard slots. The per-ton construction cost of an LNG liquefaction plant fell steadily from the 1970s through the 1990s. The cost reduced by approximately 35%. However, recently, due to materials costs, lack of skilled labor, shortage of professional engineers, designers, managers and other white-collar professionals, the cost of building liquefaction and regasification terminals has doubled.
Due to energy shortage concerns, many new LNG terminals are being contemplated in the United States. Concerns over the safety of such facilities has created extensive controversy in the regions where plans have been created to build such facilities. One such location is in the Long Island Sound between Connecticut and Long Island. Broadwater Energy
, an effort of TransCanada Corp.
and Shell, wishes to build an LNG terminal in the sound on the New York side. Local politicians including the Suffolk County Executive have raised questions about the terminal. In 2005, New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project. Several terminal proposals along the coast of Maine
have also been met with high levels of resistance and questions.
The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm sales to the downstream buyers and then sign 20–25 year contracts with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible could the sponsors of an LNG project invest in their development and operation. Thus, the LNG liquefaction business has been regarded as a game of the rich, where only players with strong financial and political resources could get involved. Major international oil companies (IOCs) such as ExxonMobil
, Royal Dutch Shell
, BP
, BG Group
; Chevron, and national oil companies (NOCs) such as Pertamina
, Petronas
are active players.
. The trade of LNG is completed by signing a sale and purchase agreement (SPA) between a supplier and receiving terminal, and by signing a gas sale agreement (GSA) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB
increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.
LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract
(TOP).
In the mid 1990s, LNG was a buyer's market. At the request of buyers, the SPAs began to adopt some flexibilities on volume and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 16 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. However, sellers have become more sophisticated and are now proposing sharing of arbitrage opportunities and moving away from S-curve pricing. There has been much discussion regarding the creation of an OGEC, the OPEC equivalent of natural gas. Russia
and Qatar
, countries with the largest and the third largest natural gas reserves in the world, have finally supported such move.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices in Europe and Japan have been lower than oil prices, although the link between LNG and oil is still strong. In contrast, prices in the US and the UK have recently skyrocketed, then fallen as a result of changes in supply and storage.
In late 1990s and in early 2000s, the market shifted for buyers, but since 2003 and 2004, it has been a strong seller's market, with net-back as the best estimation for prices.
Receiving terminals exist in about 18 countries, including India, Japan, Korea, Taiwan, China, Belgium, Spain, Italy, France, the UK, the US, Chile, and the Dominican Republic, among others. Plans exist for Argentina, Brazil, Uruguay, Canada, Greece, Ukraine and others to also construct new receiving or gasification terminals.
Until the mid-1990s, LNG demand was heavily concentrated in Northeast Asia — Japan
, Korea
and Taiwan
. At the same time, Pacific Basin supplies dominated world LNG trade. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, coupled with the inability of North American and North Sea natural gas supplies to meet the growing demand, substantially broadened the regional
markets for LNG. It also brought new Atlantic Basin and Middle East suppliers into the trade.
By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) and Indonesia (20 MT) and the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) and Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172 MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012. During next several years there would be significant increase in volume of LNG Trade and only within next three years; about 82 MTPA of new LNG supply will come to the market. For example just in 2009, about 59 MTPA of new LNG supply from 6 new plants comes to the market, including:
, witnessing a new era of energy.
Compared with the crude oil market, the natural gas market is about 60% of the crude oil market (measured on a heat equivalent basis), of which LNG forms a small but rapidly growing part. Much of this growth is driven by the need for clean fuel and some substitution effect due to the high price of oil (primarily in the heating and electricity generation sectors).
Japan
, South Korea
, Spain
, France
, Italy
and Taiwan
import large volumes of LNG due to their shortage of energy. In 2005, Japan imported 58.6 million tons of LNG, representing some 30% of the LNG trade around the world that year. Also in 2005, South Korea imported 22.1 million tons and in 2004 Taiwan imported 6.8 million tons. These three major buyers purchase approximately two-thirds of the world's LNG demand. In addition, Spain imported some 8.2 mmtpa in 2006, making it the third largest importer. France also imported similar quantities as Spain.
The construction cost of green-field LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton of capacity to $1000 per ton of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:
Recent Global Financial Crisis and decline in raw material and equipment prices is expected to cause some decline in construction cost of LNG plants, however the extent of such a decline is still unclear.
where it will be used. This proximity decreases transportation and LNG product costs for consumers.
The small-scale LNG plant also allows localized peakshaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.
The formula for an indexed price is as follows:
CP = BP + β X
The formula has been widely used in Asian LNG SPAs, where base price refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level which can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation.
basis. If the LNG price exceeds the price of crude oil in BOE
terms, then the situation is called broken oil parity. A coefficient of 0.1724 results in full oil parity. In most cases the price of LNG is less the price of crude oil in BOE
terms. In 2009, in several spot cargo deals especially in East Asia, oil parity approached the full oil parity or even exceeds oil parity.
(JCC).
In Indonesian LNG contracts, price formula is linked to Indonesian Crude Price
(ICP).
In the case of off-spec gas or LNG the buyer can refuse to accept the gas or LNG and the seller has to pay liquidated damages for the respective off-spec gas volumes.
The quality of gas or LNG is measured at delivery point by using an instrument such as a gas chromatograph.
The most important gas quality concerns involve the sulphur and mercury content and the calorific value. Due to the sensitivity of liquefaction facilities to sulfur and mercury elements, the gas being sent to the liquefaction process shall be accurately refined and tested in order to assure the minimum possible concentration of these two elements before entering the liquefaction plant, hence there is not much concern about them.
However, the main concern is the heating value of gas. Usually natural gas markets can be divided in three markets in terms of heating value:
There are some methods to modify the heating value of produced LNG to the desired level. For the purpose of increasing the heating value, injecting propane and butane is a solution. For the purpose of decreasing heating value, nitrogen injecting and extracting butane and methane are proved solutions. Blending with gas or LNG can be a solutions; however all of these solutions while theorically viable can be costly and logistically difficult to manage in large scale.
It is expected that by the end of 2012, there will be 100 liquefaction trains on stream with total capacity of 297.2 MMTPA.
The majority of these trains use either APCI or Cascade technology for the liquefaction process. The other processes, used in a small minority of some liquefaction plants, include Shell's DMR technology and the Linde technology. These processes are less important than the APCI or Cascade processes.
APCI technology is the most used liquefaction process in LNG plants: out of 100 liquefaction trains on-stream or under-construction, 86 trains, with a total capacity of 243 MMTPA have been designed based on the APCI process: the second most used is the Philips Cascade process which is used in 10 trains with a total capacity of 36.16 MMTPA. The Shell DMR process has been used in 3 trains with total capacity of 13.9 MMTPA; and, finally, the Linde/Statoil process is used only in the Snohvit 4.2 MMTPA single train.
Floating liquefied natural gas
(FLNG) facilities float above an offshore gas field, and produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets. The first FLNG facility is now in development by Shell, due for completion in around 2017.
Modern LNG storage tank
s are typically full containment type, which has a prestressed concrete
outer wall and a high-nickel steel inner tank, with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed steel or concrete roof. Storage pressure in these tanks is very low, less than 10 kPa
(1.45 psig). Sometimes more expensive underground tanks are used for storage.
Smaller quantities (say 700 m³ (190,000 US gallons) and less), may be stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures anywhere from less than 50 kPa to over 1,700 kPa (7 psig to 250 psig).
LNG must be kept cold to remain a liquid, independent of pressure. Despite efficient insulation, there will inevitably be some heat leakage into the LNG, resulting in vapourisation of the LNG. This boil-off gas acts to keep the LNG cold. The boil-off gas is typically compressed and exported as natural gas
, or is reliquefied and returned to storage.
protecting the cargo systems from damage or leaks. There are several special leak test methods available to test the integrity of an LNG vessel's membrane cargo tanks.
Transportation and supply is an important aspect of the gas business, since LNG reserves are normally quite distant from consumer markets. LNG has far more volume than oil to transport, and most gas is transported by pipelines. There is a pipeline network in the former Soviet Union
, Europe and North America. LNG, when in its gaseous state is rather bulky. Gas travels much faster than oil though a high-pressure pipeline, but can transmit only about a fifth of the amount of energy per day.
As well as pipelines, LNG is transported using both tanker truck, railway tanker, and purpose built ships known as LNG carrier
s. LNG will be sometimes taken to cryogenic
temperatures to increase the tanker capacity. The first commercial ship-to-ship transfer (STS) transfers were undertaken in February 2007 at the Flotta facility in Scapa Flow with 132,000 m³ of LNG being passed between the vessels Excalibur and Excelsior. Transfers have also been carried out by Exmar Shipmanagement
, the Belgian
gas tanker owner in the Gulf of Mexico
, which involved the transfer of LNG from a conventional LNG carrier to an LNG regasification vessel (LNGRV). Prior to this commercial exercise LNG had only ever been transferred between ships on a handful of occasions as a necessity following an incident.
. That is, the liquid is stored at its boiling point
for the pressure at which it is stored (atmospheric pressure). As the vapour boils off, heat for the phase change
cools the remaining liquid. Because the insulation is very efficient, only a relatively small amount of boil off is necessary to maintain temperature. This phenomenon is also called auto-refrigeration
.
Boil off gas from land based LNG storage tank
s is usually compressed and fed to natural gas
pipeline networks. Some LNG carrier
s use boil off gas for fuel.
A typical LNG liquifaction and export terminal exporting 4.5 million tonnes of LNG can be expected to produce in the order of 1.2 million tonnes equivalent carbon dioxide of direct emissions. The greenhouse gas emissions associated with the combustion of 4.5 million tonnes of LNG is approximately 12 million tonnes equivalent carbon dioxide.
On the West Coast of the United States where up to three new LNG importation terminals have been proposed, environmental groups, such as Pacific Environment
, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide
have moved to oppose them. While natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas alone. . However, this assessment does not consider the life cycle emissions of natural gas production, which include significant carbon dioxide emissions from gas compression and transport. On a per kilometer transported basis, LNG carbon dioxide emissions are lower than piped natural gas emissions.
Natural gas
could be considered the most environmentally friendly fossil fuel, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle
power stations. On a per kilometre transported basis, emissions from LNG are lower than piped natural gas, which is a particular issue in Europe, where significant amounts of gas are piped several thousand kilometres from Russia. However, emissions from natural gas transported as LNG are higher than for natural gas produced locally to the point of combustion as emissions associated with transport are lower.
and a combustible
substance. To ensure safe and reliable operation, particular measures are taken in the design, construction and operation of LNG facilities.
In its liquid state, LNG is not explosive and can not burn. For LNG to burn, it must first vaporize, then mix with air in the proper proportions (the flammable range
is 5% to 15%), and then be ignited. In the case of a leak, LNG vaporizes rapidly, turning into a gas (methane plus trace gases), and mixing with air. If this mixture is within the flammable range
, there is risk of ignition which would create fire
and thermal radiation
hazards.
LNG tankers have sailed over 100 million miles without a shipboard death or even a major accident.
Several on-site accidents involving or related to LNG are listed below:
(predominantly methane
, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless
, non-toxic
and non-corrosive. Hazards include flammability, freezing and asphyxia
.
The liquefaction
process involves removal of certain components, such as dust, acid gases, helium
, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed
into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa (3.6 psi)) by cooling it to approximately -162 °C.
LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density
of LNG is 2.4 times that of CNG or 60% of that of diesel fuel This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic
sea vessels (LNG carrier
s) or cryogenic road tankers are used for its transport.
LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicle
s, although it is more common to design vehicles to use compressed natural gas
. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.
expressed in MJ/L or the gasoline gallon equivalent expressed in BTU/ft3. The energy density of LNG is 2.4 times greater than that of CNG which makes it economical to transport natural gas by ship in the form of LNG. The energy density of LNG is comparable to propane
and ethanol
but is only 60% that of diesel and 70% that of gasoline
.
The density of LNG is roughly 0.41 kg/L to 0.5 kg/L, depending on temperature, pressure and composition, compared to water at 1.0 kg/L.
, carbon dioxide
and other components that will freeze
(e.g., benzene
) under the low temperatures needed for storage or be destructive to the liquefaction facility. LNG typically contains more than 90% methane
. It also contains small amounts of ethane
, propane
, butane
, some heavier alkane
s, and Nitrogen. The purification process can be designed to give almost 100% methane
. One of the risks of LNG is a rapid phase transition explosion (RPT), which occurs when cold LNG comes into contact with water
.
The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG train
s, each of which is an independent unit for gas liquefaction. The largest LNG train now in operation is in Qatar. Until recently it was the Train 4 of Atlantic LNG
in Trinidad and Tobago
with a production capacity of 5.2 million metric ton per annum (mmtpa), followed by the SEGAS LNG
plant in Egypt with a capacity of 5 mmtpa. The Qatargas II plant has a production capacity of 7.8 mmtpa for each of its two trains. LNG is loaded onto ships and delivered to a regasification terminal, where the LNG is allowed to expand and reconvert into gas. Regasification terminals are usually connected to a storage and pipeline distribution network to distribute natural gas to local distribution companies (LDCs) or independent power plants (IPPs).
Information for the following table is derived in part from publication by the US Energy Information Administration.
As most LNG plants are located in "stranded" areas not served by pipelines and the costs of LNG treatment and transportation are huge, development was slow during the second half of the last century. The construction of an LNG plant costs at least USD 1.5 billion per 1 mmtpa capacity, a receiving terminal costs USD 1 billion per 1 bcf/day throughput capacity, and LNG vessels cost USD 0.2–0.3 billion.
In the early 2000s, as more players invested, both in liquefaction and regasification, and with new technologies, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution, but increasing material costs and demand for construction contractors have driven up prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be USD 250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency, costs were reduced by 60%. Costs in US dollar terms also declined due to the devaluation of the currencies of the world's largest shipbuilders, Japanese yen and Korean won. Since 2004, ship costs have increased due to a large number of orders which have increased demand for shipyard slots. The per-ton construction cost of an LNG liquefaction plant fell steadily from the 1970s through the 1990s. The cost reduced by approximately 35%. However, recently, due to materials costs, lack of skilled labor, shortage of professional engineers, designers, managers and other white-collar professionals, the cost of building liquefaction and regasification terminals has doubled.
Due to energy shortage concerns, many new LNG terminals are being contemplated in the United States. Concerns over the safety of such facilities has created extensive controversy in the regions where plans have been created to build such facilities. One such location is in the Long Island Sound between Connecticut and Long Island. Broadwater Energy
, an effort of TransCanada Corp.
and Shell, wishes to build an LNG terminal in the sound on the New York side. Local politicians including the Suffolk County Executive have raised questions about the terminal. In 2005, New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project. Several terminal proposals along the coast of Maine
have also been met with high levels of resistance and questions.
The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm sales to the downstream buyers and then sign 20–25 year contracts with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible could the sponsors of an LNG project invest in their development and operation. Thus, the LNG liquefaction business has been regarded as a game of the rich, where only players with strong financial and political resources could get involved. Major international oil companies (IOCs) such as ExxonMobil
, Royal Dutch Shell
, BP
, BG Group
; Chevron, and national oil companies (NOCs) such as Pertamina
, Petronas
are active players.
. The trade of LNG is completed by signing a sale and purchase agreement (SPA) between a supplier and receiving terminal, and by signing a gas sale agreement (GSA) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB
increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.
LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract
(TOP).
In the mid 1990s, LNG was a buyer's market. At the request of buyers, the SPAs began to adopt some flexibilities on volume and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 16 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. However, sellers have become more sophisticated and are now proposing sharing of arbitrage opportunities and moving away from S-curve pricing. There has been much discussion regarding the creation of an OGEC, the OPEC equivalent of natural gas. Russia
and Qatar
, countries with the largest and the third largest natural gas reserves in the world, have finally supported such move.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices in Europe and Japan have been lower than oil prices, although the link between LNG and oil is still strong. In contrast, prices in the US and the UK have recently skyrocketed, then fallen as a result of changes in supply and storage.
In late 1990s and in early 2000s, the market shifted for buyers, but since 2003 and 2004, it has been a strong seller's market, with net-back as the best estimation for prices.
Receiving terminals exist in about 18 countries, including India, Japan, Korea, Taiwan, China, Belgium, Spain, Italy, France, the UK, the US, Chile, and the Dominican Republic, among others. Plans exist for Argentina, Brazil, Uruguay, Canada, Greece, Ukraine and others to also construct new receiving or gasification terminals.
Until the mid-1990s, LNG demand was heavily concentrated in Northeast Asia — Japan
, Korea
and Taiwan
. At the same time, Pacific Basin supplies dominated world LNG trade. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, coupled with the inability of North American and North Sea natural gas supplies to meet the growing demand, substantially broadened the regional
markets for LNG. It also brought new Atlantic Basin and Middle East suppliers into the trade.
By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) and Indonesia (20 MT) and the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) and Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172 MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012. During next several years there would be significant increase in volume of LNG Trade and only within next three years; about 82 MTPA of new LNG supply will come to the market. For example just in 2009, about 59 MTPA of new LNG supply from 6 new plants comes to the market, including:
, witnessing a new era of energy.
Compared with the crude oil market, the natural gas market is about 60% of the crude oil market (measured on a heat equivalent basis), of which LNG forms a small but rapidly growing part. Much of this growth is driven by the need for clean fuel and some substitution effect due to the high price of oil (primarily in the heating and electricity generation sectors).
Japan
, South Korea
, Spain
, France
, Italy
and Taiwan
import large volumes of LNG due to their shortage of energy. In 2005, Japan imported 58.6 million tons of LNG, representing some 30% of the LNG trade around the world that year. Also in 2005, South Korea imported 22.1 million tons and in 2004 Taiwan imported 6.8 million tons. These three major buyers purchase approximately two-thirds of the world's LNG demand. In addition, Spain imported some 8.2 mmtpa in 2006, making it the third largest importer. France also imported similar quantities as Spain.
The construction cost of green-field LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton of capacity to $1000 per ton of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:
Recent Global Financial Crisis and decline in raw material and equipment prices is expected to cause some decline in construction cost of LNG plants, however the extent of such a decline is still unclear.
where it will be used. This proximity decreases transportation and LNG product costs for consumers.
The small-scale LNG plant also allows localized peakshaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.
The formula for an indexed price is as follows:
CP = BP + β X
The formula has been widely used in Asian LNG SPAs, where base price refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level which can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation.
basis. If the LNG price exceeds the price of crude oil in BOE
terms, then the situation is called broken oil parity. A coefficient of 0.1724 results in full oil parity. In most cases the price of LNG is less the price of crude oil in BOE
terms. In 2009, in several spot cargo deals especially in East Asia, oil parity approached the full oil parity or even exceeds oil parity.
(JCC).
In Indonesian LNG contracts, price formula is linked to Indonesian Crude Price
(ICP).
In the case of off-spec gas or LNG the buyer can refuse to accept the gas or LNG and the seller has to pay liquidated damages for the respective off-spec gas volumes.
The quality of gas or LNG is measured at delivery point by using an instrument such as a gas chromatograph.
The most important gas quality concerns involve the sulphur and mercury content and the calorific value. Due to the sensitivity of liquefaction facilities to sulfur and mercury elements, the gas being sent to the liquefaction process shall be accurately refined and tested in order to assure the minimum possible concentration of these two elements before entering the liquefaction plant, hence there is not much concern about them.
However, the main concern is the heating value of gas. Usually natural gas markets can be divided in three markets in terms of heating value:
There are some methods to modify the heating value of produced LNG to the desired level. For the purpose of increasing the heating value, injecting propane and butane is a solution. For the purpose of decreasing heating value, nitrogen injecting and extracting butane and methane are proved solutions. Blending with gas or LNG can be a solutions; however all of these solutions while theorically viable can be costly and logistically difficult to manage in large scale.
It is expected that by the end of 2012, there will be 100 liquefaction trains on stream with total capacity of 297.2 MMTPA.
The majority of these trains use either APCI or Cascade technology for the liquefaction process. The other processes, used in a small minority of some liquefaction plants, include Shell's DMR technology and the Linde technology. These processes are less important than the APCI or Cascade processes.
APCI technology is the most used liquefaction process in LNG plants: out of 100 liquefaction trains on-stream or under-construction, 86 trains, with a total capacity of 243 MMTPA have been designed based on the APCI process: the second most used is the Philips Cascade process which is used in 10 trains with a total capacity of 36.16 MMTPA. The Shell DMR process has been used in 3 trains with total capacity of 13.9 MMTPA; and, finally, the Linde/Statoil process is used only in the Snohvit 4.2 MMTPA single train.
