LNG boom continues

by Nick Blenkey
Senior Editorial Consultant

These days, clean-burning liquefied natural gas (LNG) is the fuel that everyone in the world wants and quite a bit of it will need to be transported by ship.

According to statistics from Marine Business Strategies (www.coltoncompany.com), the world orderbook for LNG ships at press time stood at 105. At an average newbuilding price of around $200 million a copy, that equates to some $20 billion—or about twice the value of the current world order book for cruise ships.

The U.S. Department of Energy's Energy Information Agency says that from 1986 to 2000, U.S. natural gas consumption grew from 16.2 trillion ft3 to a high of 23.3 trillion ft3 with 40 percent of the increased demand being met by imports, predominantly from Canada. Based on the latest assessment from Canada's National Energy Board, however, says EIA, it is unlikely that future production from Canada will be able to support a continued increase in U.S. imports.

In the EIA's Annual Energy Outlook for 2005 reference case, U.S. natural gas consumption is projected to grow from 22 trillion ft3 in 2003 to almost 31 trillion ft3 in 2025. Most of the additional supply is expected to come from Alaska and imports of LNG.

But it is not U.S. demand alone that is powering the LNG boom. LNG has also whet the appetite of other energy-hungry economies, including Korea and China.

LNG SHIPPING: THE BASICS

When natural gas is cooled to minus 259° F (-161°C) it becomes a clear, colorless, odorless liquid. Natural gas is primarily methane, with low concentrations of other hydrocarbons, water, carbon dioxide, nitrogen, oxygen and some sulfur compounds. During liquefaction, natural gas is cooled below its boiling point, removing most of these compounds. The remaining natural gas is primarily methane with only small amounts of other hydrocarbons. LNG weighs less than half the weight of water and will float if spilled on water.

In January 1959, the world's first LNG tanker, The Methane Pioneer, a converted World War II liberty ship, carried an LNG cargo from Lake Charles, La. to the United Kingdom. The U.S. began exporting LNG to Asia in 1969, when Phillips Petroleum built a liquefaction facility, about 100 miles south of Anchorage, Alaska. The plant is still in operation.

Worldwide, there are currently 17 LNG export (liquefaction) terminals and 40 import (re-gasification) terminals handling about 120 million tons of LNG every year. A report from Sandia National Laboratory for the Department of Energy cites estimates that worldwide LNG trade will increase 35 percent by 2020. The major areas for increased LNG imports are Europe, North America, and Asia.

Four LNG marine terminals were built in the U.S. between 1971 and 1980: Lake Charles, La.; Everett, Mass.; Elba Island, Ga.; and Cove Point, Md. After reaching a peak receipt volume of four million tons in 1979, LNG imports declined when de-control of natural gas prices produced an economic supply of natural gas within U.S. borders.

After being mothballed in 1980, the Elba Island and Cove Point terminals have been refurbished and reactivated, and both are currently receiving LNG shipments. The Lake Charles and Everett terminals, which have operated below design capacity for many years, have also recently increased receipt of LNG. Import of natural gas into the U.S. is expected to double over the next 20 years. Four to eight new LNG terminals are expected to be constructed in the next four to five years and more than 40 new terminal sites are under consideration and investigation . A factor in the siting of LNG receiving terminals is the proximity to market. Thus terminals are being considered in areas with high natural gas demands, which include locations on all three U.S. coasts. Most are being planned to handle one to two LNG tanker shipments per week.