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.

Weekly Recap

This Week in thenaturalgas ALTERNATIVE…

 

To start off the week we posted about the new science of the Heat Capture System.   This technique allows us to attain nearly double the production in power generation from natural gas using the same quantity of gas.

The Heat Capture System funnels the intense heat generated from the combustion of natural gas into a heat transfer system which reacts with water.  When this reaction occurs, the water boils and then becomes steam, the steam in turn is used to power a secondary generator and thus nearly double the power is generated from the same amount of natural gas.

We followed up this blog post with a post about Casella Waste Systems, a company who is helping create plants that are capable of processing out the harmful chemicals and radioactive materials that are brought to the surface after fraccing occurs.

This is a very significant topic in the natural gas industry because one of the leading causes of resistance to the shift towards natural gas is the negative reparations of fraccing.  If the waste from this extraction method can be easily processed through plants like those being built by Casella, then the transition from oil and coal to natural gas will likely become a much more popular option.

The blog proceeded with a post about the use of natural gas as a surface fuel for vehicles.  This post really highlights the reasons as to why using CNG is a very popular choice for vehicle fuel of the future.

The preceding post for thenaturalgas ALTERNATIVE is about Australia being the new frontier for natural gas exploration.  Australia has an abundance of attractive traits for natural gas exploration such as a large amount of reserves, proven off-land reserves, a relatively near by energy hungry market (Asia), and drilling permits which have already been allotted to exploration companies.  Australia is likely to be one of the larger natural gas producers in the future and thus is a popular area for natural gas exploration.

The final blog post of the week is about the investment opportunities in the natural gas industry.  As discussed throughout our blog, the natural gas industry is on the rise and thus is a potentially very good area for individuals to put their money.  This post gives examples of different areas that can be invested in throughout the industry, as well as a few examples of companies who are big players in their respective areas of the market.

Australia, the new frontier for natural gas?

Australia is the new frontier or exploration in the global natural gas industry.  The endless pursuit for a natural gas producing region resembling the United States has lead many of the worlds largest gas companies to the shores of Australia.  The countries combination of abundant gas, low population density, efficient transport methods, and hungry market are that factors that make any gas company go falling head over heals for a piece of land.

THE STATS

Australia has approximately 390 Trillion cubic feet of natural gas reserves, which equates to about 45% that of the United States reserves, according to Forbes.  However, while this is only 45% of the quantity of natural gas that the U.S has, it needs only to serve 7% of the population that the U.S has.  Thus, Australia will have a plethora of natural gas to export.

THE FACTS

One of the largest appeals of natural gas exploration in Australia is the geographic location of its gas reserves.  The vast majority of Australian reserves lay on vacant or sparsely populated land, meaning that there will be much less resistance from environmentalists about the fraccing method used to extract the natural gas from the deposits below.  Less resistance is very appealing to all natural gas companies because it means time saved, money saved, and public image saved by staying out of the papers.

Offshore exploration is another significant upside about natural gas in Australia.  There are many medium-large sized reserves located just off of the coast but they have long been considered useless due to the fact that drilling machinery could not reach the depths at which the reserves lay.  In addition, it would be a monumental task to install the piping needed to get the extracted natural gas to the shore.  However, with the recent discovery of super chilled natural gas and an increased capacity to drill deeper water, these open sea reserves are all of a sudden quite easily trappable.  By super chilling the extracted gas, the volume of the material is condensed to 600 times smaller than what it is in its natural state, making for easy offloads to tankers which can then deliver the gas to the global markets.

As pointed out before, Australia’s natural gas reserves far outnumber what the local market demands for consumption, thus it will have a surplus of natural gas to export and profit from.  With Australia’s relatively close proximity to energy hungry Asian markets such as China and Japan, the demand for Australia’s easily accessible natural gas will be very high.

THE BELIEVERS

Many of the world’s gas giants agree that Australia is the next big place for natural gas exploration and they are showing it through their recent investments into Australian projects.  For instance, Shell has dished out an approximate U.S $12 billion for their FLNG plant off of the northwest coast of Australia.  Exxon was quick to follow and just recently applied for permits to build a similar and slightly larger FLNG vessel also off of the western coast of Australia, Forbes.  Another gas giant, Chevron, made proactive moves in Australia by acquiring two permits to mine 810,000 acres of Australian land, costing the company an estimated U.S $349 million, Forbes.

Australia has the key components to make it the new frontier in the ever increasingly competitive of natural gas exploration and extraction market.

Liquefied Natural Gas (LNG) Export Controversies in the US

For the past 20 years, the US has been an importer of natural gas with an average of 15.7 percent of its annual consumption coming from Canada. However, the production of this resource in the US has risen over 25 percent since 2005, which comes primarily from the previously inaccessible shale deposits deep in the earth, and is expected to continue growing in the future.