Floating liquefied natural gas
(FLNG) facilities float above an offshore gas field, and produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets. The first FLNG facility is now in development by Shell, due for completion in around 2017.
Modern LNG storage tank
s are typically full containment type, which has a prestressed concrete
outer wall and a high-nickel steel inner tank, with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed steel or concrete roof. Storage pressure in these tanks is very low, less than 10 kPa
(1.45 psig). Sometimes more expensive underground tanks are used for storage.
Smaller quantities (say 700 m³ (190,000 US gallons) and less), may be stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures anywhere from less than 50 kPa to over 1,700 kPa (7 psig to 250 psig).
LNG must be kept cold to remain a liquid, independent of pressure. Despite efficient insulation, there will inevitably be some heat leakage into the LNG, resulting in vapourisation of the LNG. This boil-off gas acts to keep the LNG cold. The boil-off gas is typically compressed and exported as natural gas
, or is reliquefied and returned to storage.
protecting the cargo systems from damage or leaks. There are several special leak test methods available to test the integrity of an LNG vessel's membrane cargo tanks.
Transportation and supply is an important aspect of the gas business, since LNG reserves are normally quite distant from consumer markets. LNG has far more volume than oil to transport, and most gas is transported by pipelines. There is a pipeline network in the former Soviet Union
, Europe and North America. LNG, when in its gaseous state is rather bulky. Gas travels much faster than oil though a high-pressure pipeline, but can transmit only about a fifth of the amount of energy per day.
As well as pipelines, LNG is transported using both tanker truck, railway tanker, and purpose built ships known as LNG carrier
s. LNG will be sometimes taken to cryogenic
temperatures to increase the tanker capacity. The first commercial ship-to-ship transfer (STS) transfers were undertaken in February 2007 at the Flotta facility in Scapa Flow with 132,000 m³ of LNG being passed between the vessels Excalibur and Excelsior. Transfers have also been carried out by Exmar Shipmanagement
, the Belgian
gas tanker owner in the Gulf of Mexico
, which involved the transfer of LNG from a conventional LNG carrier to an LNG regasification vessel (LNGRV). Prior to this commercial exercise LNG had only ever been transferred between ships on a handful of occasions as a necessity following an incident.
. That is, the liquid is stored at its boiling point
for the pressure at which it is stored (atmospheric pressure). As the vapour boils off, heat for the phase change
cools the remaining liquid. Because the insulation is very efficient, only a relatively small amount of boil off is necessary to maintain temperature. This phenomenon is also called auto-refrigeration
.
Boil off gas from land based LNG storage tank
s is usually compressed and fed to natural gas
pipeline networks. Some LNG carrier
s use boil off gas for fuel.
A typical LNG liquifaction and export terminal exporting 4.5 million tonnes of LNG can be expected to produce in the order of 1.2 million tonnes equivalent carbon dioxide of direct emissions. The greenhouse gas emissions associated with the combustion of 4.5 million tonnes of LNG is approximately 12 million tonnes equivalent carbon dioxide.
On the West Coast of the United States where up to three new LNG importation terminals have been proposed, environmental groups, such as Pacific Environment
, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide
have moved to oppose them. While natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas alone. . However, this assessment does not consider the life cycle emissions of natural gas production, which include significant carbon dioxide emissions from gas compression and transport. On a per kilometer transported basis, LNG carbon dioxide emissions are lower than piped natural gas emissions.
Natural gas
could be considered the most environmentally friendly fossil fuel, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle
power stations. On a per kilometre transported basis, emissions from LNG are lower than piped natural gas, which is a particular issue in Europe, where significant amounts of gas are piped several thousand kilometres from Russia. However, emissions from natural gas transported as LNG are higher than for natural gas produced locally to the point of combustion as emissions associated with transport are lower.
and a combustible
substance. To ensure safe and reliable operation, particular measures are taken in the design, construction and operation of LNG facilities.
In its liquid state, LNG is not explosive and can not burn. For LNG to burn, it must first vaporize, then mix with air in the proper proportions (the flammable range
is 5% to 15%), and then be ignited. In the case of a leak, LNG vaporizes rapidly, turning into a gas (methane plus trace gases), and mixing with air. If this mixture is within the flammable range
, there is risk of ignition which would create fire
and thermal radiation
hazards.
LNG tankers have sailed over 100 million miles without a shipboard death or even a major accident.
Several on-site accidents involving or related to LNG are listed below:
(predominantly methane
, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless
, non-toxic
and non-corrosive. Hazards include flammability, freezing and asphyxia
.
The liquefaction
process involves removal of certain components, such as dust, acid gases, helium
, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed
into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa (3.6 psi)) by cooling it to approximately -162 °C.
LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density
of LNG is 2.4 times that of CNG or 60% of that of diesel fuel This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic
sea vessels (LNG carrier
s) or cryogenic road tankers are used for its transport.
LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicle
s, although it is more common to design vehicles to use compressed natural gas
. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.
expressed in MJ/L or the gasoline gallon equivalent expressed in BTU/ft3. The energy density of LNG is 2.4 times greater than that of CNG which makes it economical to transport natural gas by ship in the form of LNG. The energy density of LNG is comparable to propane
and ethanol
but is only 60% that of diesel and 70% that of gasoline
.
The density of LNG is roughly 0.41 kg/L to 0.5 kg/L, depending on temperature, pressure and composition, compared to water at 1.0 kg/L.
, carbon dioxide
and other components that will freeze
(e.g., benzene
) under the low temperatures needed for storage or be destructive to the liquefaction facility. LNG typically contains more than 90% methane
. It also contains small amounts of ethane
, propane
, butane
, some heavier alkane
s, and Nitrogen. The purification process can be designed to give almost 100% methane
. One of the risks of LNG is a rapid phase transition explosion (RPT), which occurs when cold LNG comes into contact with water
.
The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG train
s, each of which is an independent unit for gas liquefaction. The largest LNG train now in operation is in Qatar. Until recently it was the Train 4 of Atlantic LNG
in Trinidad and Tobago
with a production capacity of 5.2 million metric ton per annum (mmtpa), followed by the SEGAS LNG
plant in Egypt with a capacity of 5 mmtpa. The Qatargas II plant has a production capacity of 7.8 mmtpa for each of its two trains. LNG is loaded onto ships and delivered to a regasification terminal, where the LNG is allowed to expand and reconvert into gas. Regasification terminals are usually connected to a storage and pipeline distribution network to distribute natural gas to local distribution companies (LDCs) or independent power plants (IPPs).
Information for the following table is derived in part from publication by the US Energy Information Administration.
As most LNG plants are located in "stranded" areas not served by pipelines and the costs of LNG treatment and transportation are huge, development was slow during the second half of the last century. The construction of an LNG plant costs at least USD 1.5 billion per 1 mmtpa capacity, a receiving terminal costs USD 1 billion per 1 bcf/day throughput capacity, and LNG vessels cost USD 0.2–0.3 billion.
In the early 2000s, as more players invested, both in liquefaction and regasification, and with new technologies, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution, but increasing material costs and demand for construction contractors have driven up prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be USD 250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency, costs were reduced by 60%. Costs in US dollar terms also declined due to the devaluation of the currencies of the world's largest shipbuilders, Japanese yen and Korean won. Since 2004, ship costs have increased due to a large number of orders which have increased demand for shipyard slots. The per-ton construction cost of an LNG liquefaction plant fell steadily from the 1970s through the 1990s. The cost reduced by approximately 35%. However, recently, due to materials costs, lack of skilled labor, shortage of professional engineers, designers, managers and other white-collar professionals, the cost of building liquefaction and regasification terminals has doubled.
Due to energy shortage concerns, many new LNG terminals are being contemplated in the United States. Concerns over the safety of such facilities has created extensive controversy in the regions where plans have been created to build such facilities. One such location is in the Long Island Sound between Connecticut and Long Island. Broadwater Energy
, an effort of TransCanada Corp.
and Shell, wishes to build an LNG terminal in the sound on the New York side. Local politicians including the Suffolk County Executive have raised questions about the terminal. In 2005, New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project. Several terminal proposals along the coast of Maine
have also been met with high levels of resistance and questions.
The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm sales to the downstream buyers and then sign 20–25 year contracts with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible could the sponsors of an LNG project invest in their development and operation. Thus, the LNG liquefaction business has been regarded as a game of the rich, where only players with strong financial and political resources could get involved. Major international oil companies (IOCs) such as ExxonMobil
, Royal Dutch Shell
, BP
, BG Group
; Chevron, and national oil companies (NOCs) such as Pertamina
, Petronas
are active players.
. The trade of LNG is completed by signing a sale and purchase agreement (SPA) between a supplier and receiving terminal, and by signing a gas sale agreement (GSA) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB
increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.
LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract
(TOP).
In the mid 1990s, LNG was a buyer's market. At the request of buyers, the SPAs began to adopt some flexibilities on volume and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 16 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. However, sellers have become more sophisticated and are now proposing sharing of arbitrage opportunities and moving away from S-curve pricing. There has been much discussion regarding the creation of an OGEC, the OPEC equivalent of natural gas. Russia
and Qatar
, countries with the largest and the third largest natural gas reserves in the world, have finally supported such move.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices in Europe and Japan have been lower than oil prices, although the link between LNG and oil is still strong. In contrast, prices in the US and the UK have recently skyrocketed, then fallen as a result of changes in supply and storage.
In late 1990s and in early 2000s, the market shifted for buyers, but since 2003 and 2004, it has been a strong seller's market, with net-back as the best estimation for prices.
Receiving terminals exist in about 18 countries, including India, Japan, Korea, Taiwan, China, Belgium, Spain, Italy, France, the UK, the US, Chile, and the Dominican Republic, among others. Plans exist for Argentina, Brazil, Uruguay, Canada, Greece, Ukraine and others to also construct new receiving or gasification terminals.
Until the mid-1990s, LNG demand was heavily concentrated in Northeast Asia — Japan
, Korea
and Taiwan
. At the same time, Pacific Basin supplies dominated world LNG trade. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, coupled with the inability of North American and North Sea natural gas supplies to meet the growing demand, substantially broadened the regional
markets for LNG. It also brought new Atlantic Basin and Middle East suppliers into the trade.
By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) and Indonesia (20 MT) and the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) and Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172 MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012. During next several years there would be significant increase in volume of LNG Trade and only within next three years; about 82 MTPA of new LNG supply will come to the market. For example just in 2009, about 59 MTPA of new LNG supply from 6 new plants comes to the market, including:
, witnessing a new era of energy.
Compared with the crude oil market, the natural gas market is about 60% of the crude oil market (measured on a heat equivalent basis), of which LNG forms a small but rapidly growing part. Much of this growth is driven by the need for clean fuel and some substitution effect due to the high price of oil (primarily in the heating and electricity generation sectors).
Japan
, South Korea
, Spain
, France
, Italy
and Taiwan
import large volumes of LNG due to their shortage of energy. In 2005, Japan imported 58.6 million tons of LNG, representing some 30% of the LNG trade around the world that year. Also in 2005, South Korea imported 22.1 million tons and in 2004 Taiwan imported 6.8 million tons. These three major buyers purchase approximately two-thirds of the world's LNG demand. In addition, Spain imported some 8.2 mmtpa in 2006, making it the third largest importer. France also imported similar quantities as Spain.
The construction cost of green-field LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton of capacity to $1000 per ton of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:
Recent Global Financial Crisis and decline in raw material and equipment prices is expected to cause some decline in construction cost of LNG plants, however the extent of such a decline is still unclear.
where it will be used. This proximity decreases transportation and LNG product costs for consumers.
The small-scale LNG plant also allows localized peakshaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.
The formula for an indexed price is as follows:
CP = BP + β X
The formula has been widely used in Asian LNG SPAs, where base price refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level which can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation.
basis. If the LNG price exceeds the price of crude oil in BOE
terms, then the situation is called broken oil parity. A coefficient of 0.1724 results in full oil parity. In most cases the price of LNG is less the price of crude oil in BOE
terms. In 2009, in several spot cargo deals especially in East Asia, oil parity approached the full oil parity or even exceeds oil parity.
(JCC).
In Indonesian LNG contracts, price formula is linked to Indonesian Crude Price
(ICP).
In the case of off-spec gas or LNG the buyer can refuse to accept the gas or LNG and the seller has to pay liquidated damages for the respective off-spec gas volumes.
The quality of gas or LNG is measured at delivery point by using an instrument such as a gas chromatograph.
The most important gas quality concerns involve the sulphur and mercury content and the calorific value. Due to the sensitivity of liquefaction facilities to sulfur and mercury elements, the gas being sent to the liquefaction process shall be accurately refined and tested in order to assure the minimum possible concentration of these two elements before entering the liquefaction plant, hence there is not much concern about them.
However, the main concern is the heating value of gas. Usually natural gas markets can be divided in three markets in terms of heating value:
There are some methods to modify the heating value of produced LNG to the desired level. For the purpose of increasing the heating value, injecting propane and butane is a solution. For the purpose of decreasing heating value, nitrogen injecting and extracting butane and methane are proved solutions. Blending with gas or LNG can be a solutions; however all of these solutions while theorically viable can be costly and logistically difficult to manage in large scale.
It is expected that by the end of 2012, there will be 100 liquefaction trains on stream with total capacity of 297.2 MMTPA.
The majority of these trains use either APCI or Cascade technology for the liquefaction process. The other processes, used in a small minority of some liquefaction plants, include Shell's DMR technology and the Linde technology. These processes are less important than the APCI or Cascade processes.
APCI technology is the most used liquefaction process in LNG plants: out of 100 liquefaction trains on-stream or under-construction, 86 trains, with a total capacity of 243 MMTPA have been designed based on the APCI process: the second most used is the Philips Cascade process which is used in 10 trains with a total capacity of 36.16 MMTPA. The Shell DMR process has been used in 3 trains with total capacity of 13.9 MMTPA; and, finally, the Linde/Statoil process is used only in the Snohvit 4.2 MMTPA single train.
Floating liquefied natural gas
(FLNG) facilities float above an offshore gas field, and produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets. The first FLNG facility is now in development by Shell, due for completion in around 2017.
Modern LNG storage tank
s are typically full containment type, which has a prestressed concrete
outer wall and a high-nickel steel inner tank, with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed steel or concrete roof. Storage pressure in these tanks is very low, less than 10 kPa
(1.45 psig). Sometimes more expensive underground tanks are used for storage.
Smaller quantities (say 700 m³ (190,000 US gallons) and less), may be stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures anywhere from less than 50 kPa to over 1,700 kPa (7 psig to 250 psig).
LNG must be kept cold to remain a liquid, independent of pressure. Despite efficient insulation, there will inevitably be some heat leakage into the LNG, resulting in vapourisation of the LNG. This boil-off gas acts to keep the LNG cold. The boil-off gas is typically compressed and exported as natural gas
, or is reliquefied and returned to storage.
protecting the cargo systems from damage or leaks. There are several special leak test methods available to test the integrity of an LNG vessel's membrane cargo tanks.
Transportation and supply is an important aspect of the gas business, since LNG reserves are normally quite distant from consumer markets. LNG has far more volume than oil to transport, and most gas is transported by pipelines. There is a pipeline network in the former Soviet Union
, Europe and North America. LNG, when in its gaseous state is rather bulky. Gas travels much faster than oil though a high-pressure pipeline, but can transmit only about a fifth of the amount of energy per day.
As well as pipelines, LNG is transported using both tanker truck, railway tanker, and purpose built ships known as LNG carrier
s. LNG will be sometimes taken to cryogenic
temperatures to increase the tanker capacity. The first commercial ship-to-ship transfer (STS) transfers were undertaken in February 2007 at the Flotta facility in Scapa Flow with 132,000 m³ of LNG being passed between the vessels Excalibur and Excelsior. Transfers have also been carried out by Exmar Shipmanagement
, the Belgian
gas tanker owner in the Gulf of Mexico
, which involved the transfer of LNG from a conventional LNG carrier to an LNG regasification vessel (LNGRV). Prior to this commercial exercise LNG had only ever been transferred between ships on a handful of occasions as a necessity following an incident.
. That is, the liquid is stored at its boiling point
for the pressure at which it is stored (atmospheric pressure). As the vapour boils off, heat for the phase change
cools the remaining liquid. Because the insulation is very efficient, only a relatively small amount of boil off is necessary to maintain temperature. This phenomenon is also called auto-refrigeration
.
Boil off gas from land based LNG storage tank
s is usually compressed and fed to natural gas
pipeline networks. Some LNG carrier
s use boil off gas for fuel.
A typical LNG liquifaction and export terminal exporting 4.5 million tonnes of LNG can be expected to produce in the order of 1.2 million tonnes equivalent carbon dioxide of direct emissions. The greenhouse gas emissions associated with the combustion of 4.5 million tonnes of LNG is approximately 12 million tonnes equivalent carbon dioxide.
On the West Coast of the United States where up to three new LNG importation terminals have been proposed, environmental groups, such as Pacific Environment
, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide
have moved to oppose them. While natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas alone. . However, this assessment does not consider the life cycle emissions of natural gas production, which include significant carbon dioxide emissions from gas compression and transport. On a per kilometer transported basis, LNG carbon dioxide emissions are lower than piped natural gas emissions.
Natural gas
could be considered the most environmentally friendly fossil fuel, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle
power stations. On a per kilometre transported basis, emissions from LNG are lower than piped natural gas, which is a particular issue in Europe, where significant amounts of gas are piped several thousand kilometres from Russia. However, emissions from natural gas transported as LNG are higher than for natural gas produced locally to the point of combustion as emissions associated with transport are lower.
and a combustible
substance. To ensure safe and reliable operation, particular measures are taken in the design, construction and operation of LNG facilities.
In its liquid state, LNG is not explosive and can not burn. For LNG to burn, it must first vaporize, then mix with air in the proper proportions (the flammable range
is 5% to 15%), and then be ignited. In the case of a leak, LNG vaporizes rapidly, turning into a gas (methane plus trace gases), and mixing with air. If this mixture is within the flammable range
, there is risk of ignition which would create fire
and thermal radiation
hazards.
LNG tankers have sailed over 100 million miles without a shipboard death or even a major accident.
Several on-site accidents involving or related to LNG are listed below:
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
(predominantly methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless
Transparency and translucency
In the field of optics, transparency is the physical property of allowing light to pass through a material; translucency only allows light to pass through diffusely. The opposite property is opacity...
, non-toxic
Toxicity
Toxicity is the degree to which a substance can damage a living or non-living organisms. Toxicity can refer to the effect on a whole organism, such as an animal, bacterium, or plant, as well as the effect on a substructure of the organism, such as a cell or an organ , such as the liver...
and non-corrosive. Hazards include flammability, freezing and asphyxia
Asphyxia
Asphyxia or asphyxiation is a condition of severely deficient supply of oxygen to the body that arises from being unable to breathe normally. An example of asphyxia is choking. Asphyxia causes generalized hypoxia, which primarily affects the tissues and organs...
.
Liquefaction of gases
Liquefaction of gases includes a number of phases used to convert a gas into a liquid state. The processes are used for scientific, industrial and commercial purposes. Many gases can be put into a liquid state at normal atmospheric pressure by simple cooling; a few, such as carbon dioxide, require...
process involves removal of certain components, such as dust, acid gases, helium
Helium
Helium is the chemical element with atomic number 2 and an atomic weight of 4.002602, which is represented by the symbol He. It is a colorless, odorless, tasteless, non-toxic, inert, monatomic gas that heads the noble gas group in the periodic table...
, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed
Condensation
Condensation is the change of the physical state of matter from gaseous phase into liquid phase, and is the reverse of vaporization. When the transition happens from the gaseous phase into the solid phase directly, the change is called deposition....
into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa (3.6 psi)) by cooling it to approximately -162 °C.
LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density
Energy density
Energy density is a term used for the amount of energy stored in a given system or region of space per unit volume. Often only the useful or extractable energy is quantified, which is to say that chemically inaccessible energy such as rest mass energy is ignored...
of LNG is 2.4 times that of CNG or 60% of that of diesel fuel This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic
Cryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
sea vessels (LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s) or cryogenic road tankers are used for its transport.
LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicle
Natural gas vehicle
thumb|right|200px|2009 [[Honda Civic GX]] hooked up to Phill refueling system.A natural gas vehicle or NGV is an alternative fuel vehicle that uses compressed natural gas or liquefied natural gas as a clean alternative to other fossil fuels...
s, although it is more common to design vehicles to use compressed natural gas
Compressed natural gas
Compressed natural gas is a fossil fuel substitute for gasoline , diesel, or propane/LPG. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill...
. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.
Energy density and other physical properties
The heating value depends on the source of gas that is used and the process that is used to liquefy the gas. The higher heating value of LNG is estimated to be 24 MJ/L. The lower heating value of LNG is 21 MJ/L or 563623 BTU/ft3. For the purpose of comparison of different fuels the heating value is also known as the energy densityEnergy density
Energy density is a term used for the amount of energy stored in a given system or region of space per unit volume. Often only the useful or extractable energy is quantified, which is to say that chemically inaccessible energy such as rest mass energy is ignored...
expressed in MJ/L or the gasoline gallon equivalent expressed in BTU/ft3. The energy density of LNG is 2.4 times greater than that of CNG which makes it economical to transport natural gas by ship in the form of LNG. The energy density of LNG is comparable to propane
Propane
Propane is a three-carbon alkane with the molecular formula , normally a gas, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used as a fuel for engines, oxy-gas torches, barbecues, portable stoves, and residential central...
and ethanol
Ethanol
Ethanol, also called ethyl alcohol, pure alcohol, grain alcohol, or drinking alcohol, is a volatile, flammable, colorless liquid. It is a psychoactive drug and one of the oldest recreational drugs. Best known as the type of alcohol found in alcoholic beverages, it is also used in thermometers, as a...
but is only 60% that of diesel and 70% that of gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
.
The density of LNG is roughly 0.41 kg/L to 0.5 kg/L, depending on temperature, pressure and composition, compared to water at 1.0 kg/L.
Production
The natural gas fed into the LNG plant will be treated to remove water, hydrogen sulfideHydrogen sulfide
Hydrogen sulfide is the chemical compound with the formula . It is a colorless, very poisonous, flammable gas with the characteristic foul odor of expired eggs perceptible at concentrations as low as 0.00047 parts per million...
, carbon dioxide
Carbon dioxide
Carbon dioxide is a naturally occurring chemical compound composed of two oxygen atoms covalently bonded to a single carbon atom...
and other components that will freeze
Freezing
Freezing or solidification is a phase change in which a liquid turns into a solid when its temperature is lowered below its freezing point. The reverse process is melting....
(e.g., benzene
Benzene
Benzene is an organic chemical compound. It is composed of 6 carbon atoms in a ring, with 1 hydrogen atom attached to each carbon atom, with the molecular formula C6H6....
) under the low temperatures needed for storage or be destructive to the liquefaction facility. LNG typically contains more than 90% methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
. It also contains small amounts of ethane
Ethane
Ethane is a chemical compound with chemical formula C2H6. It is the only two-carbon alkane that is an aliphatic hydrocarbon. At standard temperature and pressure, ethane is a colorless, odorless gas....
, propane
Propane
Propane is a three-carbon alkane with the molecular formula , normally a gas, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used as a fuel for engines, oxy-gas torches, barbecues, portable stoves, and residential central...
, butane
Butane
Butane is a gas with the formula C4H10 that is an alkane with four carbon atoms. The term may refer to any of two structural isomers, or to a mixture of them: in the IUPAC nomenclature, however, butane refers only to the unbranched n-butane isomer; the other one being called "methylpropane" or...
, some heavier alkane
Alkane
Alkanes are chemical compounds that consist only of hydrogen and carbon atoms and are bonded exclusively by single bonds without any cycles...
s, and Nitrogen. The purification process can be designed to give almost 100% methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
. One of the risks of LNG is a rapid phase transition explosion (RPT), which occurs when cold LNG comes into contact with water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...
.
The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG train
LNG train
An LNG train is the term used to describe the liquefaction and purification facilities in a liquefied natural gas plant.In order to make it practical and commercially viable to transport natural gas from one country to another, its volume has to be greatly reduced...
s, each of which is an independent unit for gas liquefaction. The largest LNG train now in operation is in Qatar. Until recently it was the Train 4 of Atlantic LNG
Atlantic LNG
The Atlantic LNG Company of Trinidad and Tobago is a liquefied natural gas producing company operating a liquefied natural gas plant in Point Fortin, Trinidad and Tobago. Atlantic LNG operates four liquefaction units...
in Trinidad and Tobago
Trinidad and Tobago
Trinidad and Tobago officially the Republic of Trinidad and Tobago is an archipelagic state in the southern Caribbean, lying just off the coast of northeastern Venezuela and south of Grenada in the Lesser Antilles...
with a production capacity of 5.2 million metric ton per annum (mmtpa), followed by the SEGAS LNG
SEGAS LNG
SEGAS LNG is a liquefied natural gas complex in Damietta, Egypt. It is located west of Port Said. The name SEGAS comes from the Spanish Egyptian Gas Company.-History:...
plant in Egypt with a capacity of 5 mmtpa. The Qatargas II plant has a production capacity of 7.8 mmtpa for each of its two trains. LNG is loaded onto ships and delivered to a regasification terminal, where the LNG is allowed to expand and reconvert into gas. Regasification terminals are usually connected to a storage and pipeline distribution network to distribute natural gas to local distribution companies (LDCs) or independent power plants (IPPs).
Information for the following table is derived in part from publication by the US Energy Information Administration.
| Plant Name | Location | Country | Startup Date | Capacity (mmtpa) | Corporation |
|---|---|---|---|---|---|
| Qatargas II Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan | Qatar | 2009 | 7.8 | |
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL4Z |
Algeria | 1964 | 0.90 | ||
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL1Z |
Algeria | 1978 | |||
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL1Z |
Algeria | 1997 | 7.9 | ||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1972 | |||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1981 | |||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1999 | 6.0 | ||
| Lumut 1 | Brunei | 1972 | 7.2 | ||
| Bontang A-B | Indonesia | 1977 | |||
| Bontang A-D | Indonesia | 1986 | |||
| Bontang A-E | Indonesia | 1989 | |||
| Bontang A-F | Indonesia | 1993 | |||
| Bontang A-G | Indonesia | 1998 | |||
| Bontang Bontang Bontang is a city on the eastern coast of the island Borneo in Indonesia. It is in the province East Kalimantan.- History :The etymology of Bontang refers to the town’s traditional status throughout history as a humble village populated mostly by immigrants. ‘Bon’ can refer in Indonesian to... A-H |
Indonesia | 1999 | 22.6 | ||
| Point Fortin | Trinidad and Tobago | 1999 | Atlantic LNG | ||
| Point Fortin Point Fortin Point Fortin, the smallest Borough in Trinidad and Tobago, is located in southwestern Trinidad, about southwest of San Fernando. After the discovery of petroleum in the area in 1906 the town grew into a major oil-producing centre. The town grew with the oil industry between the 1940s and 1980s,... |
Trinidad and Tobago | 2003 | 9.9 | Atlantic LNG | |
| Damietta Damietta Damietta , also known as Damiata, or Domyat, is a port and the capital of the Damietta Governorate in Egypt. It is located at the intersection between the Mediterranean Sea and the Nile, about north of Cairo.-History:... |
Egypt | 2004 | 5.5 | Segas LNG | |
| Idku Idku Idku, also spelt Edkou is a town in Al Buhayrah Governorate, Egypt.... |
Egypt | 2005 | 7.2 | ||
| Bintulu Bintulu Bintulu is a coastal town, and the capital of Bintulu District in the Bintulu Division of Sarawak, Malaysia. It is about 650 kilometers from Kuching and about 215 kilometers from either Sibu or Miri.... MLNG 1 |
Malaysia | 1983 | 7.6 | ||
| Bintulu MLNG 2 | Malaysia | 1994 | 7.8 | ||
| Bintulu MLNG 3 | Malaysia | 2003 | 3.4 | ||
| Bonny Island | Nigeria | 1999 | |||
| Bonny Island | Nigeria | 2003 | 9.5 | ||
| Northwest Shelf Venture North West Shelf Venture The North West Shelf Venture, situated in the north-west of Western Australia, is Australia's largest resource development project. It involves the extraction of petroleum at offshore production platforms, onshore processing and export of liquefied natural gas, and production of natural gas for... |
Karratha | Australia | 2009 | 16.3 | |
| Withnell Bay | Karratha | Australia | 1989 | ||
| Withnell Bay | Karratha | Australia | 1995 | (7.7) | |
| Sakhalin II | Russia | 2009 | 9.6. | ||
| Yemen LNG Yemen LNG Yemen LNG is the first 'natural gas liquefaction project in Yemen. The LNG plant is located in Balhaf.-History:... |
Balhaf | Yemen | 2008 | 6.7 | |
| Tangguh LNG Project Tangguh gas field The Tangguh gas field lies in Bintuni Bay, in the province of West Papua, Indonesia. The natural gas field contains over 500 billion m³ of proven natural gas reserves, with estimates of potential reserves reaching over 800 billion m³ .... |
Pappua Barat | Indonesia | 2009 | 6.7 | |
| Qatargas I Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan | Qatar | 1996 | (4.0) | |
| Qatargas I Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan Ras Laffan Industrial City Ras Laffan Industrial City is an industrial hub located north of Doha, Qatar. It is administrated by Qatar Petroleum.Ras Laffan Industrial City is the Qatar's main site for production of liquefied natural gas and gas-to-liquid... |
Qatar | 2005 | 10.0 | |
| Qatargas III Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Qatar | 2010 | 7.8 | ||
| Rasgas RasGas RasGas Company Limited is a liquefied natural gas producing company in Qatar. It is the second-biggest LNG producer in the world after Qatargas. RasGas operates seven LNG trains located in Ras Laffan Industrial City.-Operations:... I and II |
Ras Laffan | Qatar | 1999 | 6.6 | |
| Qalhat Qalhat The ancient city of Qalhat, or Galhat, is located just over 20 km north of Sur, in the Ash Sharqiyah Region of northeastern Oman.- Site Description :... |
Oman | 2000 | 7.3 | ||
| Das Island Das Island Das Island is an island in the Persian Gulf near Qatar. It is part of the emirate of Abu Dhabi, United Arab Emirates but lies well offshore, about north-west of the mainland. It covers approximately by , and is almost rectangular in shape.... I |
United Arab Emirates | 1977 | |||
| Das Island Das Island Das Island is an island in the Persian Gulf near Qatar. It is part of the emirate of Abu Dhabi, United Arab Emirates but lies well offshore, about north-west of the mainland. It covers approximately by , and is almost rectangular in shape.... I and II |
United Arab Emirates | 1994 | 5.7 | ||
| TOTAL | WORLD | 1990 | 50 | ||
| TOTAL | WORLD | 2002 | 130 | ||
| TOTAL | WORLD | 2007 | 160 |
As most LNG plants are located in "stranded" areas not served by pipelines and the costs of LNG treatment and transportation are huge, development was slow during the second half of the last century. The construction of an LNG plant costs at least USD 1.5 billion per 1 mmtpa capacity, a receiving terminal costs USD 1 billion per 1 bcf/day throughput capacity, and LNG vessels cost USD 0.2–0.3 billion.
In the early 2000s, as more players invested, both in liquefaction and regasification, and with new technologies, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution, but increasing material costs and demand for construction contractors have driven up prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be USD 250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency, costs were reduced by 60%. Costs in US dollar terms also declined due to the devaluation of the currencies of the world's largest shipbuilders, Japanese yen and Korean won. Since 2004, ship costs have increased due to a large number of orders which have increased demand for shipyard slots. The per-ton construction cost of an LNG liquefaction plant fell steadily from the 1970s through the 1990s. The cost reduced by approximately 35%. However, recently, due to materials costs, lack of skilled labor, shortage of professional engineers, designers, managers and other white-collar professionals, the cost of building liquefaction and regasification terminals has doubled.
Due to energy shortage concerns, many new LNG terminals are being contemplated in the United States. Concerns over the safety of such facilities has created extensive controversy in the regions where plans have been created to build such facilities. One such location is in the Long Island Sound between Connecticut and Long Island. Broadwater Energy
Broadwater Energy
Broadwater Energy is a Liquefied Natural Gas Terminal proposed to be built in Long Island Sound between New York State and Connecticut. The project has received vociferous objections from Connecticut officials and some New York state officials....
, an effort of TransCanada Corp.
TransCanada Corp.
TransCanada Corporation is a major North American energy company based in Calgary, Alberta, developing and operating energy infrastructure in North America. Its pipeline network includes approximately of pipeline and connects with virtually all major gas supply basins in North America...
and Shell, wishes to build an LNG terminal in the sound on the New York side. Local politicians including the Suffolk County Executive have raised questions about the terminal. In 2005, New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project. Several terminal proposals along the coast of Maine
Maine
Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...
have also been met with high levels of resistance and questions.
The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm sales to the downstream buyers and then sign 20–25 year contracts with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible could the sponsors of an LNG project invest in their development and operation. Thus, the LNG liquefaction business has been regarded as a game of the rich, where only players with strong financial and political resources could get involved. Major international oil companies (IOCs) such as ExxonMobil
ExxonMobil
Exxon Mobil Corporation or ExxonMobil, is an American multinational oil and gas corporation. It is a direct descendant of John D. Rockefeller's Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil. Its headquarters are in Irving, Texas...
, Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
, BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
, BG Group
BG Group
BG Group plc is a global oil and gas company headquartered in Reading, United Kingdom. It has operations in 25 countries across Africa, Asia, Australasia, Europe, North America and South America and produces around 680,000 barrels of oil equivalent per day. It has a major Liquefied Natural Gas ...
; Chevron, and national oil companies (NOCs) such as Pertamina
Pertamina
Pertamina is an Indonesian government-owned corporation which extracts and refines the country's oil and gas reserves. It was created in August 1968 by the merger of Pertamin and Permina...
, Petronas
Petronas
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and...
are active players.
Commercial aspects
LNG is shipped around the world in specially constructed seagoing vesselsLNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
. The trade of LNG is completed by signing a sale and purchase agreement (SPA) between a supplier and receiving terminal, and by signing a gas sale agreement (GSA) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB
FOB (shipping)
FOB is an initialism which pertains to the shipping of goods. Depending on specific usage, it may stand for Free On Board or Freight On Board. FOB specifies which party pays for which shipment and loading costs, and/or where responsibility for the goods is transferred...
increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.
LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract
Take-or-pay contract
A take-or-pay contract is a rule structuring negotiations between companies and their suppliers. With this kind of contract, the company either takes the product from the supplier or pays the supplier a penalty. For any product the company takes, they agree to pay the supplier a certain price, say...
(TOP).
In the mid 1990s, LNG was a buyer's market. At the request of buyers, the SPAs began to adopt some flexibilities on volume and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 16 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. However, sellers have become more sophisticated and are now proposing sharing of arbitrage opportunities and moving away from S-curve pricing. There has been much discussion regarding the creation of an OGEC, the OPEC equivalent of natural gas. Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
and Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
, countries with the largest and the third largest natural gas reserves in the world, have finally supported such move.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices in Europe and Japan have been lower than oil prices, although the link between LNG and oil is still strong. In contrast, prices in the US and the UK have recently skyrocketed, then fallen as a result of changes in supply and storage.
In late 1990s and in early 2000s, the market shifted for buyers, but since 2003 and 2004, it has been a strong seller's market, with net-back as the best estimation for prices.
Receiving terminals exist in about 18 countries, including India, Japan, Korea, Taiwan, China, Belgium, Spain, Italy, France, the UK, the US, Chile, and the Dominican Republic, among others. Plans exist for Argentina, Brazil, Uruguay, Canada, Greece, Ukraine and others to also construct new receiving or gasification terminals.
Trade
In 2004, LNG accounted for 7% of the world’s natural gas demand. The global trade in LNG, which has increased at a rate of 7.4 percent per year over the decade from 1995 to 2005, is expected to continue to grow substantially during the coming years. The projected growth in LNG in the base case is expected to increase at 6.7 percent per year from 2005 to 2020.Until the mid-1990s, LNG demand was heavily concentrated in Northeast Asia — Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, Korea
Korea
Korea ) is an East Asian geographic region that is currently divided into two separate sovereign states — North Korea and South Korea. Located on the Korean Peninsula, Korea is bordered by the People's Republic of China to the northwest, Russia to the northeast, and is separated from Japan to the...
and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
. At the same time, Pacific Basin supplies dominated world LNG trade. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, coupled with the inability of North American and North Sea natural gas supplies to meet the growing demand, substantially broadened the regional
markets for LNG. It also brought new Atlantic Basin and Middle East suppliers into the trade.
By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) and Indonesia (20 MT) and the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) and Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172 MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012. During next several years there would be significant increase in volume of LNG Trade and only within next three years; about 82 MTPA of new LNG supply will come to the market. For example just in 2009, about 59 MTPA of new LNG supply from 6 new plants comes to the market, including:
- Northwest Shelf Train 5: 4.4 MTPA
- Sakhalin II: 9.6 MTPA
- Yemen LNGYemen LNGYemen LNG is the first 'natural gas liquefaction project in Yemen. The LNG plant is located in Balhaf.-History:...
: 6.7 MTPA - Tangguh: 7.6 MTPA
- QatargasQatargasQatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar...
: 15.6 MTPA - RasgasRasGasRasGas Company Limited is a liquefied natural gas producing company in Qatar. It is the second-biggest LNG producer in the world after Qatargas. RasGas operates seven LNG trains located in Ras Laffan Industrial City.-Operations:...
Qatar: 15.6 MTPA
Imports
In 1964, the UK and France made the first LNG trade, buying gas from AlgeriaAlgeria
Algeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
, witnessing a new era of energy.
Compared with the crude oil market, the natural gas market is about 60% of the crude oil market (measured on a heat equivalent basis), of which LNG forms a small but rapidly growing part. Much of this growth is driven by the need for clean fuel and some substitution effect due to the high price of oil (primarily in the heating and electricity generation sectors).
Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
import large volumes of LNG due to their shortage of energy. In 2005, Japan imported 58.6 million tons of LNG, representing some 30% of the LNG trade around the world that year. Also in 2005, South Korea imported 22.1 million tons and in 2004 Taiwan imported 6.8 million tons. These three major buyers purchase approximately two-thirds of the world's LNG demand. In addition, Spain imported some 8.2 mmtpa in 2006, making it the third largest importer. France also imported similar quantities as Spain.
Cargo diversion
Based on the LNGSPAs, LNG is destined for pre-agreed destinations, and diversion of that LNG is not allowed. However if Seller and Buyer make a mutual agreement, then diversion of the cargoes is possible but subject to sharing the profits coming from such diversion. In some jurisdictions such as the European Union it is not allowed to apply the profit-sharing clause in the LNGSPAs for any diverted cargoes inside the EU territories.Cost of LNG plants
For an extended period of time, design improvements in liquefaction plants and tankers had the effect of reducing costs. As recently as 2003, it was common to assume that this was a “learning curve” effect and would continue into the future. But this perception of steadily falling costs for LNG has been dashed in the last several years.The construction cost of green-field LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton of capacity to $1000 per ton of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:
- Low availability of EPC contractors as result of extraordinary high level of ongoing petroleum projects world wide.
- High raw material prices as result of surge in demand for raw materials.
- Lack of skilled and experienced workforce in LNG industry.
- Devaluation of US dollar.
Recent Global Financial Crisis and decline in raw material and equipment prices is expected to cause some decline in construction cost of LNG plants, however the extent of such a decline is still unclear.
Small Scale Liquefaction Plants
Small-scale liquefaction plants are advantageous because their compact size enables the production of LNG close to the locationwhere it will be used. This proximity decreases transportation and LNG product costs for consumers.
The small-scale LNG plant also allows localized peakshaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.
LNG pricing
There are three major pricing systems in the current LNG contracts:- Oil indexed contract used primarily in Japan, Korea, Taiwan and China;
- Oil, oil products and other energy carriers indexed contracts used primarily in Continental Europe; and
- Market indexed contracts used in the US and the UK.;
The formula for an indexed price is as follows:
CP = BP + β X
- BP: constant part or base price
- β: gradient
- X: indexation
The formula has been widely used in Asian LNG SPAs, where base price refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level which can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation.
Oil parity
Oil parity is the LNG price that would be equal to that of crude oil on a Barrel of oil equivalentBarrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
basis. If the LNG price exceeds the price of crude oil in BOE
Barrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
terms, then the situation is called broken oil parity. A coefficient of 0.1724 results in full oil parity. In most cases the price of LNG is less the price of crude oil in BOE
Barrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
terms. In 2009, in several spot cargo deals especially in East Asia, oil parity approached the full oil parity or even exceeds oil parity.
