LNG, What’s the big deal?

LNG is the key piece in making natural gas an internationally traded commodity, without it, supply and demand of the resource would be far out of balance.  Beyond this, LNG is important in the growing natural gas industry because it allows for the extraction from tough to reach reserves; it can be shipped efficiently and safely, and a has potentially great upside for exporting countries.

The largest benefit of LNG is that it opens up natural gas to world trade.  Prior to the technology which allows us to transform natural gas into its liquid state, natural gas could only be distributed regionally through gas pipelines.  This not only restricted the trade of natural gas, it also restricted the markets ability to grow.  For instance, Australia is currently producing two times more gas than what it consumes.  If it were to have no way to ship this excess over seas, the country would have no incentive to produce its maximum capacity of natural gas and their abundant supply would be a waste since it can’t get to countries who need the energy.

Top 6 exporters of LNG in 2011:

Thankfully however, we now have the ability to super cool natural gas to -162 degrees C, at which point the gas turns into its liquid state. Once in its liquid state, natural gas is 1/600 that of its gaseous volume, meaning that we can transport natural gas on tankers at and economic cost.

With the ability to ship LNG globally comes the ability to import and export natural gas.  Thus, countries such as Qatar and Australia have incentive to produce as much LNG as possible for export.  This benefits both the exporting countries economically and the importing countries because they now have the supply to meet their consumption, The Economist.

While LNG is the key to the international trade of natural gas, it is also important because we now have the ability to tap large natural gas reserves that were once considered inaccessible.  Prior to LNG, we were unable to tap any reserves that were much more than a few miles off any coast because the amount of pipeline that had to be laid under the ocean was unfeasible.  With LNG and LNG specific tankers, we are now able to pump what is extracted from these reserves directly into these ships for super cooling and transport.

By pumping extracted natural gas at sea directly onto the ships, not only are time and money being saved but the detrimental impact on the environment is being reduced.  When LNG is stored, it is put under no pressure and therefore is not explosive.  The ships that transport LNG are some of the most high tech on the sea with double hulls and massive amounts of insulation to prevent any sort of leak.  Even though a spill is not of great fear considering the quality of these ships, the impacts of and LNG spill would be minimal in that LNG is insoluble in water and would all evaporate in a matter of minutes.

The inside membrane of a LNG tanker, Chevron:

LNG has opened the world to natural gas trade providing import opportunities for countries lacking the resource, and export opportunities for countries fortunate enough to have excess.  It has allowed for the market to expand to new heights and with continued exploration by the worlds gas companies, the outlook is only bright for LNG.

Natural Gas Reserves Around the World Bridging Future and Current Energy Sources

As the info-graphic shows there is a substantial amount of Natural Gas reserves in the world today. As extraction techniques continue to improve and ground penetrating radar allows us to discover new reserves of Natural Gas we see an energy that has many applications and availability for the future.

TEDx had a speaker that provided some evidence of how the further development can impact America. We neither support nor dispute what the presenter has said, but believe it is a lecture worth hearing to further develop the linkage of Natural Gas as a future energy source.

In order for Natural Gas to make a true impact on the world countries must develop their exporting abilities.When exports were plotted on the graph they were so minuscule that they did not even appear compared to their reserves.  This shows how small the interconnection of Natural Gas supplies and demands between world economies. If there is to be a switch over to Natural Gas as a global energy source countries must begin exporting and importing different types of Natural Gas between each other.

This could be of particular benefit to Russia and its economy. As shown in the graph Russia by far has the largest amount of Natural Gas reserves in the world. If it were to harness that immense resource, its exports alone could power the world for  many years.

In comparison the United States has already taken steps towards becoming a net exporter of natural gas. It has begun converting current facilities made for Natural Gas imports and reforming them to be able to fill shipping transports and export Natural Gas.

China has seen the huge benefit Natural Gas provides to the countries that are able to develop it and has begun developing its own Natural Gas reserves. However, China faces many problems in the implementation of its extraction process. Firstly, China has a very different terrain compared to the United States. This difference in terrain has caused a huge a delay in the technology transfer of  the current facking technology developed in America.

In order for the Chinese to access their current reserves of Natural Gas they will need to develop a system allowing them to extract their reserves in an efficient manner and be cost sustaining.

Many United States companies have descended on China forming partnerships to help develop the Chinese’s Natural Gas Reserves. Companies like RMI have begun major developments in China. Hopping that the development of Natural Gas and renewables will help address the growing problems of contamination, pollution and climate change.

As this resource develops further we will see huge economies of scale continue to lower the costs of Natural Gas. Additionally, as renewable energy sources begin to take over the traditional role of fossil fuels natural gas will be able to power solely keep sectors and become much more widely available. While this process of conversion begins to occur, we will be able to give even cheaper energy to the rest of the world that cannot afford the new renewable technologies during their industrialization. This way Natural Gas can be both a bridge fuel for the industrial countries now and then for developing countries in the future.

 

Weekly Recap

Why is Liquefied Natural Gas (LNG) so important?

For starters, LNG is a key ingredient in making natural gas an internationally traded commodity, without this resource in use, the supply and demand for natural gas as a whole would dwindle. Not only that, but new developments have made the transportation of LNG across boarders easier and safer, which makes exporting and importing this resource more attractive.

