Liquefied natural gas

Liquefied natural gas or LNG is natural gas that has been processed to remove impurities and heavy hydrocarbons and then condensed into a liquid at atmospheric pressure by cooling it to approximately -163 degrees Celsius. LNG is transported by specially designed vessels and stored in specially designed tanks. LNG is about 1/600th the volume of natural gas at standard temperature and pressure (STP), making it much more cost-efficient to transport over long distances where pipelines do not exist. Where moving natural gas by pipelines is not possible or economical, it can be transported by LNG vessels, where the most common tank types are membrane(prismatic) or Moss Rosenberg (spheres).

Basic Facts on LNG

LNG offers an energy density comparable to petrol and diesel fuels and produces less pollution, but its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.

Conditions required to condense natural gas depend on its precise composition, the market that it will be sold to and the process being used, but typically involve temperatures between -120 and -170 degrees Celsius (pure methane liquefies at -161.6 C) and pressures of between 101 and 6000 kPa (14.7 and 870 lbf/in²). High pressure natural gas that is condensed is then reduced in pressure for storage and shipping.

The density of LNG is roughly 0.41 to 0.5 kg/L, depending on temperature, pressure and composition. In comparison water has a density of 1.0 kg/L.

LNG does not have a specific heat value as it is made from natural gas, which is a mixture of different gases. The heat 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 24MJ/L at -164 degrees Celsius. This corresponds to a lower heating value of 21MJ/L.

The natural gas fed into the LNG plant will be treated to remove water, hydrogen sulfide, 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. Purified LNG typically contains more than 90% methane. It also contains small amounts of ethane, propane, butane and some heavier alkanes. The purification process can be designed to give almost 100% methane.

The most important infrastructure needed for LNG production and transportation is an LNG plant consisting of one or more LNG trains, each of which is an independent unit for gas liquefaction. The largest LNG train is the SEGAS Plant in Egypt with a capacity of 5mtpaExxon Mobil operating Qatargas stage 2, of which one train has a production ability of 5 million ton per annum (mtpa). Other facilities needed are load-out terminals for loading the LNG onto vehicles, LNG vessels for transportation, and a receiving terminal at the destination for discharge and regasification, where the LNG is reheated and turned 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).

In 1964 the UK and France were the LNG buyers under the world’s first LNG trade from Algeria, witnessing a new era of energy. As most LNG plants are located in "stranded" areas not served by pipelines, the costs of LNG treatment and transportation were so huge that development has been slow during the past half century. The construction of an LNG plant costs USD 1-3 billion, a receiving terminal costs USD 0.5-1 billion, and LNG vessels cost USD 0.2-0.3 billion. Compared with the crude oil, the natural gas market is small but mature. The commercial development of LNG is a style called value chain, which means LNG suppliers first confirm the downstream buyers and then sign 20-25 year contracts with strict terms and structures for gas pricing. Only when the customers were 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 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 BP, ExxonMobil, Royal Dutch Shell; and national oil companies (NOCs) such as Pertamina, Petronas were active players. Japan, South Korea and Taiwan imported large sums of LNG due to their shortage of energy. In 2002 Japan imported 54 million tons of LNG, representing 48% of the LNG trade around the world that year. Also in 2002, South Korea imported 17.7 million tons and Taiwan 5.33 million tons. These three major buyers purchase approximately 70% of the world's LNG demand.

In recent years, as more players take part in investment, both in downstream and upstream, and new technologies are adopted, the prices for construction of LNG plants, receiving terminals and vessels have fallen, making LNG a more competitive means of energy distribution. 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, reducing costs 60%. The per-ton construction cost of a LNG liquefaction plant fell steadily from the 1970s through the1990s, with the cost reduced to approximately 35%.

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 between TransCanada Corp. and Shell (A British-Dutch Corporation) wishes to build a LNG terminal in the sound on the New York side. Local politicans including the Suffolk County Executive have raised questions about the terminal. New York Senators Chuck Schumer and Hillary Clinton have both announced their opposition to the project.

Trade in LNG

LNG is shipped around the world in specially constructed seagoing vessels. 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 DEX or Ex Ship, which meant the seller was responsible for the transportation. But with low shipbuilding costs, and the buyer preferring to ensure reliable and stable supply, there are more and more contract terms of FOB, under which the buyer is responsible for the transportation, which is realized by the buyer owning the vessel or signing a long-term charter agreement with independent carriers.

