Liquefied Natural Gas

Oil as Natural Gass

Natural gas plays a vital role in the U.S. energy supply and in achieving the nation’s economic and environmental goals. One of several supply options involves increasing imports of liquefied natural gas (LNG) to ensure that American consumers have adequate supplies of natural gas for the future.

Natural gas consumption in the United States is expected to increase slightly from about 24.3 trillion cubic feet (Tcf) in 2011 to 26.6 Tcf by 2035. Currently, most of the demand for natural gas in the United States is met with domestic production and imports via pipeline from Canada. A small percentage of gas supplies are imported and received as liquefied natural gas. A significant portion of the world’s natural gas resources are considered “stranded” because they are located far from any market. Transportation of LNG by ship is one method to bring this stranded gas to the consumer.
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 vehicles, 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.

LNG is produced by taking natural gas from a production field, removing impurities, and liquefying the natural gas. In the liquefaction process, the gas is cooled to a temperature of approximately-260 degrees F at ambient pressure. This condensed liquid form of natural gas takes up about 1/600th of the volume of natural gas at a stove burner tip. The LNG is loaded onto double-hulled ships which are used for both safety and insulating purposes. Once the ship arrives at the receiving port, the LNG is typically off-loaded into well-insulated storage tanks. Regasification is used to convert the LNG back into its gas form, which enters the domestic pipeline distribution system and is ultimately delivered to the end-user.

In 2011, the United States imported 349 billion cubic feet (Bcf) of LNG from seven different exporting countries, with the largest being Trinidad and Tobago. Imports in 2011 decreased by 19 percent from 431 Bcf in 2010. There are currently twelve LNG import terminals located along the Atlantic and Gulf coasts. The mainland terminals are: Everett, Massachusetts; Cove Point, Maryland; Elba Island, Georgia; Lake Charles, Louisiana; Sabine Pass, Louisiana; Cameron, Louisiana; Golden Pass, Texas; Freeport, Texas; and Gulf LNG, Mississippi. These nine facilities have a total baseload sendout capacity of approximately 16.1 Bcf/day. The offshore terminals are Gulf Gateway Energy Bridge in the Gulf of Mexico and Northeast Gateway and Neptune Deepwater Port located offshore Massachusetts, with a baseload sendout capacity of 1.2 Bcf/day, though Excelerate Energy has announced plans to retire the Gulf Gateway terminal. As of December 2012, FERC reported 13 new or expanded North American LNG import terminal projects that have been approved or proposed, one of which is under construction. FERC also identified 10 North American LNG export terminal projects that have been proposed, one of which is under construction. Some projects include both import and export capabilities.

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Global Natural Gas and LNG Demand

Historic and projected demand

Total global natural gas demand is estimated to have grown by about 2.7% per year since 2000; however, global LNG demand has risen by an estimated 7.6% per year over the same period, almost three times faster.1 The strong LNG demand growth has been largely driven on a regional perspective by Asia, and from a broader perspective, underpinned by what analysts at J.P. Morgan termed “durable, investible and politically charged themes.

  • National energy supply security — ensuring supply diversity and exibility
  • National energy infrastructure renewal to improve system resilience to supply/demand shocks, stimulate investment and reduce unemployment
  • De-carbonization of economic growth as a social imperative, continuing the displacement of coal by natural gas
  • Rising popular opposition to nuclear power generation

Global gas demand is expected to continue to grow strongly. In its most recent annual World Energy Outlook, the International Energy Agency (IEA) forecast a growing role for natural gas in the world’s energy mix, with the natural gas share growing from 21% in 2010 to 25% in 2035, with natural gas as the only fossil fuel whose share was growing. The IEA sees global natural gas demand growing at about 1.6% per year through 2035, more
than twice the expected growth rate for oil. Some other analysts forecasters put gas’s growth rate even higher.

LNG demand growth is, however, expected to be even stronger, particularly through 2020. While a wide range of forecasts exists, a broad consensus of industry analysts/observers sees average annual growth of around 5% to 6% per year. After 2020, demand growth is expected to continue, albeit at a slightly slower pace (i.e., around 2% to 3% per year) as markets mature, demand shifts to more price-sensitive buyers, and some price subsidies

  • Deutsche Bank Markets Research, Global LNG: Gorgon & the Global LNG Monster, 17 September 2012
  • J.P. Morgan Cazenove Global Equity Research, Global LNG, 13 January 2012
  • International Energy Agency, World Energy Outlook 2012, October 2012
  • Global natural gas are removed in non-OECD markets. Global LNG demand by 2030 could, however, be almost double that of the estimated 2012 level of about 250 million metric tonnes.

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