Odorless, colorless, non-toxic, non-corrosive and non-flammable, LNG is a form of methane gas cooled to approximately -160 degrees Celsius and colder than Antarctica on the winter solstice. LNG is compressed up to 600 times its original volume and, like Doctor Who's Tardis, an LNG carrier can carry a greater volume than seems possible at first glance. Thanks to investments in large export liquefaction plants, dedicated vessels now carry LNG to regasification facilities in import markets around the world. LNG has rapidly grown in importance since the first shipments in 1964, today accounting for 10 percent of global natural gas consumption and 31 percent of global natural gas trade.
The LNG carriers cost around $200 million and can be chartered for periods of five years or more. The first commercial LNG tankers, the Methane Princess and the Methane Progress, left Algeria bound for England and France in 1964. These first vessels, equipped with self-contained aluminum Conch tanks, had a capacity of 27.000 cubic meters and used LNG as fuel. Of the 370 ocean-going LNG tankers currently in service, 260 are equipped with steam turbines capable of burning oil or regasified gas. Another 60 are dual fuel. In addition, LNG carriers have grown in size — the largest are those of the Q-Max series and reach 345 meters in length, 53,8 meters in width and 34,7 meters in height and have a capacity of 266.000 cubic metres. Today there are also ship-to-ship LNG tankers — small LNG tankers with a capacity of between 1.000 cubic meters and 3.000 cubic meters that carry small quantities of LNG. Such shipments are suitable for meeting the energy needs of many island communities in Indonesia and the Philippines.
The growth in LNG production owes much to the growing number of natural gas suppliers, notably Qatar, Oman, Australia, Malaysia, Nigeria, Indonesia and Norway. The USA has also become a major exporter of LNG thanks to the spectacular growth of unconventional production of shale oil and gas. Until a recent slowdown, growing LNG production was able to meet the gas demand of industry and electricity producers in Japan, China and South Korea. New markets for LNG, particularly in Latin America, are being served this year from US LNG and emerging markets such as India, Pakistan and South Africa. The massive investments in recent years in LNG carriers, liquefaction plants and regasification plants has transformed what was mainly a regional market limited by access to pipelines, into a global market.
From the first LNG export facility in Algeria, the number of operational liquefaction plants has grown to 40 in 20 countries with an estimated output of 270 MT. There are currently 12 more plants under construction, including five in the US, including Cheniere Energy's Sabine Pass where two of the six trains are already operating. By the end of 2017, the five export plants are expected to liquefy 3,2 billion cubic feet per day, an amount close to that used each day in NY state in 2015. Other similar plants around the world are San Vicente de Cañete in Peru, Gorgon in Australia and Ras Laffan in Qatar.
While an LNG export facility may cost at least $30 billion or $1,5 billion per million tonnes of annual capacity, more than 50 billion cubic meters of new LNG liquefaction capacity per year have entered service. since 2014 at the time of the oil and gas price peak. Not only has the number of facilities dedicated to exports multiplied, but innovation and economies of scale have allowed the output of a single train to grow from 1 million tons per year in 1960 to 5 million tons per year in 2001. An ancillary development, the "Floating liquefaction natural gas units (FLNG)" will further increase the availability of LNG.
In 2017, Petronas' offshore Kanowit field, near Sarawak in Malaysia, and Shell's Prelude and Concerto fields in the Browse LNG Basin off Australia will enter production directly into a FLNG. Shell's Prelude FLNG will be longer than four football fields. Despite a $30 billion investment, KPMG notes that FLNG technology is flexible, allowing relatively quick and inexpensive access to smaller and more distant offshore reserves with a reduced environmental footprint. Overall, the new LNG production capacity is expected to reach an additional 150 bcm by 2020, of which 90 percent will come from Australia and the USA.
Natural gas is seen as the fuel of the future by BP, which expects gas to become the leading fossil fuel in 2035 as it is cleaner than coal and oil, plentiful and cheap. Natural gas consumption by the power generation sector is projected to grow through 2040, with the industrial and power generation sectors combined to account for 73 percent of the total increase in global natural gas consumption projected by IEA International Energy Outlook 2016. The current oversupply raises questions about which markets and sectors will absorb increasing quantities of LNG? Consulting firm Mckinsey expects Cuba, Morocco, South Africa and the Philippines to become new LNG customers. See Figure 4. Already today, investors in Johannesburg and Manilla have made proposals to use floating storage and regasification units to supply gas to their onshore thermal plants.
Morocco, Egypt, Jordan, Kuwait and Dubai had a total import capacity of approximately 2016 billion cubic meters at the beginning of 39,1. In the coming years, the Middle Eastern countries, characterized by a high population growth rate, economic development plans and the need to conserve their oil and gas reserves for export, will represent a significantly growing market for imports of LNG. Between February and early October 2016, 34 LNG tankers left the Sabine Pass export facility, two-thirds of which were destined for ports in Latin America, and in particular Argentina, Brazil, Chile and Mexico. Colombia is expected to be a new buyer in 2017 when an FSRU is operational. However, due to the growing availability of US gas transported via pipeline to Mexico, the growth of hydroelectric production in Brazil and the development of shales in Argentina, the growing demand for LNG could be relatively short-lived.
Pakistan offers good prospects as it is under pressure to meet growing electricity demand and compensate for dwindling local gas supplies. It is currently seeking offers for 60 cargoes through 2020 and expects a demand of 60 million tonnes of LNG in 2025, making it the world's second largest LNG importer after Japan. Imports will be facilitated by one existing FRSU, by the completion of three additional units in 2018, for a total of 7 FRSU in operation in 2020 with an import capacity of 30 million tons per year.
India's transportation sector also represents an attractive opportunity as gas is competitive with more expensive diesel and petrol, and operating costs could be more than 60 and 32 percent lower, respectively, at current prices. As Petroleum Minister Dharmendra Pradhan said on Nov. 10, “If we are able to convert heavy-duty vehicles to run on LNG we will make a contribution to reducing pollution and will also reduce costs". Petronet LNG, India's largest importer of LNG, and Indian Oil Corporation, a major retail fuel distributor, are currently testing LNG-powered bus lines. About 33 countries have LNG regasification or import terminals, according to the IGU (International Gas Union). The land terminals cost more than $1 billion, of which construction accounts for about 35 percent. Examples of land-based facilities are the Grain Terminal near London, Gas Access to Europe (GATE) in Rotterdam and the Adriatic LNG Terminal near Venice. As of January 2016, 15 new terminals (including eight in China) were expected to boost global imports by around 73 million tonnes annually in 2019.
A cheaper recent innovation is the floating regasification and storage unit (FRSU), costing between $200 and $300 million, of which 20 are currently operational, mainly in Egypt, Italy and Chile, Jordan, Pakistan and Japan. . For countries looking to rapidly start LNG electricity production, FSRUs have the advantage of avoiding the costs and licensing hassles of land-based facilities as they can be chartered and towed into position. LNG took only fifty years to develop from a local product to one capable of meeting the energy needs of customers around the world. In this period the technology has matured and adapted according to changing market conditions. The industry today faces the challenge of a global LNG oversupply.
From the Eniday site.