The agreements for LNG trade used to be long-term portfolios that were relatively inflexible 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, which is called the obligation of take or pay (TOP).

In contrast to LNG imported to North America, where the price is pegged to Henry Hub, most of the LNG imported to Asia is pegged to crude oil prices by a formula consisting of indexation called the Japan Crude Cocktail (JCC).

The pricing structure that has been widely used in Asian LNG SPAs is as follows: PLNG = A+B×Pcrude oil, where A refers to a term that represents various non-oil factors, but usually a constant determined by negotiation at a level that can prevent LNG prices from falling below a certain level. It thus varies regardless of oil price fluctuation. Typical figures of ex-ship contracts range from USD 0.7 to 0.9. B is a degree of indexation to oil prices; typical figures are 0.1485 or 0.1558, and Pcrude oil usually denominated in JCC. PLNG and Pcrude oil stand for price of oil in USD per million British Thermal Unit (MMBTU (in the fuel industry, M stands for 1000 and MM for 1 000 000)). With the demand of LNG moving up and down, the price of LNG moves in a "S" curve. With new demand from China, India and US increasing dramatically, and crude oil price skyrocketing, the LNG price is on the rise too.

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 15 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. Sellers now propose rigid SPAs and would like an association similar to OPEC to be established to protect their interests. It is certain that the competition between sellers and buyers will go on.

Receiving terminals exist in several countries (see the list of importing countries in table below; China is expected to move onto the list by 2006), allowing gas imports from other areas (see list of exporting countries in table below).

The United States Department of Energy's Energy Information Administration provides estimates of LNG trade in 2002 as follows:

Country	Export volume		Country	Import volume
Country	(10⁹ ft³)	(10⁶ t)	Country	(10⁹ ft³)	(10⁶ t)
Indonesia	1,100	23.0	Japan	9,200	188.3
Algeria	935	19.6	South Korea	2,000	40.7
Malaysia	741	15.6	France	511	10.7
Qatar	726	14.9	Taiwan	363	7.5
Nigeria	394	8.2	United Kingdom	356	7.3
Australia	367	7.7	United States	229	4.8
Oman	356	7.3	Turkey	224	4.6
Brunei Darussalam	351	7.2	Portugal	146	3.3
United Arab Emirates	278	5.7	Spain	131	2.7
Russia	234	4.8	Italy	130	2.6
Trinidad and Tobago	189	4.0	Belgium	124	2.7
United States	68	1.4	India	122	2.5

LNG safety and accidents

In its liquid state, LNG is not explosive. For an explosion to occur with LNG, it must first vaporize and then mix with air in the proper proportions (the explosive range is 5% to 15%), and then be ignited afterwards. Serious accidents involving LNG to date 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 fire. 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 nickel, which made the tank brittle when exposed to the extreme cold of LNG, and the tank ruptured, spilling LNG into the city sewer system.

1973, February,Staten Island, New York. While repairing the interior of an empty storage tank, a fire started. The pressure increased inside the tank so fast the concrete dome on the tank lifted and then collapsed falling inside the tank and killing the 37 construction workers below.

1979, Lusby, Maryland, at the Cove Point LNG facility a pump seal failed, releasing gas vapors, which entered and settled in an electrical conduit. A worker switched off a circuit breaker, igniting the gas vapors, killing a worker and causing heavy damage to the building. National fire codes were changed as a result of the accident.

2004, 19 January, Skikda, Algeria. Explosion at Sonatrach LNG liquefaction facility. 27 killed, 80 injured, three LNG trains destroyed, 2004 production was down 76% for the year. A cold hydrocarbon leak occurred introducing the high-pressure steam boiler with gases via a combustion air fan. The explosion inside the boiler fire box precipitated a larger explosion of vapors outside the box.

Seaborne LNG transport tankers (including their loading terminals) have not had a major accident in over 33,000 voyages since maritime inception in 1959. There have, however, been several significant incidents with LNG ships, but with no spills. In addition to accidents, terrorism experts are concerned that intentional sabotage could lead to unprecedented releases, resulting in massive fires and other damaging effects. The latter may include detonations (producing large blast waves) and deflagration-to-detonation transition phenomena. As the Department of Energy notes in its December 2004 report (Sandia National Labs, SAND2004-6258), the available testing data on LNG spills are based on releases of very small size in comparison to releases expected from intentional attacks. Despite intense local opposition, the Federal Energy Regulatory Commission has approved a site permit for an LNG terminal in Fall River, Massachusetts in a densely populated harbor area.

LNG storage

LNG tanks are always of double-wall construction with extremely efficient insulation between the walls. Large tanks are low aspect ratio (height to width) and cylindrical in design with a domed roof. Storage pressures in these tanks are very low, less than 5 psig. Smaller quantities, 70,000 gallons and less, are stored in horizontal or vertical, vacuum-jacketed, pressure vessels. These tanks may be at pressures any where from less than 5 psig to over 250 psig.

LNG must be maintained cold (at least below -117°F) to remain a liquid, independent of pressure.

LNG refrigeration

The insulation, as efficient as it is, will not keep the temperature of LNG cold by itself. LNG is stored as a "boiling cryogen," that is, it is a very cold liquid at its boiling point for the pressure it is being stored. Stored LNG is analogous to boiling water, only 470° colder. The temperature of boiling water (212°F) does not change, even with increased heat, as it is cooled by evaporation (steam generation). In much the same way, LNG will stay at near constant temperature if kept at constant pressure. This phenomenon is called "autorefrigeration". As long as the steam (LNG vapor boil off) is allowed to leave the tea kettle (tank), the temperature will remain constant. If the vapor is not drawn off, then the pressure and temperature inside the vessel will rise. However, even at 100 psig, the LNG temperature will still be only about -200°F.

LNG, LPG, and CNG

Liquefied Natural Gas (LNG)

When natural gas is cooled to a temperature of approximately -260°F at atmospheric pressure it condenses to a liquid called liquefied natural gas (LNG). One volume of this liquid takes up about 1/600th the volume of natural gas at a stove burner tip. LNG weighs less than one-half that of water, actually about 45% as much. LNG is odorless, colorless, non-corrosive, and non-toxic. When vaporized it burns only in concentrations of 5% to 15% when mixed with air. Neither LNG, nor its vapor, can explode in an unconfined environment. Natural gas is composed primarily of methane (typically, at least 90%), but may also contain ethane, propane and heavier hydrocarbons. Small quantities of nitrogen, oxygen, carbon dioxide, sulfur compounds, and water may also be found in "pipeline" natural gas. The liquefaction process removes the oxygen, carbon dioxide, sulfur compounds, and water. The process can also be designed to purify the LNG to almost 100% methane.

Compressed natural gas (CNG)

Compressed natural gas (CNG) is natural gas pressurized and stored in welding bottle-like tanks at pressures up to 3,600 psig. Typically, it is same composition of the local "pipeline" gas, with some of the water removed. CNG and LNG are both delivered to the engines as low pressure vapor (ounces to 300 psig). CNG is often misrepresented as the only form natural gas can be used as vehicle fuel. LNG can be used to make CNG. This process requires much less capital intensive equipment and about 15% of the operating and maintenance costs.

Liquid Petroleum Gas (LPG)

Liquid petroleum gas (LPG, and sometimes called propane) is often confused with LNG and vice versa. They are not the same and the differences are significant. LPG is composed primarily of propane (upwards to 95%) and smaller quantities of butane. LPG can be stored as a liquid in tanks by applying pressure alone. LPG is the "bottled gas" often found under BBQ grills. LPG has been used as fuel in light duty vehicles for many years. Many petrol stations in Europe have LPG pumps as well.

External links

The Global Liquefied Natural Gas Market: Status and Outlook @ the EIA - DOE
Liquefied Natural Gas in the US: Federal Energy Regulatory Commission (FERC)
Alternative Fuel Vehicle Training From the National Alternative Fuels Training Consortium.
Ventura LNG Task Force A local community group in Ventura CA working on LNG issues.
LNG Law Blog Your Daily Online Source for Liquefied Natural Gas
^* Poten & Partners: A Collection of Articles Relating to LNG

LNG at the majors:

LNG transportation:
- Transportation of LNG in Small LNG ships

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