S-Curve
Many formula include an S-curve, where the price formula is different above and below a certain oil price, to dampen the impact of high oil prices on the buyer, and low oil prices on the seller.JCC and ICP
In most of the East Asian LNG contracts, price formula is indexed to a basket of crude imported to Japan called the Japan Crude CocktailJapan Crude Cocktail
The Japan Customs-cleared Crude is the average price of customs-cleared crude oil imports into Japan as reported in customs statistics; nicknamed the "Japanese Crude Cocktail"....
(JCC).
In Indonesian LNG contracts, price formula is linked to Indonesian Crude Price
Indonesian Crude Price
Indonesian Crude Price, or ICP, is a price index for crude oil from Indonesia.The ICP is determined by Pertamina, based on moving average spot price of a basket of five internationally traded crudes:* Minas * Tapis...
(ICP).
Brent and other energy carriers
In the continental Europe, the price formula indexation does not follow the same format, and it varies from contract to contract. Brent crude price (B), heavy fuel oil price (HFO), light fuel oil price (LFO), gas oil price (GO), coal price, electricity price and in some cases, consumer and producer price indexes are the indexation elements of price formulas.Price review
Usually there exists a clause allowing parties to trigger the price revision or price reopening in LNGSPAs. In some contracts there are two options for triggering a price revision. regular and special. Regular ones are the dates that will be agreed and defined in the LNGSPAs for the purpose of price review.Quality of LNG
LNG quality is one of the most important issues in the LNG business. Any gas which does not conform to the agreed specifications in the sale and purchase agreement is regarded as “off-specification” (off-spec) or “off-quality” gas or LNG. Quality regulations serve three purposes:- 1 - to ensure that the gas distributed is non-corrosive and non-toxic, below the upper limits for H2S, total sulphur, CO2 and Hg content;
- 2 - to guard against the formation of liquids or hydrates in the networks, through maximum water and hydrocarbon dewpoints;
- 3 - to allow interchangeability of the gases distributed, via limits on the variation range for parameters affecting combustion: content of inert gases, calorific value, Wobbe indexWobbe indexThe Wobbe Index or Wobbe number is an indicator of the interchangeability of fuel gases such as natural gas, liquified petroleum gas , and town gas and is frequently defined in the specifications of gas supply and transport utilities...
, Soot Index, Incomplete Combustion Factor, Yellow Tip Index, etc.
In the case of off-spec gas or LNG the buyer can refuse to accept the gas or LNG and the seller has to pay liquidated damages for the respective off-spec gas volumes.
The quality of gas or LNG is measured at delivery point by using an instrument such as a gas chromatograph.
The most important gas quality concerns involve the sulphur and mercury content and the calorific value. Due to the sensitivity of liquefaction facilities to sulfur and mercury elements, the gas being sent to the liquefaction process shall be accurately refined and tested in order to assure the minimum possible concentration of these two elements before entering the liquefaction plant, hence there is not much concern about them.
However, the main concern is the heating value of gas. Usually natural gas markets can be divided in three markets in terms of heating value:
- Asia (Japan, Korea, Taiwan) where gas distributed is rich, with an GCV higher than 43 MJ/m3(n), i.e. 1,090 Btu/scf,
- the UK and the US, where distributed gas is lean, with an GCV usually lower than 42 MJ/m3(n), i.e. 1,065 Btu/scf,
- Continental Europe, where the acceptable GCV range is quite wide: approx. 39 to 46 MJ/m3(n), i.e. 990 to 1,160 Btu/scf.
There are some methods to modify the heating value of produced LNG to the desired level. For the purpose of increasing the heating value, injecting propane and butane is a solution. For the purpose of decreasing heating value, nitrogen injecting and extracting butane and methane are proved solutions. Blending with gas or LNG can be a solutions; however all of these solutions while theorically viable can be costly and logistically difficult to manage in large scale.
Liquefaction technology
Currently there are 4 Liquefaction processes available:- C3MR ( sometimes referred to as APCI): designed by Air Products & ChemicalsAir Products & ChemicalsAir Products and Chemicals, Inc. is an international corporation whose principal business is selling gases and chemicals for industrial uses. Air Products' headquarters is in Allentown, Pennsylvania, in the Lehigh Valley region of Pennsylvania, in the United States. Air Products is the Lehigh...
, Incorporation. - Cascade: designed by ConocoPhillips.
- Shell DMR
- Linde
It is expected that by the end of 2012, there will be 100 liquefaction trains on stream with total capacity of 297.2 MMTPA.
The majority of these trains use either APCI or Cascade technology for the liquefaction process. The other processes, used in a small minority of some liquefaction plants, include Shell's DMR technology and the Linde technology. These processes are less important than the APCI or Cascade processes.
APCI technology is the most used liquefaction process in LNG plants: out of 100 liquefaction trains on-stream or under-construction, 86 trains, with a total capacity of 243 MMTPA have been designed based on the APCI process: the second most used is the Philips Cascade process which is used in 10 trains with a total capacity of 36.16 MMTPA. The Shell DMR process has been used in 3 trains with total capacity of 13.9 MMTPA; and, finally, the Linde/Statoil process is used only in the Snohvit 4.2 MMTPA single train.
Floating liquefied natural gas
Floating liquefied natural gas
Floating liquefied natural gas refers to water-based liquefied natural gas operations employing technologies designed to enable the development of offshore natural gas resources. While no FLNG facilities currently exist, a facility is in development by Royal Dutch Shell, and is due to be...
(FLNG) facilities float above an offshore gas field, and produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets. The first FLNG facility is now in development by Shell, due for completion in around 2017.
Storage
LNG storage tank
A liquefied natural gas storage tank or LNG storage tank is a specialized type of storage tank used for the storage of Liquefied Natural Gas. LNG storage tanks can be found in ground, above ground or in LNG carriers. The common characteristic of LNG Storage tanks is the ability to store LNG at the...
s are typically full containment type, which has a prestressed concrete
Prestressed concrete
Prestressed concrete is a method for overcoming concrete's natural weakness in tension. It can be used to produce beams, floors or bridges with a longer span than is practical with ordinary reinforced concrete...
outer wall and a high-nickel steel inner tank, with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed steel or concrete roof. Storage pressure in these tanks is very low, less than 10 kPa
Pascal (unit)
The pascal is the SI derived unit of pressure, internal pressure, stress, Young's modulus and tensile strength, named after the French mathematician, physicist, inventor, writer, and philosopher Blaise Pascal. It is a measure of force per unit area, defined as one newton per square metre...
(1.45 psig). Sometimes more expensive underground tanks are used for storage.
Smaller quantities (say 700 m³ (190,000 US gallons) and less), may be stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures anywhere from less than 50 kPa to over 1,700 kPa (7 psig to 250 psig).
LNG must be kept cold to remain a liquid, independent of pressure. Despite efficient insulation, there will inevitably be some heat leakage into the LNG, resulting in vapourisation of the LNG. This boil-off gas acts to keep the LNG cold. The boil-off gas is typically compressed and exported as natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, or is reliquefied and returned to storage.
Transportation
LNG is transported in specially designed ships with double hullsHull (watercraft)
A hull is the watertight body of a ship or boat. Above the hull is the superstructure and/or deckhouse, where present. The line where the hull meets the water surface is called the waterline.The structure of the hull varies depending on the vessel type...
protecting the cargo systems from damage or leaks. There are several special leak test methods available to test the integrity of an LNG vessel's membrane cargo tanks.
Transportation and supply is an important aspect of the gas business, since LNG reserves are normally quite distant from consumer markets. LNG has far more volume than oil to transport, and most gas is transported by pipelines. There is a pipeline network in the former Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
, Europe and North America. LNG, when in its gaseous state is rather bulky. Gas travels much faster than oil though a high-pressure pipeline, but can transmit only about a fifth of the amount of energy per day.
As well as pipelines, LNG is transported using both tanker truck, railway tanker, and purpose built ships known as LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s. LNG will be sometimes taken to cryogenic
Cryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
temperatures to increase the tanker capacity. The first commercial ship-to-ship transfer (STS) transfers were undertaken in February 2007 at the Flotta facility in Scapa Flow with 132,000 m³ of LNG being passed between the vessels Excalibur and Excelsior. Transfers have also been carried out by Exmar Shipmanagement
Exmar Shipmanagement
EXMAR Shipmanagement evolved in 1991 from the shipping activities of the CMB group, Compagnie Maritime Belge, established in 1895 as a diversified shipping group with headquarters in Antwerp, Belgium....
, the Belgian
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
gas tanker owner in the Gulf of Mexico
Gulf of Mexico
The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
, which involved the transfer of LNG from a conventional LNG carrier to an LNG regasification vessel (LNGRV). Prior to this commercial exercise LNG had only ever been transferred between ships on a handful of occasions as a necessity following an incident.
Terminals
Liquefied natural gas is used to transport natural gas over long distances, often by sea. In most cases, LNG terminals are purpose-built ports used exclusively to export or import LNG.Refrigeration
The insulation, as efficient as it is, will not keep LNG cold enough by itself. Inevitably, heat leakage will warm and vapourise the LNG. Industry practice is to store LNG as a boiling cryogenCryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
. That is, the liquid is stored at its boiling point
Boiling point
The boiling point of an element or a substance is the temperature at which the vapor pressure of the liquid equals the environmental pressure surrounding the liquid....
for the pressure at which it is stored (atmospheric pressure). As the vapour boils off, heat for the phase change
Phase transition
A phase transition is the transformation of a thermodynamic system from one phase or state of matter to another.A phase of a thermodynamic system and the states of matter have uniform physical properties....
cools the remaining liquid. Because the insulation is very efficient, only a relatively small amount of boil off is necessary to maintain temperature. This phenomenon is also called auto-refrigeration
Refrigeration
Refrigeration is a process in which work is done to move heat from one location to another. This work is traditionally done by mechanical work, but can also be done by magnetism, laser or other means...
.
Boil off gas from land based LNG storage tank
LNG storage tank
A liquefied natural gas storage tank or LNG storage tank is a specialized type of storage tank used for the storage of Liquefied Natural Gas. LNG storage tanks can be found in ground, above ground or in LNG carriers. The common characteristic of LNG Storage tanks is the ability to store LNG at the...
s is usually compressed and fed to natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
pipeline networks. Some LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s use boil off gas for fuel.
Environmental concerns
Issues commonly referenced include: focus on climate forcing associated with carbon dioxide production in extraction(however, in reality carbon dioxide emissions in the LNG supply chain are lower than in piping natural gas from remote fields when considering equivalent transport distances), liquefaction, gasification and transport; Some groups have identified the plants' release of nitrogen oxide and particulate matter, known to aggravate asthma and respiratory disease as a particular issue. However, combustion emissions from LNG plants are no greater than from a similar energy-demand industrial plant burning natural gas; environmental justice issues associated with site placement; and that expensive infrastructure investment will displace cleaner alternatives.A typical LNG liquifaction and export terminal exporting 4.5 million tonnes of LNG can be expected to produce in the order of 1.2 million tonnes equivalent carbon dioxide of direct emissions. The greenhouse gas emissions associated with the combustion of 4.5 million tonnes of LNG is approximately 12 million tonnes equivalent carbon dioxide.
On the West Coast of the United States where up to three new LNG importation terminals have been proposed, environmental groups, such as Pacific Environment
Pacific Environment
Pacific Environment is an environmental organization based in San Francisco, California, USA founded in 1987. Its objective is to protect the living environment of the Pacific Rim.-Mission statement:...
, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide
Rising Tide North America
Rising Tide North America is a grassroots network of groups and individuals in North America who take action against the root causes of climate change and work towards a just transition to a non-carbon society. Rising Tide North America is part of an international network dedicated to building a...
have moved to oppose them. While natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas alone. . However, this assessment does not consider the life cycle emissions of natural gas production, which include significant carbon dioxide emissions from gas compression and transport. On a per kilometer transported basis, LNG carbon dioxide emissions are lower than piped natural gas emissions.
Natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
could be considered the most environmentally friendly fossil fuel, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle
Combined cycle
In electric power generation a combined cycle is an assembly of heat engines that work in tandem off the same source of heat, converting it into mechanical energy, which in turn usually drives electrical generators...
power stations. On a per kilometre transported basis, emissions from LNG are lower than piped natural gas, which is a particular issue in Europe, where significant amounts of gas are piped several thousand kilometres from Russia. However, emissions from natural gas transported as LNG are higher than for natural gas produced locally to the point of combustion as emissions associated with transport are lower.
Safety and accidents
Natural gas is a fuelFuel
Fuel is any material that stores energy that can later be extracted to perform mechanical work in a controlled manner. Most fuels used by humans undergo combustion, a redox reaction in which a combustible substance releases energy after it ignites and reacts with the oxygen in the air...
and a combustible
Combustibility
Combustibility is a measure of how easily a substance will set on fire, through fire or combustion. This is an important property to consider when a substance is used for construction or is being stored. Special precautions are usually required for substances that are easily combustible...
substance. To ensure safe and reliable operation, particular measures are taken in the design, construction and operation of LNG facilities.
In its liquid state, LNG is not explosive and can not burn. For LNG to burn, it must first vaporize, then mix with air in the proper proportions (the flammable range
Flammability limit
Flammability limits, also called flammable limits, give the proportion of combustible gases in a mixture, between which limits this mixture is flammable. Gas mixtures consisting of combustible, oxidizing, and inert gases are only flammable under certain conditions. The lower flammable limit ...
is 5% to 15%), and then be ignited. In the case of a leak, LNG vaporizes rapidly, turning into a gas (methane plus trace gases), and mixing with air. If this mixture is within the flammable range
Flammability limit
Flammability limits, also called flammable limits, give the proportion of combustible gases in a mixture, between which limits this mixture is flammable. Gas mixtures consisting of combustible, oxidizing, and inert gases are only flammable under certain conditions. The lower flammable limit ...
, there is risk of ignition which would create fire
Fire
Fire is the rapid oxidation of a material in the chemical process of combustion, releasing heat, light, and various reaction products. Slower oxidative processes like rusting or digestion are not included by this definition....
and thermal radiation
Thermal radiation
Thermal radiation is electromagnetic radiation generated by the thermal motion of charged particles in matter. All matter with a temperature greater than absolute zero emits thermal radiation....
hazards.
LNG tankers have sailed over 100 million miles without a shipboard death or even a major accident.
Several on-site accidents involving or related to LNG are listed below:
- 1944, 20 October. The East Ohio Natural Gas Company experienced a failure of an LNG tank in Cleveland, Ohio. 128 people perished in the explosion and fireCleveland East Ohio Gas ExplosionCleveland East Ohio Gas Explosion occurred on the afternoon of Friday, October 20, 1944. The resulting gas leak, explosion and fires killed 130 people and destroyed a one square mile area on Cleveland, Ohio's east side.-The disaster:At 2:30 p.m...
. The tank did not have a dike retaining wall, and it was made during World War II, when metal rationing was very strict. The steel of the tank was made with an extremely low amount of nickelNickelNickel is a chemical element with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel belongs to the transition metals and is hard and ductile...
, which meant the tank was brittle when exposed to the extreme cold of LNG. The tank ruptured, spilling LNG into the city sewer system. The LNG vaporized and turned into gas, which exploded and burned. - 1979 October, Lusby, MarylandLusby, MarylandLusby is a place in Calvert County, Maryland, United States. The population was officially 1,666 at the 2000 census, although residents of the Chesapeake Ranch Estates-Drum Point community also use the Lusby zip code designation, making Lusby in fact a much larger community...
, at the Cove Point LNG facility a pump seal failed, releasing gas vapors (not LNG), which entered and settled in an electrical conduit. A worker switched off a circuit breaker, igniting the gas vapors, killing a worker, severely injuring another and causing heavy damage to the building. National fire codes were changed as a result of the accident. - 2004, 19 January, SkikdaSkikdaSkikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962...
, AlgeriaAlgeriaAlgeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
. Explosion at Sonatrach LNG liquefaction facility. 27 killed, 56 injured, three LNG trains destroyed, 2004 production was down 76% for the year. A steam boiler that was part of a liquefaction train exploded triggering a massive hydrocarbon gas explosion. The explosion occurred where propane and ethane refrigeration storage were located.
See also
- Compressed natural gasCompressed natural gasCompressed natural gas is a fossil fuel substitute for gasoline , diesel, or propane/LPG. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill...
- Gasoline gallon equivalent
- Industrial gasIndustrial gasIndustrial gas is a group of gases that are commercially manufactured and sold for uses in other applications. These gases are mainly used in an industrial processes, such as steelmaking, oil refining, medical applications, fertilizer, semiconductors, etc.,...
- Liquefied petroleum gas
- List of LNG terminals
- Natural gas processingNatural gas processingNatural-gas processing is a complex industrial process designed to clean raw natural gas by separating impurities and various non-methane hydrocarbons and fluids to produce what is known as pipeline quality dry natural gas.-Background:...
- Natural gas storageNatural gas storageNatural gas, like many other commodities, can be stored for an indefinite period of time in natural gas storage facilities for later consumption.- Usage :...
- LNG spillLNG spillA liquefied natural gas spill can happen during an accident or an intentional act such as terrorism. LNG is normally stored and transported in liquid form at a temperature of approximately -161 degrees Celsius. If this supercooled liquid is released from a storage facility, pipeline, or LNG...
External links
- New LNG Plant Technology
- What is LNG and how is it becoming a U.S. energy source?
- Liquefied Natural Gas in the US: Federal Energy Regulatory Commission (FERC)
- LNG safety
- Alternative Fuel Vehicle Training From the National Alternative Fuels Training Consortium
- LNG Safety "The Risks and Dangers of LNG" is an exhaustive report prepared by CH·IV International President, Jeff Beale, analyzing the points made in a controversial Anti-LNG video.
- LNG Terminal Siting Standards Organization Advocating Government Adoption of LNG Industry Standards
- Prospects for Development of LNG in Russia Konstantin Simonov's speech at LNG 2008. April 23, 2008.
- The Terrorist Threat to Liquefied Natural Gas: Fact or Fiction?
Other sources
Liquefied natural gas or LNG is natural gasNatural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
(predominantly methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless
Transparency and translucency
In the field of optics, transparency is the physical property of allowing light to pass through a material; translucency only allows light to pass through diffusely. The opposite property is opacity...
, non-toxic
Toxicity
Toxicity is the degree to which a substance can damage a living or non-living organisms. Toxicity can refer to the effect on a whole organism, such as an animal, bacterium, or plant, as well as the effect on a substructure of the organism, such as a cell or an organ , such as the liver...
and non-corrosive. Hazards include flammability, freezing and asphyxia
Asphyxia
Asphyxia or asphyxiation is a condition of severely deficient supply of oxygen to the body that arises from being unable to breathe normally. An example of asphyxia is choking. Asphyxia causes generalized hypoxia, which primarily affects the tissues and organs...
.
Liquefaction of gases
Liquefaction of gases includes a number of phases used to convert a gas into a liquid state. The processes are used for scientific, industrial and commercial purposes. Many gases can be put into a liquid state at normal atmospheric pressure by simple cooling; a few, such as carbon dioxide, require...
process involves removal of certain components, such as dust, acid gases, helium
Helium
Helium is the chemical element with atomic number 2 and an atomic weight of 4.002602, which is represented by the symbol He. It is a colorless, odorless, tasteless, non-toxic, inert, monatomic gas that heads the noble gas group in the periodic table...
, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed
Condensation
Condensation is the change of the physical state of matter from gaseous phase into liquid phase, and is the reverse of vaporization. When the transition happens from the gaseous phase into the solid phase directly, the change is called deposition....
into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa (3.6 psi)) by cooling it to approximately -162 °C.
LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density
Energy density
Energy density is a term used for the amount of energy stored in a given system or region of space per unit volume. Often only the useful or extractable energy is quantified, which is to say that chemically inaccessible energy such as rest mass energy is ignored...
of LNG is 2.4 times that of CNG or 60% of that of diesel fuel This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic
Cryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
sea vessels (LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s) or cryogenic road tankers are used for its transport.
LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicle
Natural gas vehicle
thumb|right|200px|2009 [[Honda Civic GX]] hooked up to Phill refueling system.A natural gas vehicle or NGV is an alternative fuel vehicle that uses compressed natural gas or liquefied natural gas as a clean alternative to other fossil fuels...
s, although it is more common to design vehicles to use compressed natural gas
Compressed natural gas
Compressed natural gas is a fossil fuel substitute for gasoline , diesel, or propane/LPG. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill...
. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.
Energy density and other physical properties
The heating value depends on the source of gas that is used and the process that is used to liquefy the gas. The higher heating value of LNG is estimated to be 24 MJ/L. The lower heating value of LNG is 21 MJ/L or 563623 BTU/ft3. For the purpose of comparison of different fuels the heating value is also known as the energy densityEnergy density
Energy density is a term used for the amount of energy stored in a given system or region of space per unit volume. Often only the useful or extractable energy is quantified, which is to say that chemically inaccessible energy such as rest mass energy is ignored...
expressed in MJ/L or the gasoline gallon equivalent expressed in BTU/ft3. The energy density of LNG is 2.4 times greater than that of CNG which makes it economical to transport natural gas by ship in the form of LNG. The energy density of LNG is comparable to propane
Propane
Propane is a three-carbon alkane with the molecular formula , normally a gas, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used as a fuel for engines, oxy-gas torches, barbecues, portable stoves, and residential central...
and ethanol
Ethanol
Ethanol, also called ethyl alcohol, pure alcohol, grain alcohol, or drinking alcohol, is a volatile, flammable, colorless liquid. It is a psychoactive drug and one of the oldest recreational drugs. Best known as the type of alcohol found in alcoholic beverages, it is also used in thermometers, as a...
but is only 60% that of diesel and 70% that of gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
.
The density of LNG is roughly 0.41 kg/L to 0.5 kg/L, depending on temperature, pressure and composition, compared to water at 1.0 kg/L.
Production
The natural gas fed into the LNG plant will be treated to remove water, hydrogen sulfideHydrogen sulfide
Hydrogen sulfide is the chemical compound with the formula . It is a colorless, very poisonous, flammable gas with the characteristic foul odor of expired eggs perceptible at concentrations as low as 0.00047 parts per million...
, carbon dioxide
Carbon dioxide
Carbon dioxide is a naturally occurring chemical compound composed of two oxygen atoms covalently bonded to a single carbon atom...
and other components that will freeze
Freezing
Freezing or solidification is a phase change in which a liquid turns into a solid when its temperature is lowered below its freezing point. The reverse process is melting....
(e.g., benzene
Benzene
Benzene is an organic chemical compound. It is composed of 6 carbon atoms in a ring, with 1 hydrogen atom attached to each carbon atom, with the molecular formula C6H6....
) under the low temperatures needed for storage or be destructive to the liquefaction facility. LNG typically contains more than 90% methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
. It also contains small amounts of ethane
Ethane
Ethane is a chemical compound with chemical formula C2H6. It is the only two-carbon alkane that is an aliphatic hydrocarbon. At standard temperature and pressure, ethane is a colorless, odorless gas....
, propane
Propane
Propane is a three-carbon alkane with the molecular formula , normally a gas, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used as a fuel for engines, oxy-gas torches, barbecues, portable stoves, and residential central...
, butane
Butane
Butane is a gas with the formula C4H10 that is an alkane with four carbon atoms. The term may refer to any of two structural isomers, or to a mixture of them: in the IUPAC nomenclature, however, butane refers only to the unbranched n-butane isomer; the other one being called "methylpropane" or...
, some heavier alkane
Alkane
Alkanes are chemical compounds that consist only of hydrogen and carbon atoms and are bonded exclusively by single bonds without any cycles...
s, and Nitrogen. The purification process can be designed to give almost 100% methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
. One of the risks of LNG is a rapid phase transition explosion (RPT), which occurs when cold LNG comes into contact with water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...
.
The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG train
LNG train
An LNG train is the term used to describe the liquefaction and purification facilities in a liquefied natural gas plant.In order to make it practical and commercially viable to transport natural gas from one country to another, its volume has to be greatly reduced...
s, each of which is an independent unit for gas liquefaction. The largest LNG train now in operation is in Qatar. Until recently it was the Train 4 of Atlantic LNG
Atlantic LNG
The Atlantic LNG Company of Trinidad and Tobago is a liquefied natural gas producing company operating a liquefied natural gas plant in Point Fortin, Trinidad and Tobago. Atlantic LNG operates four liquefaction units...
in Trinidad and Tobago
Trinidad and Tobago
Trinidad and Tobago officially the Republic of Trinidad and Tobago is an archipelagic state in the southern Caribbean, lying just off the coast of northeastern Venezuela and south of Grenada in the Lesser Antilles...
with a production capacity of 5.2 million metric ton per annum (mmtpa), followed by the SEGAS LNG
SEGAS LNG
SEGAS LNG is a liquefied natural gas complex in Damietta, Egypt. It is located west of Port Said. The name SEGAS comes from the Spanish Egyptian Gas Company.-History:...
plant in Egypt with a capacity of 5 mmtpa. The Qatargas II plant has a production capacity of 7.8 mmtpa for each of its two trains. LNG is loaded onto ships and delivered to a regasification terminal, where the LNG is allowed to expand and reconvert into gas. Regasification terminals are usually connected to a storage and pipeline distribution network to distribute natural gas to local distribution companies (LDCs) or independent power plants (IPPs).
Information for the following table is derived in part from publication by the US Energy Information Administration.
| Plant Name | Location | Country | Startup Date | Capacity (mmtpa) | Corporation |
|---|---|---|---|---|---|
| Qatargas II Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan | Qatar | 2009 | 7.8 | |
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL4Z |
Algeria | 1964 | 0.90 | ||
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL1Z |
Algeria | 1978 | |||
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL1Z |
Algeria | 1997 | 7.9 | ||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1972 | |||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1981 | |||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1999 | 6.0 | ||
| Lumut 1 | Brunei | 1972 | 7.2 | ||
| Bontang A-B | Indonesia | 1977 | |||
| Bontang A-D | Indonesia | 1986 | |||
| Bontang A-E | Indonesia | 1989 | |||
| Bontang A-F | Indonesia | 1993 | |||
| Bontang A-G | Indonesia | 1998 | |||
| Bontang Bontang Bontang is a city on the eastern coast of the island Borneo in Indonesia. It is in the province East Kalimantan.- History :The etymology of Bontang refers to the town’s traditional status throughout history as a humble village populated mostly by immigrants. ‘Bon’ can refer in Indonesian to... A-H |
Indonesia | 1999 | 22.6 | ||
| Point Fortin | Trinidad and Tobago | 1999 | Atlantic LNG | ||
| Point Fortin Point Fortin Point Fortin, the smallest Borough in Trinidad and Tobago, is located in southwestern Trinidad, about southwest of San Fernando. After the discovery of petroleum in the area in 1906 the town grew into a major oil-producing centre. The town grew with the oil industry between the 1940s and 1980s,... |
Trinidad and Tobago | 2003 | 9.9 | Atlantic LNG | |
| Damietta Damietta Damietta , also known as Damiata, or Domyat, is a port and the capital of the Damietta Governorate in Egypt. It is located at the intersection between the Mediterranean Sea and the Nile, about north of Cairo.-History:... |
Egypt | 2004 | 5.5 | Segas LNG | |
| Idku Idku Idku, also spelt Edkou is a town in Al Buhayrah Governorate, Egypt.... |
Egypt | 2005 | 7.2 | ||
| Bintulu Bintulu Bintulu is a coastal town, and the capital of Bintulu District in the Bintulu Division of Sarawak, Malaysia. It is about 650 kilometers from Kuching and about 215 kilometers from either Sibu or Miri.... MLNG 1 |
Malaysia | 1983 | 7.6 | ||
| Bintulu MLNG 2 | Malaysia | 1994 | 7.8 | ||
| Bintulu MLNG 3 | Malaysia | 2003 | 3.4 | ||
| Bonny Island | Nigeria | 1999 | |||
| Bonny Island | Nigeria | 2003 | 9.5 | ||
| Northwest Shelf Venture North West Shelf Venture The North West Shelf Venture, situated in the north-west of Western Australia, is Australia's largest resource development project. It involves the extraction of petroleum at offshore production platforms, onshore processing and export of liquefied natural gas, and production of natural gas for... |
Karratha | Australia | 2009 | 16.3 | |
| Withnell Bay | Karratha | Australia | 1989 | ||
| Withnell Bay | Karratha | Australia | 1995 | (7.7) | |
| Sakhalin II | Russia | 2009 | 9.6. | ||
| Yemen LNG Yemen LNG Yemen LNG is the first 'natural gas liquefaction project in Yemen. The LNG plant is located in Balhaf.-History:... |
Balhaf | Yemen | 2008 | 6.7 | |
| Tangguh LNG Project Tangguh gas field The Tangguh gas field lies in Bintuni Bay, in the province of West Papua, Indonesia. The natural gas field contains over 500 billion m³ of proven natural gas reserves, with estimates of potential reserves reaching over 800 billion m³ .... |
Pappua Barat | Indonesia | 2009 | 6.7 | |
| Qatargas I Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan | Qatar | 1996 | (4.0) | |
| Qatargas I Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan Ras Laffan Industrial City Ras Laffan Industrial City is an industrial hub located north of Doha, Qatar. It is administrated by Qatar Petroleum.Ras Laffan Industrial City is the Qatar's main site for production of liquefied natural gas and gas-to-liquid... |
Qatar | 2005 | 10.0 | |
| Qatargas III Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Qatar | 2010 | 7.8 | ||
| Rasgas RasGas RasGas Company Limited is a liquefied natural gas producing company in Qatar. It is the second-biggest LNG producer in the world after Qatargas. RasGas operates seven LNG trains located in Ras Laffan Industrial City.-Operations:... I and II |
Ras Laffan | Qatar | 1999 | 6.6 | |
| Qalhat Qalhat The ancient city of Qalhat, or Galhat, is located just over 20 km north of Sur, in the Ash Sharqiyah Region of northeastern Oman.- Site Description :... |
Oman | 2000 | 7.3 | ||
| Das Island Das Island Das Island is an island in the Persian Gulf near Qatar. It is part of the emirate of Abu Dhabi, United Arab Emirates but lies well offshore, about north-west of the mainland. It covers approximately by , and is almost rectangular in shape.... I |
United Arab Emirates | 1977 | |||
| Das Island Das Island Das Island is an island in the Persian Gulf near Qatar. It is part of the emirate of Abu Dhabi, United Arab Emirates but lies well offshore, about north-west of the mainland. It covers approximately by , and is almost rectangular in shape.... I and II |
United Arab Emirates | 1994 | 5.7 | ||
| TOTAL | WORLD | 1990 | 50 | ||
| TOTAL | WORLD | 2002 | 130 | ||
| TOTAL | WORLD | 2007 | 160 |
As most LNG plants are located in "stranded" areas not served by pipelines and the costs of LNG treatment and transportation are huge, development was slow during the second half of the last century. The construction of an LNG plant costs at least USD 1.5 billion per 1 mmtpa capacity, a receiving terminal costs USD 1 billion per 1 bcf/day throughput capacity, and LNG vessels cost USD 0.2–0.3 billion.
In the early 2000s, as more players invested, both in liquefaction and regasification, and with new technologies, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution, but increasing material costs and demand for construction contractors have driven up prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be USD 250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency, costs were reduced by 60%. Costs in US dollar terms also declined due to the devaluation of the currencies of the world's largest shipbuilders, Japanese yen and Korean won. Since 2004, ship costs have increased due to a large number of orders which have increased demand for shipyard slots. The per-ton construction cost of an LNG liquefaction plant fell steadily from the 1970s through the 1990s. The cost reduced by approximately 35%. However, recently, due to materials costs, lack of skilled labor, shortage of professional engineers, designers, managers and other white-collar professionals, the cost of building liquefaction and regasification terminals has doubled.
Due to energy shortage concerns, many new LNG terminals are being contemplated in the United States. Concerns over the safety of such facilities has created extensive controversy in the regions where plans have been created to build such facilities. One such location is in the Long Island Sound between Connecticut and Long Island. Broadwater Energy
Broadwater Energy
Broadwater Energy is a Liquefied Natural Gas Terminal proposed to be built in Long Island Sound between New York State and Connecticut. The project has received vociferous objections from Connecticut officials and some New York state officials....
, an effort of TransCanada Corp.
TransCanada Corp.
TransCanada Corporation is a major North American energy company based in Calgary, Alberta, developing and operating energy infrastructure in North America. Its pipeline network includes approximately of pipeline and connects with virtually all major gas supply basins in North America...
and Shell, wishes to build an LNG terminal in the sound on the New York side. Local politicians including the Suffolk County Executive have raised questions about the terminal. In 2005, New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project. Several terminal proposals along the coast of Maine
Maine
Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...
have also been met with high levels of resistance and questions.
The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm sales to the downstream buyers and then sign 20–25 year contracts with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible could the sponsors of an LNG project invest in their development and operation. Thus, the LNG liquefaction business has been regarded as a game of the rich, where only players with strong financial and political resources could get involved. Major international oil companies (IOCs) such as ExxonMobil
ExxonMobil
Exxon Mobil Corporation or ExxonMobil, is an American multinational oil and gas corporation. It is a direct descendant of John D. Rockefeller's Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil. Its headquarters are in Irving, Texas...
, Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
, BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
, BG Group
BG Group
BG Group plc is a global oil and gas company headquartered in Reading, United Kingdom. It has operations in 25 countries across Africa, Asia, Australasia, Europe, North America and South America and produces around 680,000 barrels of oil equivalent per day. It has a major Liquefied Natural Gas ...
; Chevron, and national oil companies (NOCs) such as Pertamina
Pertamina
Pertamina is an Indonesian government-owned corporation which extracts and refines the country's oil and gas reserves. It was created in August 1968 by the merger of Pertamin and Permina...
, Petronas
Petronas
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and...
are active players.
Commercial aspects
LNG is shipped around the world in specially constructed seagoing vesselsLNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
. The trade of LNG is completed by signing a sale and purchase agreement (SPA) between a supplier and receiving terminal, and by signing a gas sale agreement (GSA) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB
FOB (shipping)
FOB is an initialism which pertains to the shipping of goods. Depending on specific usage, it may stand for Free On Board or Freight On Board. FOB specifies which party pays for which shipment and loading costs, and/or where responsibility for the goods is transferred...
increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.
LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract
Take-or-pay contract
A take-or-pay contract is a rule structuring negotiations between companies and their suppliers. With this kind of contract, the company either takes the product from the supplier or pays the supplier a penalty. For any product the company takes, they agree to pay the supplier a certain price, say...
(TOP).
In the mid 1990s, LNG was a buyer's market. At the request of buyers, the SPAs began to adopt some flexibilities on volume and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 16 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. However, sellers have become more sophisticated and are now proposing sharing of arbitrage opportunities and moving away from S-curve pricing. There has been much discussion regarding the creation of an OGEC, the OPEC equivalent of natural gas. Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
and Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
, countries with the largest and the third largest natural gas reserves in the world, have finally supported such move.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices in Europe and Japan have been lower than oil prices, although the link between LNG and oil is still strong. In contrast, prices in the US and the UK have recently skyrocketed, then fallen as a result of changes in supply and storage.
In late 1990s and in early 2000s, the market shifted for buyers, but since 2003 and 2004, it has been a strong seller's market, with net-back as the best estimation for prices.
Receiving terminals exist in about 18 countries, including India, Japan, Korea, Taiwan, China, Belgium, Spain, Italy, France, the UK, the US, Chile, and the Dominican Republic, among others. Plans exist for Argentina, Brazil, Uruguay, Canada, Greece, Ukraine and others to also construct new receiving or gasification terminals.
Trade
In 2004, LNG accounted for 7% of the world’s natural gas demand. The global trade in LNG, which has increased at a rate of 7.4 percent per year over the decade from 1995 to 2005, is expected to continue to grow substantially during the coming years. The projected growth in LNG in the base case is expected to increase at 6.7 percent per year from 2005 to 2020.Until the mid-1990s, LNG demand was heavily concentrated in Northeast Asia — Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, Korea
Korea
Korea ) is an East Asian geographic region that is currently divided into two separate sovereign states — North Korea and South Korea. Located on the Korean Peninsula, Korea is bordered by the People's Republic of China to the northwest, Russia to the northeast, and is separated from Japan to the...
and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
. At the same time, Pacific Basin supplies dominated world LNG trade. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, coupled with the inability of North American and North Sea natural gas supplies to meet the growing demand, substantially broadened the regional
markets for LNG. It also brought new Atlantic Basin and Middle East suppliers into the trade.
By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) and Indonesia (20 MT) and the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) and Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172 MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012. During next several years there would be significant increase in volume of LNG Trade and only within next three years; about 82 MTPA of new LNG supply will come to the market. For example just in 2009, about 59 MTPA of new LNG supply from 6 new plants comes to the market, including:
- Northwest Shelf Train 5: 4.4 MTPA
- Sakhalin II: 9.6 MTPA
- Yemen LNGYemen LNGYemen LNG is the first 'natural gas liquefaction project in Yemen. The LNG plant is located in Balhaf.-History:...
: 6.7 MTPA - Tangguh: 7.6 MTPA
- QatargasQatargasQatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar...
: 15.6 MTPA - RasgasRasGasRasGas Company Limited is a liquefied natural gas producing company in Qatar. It is the second-biggest LNG producer in the world after Qatargas. RasGas operates seven LNG trains located in Ras Laffan Industrial City.-Operations:...
Qatar: 15.6 MTPA
Imports
In 1964, the UK and France made the first LNG trade, buying gas from AlgeriaAlgeria
Algeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
, witnessing a new era of energy.
Compared with the crude oil market, the natural gas market is about 60% of the crude oil market (measured on a heat equivalent basis), of which LNG forms a small but rapidly growing part. Much of this growth is driven by the need for clean fuel and some substitution effect due to the high price of oil (primarily in the heating and electricity generation sectors).
Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
import large volumes of LNG due to their shortage of energy. In 2005, Japan imported 58.6 million tons of LNG, representing some 30% of the LNG trade around the world that year. Also in 2005, South Korea imported 22.1 million tons and in 2004 Taiwan imported 6.8 million tons. These three major buyers purchase approximately two-thirds of the world's LNG demand. In addition, Spain imported some 8.2 mmtpa in 2006, making it the third largest importer. France also imported similar quantities as Spain.
Cargo diversion
Based on the LNGSPAs, LNG is destined for pre-agreed destinations, and diversion of that LNG is not allowed. However if Seller and Buyer make a mutual agreement, then diversion of the cargoes is possible but subject to sharing the profits coming from such diversion. In some jurisdictions such as the European Union it is not allowed to apply the profit-sharing clause in the LNGSPAs for any diverted cargoes inside the EU territories.Cost of LNG plants
For an extended period of time, design improvements in liquefaction plants and tankers had the effect of reducing costs. As recently as 2003, it was common to assume that this was a “learning curve” effect and would continue into the future. But this perception of steadily falling costs for LNG has been dashed in the last several years.The construction cost of green-field LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton of capacity to $1000 per ton of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:
- Low availability of EPC contractors as result of extraordinary high level of ongoing petroleum projects world wide.
- High raw material prices as result of surge in demand for raw materials.
- Lack of skilled and experienced workforce in LNG industry.
- Devaluation of US dollar.
Recent Global Financial Crisis and decline in raw material and equipment prices is expected to cause some decline in construction cost of LNG plants, however the extent of such a decline is still unclear.
Small Scale Liquefaction Plants
Small-scale liquefaction plants are advantageous because their compact size enables the production of LNG close to the locationwhere it will be used. This proximity decreases transportation and LNG product costs for consumers.
The small-scale LNG plant also allows localized peakshaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.
LNG pricing
There are three major pricing systems in the current LNG contracts:- Oil indexed contract used primarily in Japan, Korea, Taiwan and China;
- Oil, oil products and other energy carriers indexed contracts used primarily in Continental Europe; and
- Market indexed contracts used in the US and the UK.;
The formula for an indexed price is as follows:
CP = BP + β X
- BP: constant part or base price
- β: gradient
- X: indexation
The formula has been widely used in Asian LNG SPAs, where base price refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level which can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation.
Oil parity
Oil parity is the LNG price that would be equal to that of crude oil on a Barrel of oil equivalentBarrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
basis. If the LNG price exceeds the price of crude oil in BOE
Barrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
terms, then the situation is called broken oil parity. A coefficient of 0.1724 results in full oil parity. In most cases the price of LNG is less the price of crude oil in BOE
Barrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
terms. In 2009, in several spot cargo deals especially in East Asia, oil parity approached the full oil parity or even exceeds oil parity.