In order to make LNG and other natural gas resources a globally traded commodity, countries with high reserves need to start exporting the natural gas to those countries with little to no reserves in natural gas.

For example, Russia has the largest number of natural gas reserves in the world; so much in fact that if they decided to export all of their reserves, they could power the entire world for several years alone.

On the other hand the United States has already taken steps towards becoming a net exporter of natural gas. There are plans to create a pipeline from the North Alaskan Coast inland. This project would not only provide many jobs for the unemployed, but also huge revenue for the state of Alaska. 2021 is the target year to have the pipeline fully up and running.

Now that natural gas is becoming a more popular use of energy, it would be a smart investment for countries to export their reserves into the global market. The use of natural gas has come a long way in the past couple years and it is projected to be the energy of the future.

This is from a 3-D animation tutorial of how the natural gas companies (Shell) turn natural gas into a liquid.

Why U.S. natural gas companies should be focusing on Alaska

On April 10^th of this year, Conoco suspended its plans to drill in the Arctic Ocean off the northern coast of Alaska. Conoco blamed “unclear” federal regulations related to Arctic Ocean drilling, the Wall Street Journal reports. Shell is also no closer to drilling, as both of its drilling rigs set to drill in Arctic waters off the coast of Alaska have been damaged. But maybe Conoco and Shell should be taking Exxon Mobil’s example and working with legislators to get an Alaskan pipeline built.

Currently, it is very cost ineffective to transport natural gas from Alaska’s North Slope to the Midwest or even to cities in Canada. The Gas Pipeline Project Office, a governmental sector of the State of Alaska estimates that if everything goes as planned and the right regulations get passed, the project could be completed by 2021. The Alaskan State government is in support of the pipeline because it would be a large revenue generator and provide many Alaskans jobs.

Why is now the perfect time to build this pipeline? Demand is becoming steadier and thus, cash flows are more predictable.  Not long ago, demand was much higher in the winter months than summer months because natural gas was used primarily for heating. But, now natural gas is being used in the summer to produce electricity by many new natural gas fired power plants.

Also, many companies are slowly, but surely, switching their fleets to natural gas powered vehicles to cut variable costs and decrease pollution. Part of the trend is driven by tax incentives offered by the federal government to companies/individuals who purchase alternative powered vehicles.

According to the U.S. Energy Information Administration, the top natural gas producing states are Texas, Louisiana, Wyoming, Oklahoma, and Colorado but Alaska could enter that list once the pipeline is built.

So why is the pipeline not being built yet? There are multiple laws that need to be passed by the U.S. Federal government, and the Alaskan government to allow the construction to proceed. Then the parts of the pipeline that run through Canada have to be approved by the Canadian government. Plans for the pipeline have been drafted, but licenses still have to be granted. What is behind most of these governmental barriers? Environmentally conscious groups are at the forefront. The BP oil spill in 2010 and an oil line rupture in Kalamazoo recently have shed a negative light on oil and gas exploration and transportation. But there are millions of miles of oil and gas pipelines already in existence and according to TransCanada CEO, pipelines are the safest way to transport oil and gas.

Will we see the Alaskan Pipeline project start soon? I sure hope so.

Natural Gas Pipelines and Baker Hughes

The natural gas industry uses natural gas pipelines to transport natural gas around the country. In the US alone there is a highly integrated transmission and distribution grid that can transport natural gas to and from nearly any location in the lower 48 states.

For natural gas to be able to be transported to almost any location in the lower 48 states there are 305,000 miles of interstate and intrastate pipelines that are needed. There are over 210 different natural gas pipeline systems that make up these 305,000 miles. 400 underground natural gas storage facilities store the natural gas, while there are more than 11,00 delivery points, 5,000 receipt points, 1,400 interconnection points, and 24 hubs or market centers that provide a way to get the natural gas to the consumers.

Pipelines are the best way to transport natural gas in this day and age, but there are several problems that these pipelines and pipeline companies can cause. To start with, under a federal law known as the natural gas act, companies have the right to exercise eminent domain so it can condemn private property for constructing and maintaining the pipeline. If the company chooses your private land as some of the land it wants to use all you can do is live with it or move away.

This doesn’t sound like a big problem to most people, but serious problems with the pipelines are that there is a constant risk of accidents, spills, and explosions. In the past few years, there have been many large pipeline failures that led to massive damage and even loss of live.

In September 2010, a natural gas pipeline explosion of San Bruno, California killed eight people. Once the National Transportation Safety Board had time to investigate the case they found “troubling revelations… about a company that exploited weakness in a lax system of oversight and government agencies that placed a blind trust in operators to the detriment of public safety.”

Luckily companies like Baker Hughes have created the GEOPIG high-resolution caliper in-line inspection service. These PIGs are intelligent robotic devices that are propelled down the pipelines to evaluate the interior of the pipeline. These PIGs can test pipe thickness, pipe roundness, check for signs of corrosion, detect minute leaks, and any other defects along the interior of the pipeline.

Although it is great that companies like Baker Hughes have created these PIGS that are making pipelines much safer, they have not solved all of the problems for the natural gas pipelines. It will be interesting to see how increase use of natural gas will affect these pipelines and the safety hazards that go along with them.

Natural Gas Pipelines by Region: