Story by Noah Botwinick, contributing author for the PeoplePlanetProfitBlog.com.
LNG: America’s Key Export
What is LNG?
LNG, or Liquefied Natural Gas, is a form of natural gas that has been converted into a liquid form in order to make it easily transported or stored. The benefit of converting gas into this form is that LNG generally occupies about 1/600th the space of natural gas in its regular, gaseous state. LNG will not damage objects it comes into contact with and is non-toxic, odorless and colorless. To transform gas into its liquefied state, gas is first extracted; then it is transported to a plant where it is purified by having water, oil, mud, unwanted gases and traces of mercury removed. Next, the gas is cooled down until becomes a liquid, which is then stored in storage tanks that can be easily transported.
LNG as an Export
LNG is more cost-efficient to transport across long distances where pipelines don’t exist because the energy density of it is less than that of diesel fuel. To transport the LNG, specially created cryogenic sea vessels that maintain very cold temperatures or cryogenic road tankers are used. After the LNG is shipped to the natural gas markets, it is turned back into gas and distributed to users via pipelines as natural gas. The need for expensive cryogenic tanks to store and transport LNG has kept LNG from being more widely used in energy markets. The largest LNG operating plant in the world is now in Qatar, and the next 6 largest plants can be found in Algeria.
Many new LNG plants are currently in the process of being discussed as to whether or not to build them in the US, but such ideas have been met with resistance from local governments in the regions where these plants would be built. The two main reasons for opposition to such plants are the potential dangers involved, as well as the fact that those in the area don’t stand to gain anything from such plants being constructed in their region.
Brief Background of LNG as an Export
In 1970, Global LNG trade was three billion cubic meters, and by 2011 it had exploded to 331 billion cubic meters. In 2004, LNG made up approximately seven percent of the world’s natural gas demand. The global trade in LNG has increased at a rate of 7.4 percent per year from 1995 to 2005 and is expected to continue to increase significantly in the near future. 19 countries currently export LNG.
Until the 1990s, LNG demand came mostly from Japan, Korea and Taiwan, while LNG supply was controlled mostly by the Pacific Basin. However, as a global interest in using natural gas-fired combined cycle generating units for electric power generation increased, there arose an inability of North American and North Sea natural gas supplies to meet the growing demand. As a result, the regional markets for LNG grew and new Atlantic Basin and Middle East suppliers joined the market. By 2008, there were 15 countries that exported LNG to 17 importing countries. The three biggest LNG exporters in 2007 were Qatar, Malaysia, and Indonesia and the three biggest LNG importers at this time were Japan, South Korea and Spain. Total LNG trade volumes grew from 140 metric million tons in 2005 to 158 metric million tons in 2006, 165 metric million tons in 2007, and 172 metric million tons in 2008. This number has continued to rise since then and is expected to continue to in the future.
Today, the following countries export LNG:
The Republic of Trinidad and Tobago
United Arab Emirates
Who is Importing LNG?
The first countries to import LNG were the UK and France in 1964, when they imported it from Algeria. Since then, the following countries have begun importing LNG as well:
How much LNG does the US Export?
The US is projected to sell 50 metric million tons of LNG per year by the year 2020, which will account for approximately 10 percent of the projected world market. By contrast, Qatar is currently producing 77 million tons per year, and Australia is expected to pass Qatar by 2020. According to the US Energy Department, increased US LNG exports would likely result in a net positive for the US, accounting for approximately $30 billion in trade revenue. This is because gas demand for electric generation, transportation, and as an industrial feedstock is increasing. However, perhaps the most significant dynamic with the potential to drive natural gas prices up in the foreseeable future is a growing push to export LNG from the US. That factor has recently greatly increased, with numerous LNG export requests having been filed with the US Department ofEnergy in the past few years.
According to the Energy Information Administration, total natural gas consumption for 2011 in the US was 24.3 trillion cubic feet, and 2012 consumption was about 26 trillion cubic feet. Since mid-August of this past year, US companies have filed for permits with the US Department of Energy to export 7.8 trillion cubic feet of LNG, which amounts to approximately 30% of current total domestic consumption in the US. Total requests at that point equaled 11.2 trillion cubic feet, plus the 5.3 trillion cubic feet of requests requested last year, which amounts to roughly 16.5 trillion cubic feet. That’s over 60% of current domestic consumption.
Although not all of these planned facilities will be built, some certainly will because the economics are compelling and there is a strong market for it that constantly increases as energy needs increase around the world. India’s LNG import capacity is expected to greatly increase in the coming years and in a country of over a billion inhabitants, with their enormous energy problems, their needs should continue to increase. Additionally, Japan has recently shut down 52 out of its 54 nuclear reactors that produced energy, and companies in Tokyo are looking to make long-range gas contracts to supply gas-fired generators with US gas companies.
Right now, most of the LNG imported by these and other Asian countries will come from countries other than the US; there are 18 countries that export the gas to 25 importing nations. Qatar currently supplies almost a third of all global LNG, with the US just .1% of total LNG imports. However, due to new pipelines, multiple vendors, and world class shale reserves the US is likely to be transformed into a more serious exporter of global LNG. If permits can be secured, export growth could occur relatively quickly.
Although it is expensive to produce and transport LNG, in the long run, supply and demand are predicted to reach an equilibrium in the energy market, thereby making it cost effective to increase LNG exports. In recognition of this increasing market, export requests have been increased to 1.25 times greater than the amount that has been submitted in the previous two years.