S-Curve
Many formula include an S-curve, where the price formula is different above and below a certain oil price, to dampen the impact of high oil prices on the buyer, and low oil prices on the seller.JCC and ICP
In most of the East Asian LNG contracts, price formula is indexed to a basket of crude imported to Japan called the Japan Crude CocktailJapan Crude Cocktail
The Japan Customs-cleared Crude is the average price of customs-cleared crude oil imports into Japan as reported in customs statistics; nicknamed the "Japanese Crude Cocktail"....
(JCC).
In Indonesian LNG contracts, price formula is linked to Indonesian Crude Price
Indonesian Crude Price
Indonesian Crude Price, or ICP, is a price index for crude oil from Indonesia.The ICP is determined by Pertamina, based on moving average spot price of a basket of five internationally traded crudes:* Minas * Tapis...
(ICP).
Brent and other energy carriers
In the continental Europe, the price formula indexation does not follow the same format, and it varies from contract to contract. Brent crude price (B), heavy fuel oil price (HFO), light fuel oil price (LFO), gas oil price (GO), coal price, electricity price and in some cases, consumer and producer price indexes are the indexation elements of price formulas.Price review
Usually there exists a clause allowing parties to trigger the price revision or price reopening in LNGSPAs. In some contracts there are two options for triggering a price revision. regular and special. Regular ones are the dates that will be agreed and defined in the LNGSPAs for the purpose of price review.Quality of LNG
LNG quality is one of the most important issues in the LNG business. Any gas which does not conform to the agreed specifications in the sale and purchase agreement is regarded as “off-specification” (off-spec) or “off-quality” gas or LNG. Quality regulations serve three purposes:- 1 - to ensure that the gas distributed is non-corrosive and non-toxic, below the upper limits for H2S, total sulphur, CO2 and Hg content;
- 2 - to guard against the formation of liquids or hydrates in the networks, through maximum water and hydrocarbon dewpoints;
- 3 - to allow interchangeability of the gases distributed, via limits on the variation range for parameters affecting combustion: content of inert gases, calorific value, Wobbe indexWobbe indexThe Wobbe Index or Wobbe number is an indicator of the interchangeability of fuel gases such as natural gas, liquified petroleum gas , and town gas and is frequently defined in the specifications of gas supply and transport utilities...
, Soot Index, Incomplete Combustion Factor, Yellow Tip Index, etc.
In the case of off-spec gas or LNG the buyer can refuse to accept the gas or LNG and the seller has to pay liquidated damages for the respective off-spec gas volumes.
The quality of gas or LNG is measured at delivery point by using an instrument such as a gas chromatograph.
The most important gas quality concerns involve the sulphur and mercury content and the calorific value. Due to the sensitivity of liquefaction facilities to sulfur and mercury elements, the gas being sent to the liquefaction process shall be accurately refined and tested in order to assure the minimum possible concentration of these two elements before entering the liquefaction plant, hence there is not much concern about them.
However, the main concern is the heating value of gas. Usually natural gas markets can be divided in three markets in terms of heating value:
- Asia (Japan, Korea, Taiwan) where gas distributed is rich, with an GCV higher than 43 MJ/m3(n), i.e. 1,090 Btu/scf,
- the UK and the US, where distributed gas is lean, with an GCV usually lower than 42 MJ/m3(n), i.e. 1,065 Btu/scf,
- Continental Europe, where the acceptable GCV range is quite wide: approx. 39 to 46 MJ/m3(n), i.e. 990 to 1,160 Btu/scf.
There are some methods to modify the heating value of produced LNG to the desired level. For the purpose of increasing the heating value, injecting propane and butane is a solution. For the purpose of decreasing heating value, nitrogen injecting and extracting butane and methane are proved solutions. Blending with gas or LNG can be a solutions; however all of these solutions while theorically viable can be costly and logistically difficult to manage in large scale.
Liquefaction technology
Currently there are 4 Liquefaction processes available:- C3MR ( sometimes referred to as APCI): designed by Air Products & ChemicalsAir Products & ChemicalsAir Products and Chemicals, Inc. is an international corporation whose principal business is selling gases and chemicals for industrial uses. Air Products' headquarters is in Allentown, Pennsylvania, in the Lehigh Valley region of Pennsylvania, in the United States. Air Products is the Lehigh...
, Incorporation. - Cascade: designed by ConocoPhillips.
- Shell DMR
- Linde
It is expected that by the end of 2012, there will be 100 liquefaction trains on stream with total capacity of 297.2 MMTPA.
The majority of these trains use either APCI or Cascade technology for the liquefaction process. The other processes, used in a small minority of some liquefaction plants, include Shell's DMR technology and the Linde technology. These processes are less important than the APCI or Cascade processes.
APCI technology is the most used liquefaction process in LNG plants: out of 100 liquefaction trains on-stream or under-construction, 86 trains, with a total capacity of 243 MMTPA have been designed based on the APCI process: the second most used is the Philips Cascade process which is used in 10 trains with a total capacity of 36.16 MMTPA. The Shell DMR process has been used in 3 trains with total capacity of 13.9 MMTPA; and, finally, the Linde/Statoil process is used only in the Snohvit 4.2 MMTPA single train.
Floating liquefied natural gas
Floating liquefied natural gas
Floating liquefied natural gas refers to water-based liquefied natural gas operations employing technologies designed to enable the development of offshore natural gas resources. While no FLNG facilities currently exist, a facility is in development by Royal Dutch Shell, and is due to be...
(FLNG) facilities float above an offshore gas field, and produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets. The first FLNG facility is now in development by Shell, due for completion in around 2017.
Storage
LNG storage tank
A liquefied natural gas storage tank or LNG storage tank is a specialized type of storage tank used for the storage of Liquefied Natural Gas. LNG storage tanks can be found in ground, above ground or in LNG carriers. The common characteristic of LNG Storage tanks is the ability to store LNG at the...
s are typically full containment type, which has a prestressed concrete
Prestressed concrete
Prestressed concrete is a method for overcoming concrete's natural weakness in tension. It can be used to produce beams, floors or bridges with a longer span than is practical with ordinary reinforced concrete...
outer wall and a high-nickel steel inner tank, with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed steel or concrete roof. Storage pressure in these tanks is very low, less than 10 kPa
Pascal (unit)
The pascal is the SI derived unit of pressure, internal pressure, stress, Young's modulus and tensile strength, named after the French mathematician, physicist, inventor, writer, and philosopher Blaise Pascal. It is a measure of force per unit area, defined as one newton per square metre...
(1.45 psig). Sometimes more expensive underground tanks are used for storage.
Smaller quantities (say 700 m³ (190,000 US gallons) and less), may be stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures anywhere from less than 50 kPa to over 1,700 kPa (7 psig to 250 psig).
LNG must be kept cold to remain a liquid, independent of pressure. Despite efficient insulation, there will inevitably be some heat leakage into the LNG, resulting in vapourisation of the LNG. This boil-off gas acts to keep the LNG cold. The boil-off gas is typically compressed and exported as natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, or is reliquefied and returned to storage.
Transportation
LNG is transported in specially designed ships with double hullsHull (watercraft)
A hull is the watertight body of a ship or boat. Above the hull is the superstructure and/or deckhouse, where present. The line where the hull meets the water surface is called the waterline.The structure of the hull varies depending on the vessel type...
protecting the cargo systems from damage or leaks. There are several special leak test methods available to test the integrity of an LNG vessel's membrane cargo tanks.
Transportation and supply is an important aspect of the gas business, since LNG reserves are normally quite distant from consumer markets. LNG has far more volume than oil to transport, and most gas is transported by pipelines. There is a pipeline network in the former Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
, Europe and North America. LNG, when in its gaseous state is rather bulky. Gas travels much faster than oil though a high-pressure pipeline, but can transmit only about a fifth of the amount of energy per day.
As well as pipelines, LNG is transported using both tanker truck, railway tanker, and purpose built ships known as LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s. LNG will be sometimes taken to cryogenic
Cryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
temperatures to increase the tanker capacity. The first commercial ship-to-ship transfer (STS) transfers were undertaken in February 2007 at the Flotta facility in Scapa Flow with 132,000 m³ of LNG being passed between the vessels Excalibur and Excelsior. Transfers have also been carried out by Exmar Shipmanagement
Exmar Shipmanagement
EXMAR Shipmanagement evolved in 1991 from the shipping activities of the CMB group, Compagnie Maritime Belge, established in 1895 as a diversified shipping group with headquarters in Antwerp, Belgium....
, the Belgian
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
gas tanker owner in the Gulf of Mexico
Gulf of Mexico
The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
, which involved the transfer of LNG from a conventional LNG carrier to an LNG regasification vessel (LNGRV). Prior to this commercial exercise LNG had only ever been transferred between ships on a handful of occasions as a necessity following an incident.
Terminals
Liquefied natural gas is used to transport natural gas over long distances, often by sea. In most cases, LNG terminals are purpose-built ports used exclusively to export or import LNG.Refrigeration
The insulation, as efficient as it is, will not keep LNG cold enough by itself. Inevitably, heat leakage will warm and vapourise the LNG. Industry practice is to store LNG as a boiling cryogenCryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
. That is, the liquid is stored at its boiling point
Boiling point
The boiling point of an element or a substance is the temperature at which the vapor pressure of the liquid equals the environmental pressure surrounding the liquid....
for the pressure at which it is stored (atmospheric pressure). As the vapour boils off, heat for the phase change
Phase transition
A phase transition is the transformation of a thermodynamic system from one phase or state of matter to another.A phase of a thermodynamic system and the states of matter have uniform physical properties....
cools the remaining liquid. Because the insulation is very efficient, only a relatively small amount of boil off is necessary to maintain temperature. This phenomenon is also called auto-refrigeration
Refrigeration
Refrigeration is a process in which work is done to move heat from one location to another. This work is traditionally done by mechanical work, but can also be done by magnetism, laser or other means...
.
Boil off gas from land based LNG storage tank
LNG storage tank
A liquefied natural gas storage tank or LNG storage tank is a specialized type of storage tank used for the storage of Liquefied Natural Gas. LNG storage tanks can be found in ground, above ground or in LNG carriers. The common characteristic of LNG Storage tanks is the ability to store LNG at the...
s is usually compressed and fed to natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
pipeline networks. Some LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s use boil off gas for fuel.
Environmental concerns
Issues commonly referenced include: focus on climate forcing associated with carbon dioxide production in extraction(however, in reality carbon dioxide emissions in the LNG supply chain are lower than in piping natural gas from remote fields when considering equivalent transport distances), liquefaction, gasification and transport; Some groups have identified the plants' release of nitrogen oxide and particulate matter, known to aggravate asthma and respiratory disease as a particular issue. However, combustion emissions from LNG plants are no greater than from a similar energy-demand industrial plant burning natural gas; environmental justice issues associated with site placement; and that expensive infrastructure investment will displace cleaner alternatives.A typical LNG liquifaction and export terminal exporting 4.5 million tonnes of LNG can be expected to produce in the order of 1.2 million tonnes equivalent carbon dioxide of direct emissions. The greenhouse gas emissions associated with the combustion of 4.5 million tonnes of LNG is approximately 12 million tonnes equivalent carbon dioxide.
On the West Coast of the United States where up to three new LNG importation terminals have been proposed, environmental groups, such as Pacific Environment
Pacific Environment
Pacific Environment is an environmental organization based in San Francisco, California, USA founded in 1987. Its objective is to protect the living environment of the Pacific Rim.-Mission statement:...
, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide
Rising Tide North America
Rising Tide North America is a grassroots network of groups and individuals in North America who take action against the root causes of climate change and work towards a just transition to a non-carbon society. Rising Tide North America is part of an international network dedicated to building a...
have moved to oppose them. While natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas alone. . However, this assessment does not consider the life cycle emissions of natural gas production, which include significant carbon dioxide emissions from gas compression and transport. On a per kilometer transported basis, LNG carbon dioxide emissions are lower than piped natural gas emissions.
Natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
could be considered the most environmentally friendly fossil fuel, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle
Combined cycle
In electric power generation a combined cycle is an assembly of heat engines that work in tandem off the same source of heat, converting it into mechanical energy, which in turn usually drives electrical generators...
power stations. On a per kilometre transported basis, emissions from LNG are lower than piped natural gas, which is a particular issue in Europe, where significant amounts of gas are piped several thousand kilometres from Russia. However, emissions from natural gas transported as LNG are higher than for natural gas produced locally to the point of combustion as emissions associated with transport are lower.
Safety and accidents
Natural gas is a fuelFuel
Fuel is any material that stores energy that can later be extracted to perform mechanical work in a controlled manner. Most fuels used by humans undergo combustion, a redox reaction in which a combustible substance releases energy after it ignites and reacts with the oxygen in the air...
and a combustible
Combustibility
Combustibility is a measure of how easily a substance will set on fire, through fire or combustion. This is an important property to consider when a substance is used for construction or is being stored. Special precautions are usually required for substances that are easily combustible...
substance. To ensure safe and reliable operation, particular measures are taken in the design, construction and operation of LNG facilities.
In its liquid state, LNG is not explosive and can not burn. For LNG to burn, it must first vaporize, then mix with air in the proper proportions (the flammable range
Flammability limit
Flammability limits, also called flammable limits, give the proportion of combustible gases in a mixture, between which limits this mixture is flammable. Gas mixtures consisting of combustible, oxidizing, and inert gases are only flammable under certain conditions. The lower flammable limit ...
is 5% to 15%), and then be ignited. In the case of a leak, LNG vaporizes rapidly, turning into a gas (methane plus trace gases), and mixing with air. If this mixture is within the flammable range
Flammability limit
Flammability limits, also called flammable limits, give the proportion of combustible gases in a mixture, between which limits this mixture is flammable. Gas mixtures consisting of combustible, oxidizing, and inert gases are only flammable under certain conditions. The lower flammable limit ...
, there is risk of ignition which would create fire
Fire
Fire is the rapid oxidation of a material in the chemical process of combustion, releasing heat, light, and various reaction products. Slower oxidative processes like rusting or digestion are not included by this definition....
and thermal radiation
Thermal radiation
Thermal radiation is electromagnetic radiation generated by the thermal motion of charged particles in matter. All matter with a temperature greater than absolute zero emits thermal radiation....
hazards.
LNG tankers have sailed over 100 million miles without a shipboard death or even a major accident.
Several on-site accidents involving or related to LNG are listed below:
- 1944, 20 October. The East Ohio Natural Gas Company experienced a failure of an LNG tank in Cleveland, Ohio. 128 people perished in the explosion and fireCleveland East Ohio Gas ExplosionCleveland East Ohio Gas Explosion occurred on the afternoon of Friday, October 20, 1944. The resulting gas leak, explosion and fires killed 130 people and destroyed a one square mile area on Cleveland, Ohio's east side.-The disaster:At 2:30 p.m...
. The tank did not have a dike retaining wall, and it was made during World War II, when metal rationing was very strict. The steel of the tank was made with an extremely low amount of nickelNickelNickel is a chemical element with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel belongs to the transition metals and is hard and ductile...
, which meant the tank was brittle when exposed to the extreme cold of LNG. The tank ruptured, spilling LNG into the city sewer system. The LNG vaporized and turned into gas, which exploded and burned. - 1979 October, Lusby, MarylandLusby, MarylandLusby is a place in Calvert County, Maryland, United States. The population was officially 1,666 at the 2000 census, although residents of the Chesapeake Ranch Estates-Drum Point community also use the Lusby zip code designation, making Lusby in fact a much larger community...
, at the Cove Point LNG facility a pump seal failed, releasing gas vapors (not LNG), which entered and settled in an electrical conduit. A worker switched off a circuit breaker, igniting the gas vapors, killing a worker, severely injuring another and causing heavy damage to the building. National fire codes were changed as a result of the accident. - 2004, 19 January, SkikdaSkikdaSkikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962...
, AlgeriaAlgeriaAlgeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
. Explosion at Sonatrach LNG liquefaction facility. 27 killed, 56 injured, three LNG trains destroyed, 2004 production was down 76% for the year. A steam boiler that was part of a liquefaction train exploded triggering a massive hydrocarbon gas explosion. The explosion occurred where propane and ethane refrigeration storage were located.
See also
- Compressed natural gasCompressed natural gasCompressed natural gas is a fossil fuel substitute for gasoline , diesel, or propane/LPG. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill...
- Gasoline gallon equivalent
- Industrial gasIndustrial gasIndustrial gas is a group of gases that are commercially manufactured and sold for uses in other applications. These gases are mainly used in an industrial processes, such as steelmaking, oil refining, medical applications, fertilizer, semiconductors, etc.,...
- Liquefied petroleum gas
- List of LNG terminals
- Natural gas processingNatural gas processingNatural-gas processing is a complex industrial process designed to clean raw natural gas by separating impurities and various non-methane hydrocarbons and fluids to produce what is known as pipeline quality dry natural gas.-Background:...
- Natural gas storageNatural gas storageNatural gas, like many other commodities, can be stored for an indefinite period of time in natural gas storage facilities for later consumption.- Usage :...
- LNG spillLNG spillA liquefied natural gas spill can happen during an accident or an intentional act such as terrorism. LNG is normally stored and transported in liquid form at a temperature of approximately -161 degrees Celsius. If this supercooled liquid is released from a storage facility, pipeline, or LNG...
External links
- New LNG Plant Technology
- What is LNG and how is it becoming a U.S. energy source?
- Liquefied Natural Gas in the US: Federal Energy Regulatory Commission (FERC)
- LNG safety
- Alternative Fuel Vehicle Training From the National Alternative Fuels Training Consortium
- LNG Safety "The Risks and Dangers of LNG" is an exhaustive report prepared by CH·IV International President, Jeff Beale, analyzing the points made in a controversial Anti-LNG video.
- LNG Terminal Siting Standards Organization Advocating Government Adoption of LNG Industry Standards
- Prospects for Development of LNG in Russia Konstantin Simonov's speech at LNG 2008. April 23, 2008.
- The Terrorist Threat to Liquefied Natural Gas: Fact or Fiction?
Other sources
Liquefied natural gas or LNG is natural gasNatural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
(predominantly methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless
Transparency and translucency
In the field of optics, transparency is the physical property of allowing light to pass through a material; translucency only allows light to pass through diffusely. The opposite property is opacity...
, non-toxic
Toxicity
Toxicity is the degree to which a substance can damage a living or non-living organisms. Toxicity can refer to the effect on a whole organism, such as an animal, bacterium, or plant, as well as the effect on a substructure of the organism, such as a cell or an organ , such as the liver...
and non-corrosive. Hazards include flammability, freezing and asphyxia
Asphyxia
Asphyxia or asphyxiation is a condition of severely deficient supply of oxygen to the body that arises from being unable to breathe normally. An example of asphyxia is choking. Asphyxia causes generalized hypoxia, which primarily affects the tissues and organs...
.
Liquefaction of gases
Liquefaction of gases includes a number of phases used to convert a gas into a liquid state. The processes are used for scientific, industrial and commercial purposes. Many gases can be put into a liquid state at normal atmospheric pressure by simple cooling; a few, such as carbon dioxide, require...
process involves removal of certain components, such as dust, acid gases, helium
Helium
Helium is the chemical element with atomic number 2 and an atomic weight of 4.002602, which is represented by the symbol He. It is a colorless, odorless, tasteless, non-toxic, inert, monatomic gas that heads the noble gas group in the periodic table...
, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed
Condensation
Condensation is the change of the physical state of matter from gaseous phase into liquid phase, and is the reverse of vaporization. When the transition happens from the gaseous phase into the solid phase directly, the change is called deposition....
into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa (3.6 psi)) by cooling it to approximately -162 °C.
LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density
Energy density
Energy density is a term used for the amount of energy stored in a given system or region of space per unit volume. Often only the useful or extractable energy is quantified, which is to say that chemically inaccessible energy such as rest mass energy is ignored...
of LNG is 2.4 times that of CNG or 60% of that of diesel fuel This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic
Cryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
sea vessels (LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s) or cryogenic road tankers are used for its transport.
LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicle
Natural gas vehicle
thumb|right|200px|2009 [[Honda Civic GX]] hooked up to Phill refueling system.A natural gas vehicle or NGV is an alternative fuel vehicle that uses compressed natural gas or liquefied natural gas as a clean alternative to other fossil fuels...
s, although it is more common to design vehicles to use compressed natural gas
Compressed natural gas
Compressed natural gas is a fossil fuel substitute for gasoline , diesel, or propane/LPG. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill...
. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.
Energy density and other physical properties
The heating value depends on the source of gas that is used and the process that is used to liquefy the gas. The higher heating value of LNG is estimated to be 24 MJ/L. The lower heating value of LNG is 21 MJ/L or 563623 BTU/ft3. For the purpose of comparison of different fuels the heating value is also known as the energy densityEnergy density
Energy density is a term used for the amount of energy stored in a given system or region of space per unit volume. Often only the useful or extractable energy is quantified, which is to say that chemically inaccessible energy such as rest mass energy is ignored...
expressed in MJ/L or the gasoline gallon equivalent expressed in BTU/ft3. The energy density of LNG is 2.4 times greater than that of CNG which makes it economical to transport natural gas by ship in the form of LNG. The energy density of LNG is comparable to propane
Propane
Propane is a three-carbon alkane with the molecular formula , normally a gas, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used as a fuel for engines, oxy-gas torches, barbecues, portable stoves, and residential central...
and ethanol
Ethanol
Ethanol, also called ethyl alcohol, pure alcohol, grain alcohol, or drinking alcohol, is a volatile, flammable, colorless liquid. It is a psychoactive drug and one of the oldest recreational drugs. Best known as the type of alcohol found in alcoholic beverages, it is also used in thermometers, as a...
but is only 60% that of diesel and 70% that of gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
.
The density of LNG is roughly 0.41 kg/L to 0.5 kg/L, depending on temperature, pressure and composition, compared to water at 1.0 kg/L.
Production
The natural gas fed into the LNG plant will be treated to remove water, hydrogen sulfideHydrogen sulfide
Hydrogen sulfide is the chemical compound with the formula . It is a colorless, very poisonous, flammable gas with the characteristic foul odor of expired eggs perceptible at concentrations as low as 0.00047 parts per million...
, carbon dioxide
Carbon dioxide
Carbon dioxide is a naturally occurring chemical compound composed of two oxygen atoms covalently bonded to a single carbon atom...
and other components that will freeze
Freezing
Freezing or solidification is a phase change in which a liquid turns into a solid when its temperature is lowered below its freezing point. The reverse process is melting....
(e.g., benzene
Benzene
Benzene is an organic chemical compound. It is composed of 6 carbon atoms in a ring, with 1 hydrogen atom attached to each carbon atom, with the molecular formula C6H6....
) under the low temperatures needed for storage or be destructive to the liquefaction facility. LNG typically contains more than 90% methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
. It also contains small amounts of ethane
Ethane
Ethane is a chemical compound with chemical formula C2H6. It is the only two-carbon alkane that is an aliphatic hydrocarbon. At standard temperature and pressure, ethane is a colorless, odorless gas....
, propane
Propane
Propane is a three-carbon alkane with the molecular formula , normally a gas, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used as a fuel for engines, oxy-gas torches, barbecues, portable stoves, and residential central...
, butane
Butane
Butane is a gas with the formula C4H10 that is an alkane with four carbon atoms. The term may refer to any of two structural isomers, or to a mixture of them: in the IUPAC nomenclature, however, butane refers only to the unbranched n-butane isomer; the other one being called "methylpropane" or...
, some heavier alkane
Alkane
Alkanes are chemical compounds that consist only of hydrogen and carbon atoms and are bonded exclusively by single bonds without any cycles...
s, and Nitrogen. The purification process can be designed to give almost 100% methane
Methane
Methane is a chemical compound with the chemical formula . It is the simplest alkane, the principal component of natural gas, and probably the most abundant organic compound on earth. The relative abundance of methane makes it an attractive fuel...
. One of the risks of LNG is a rapid phase transition explosion (RPT), which occurs when cold LNG comes into contact with water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...
.
The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG train
LNG train
An LNG train is the term used to describe the liquefaction and purification facilities in a liquefied natural gas plant.In order to make it practical and commercially viable to transport natural gas from one country to another, its volume has to be greatly reduced...
s, each of which is an independent unit for gas liquefaction. The largest LNG train now in operation is in Qatar. Until recently it was the Train 4 of Atlantic LNG
Atlantic LNG
The Atlantic LNG Company of Trinidad and Tobago is a liquefied natural gas producing company operating a liquefied natural gas plant in Point Fortin, Trinidad and Tobago. Atlantic LNG operates four liquefaction units...
in Trinidad and Tobago
Trinidad and Tobago
Trinidad and Tobago officially the Republic of Trinidad and Tobago is an archipelagic state in the southern Caribbean, lying just off the coast of northeastern Venezuela and south of Grenada in the Lesser Antilles...
with a production capacity of 5.2 million metric ton per annum (mmtpa), followed by the SEGAS LNG
SEGAS LNG
SEGAS LNG is a liquefied natural gas complex in Damietta, Egypt. It is located west of Port Said. The name SEGAS comes from the Spanish Egyptian Gas Company.-History:...
plant in Egypt with a capacity of 5 mmtpa. The Qatargas II plant has a production capacity of 7.8 mmtpa for each of its two trains. LNG is loaded onto ships and delivered to a regasification terminal, where the LNG is allowed to expand and reconvert into gas. Regasification terminals are usually connected to a storage and pipeline distribution network to distribute natural gas to local distribution companies (LDCs) or independent power plants (IPPs).
Information for the following table is derived in part from publication by the US Energy Information Administration.
| Plant Name | Location | Country | Startup Date | Capacity (mmtpa) | Corporation |
|---|---|---|---|---|---|
| Qatargas II Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan | Qatar | 2009 | 7.8 | |
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL4Z |
Algeria | 1964 | 0.90 | ||
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL1Z |
Algeria | 1978 | |||
| Arzew Arzew Arzew or Arzeu is a port city in Algeria, from Oran. It is the capital of Arzew District, Oran Province.-Antiquity:Like the rest of North Africa, the site of modern-day Arzew was originally inhabited by the Berbers... GL1Z |
Algeria | 1997 | 7.9 | ||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1972 | |||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1981 | |||
| Skikda Skikda Skikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962... GL1K |
Algeria | 1999 | 6.0 | ||
| Lumut 1 | Brunei | 1972 | 7.2 | ||
| Bontang A-B | Indonesia | 1977 | |||
| Bontang A-D | Indonesia | 1986 | |||
| Bontang A-E | Indonesia | 1989 | |||
| Bontang A-F | Indonesia | 1993 | |||
| Bontang A-G | Indonesia | 1998 | |||
| Bontang Bontang Bontang is a city on the eastern coast of the island Borneo in Indonesia. It is in the province East Kalimantan.- History :The etymology of Bontang refers to the town’s traditional status throughout history as a humble village populated mostly by immigrants. ‘Bon’ can refer in Indonesian to... A-H |
Indonesia | 1999 | 22.6 | ||
| Point Fortin | Trinidad and Tobago | 1999 | Atlantic LNG | ||
| Point Fortin Point Fortin Point Fortin, the smallest Borough in Trinidad and Tobago, is located in southwestern Trinidad, about southwest of San Fernando. After the discovery of petroleum in the area in 1906 the town grew into a major oil-producing centre. The town grew with the oil industry between the 1940s and 1980s,... |
Trinidad and Tobago | 2003 | 9.9 | Atlantic LNG | |
| Damietta Damietta Damietta , also known as Damiata, or Domyat, is a port and the capital of the Damietta Governorate in Egypt. It is located at the intersection between the Mediterranean Sea and the Nile, about north of Cairo.-History:... |
Egypt | 2004 | 5.5 | Segas LNG | |
| Idku Idku Idku, also spelt Edkou is a town in Al Buhayrah Governorate, Egypt.... |
Egypt | 2005 | 7.2 | ||
| Bintulu Bintulu Bintulu is a coastal town, and the capital of Bintulu District in the Bintulu Division of Sarawak, Malaysia. It is about 650 kilometers from Kuching and about 215 kilometers from either Sibu or Miri.... MLNG 1 |
Malaysia | 1983 | 7.6 | ||
| Bintulu MLNG 2 | Malaysia | 1994 | 7.8 | ||
| Bintulu MLNG 3 | Malaysia | 2003 | 3.4 | ||
| Bonny Island | Nigeria | 1999 | |||
| Bonny Island | Nigeria | 2003 | 9.5 | ||
| Northwest Shelf Venture North West Shelf Venture The North West Shelf Venture, situated in the north-west of Western Australia, is Australia's largest resource development project. It involves the extraction of petroleum at offshore production platforms, onshore processing and export of liquefied natural gas, and production of natural gas for... |
Karratha | Australia | 2009 | 16.3 | |
| Withnell Bay | Karratha | Australia | 1989 | ||
| Withnell Bay | Karratha | Australia | 1995 | (7.7) | |
| Sakhalin II | Russia | 2009 | 9.6. | ||
| Yemen LNG Yemen LNG Yemen LNG is the first 'natural gas liquefaction project in Yemen. The LNG plant is located in Balhaf.-History:... |
Balhaf | Yemen | 2008 | 6.7 | |
| Tangguh LNG Project Tangguh gas field The Tangguh gas field lies in Bintuni Bay, in the province of West Papua, Indonesia. The natural gas field contains over 500 billion m³ of proven natural gas reserves, with estimates of potential reserves reaching over 800 billion m³ .... |
Pappua Barat | Indonesia | 2009 | 6.7 | |
| Qatargas I Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan | Qatar | 1996 | (4.0) | |
| Qatargas I Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Ras Laffan Ras Laffan Industrial City Ras Laffan Industrial City is an industrial hub located north of Doha, Qatar. It is administrated by Qatar Petroleum.Ras Laffan Industrial City is the Qatar's main site for production of liquefied natural gas and gas-to-liquid... |
Qatar | 2005 | 10.0 | |
| Qatargas III Qatargas Qatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar... |
Qatar | 2010 | 7.8 | ||
| Rasgas RasGas RasGas Company Limited is a liquefied natural gas producing company in Qatar. It is the second-biggest LNG producer in the world after Qatargas. RasGas operates seven LNG trains located in Ras Laffan Industrial City.-Operations:... I and II |
Ras Laffan | Qatar | 1999 | 6.6 | |
| Qalhat Qalhat The ancient city of Qalhat, or Galhat, is located just over 20 km north of Sur, in the Ash Sharqiyah Region of northeastern Oman.- Site Description :... |
Oman | 2000 | 7.3 | ||
| Das Island Das Island Das Island is an island in the Persian Gulf near Qatar. It is part of the emirate of Abu Dhabi, United Arab Emirates but lies well offshore, about north-west of the mainland. It covers approximately by , and is almost rectangular in shape.... I |
United Arab Emirates | 1977 | |||
| Das Island Das Island Das Island is an island in the Persian Gulf near Qatar. It is part of the emirate of Abu Dhabi, United Arab Emirates but lies well offshore, about north-west of the mainland. It covers approximately by , and is almost rectangular in shape.... I and II |
United Arab Emirates | 1994 | 5.7 | ||
| TOTAL | WORLD | 1990 | 50 | ||
| TOTAL | WORLD | 2002 | 130 | ||
| TOTAL | WORLD | 2007 | 160 |
As most LNG plants are located in "stranded" areas not served by pipelines and the costs of LNG treatment and transportation are huge, development was slow during the second half of the last century. The construction of an LNG plant costs at least USD 1.5 billion per 1 mmtpa capacity, a receiving terminal costs USD 1 billion per 1 bcf/day throughput capacity, and LNG vessels cost USD 0.2–0.3 billion.
In the early 2000s, as more players invested, both in liquefaction and regasification, and with new technologies, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution, but increasing material costs and demand for construction contractors have driven up prices in the last few years. The standard price for a 125,000 cubic meter LNG vessel built in European and Japanese shipyards used to be USD 250 million. When Korean and Chinese shipyards entered the race, increased competition reduced profit margins and improved efficiency, costs were reduced by 60%. Costs in US dollar terms also declined due to the devaluation of the currencies of the world's largest shipbuilders, Japanese yen and Korean won. Since 2004, ship costs have increased due to a large number of orders which have increased demand for shipyard slots. The per-ton construction cost of an LNG liquefaction plant fell steadily from the 1970s through the 1990s. The cost reduced by approximately 35%. However, recently, due to materials costs, lack of skilled labor, shortage of professional engineers, designers, managers and other white-collar professionals, the cost of building liquefaction and regasification terminals has doubled.
Due to energy shortage concerns, many new LNG terminals are being contemplated in the United States. Concerns over the safety of such facilities has created extensive controversy in the regions where plans have been created to build such facilities. One such location is in the Long Island Sound between Connecticut and Long Island. Broadwater Energy
Broadwater Energy
Broadwater Energy is a Liquefied Natural Gas Terminal proposed to be built in Long Island Sound between New York State and Connecticut. The project has received vociferous objections from Connecticut officials and some New York state officials....
, an effort of TransCanada Corp.
TransCanada Corp.
TransCanada Corporation is a major North American energy company based in Calgary, Alberta, developing and operating energy infrastructure in North America. Its pipeline network includes approximately of pipeline and connects with virtually all major gas supply basins in North America...
and Shell, wishes to build an LNG terminal in the sound on the New York side. Local politicians including the Suffolk County Executive have raised questions about the terminal. In 2005, New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project. Several terminal proposals along the coast of Maine
Maine
Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...
have also been met with high levels of resistance and questions.
The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm sales to the downstream buyers and then sign 20–25 year contracts with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible could the sponsors of an LNG project invest in their development and operation. Thus, the LNG liquefaction business has been regarded as a game of the rich, where only players with strong financial and political resources could get involved. Major international oil companies (IOCs) such as ExxonMobil
ExxonMobil
Exxon Mobil Corporation or ExxonMobil, is an American multinational oil and gas corporation. It is a direct descendant of John D. Rockefeller's Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil. Its headquarters are in Irving, Texas...
, Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
, BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
, BG Group
BG Group
BG Group plc is a global oil and gas company headquartered in Reading, United Kingdom. It has operations in 25 countries across Africa, Asia, Australasia, Europe, North America and South America and produces around 680,000 barrels of oil equivalent per day. It has a major Liquefied Natural Gas ...
; Chevron, and national oil companies (NOCs) such as Pertamina
Pertamina
Pertamina is an Indonesian government-owned corporation which extracts and refines the country's oil and gas reserves. It was created in August 1968 by the merger of Pertamin and Permina...
, Petronas
Petronas
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and...
are active players.
Commercial aspects
LNG is shipped around the world in specially constructed seagoing vesselsLNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
. The trade of LNG is completed by signing a sale and purchase agreement (SPA) between a supplier and receiving terminal, and by signing a gas sale agreement (GSA) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB
FOB (shipping)
FOB is an initialism which pertains to the shipping of goods. Depending on specific usage, it may stand for Free On Board or Freight On Board. FOB specifies which party pays for which shipment and loading costs, and/or where responsibility for the goods is transferred...
increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.
LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract
Take-or-pay contract
A take-or-pay contract is a rule structuring negotiations between companies and their suppliers. With this kind of contract, the company either takes the product from the supplier or pays the supplier a penalty. For any product the company takes, they agree to pay the supplier a certain price, say...
(TOP).
In the mid 1990s, LNG was a buyer's market. At the request of buyers, the SPAs began to adopt some flexibilities on volume and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 16 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. However, sellers have become more sophisticated and are now proposing sharing of arbitrage opportunities and moving away from S-curve pricing. There has been much discussion regarding the creation of an OGEC, the OPEC equivalent of natural gas. Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
and Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
, countries with the largest and the third largest natural gas reserves in the world, have finally supported such move.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices in Europe and Japan have been lower than oil prices, although the link between LNG and oil is still strong. In contrast, prices in the US and the UK have recently skyrocketed, then fallen as a result of changes in supply and storage.
In late 1990s and in early 2000s, the market shifted for buyers, but since 2003 and 2004, it has been a strong seller's market, with net-back as the best estimation for prices.
Receiving terminals exist in about 18 countries, including India, Japan, Korea, Taiwan, China, Belgium, Spain, Italy, France, the UK, the US, Chile, and the Dominican Republic, among others. Plans exist for Argentina, Brazil, Uruguay, Canada, Greece, Ukraine and others to also construct new receiving or gasification terminals.
Trade
In 2004, LNG accounted for 7% of the world’s natural gas demand. The global trade in LNG, which has increased at a rate of 7.4 percent per year over the decade from 1995 to 2005, is expected to continue to grow substantially during the coming years. The projected growth in LNG in the base case is expected to increase at 6.7 percent per year from 2005 to 2020.Until the mid-1990s, LNG demand was heavily concentrated in Northeast Asia — Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, Korea
Korea
Korea ) is an East Asian geographic region that is currently divided into two separate sovereign states — North Korea and South Korea. Located on the Korean Peninsula, Korea is bordered by the People's Republic of China to the northwest, Russia to the northeast, and is separated from Japan to the...
and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
. At the same time, Pacific Basin supplies dominated world LNG trade. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, coupled with the inability of North American and North Sea natural gas supplies to meet the growing demand, substantially broadened the regional
markets for LNG. It also brought new Atlantic Basin and Middle East suppliers into the trade.
By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) and Indonesia (20 MT) and the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) and Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172 MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012. During next several years there would be significant increase in volume of LNG Trade and only within next three years; about 82 MTPA of new LNG supply will come to the market. For example just in 2009, about 59 MTPA of new LNG supply from 6 new plants comes to the market, including:
- Northwest Shelf Train 5: 4.4 MTPA
- Sakhalin II: 9.6 MTPA
- Yemen LNGYemen LNGYemen LNG is the first 'natural gas liquefaction project in Yemen. The LNG plant is located in Balhaf.-History:...
: 6.7 MTPA - Tangguh: 7.6 MTPA
- QatargasQatargasQatargas is the world's largest liquefied natural gas company. It annually produces and supplies the globe with 42 million metric tons of LNG from across its four ventures . It is headquartered in Doha, Qatar, and maintains its upstream assets in Ras Laffan, Qatar...
: 15.6 MTPA - RasgasRasGasRasGas Company Limited is a liquefied natural gas producing company in Qatar. It is the second-biggest LNG producer in the world after Qatargas. RasGas operates seven LNG trains located in Ras Laffan Industrial City.-Operations:...
Qatar: 15.6 MTPA
Imports
In 1964, the UK and France made the first LNG trade, buying gas from AlgeriaAlgeria
Algeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
, witnessing a new era of energy.
Compared with the crude oil market, the natural gas market is about 60% of the crude oil market (measured on a heat equivalent basis), of which LNG forms a small but rapidly growing part. Much of this growth is driven by the need for clean fuel and some substitution effect due to the high price of oil (primarily in the heating and electricity generation sectors).
Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
import large volumes of LNG due to their shortage of energy. In 2005, Japan imported 58.6 million tons of LNG, representing some 30% of the LNG trade around the world that year. Also in 2005, South Korea imported 22.1 million tons and in 2004 Taiwan imported 6.8 million tons. These three major buyers purchase approximately two-thirds of the world's LNG demand. In addition, Spain imported some 8.2 mmtpa in 2006, making it the third largest importer. France also imported similar quantities as Spain.
Cargo diversion
Based on the LNGSPAs, LNG is destined for pre-agreed destinations, and diversion of that LNG is not allowed. However if Seller and Buyer make a mutual agreement, then diversion of the cargoes is possible but subject to sharing the profits coming from such diversion. In some jurisdictions such as the European Union it is not allowed to apply the profit-sharing clause in the LNGSPAs for any diverted cargoes inside the EU territories.Cost of LNG plants
For an extended period of time, design improvements in liquefaction plants and tankers had the effect of reducing costs. As recently as 2003, it was common to assume that this was a “learning curve” effect and would continue into the future. But this perception of steadily falling costs for LNG has been dashed in the last several years.The construction cost of green-field LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton of capacity to $1000 per ton of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:
- Low availability of EPC contractors as result of extraordinary high level of ongoing petroleum projects world wide.
- High raw material prices as result of surge in demand for raw materials.
- Lack of skilled and experienced workforce in LNG industry.
- Devaluation of US dollar.
Recent Global Financial Crisis and decline in raw material and equipment prices is expected to cause some decline in construction cost of LNG plants, however the extent of such a decline is still unclear.
Small Scale Liquefaction Plants
Small-scale liquefaction plants are advantageous because their compact size enables the production of LNG close to the locationwhere it will be used. This proximity decreases transportation and LNG product costs for consumers.
The small-scale LNG plant also allows localized peakshaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.
LNG pricing
There are three major pricing systems in the current LNG contracts:- Oil indexed contract used primarily in Japan, Korea, Taiwan and China;
- Oil, oil products and other energy carriers indexed contracts used primarily in Continental Europe; and
- Market indexed contracts used in the US and the UK.;
The formula for an indexed price is as follows:
CP = BP + β X
- BP: constant part or base price
- β: gradient
- X: indexation
The formula has been widely used in Asian LNG SPAs, where base price refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level which can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation.
Oil parity
Oil parity is the LNG price that would be equal to that of crude oil on a Barrel of oil equivalentBarrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
basis. If the LNG price exceeds the price of crude oil in BOE
Barrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
terms, then the situation is called broken oil parity. A coefficient of 0.1724 results in full oil parity. In most cases the price of LNG is less the price of crude oil in BOE
Barrel of oil equivalent
The barrel of oil equivalent is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU...
terms. In 2009, in several spot cargo deals especially in East Asia, oil parity approached the full oil parity or even exceeds oil parity.
S-Curve
Many formula include an S-curve, where the price formula is different above and below a certain oil price, to dampen the impact of high oil prices on the buyer, and low oil prices on the seller.JCC and ICP
In most of the East Asian LNG contracts, price formula is indexed to a basket of crude imported to Japan called the Japan Crude CocktailJapan Crude Cocktail
The Japan Customs-cleared Crude is the average price of customs-cleared crude oil imports into Japan as reported in customs statistics; nicknamed the "Japanese Crude Cocktail"....
(JCC).
In Indonesian LNG contracts, price formula is linked to Indonesian Crude Price
Indonesian Crude Price
Indonesian Crude Price, or ICP, is a price index for crude oil from Indonesia.The ICP is determined by Pertamina, based on moving average spot price of a basket of five internationally traded crudes:* Minas * Tapis...
(ICP).
Brent and other energy carriers
In the continental Europe, the price formula indexation does not follow the same format, and it varies from contract to contract. Brent crude price (B), heavy fuel oil price (HFO), light fuel oil price (LFO), gas oil price (GO), coal price, electricity price and in some cases, consumer and producer price indexes are the indexation elements of price formulas.Price review
Usually there exists a clause allowing parties to trigger the price revision or price reopening in LNGSPAs. In some contracts there are two options for triggering a price revision. regular and special. Regular ones are the dates that will be agreed and defined in the LNGSPAs for the purpose of price review.Quality of LNG
LNG quality is one of the most important issues in the LNG business. Any gas which does not conform to the agreed specifications in the sale and purchase agreement is regarded as “off-specification” (off-spec) or “off-quality” gas or LNG. Quality regulations serve three purposes:- 1 - to ensure that the gas distributed is non-corrosive and non-toxic, below the upper limits for H2S, total sulphur, CO2 and Hg content;
- 2 - to guard against the formation of liquids or hydrates in the networks, through maximum water and hydrocarbon dewpoints;
- 3 - to allow interchangeability of the gases distributed, via limits on the variation range for parameters affecting combustion: content of inert gases, calorific value, Wobbe indexWobbe indexThe Wobbe Index or Wobbe number is an indicator of the interchangeability of fuel gases such as natural gas, liquified petroleum gas , and town gas and is frequently defined in the specifications of gas supply and transport utilities...
, Soot Index, Incomplete Combustion Factor, Yellow Tip Index, etc.
In the case of off-spec gas or LNG the buyer can refuse to accept the gas or LNG and the seller has to pay liquidated damages for the respective off-spec gas volumes.
The quality of gas or LNG is measured at delivery point by using an instrument such as a gas chromatograph.
The most important gas quality concerns involve the sulphur and mercury content and the calorific value. Due to the sensitivity of liquefaction facilities to sulfur and mercury elements, the gas being sent to the liquefaction process shall be accurately refined and tested in order to assure the minimum possible concentration of these two elements before entering the liquefaction plant, hence there is not much concern about them.
However, the main concern is the heating value of gas. Usually natural gas markets can be divided in three markets in terms of heating value:
- Asia (Japan, Korea, Taiwan) where gas distributed is rich, with an GCV higher than 43 MJ/m3(n), i.e. 1,090 Btu/scf,
- the UK and the US, where distributed gas is lean, with an GCV usually lower than 42 MJ/m3(n), i.e. 1,065 Btu/scf,
- Continental Europe, where the acceptable GCV range is quite wide: approx. 39 to 46 MJ/m3(n), i.e. 990 to 1,160 Btu/scf.
There are some methods to modify the heating value of produced LNG to the desired level. For the purpose of increasing the heating value, injecting propane and butane is a solution. For the purpose of decreasing heating value, nitrogen injecting and extracting butane and methane are proved solutions. Blending with gas or LNG can be a solutions; however all of these solutions while theorically viable can be costly and logistically difficult to manage in large scale.
Liquefaction technology
Currently there are 4 Liquefaction processes available:- C3MR ( sometimes referred to as APCI): designed by Air Products & ChemicalsAir Products & ChemicalsAir Products and Chemicals, Inc. is an international corporation whose principal business is selling gases and chemicals for industrial uses. Air Products' headquarters is in Allentown, Pennsylvania, in the Lehigh Valley region of Pennsylvania, in the United States. Air Products is the Lehigh...
, Incorporation. - Cascade: designed by ConocoPhillips.
- Shell DMR
- Linde
It is expected that by the end of 2012, there will be 100 liquefaction trains on stream with total capacity of 297.2 MMTPA.
The majority of these trains use either APCI or Cascade technology for the liquefaction process. The other processes, used in a small minority of some liquefaction plants, include Shell's DMR technology and the Linde technology. These processes are less important than the APCI or Cascade processes.
APCI technology is the most used liquefaction process in LNG plants: out of 100 liquefaction trains on-stream or under-construction, 86 trains, with a total capacity of 243 MMTPA have been designed based on the APCI process: the second most used is the Philips Cascade process which is used in 10 trains with a total capacity of 36.16 MMTPA. The Shell DMR process has been used in 3 trains with total capacity of 13.9 MMTPA; and, finally, the Linde/Statoil process is used only in the Snohvit 4.2 MMTPA single train.
Floating liquefied natural gas
Floating liquefied natural gas
Floating liquefied natural gas refers to water-based liquefied natural gas operations employing technologies designed to enable the development of offshore natural gas resources. While no FLNG facilities currently exist, a facility is in development by Royal Dutch Shell, and is due to be...
(FLNG) facilities float above an offshore gas field, and produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to markets. The first FLNG facility is now in development by Shell, due for completion in around 2017.
Storage
LNG storage tank
A liquefied natural gas storage tank or LNG storage tank is a specialized type of storage tank used for the storage of Liquefied Natural Gas. LNG storage tanks can be found in ground, above ground or in LNG carriers. The common characteristic of LNG Storage tanks is the ability to store LNG at the...
s are typically full containment type, which has a prestressed concrete
Prestressed concrete
Prestressed concrete is a method for overcoming concrete's natural weakness in tension. It can be used to produce beams, floors or bridges with a longer span than is practical with ordinary reinforced concrete...
outer wall and a high-nickel steel inner tank, with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed steel or concrete roof. Storage pressure in these tanks is very low, less than 10 kPa
Pascal (unit)
The pascal is the SI derived unit of pressure, internal pressure, stress, Young's modulus and tensile strength, named after the French mathematician, physicist, inventor, writer, and philosopher Blaise Pascal. It is a measure of force per unit area, defined as one newton per square metre...
(1.45 psig). Sometimes more expensive underground tanks are used for storage.
Smaller quantities (say 700 m³ (190,000 US gallons) and less), may be stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures anywhere from less than 50 kPa to over 1,700 kPa (7 psig to 250 psig).
LNG must be kept cold to remain a liquid, independent of pressure. Despite efficient insulation, there will inevitably be some heat leakage into the LNG, resulting in vapourisation of the LNG. This boil-off gas acts to keep the LNG cold. The boil-off gas is typically compressed and exported as natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, or is reliquefied and returned to storage.
Transportation
LNG is transported in specially designed ships with double hullsHull (watercraft)
A hull is the watertight body of a ship or boat. Above the hull is the superstructure and/or deckhouse, where present. The line where the hull meets the water surface is called the waterline.The structure of the hull varies depending on the vessel type...
protecting the cargo systems from damage or leaks. There are several special leak test methods available to test the integrity of an LNG vessel's membrane cargo tanks.
Transportation and supply is an important aspect of the gas business, since LNG reserves are normally quite distant from consumer markets. LNG has far more volume than oil to transport, and most gas is transported by pipelines. There is a pipeline network in the former Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
, Europe and North America. LNG, when in its gaseous state is rather bulky. Gas travels much faster than oil though a high-pressure pipeline, but can transmit only about a fifth of the amount of energy per day.
As well as pipelines, LNG is transported using both tanker truck, railway tanker, and purpose built ships known as LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s. LNG will be sometimes taken to cryogenic
Cryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
temperatures to increase the tanker capacity. The first commercial ship-to-ship transfer (STS) transfers were undertaken in February 2007 at the Flotta facility in Scapa Flow with 132,000 m³ of LNG being passed between the vessels Excalibur and Excelsior. Transfers have also been carried out by Exmar Shipmanagement
Exmar Shipmanagement
EXMAR Shipmanagement evolved in 1991 from the shipping activities of the CMB group, Compagnie Maritime Belge, established in 1895 as a diversified shipping group with headquarters in Antwerp, Belgium....
, the Belgian
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
gas tanker owner in the Gulf of Mexico
Gulf of Mexico
The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
, which involved the transfer of LNG from a conventional LNG carrier to an LNG regasification vessel (LNGRV). Prior to this commercial exercise LNG had only ever been transferred between ships on a handful of occasions as a necessity following an incident.
Terminals
Liquefied natural gas is used to transport natural gas over long distances, often by sea. In most cases, LNG terminals are purpose-built ports used exclusively to export or import LNG.Refrigeration
The insulation, as efficient as it is, will not keep LNG cold enough by itself. Inevitably, heat leakage will warm and vapourise the LNG. Industry practice is to store LNG as a boiling cryogenCryogenics
In physics, cryogenics is the study of the production of very low temperature and the behavior of materials at those temperatures. A person who studies elements under extremely cold temperature is called a cryogenicist. Rather than the relative temperature scales of Celsius and Fahrenheit,...
. That is, the liquid is stored at its boiling point
Boiling point
The boiling point of an element or a substance is the temperature at which the vapor pressure of the liquid equals the environmental pressure surrounding the liquid....
for the pressure at which it is stored (atmospheric pressure). As the vapour boils off, heat for the phase change
Phase transition
A phase transition is the transformation of a thermodynamic system from one phase or state of matter to another.A phase of a thermodynamic system and the states of matter have uniform physical properties....
cools the remaining liquid. Because the insulation is very efficient, only a relatively small amount of boil off is necessary to maintain temperature. This phenomenon is also called auto-refrigeration
Refrigeration
Refrigeration is a process in which work is done to move heat from one location to another. This work is traditionally done by mechanical work, but can also be done by magnetism, laser or other means...
.
Boil off gas from land based LNG storage tank
LNG storage tank
A liquefied natural gas storage tank or LNG storage tank is a specialized type of storage tank used for the storage of Liquefied Natural Gas. LNG storage tanks can be found in ground, above ground or in LNG carriers. The common characteristic of LNG Storage tanks is the ability to store LNG at the...
s is usually compressed and fed to natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
pipeline networks. Some LNG carrier
LNG carrier
An LNG carrier is a tank ship designed for transporting liquefied natural gas . As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.-History:...
s use boil off gas for fuel.
Environmental concerns
Issues commonly referenced include: focus on climate forcing associated with carbon dioxide production in extraction(however, in reality carbon dioxide emissions in the LNG supply chain are lower than in piping natural gas from remote fields when considering equivalent transport distances), liquefaction, gasification and transport; Some groups have identified the plants' release of nitrogen oxide and particulate matter, known to aggravate asthma and respiratory disease as a particular issue. However, combustion emissions from LNG plants are no greater than from a similar energy-demand industrial plant burning natural gas; environmental justice issues associated with site placement; and that expensive infrastructure investment will displace cleaner alternatives.A typical LNG liquifaction and export terminal exporting 4.5 million tonnes of LNG can be expected to produce in the order of 1.2 million tonnes equivalent carbon dioxide of direct emissions. The greenhouse gas emissions associated with the combustion of 4.5 million tonnes of LNG is approximately 12 million tonnes equivalent carbon dioxide.
On the West Coast of the United States where up to three new LNG importation terminals have been proposed, environmental groups, such as Pacific Environment
Pacific Environment
Pacific Environment is an environmental organization based in San Francisco, California, USA founded in 1987. Its objective is to protect the living environment of the Pacific Rim.-Mission statement:...
, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide
Rising Tide North America
Rising Tide North America is a grassroots network of groups and individuals in North America who take action against the root causes of climate change and work towards a just transition to a non-carbon society. Rising Tide North America is part of an international network dedicated to building a...
have moved to oppose them. While natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas alone. . However, this assessment does not consider the life cycle emissions of natural gas production, which include significant carbon dioxide emissions from gas compression and transport. On a per kilometer transported basis, LNG carbon dioxide emissions are lower than piped natural gas emissions.
Natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
could be considered the most environmentally friendly fossil fuel, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle
Combined cycle
In electric power generation a combined cycle is an assembly of heat engines that work in tandem off the same source of heat, converting it into mechanical energy, which in turn usually drives electrical generators...
power stations. On a per kilometre transported basis, emissions from LNG are lower than piped natural gas, which is a particular issue in Europe, where significant amounts of gas are piped several thousand kilometres from Russia. However, emissions from natural gas transported as LNG are higher than for natural gas produced locally to the point of combustion as emissions associated with transport are lower.
Safety and accidents
Natural gas is a fuelFuel
Fuel is any material that stores energy that can later be extracted to perform mechanical work in a controlled manner. Most fuels used by humans undergo combustion, a redox reaction in which a combustible substance releases energy after it ignites and reacts with the oxygen in the air...
and a combustible
Combustibility
Combustibility is a measure of how easily a substance will set on fire, through fire or combustion. This is an important property to consider when a substance is used for construction or is being stored. Special precautions are usually required for substances that are easily combustible...
substance. To ensure safe and reliable operation, particular measures are taken in the design, construction and operation of LNG facilities.
In its liquid state, LNG is not explosive and can not burn. For LNG to burn, it must first vaporize, then mix with air in the proper proportions (the flammable range
Flammability limit
Flammability limits, also called flammable limits, give the proportion of combustible gases in a mixture, between which limits this mixture is flammable. Gas mixtures consisting of combustible, oxidizing, and inert gases are only flammable under certain conditions. The lower flammable limit ...
is 5% to 15%), and then be ignited. In the case of a leak, LNG vaporizes rapidly, turning into a gas (methane plus trace gases), and mixing with air. If this mixture is within the flammable range
Flammability limit
Flammability limits, also called flammable limits, give the proportion of combustible gases in a mixture, between which limits this mixture is flammable. Gas mixtures consisting of combustible, oxidizing, and inert gases are only flammable under certain conditions. The lower flammable limit ...
, there is risk of ignition which would create fire
Fire
Fire is the rapid oxidation of a material in the chemical process of combustion, releasing heat, light, and various reaction products. Slower oxidative processes like rusting or digestion are not included by this definition....
and thermal radiation
Thermal radiation
Thermal radiation is electromagnetic radiation generated by the thermal motion of charged particles in matter. All matter with a temperature greater than absolute zero emits thermal radiation....
hazards.
LNG tankers have sailed over 100 million miles without a shipboard death or even a major accident.
Several on-site accidents involving or related to LNG are listed below:
- 1944, 20 October. The East Ohio Natural Gas Company experienced a failure of an LNG tank in Cleveland, Ohio. 128 people perished in the explosion and fireCleveland East Ohio Gas ExplosionCleveland East Ohio Gas Explosion occurred on the afternoon of Friday, October 20, 1944. The resulting gas leak, explosion and fires killed 130 people and destroyed a one square mile area on Cleveland, Ohio's east side.-The disaster:At 2:30 p.m...
. The tank did not have a dike retaining wall, and it was made during World War II, when metal rationing was very strict. The steel of the tank was made with an extremely low amount of nickelNickelNickel is a chemical element with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel belongs to the transition metals and is hard and ductile...
, which meant the tank was brittle when exposed to the extreme cold of LNG. The tank ruptured, spilling LNG into the city sewer system. The LNG vaporized and turned into gas, which exploded and burned. - 1979 October, Lusby, MarylandLusby, MarylandLusby is a place in Calvert County, Maryland, United States. The population was officially 1,666 at the 2000 census, although residents of the Chesapeake Ranch Estates-Drum Point community also use the Lusby zip code designation, making Lusby in fact a much larger community...
, at the Cove Point LNG facility a pump seal failed, releasing gas vapors (not LNG), which entered and settled in an electrical conduit. A worker switched off a circuit breaker, igniting the gas vapors, killing a worker, severely injuring another and causing heavy damage to the building. National fire codes were changed as a result of the accident. - 2004, 19 January, SkikdaSkikdaSkikda is a city in north eastern Algeria and a port on the Gulf of Stora, the ancient Sinus Numidicus. It was known as Philippeville until the end of the Algerian War of Independence in 1962...
, AlgeriaAlgeriaAlgeria , officially the People's Democratic Republic of Algeria , also formally referred to as the Democratic and Popular Republic of Algeria, is a country in the Maghreb region of Northwest Africa with Algiers as its capital.In terms of land area, it is the largest country in Africa and the Arab...
. Explosion at Sonatrach LNG liquefaction facility. 27 killed, 56 injured, three LNG trains destroyed, 2004 production was down 76% for the year. A steam boiler that was part of a liquefaction train exploded triggering a massive hydrocarbon gas explosion. The explosion occurred where propane and ethane refrigeration storage were located.
See also
- Compressed natural gasCompressed natural gasCompressed natural gas is a fossil fuel substitute for gasoline , diesel, or propane/LPG. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill...
- Gasoline gallon equivalent
- Industrial gasIndustrial gasIndustrial gas is a group of gases that are commercially manufactured and sold for uses in other applications. These gases are mainly used in an industrial processes, such as steelmaking, oil refining, medical applications, fertilizer, semiconductors, etc.,...
- Liquefied petroleum gas
- List of LNG terminals
- Natural gas processingNatural gas processingNatural-gas processing is a complex industrial process designed to clean raw natural gas by separating impurities and various non-methane hydrocarbons and fluids to produce what is known as pipeline quality dry natural gas.-Background:...
- Natural gas storageNatural gas storageNatural gas, like many other commodities, can be stored for an indefinite period of time in natural gas storage facilities for later consumption.- Usage :...
- LNG spillLNG spillA liquefied natural gas spill can happen during an accident or an intentional act such as terrorism. LNG is normally stored and transported in liquid form at a temperature of approximately -161 degrees Celsius. If this supercooled liquid is released from a storage facility, pipeline, or LNG...
External links
- New LNG Plant Technology
- What is LNG and how is it becoming a U.S. energy source?
- Liquefied Natural Gas in the US: Federal Energy Regulatory Commission (FERC)
- LNG safety
- Alternative Fuel Vehicle Training From the National Alternative Fuels Training Consortium
- LNG Safety "The Risks and Dangers of LNG" is an exhaustive report prepared by CH·IV International President, Jeff Beale, analyzing the points made in a controversial Anti-LNG video.
- LNG Terminal Siting Standards Organization Advocating Government Adoption of LNG Industry Standards
- Prospects for Development of LNG in Russia Konstantin Simonov's speech at LNG 2008. April 23, 2008.
- The Terrorist Threat to Liquefied Natural Gas: Fact or Fiction?
Other sources
- The Global Liquefied Natural Gas Market: Status and Outlook - (Adobe Acrobat *.PDF document)
- California Energy Commission: The Outlook for Global Trade in Liquefied Natural Gas Projections to the Year 2020 - (Adobe Acrobat *.PDF document)
- Guidance on Risk Analysis and Safety Implications of a Large Liquefied Natural Gas (LNG) Spill Over Water - (Adobe Acrobat *.PDF document)
- The International Group of Liquefied Natural Gas Importers (GIIGNL)
- The LNG Industry 2008 - (Adobe Acrobat *.PDF document)
- Society of International Gas Terminal and Tanker Operators World LNG Industry Standards