Presently, the production of natural gas in the US is greater than its national consumption and is causing quite the controversy on whether or not the US should export the resource in the global market. A few years ago, liquefied natural gas (LNG) import terminals were constructed across North America in response to the country’s diminishing natural gas supplies. Today, due to the rise of production, major natural gas companies in the US are trying to convert these terminals into export terminals which will transport LNG overseas.

Cheniere Energy Inc., a natural gas company based out of Houston, TX, is the only company in the US with an approved LNG terminal. It was in January of 2012 when Cheniere Energy was given approval by the Department of Energy to export LNG through its Sabine Pass Liquefaction terminal in Cameron Parish, LA, which has the potential to ship up to 2 billion cubic feet of gas per day by the year 2015. The company also intends to open a new export terminal in Corpus Christi, TX by 2017 but will only see production if Cheniere gets the approval.

Chevron’s Gorgon project in Australia.

Other US natural gas companies, who are unable to export domestically, have turned to alternative plans by building exporting facilities on foreign soil (where there are little to no restrictions on natural gas production). For example, Chevron Corporation is one of the leading suppliers of LNG exports with its Wheatstone and Gorgon projects in Australia. The Gorgon Project is Australia’s largest single-resource project, with a 15 million-metric ton per-year LNG facility.

KBR Inc., another US company, is a leading LNG production facility developer, with already having constructed over 40% of LNG facilities around the world.

What is causing all the controversy over exporting LNG?

Industrial consumers of natural gas are worried the exportation of natural gas will increase oil and natural gas prices as well as their production costs.

Alliances are starting to form together and fight against the approval given by the Department of Energy for exporting natural gas. The alliances include utilities dependent on natural gas to fuel electricity generation, chemical companies that use it as a feedstock for making myriad industrial chemicals, and heavy industrial users such Alcoa and Nucor who use natural gas to fire their metal-making operations.

America’s Energy Advantage, a group backed by six large industrial companies including Dow Chemical, Huntsman, and Alcoa, believe tens of billions of dollars for potential investment in US industry are at risk if the government allows for the substantial increase in exported LNG. The group also argues an increase in exporting LNG will hurt the US economy by eliminating domestic jobs and increase natural gas prices.

Today the US price of natural gas is $3.27 per thousand cubic feet, compare this  price to those in the world market, you will see the Europeans pay upwards of $12 per thousand cubic feet and the Japanese pay more than $17. If the US were to start exporting, domestic natural gas prices will increase significantly.

It looks like right now the controversies surrounding natural gas production and exportation in the US will only get resolved if there can be an agreement on some sort of compromise otherwise the issue will never go away.

thenaturalgas ALTERNATIVES

Shell Floating LNG Plant

The most recent big development in the area of natural gas exploration is the movement towards FLNG or floating liquefied natural gas, and Shell is leading the charge.  With the development of their Prelude project, Shell is poised to be the first company in the world to create a vessel or platform which can extract remote deposits of LNG according to Bloomberg.  The ability to tap additional reserves of LNG means not only advancement in the movement towards natural gas energy but further economic development for Australia and less environmental impacts.

The $10.8-12.6 billion project means constructing the largest vessel on Earth at a weight of 600,000 tonnes and a length nearly equal to that of the Empire State Building.  The construction of the hull began at Samsung Heavy Industries in South Korea in 2009 and the project is set to begin operation over the Prelude LNG reserve in 2015.  The vessel will be towed to the Prelude reserve after completion and moored at said location for 25 years.

Extracting LNG from remote deposits at sea has always been a sought after goal for natural gas companies but was never economical because locations were either too remote or the costs were astronomical with the amount of pipeline and energy it would take to get the LNG to coastal plants.  Thanks to groundbreaking technology however, scientists have found that by chilling the extracted LNG to -162 degrees Celsius, the volume of LNG can be shrunk by 600 times what it is in its natural state.  Thus allowing for enormous amounts of LNG to be shipped to mainland rather than pumped through pipelines.

The benefits for northwest Australia and Australia as a whole will be immense both environmentally and economically.  The permits to build LNG plants on land in Australia have become few and far between recently and with seven plants currently under construction, they will be even more rare to acquire.  In a sense, the LNG industry is capped at the moment in Australia with nowhere to expand to.  However with the arrival of FLNG plants, the gates are again open for companies to explore and tap previously inaccessible LNG reserves, meaning many more jobs for Australian workers and more money for Australia to tax.

Not only is the development of FLNG good for the Australian economy, it is also a more environmentally responsible means of natural gas extraction.  Thanks to the ability to condense the extracted LNG for transportation, pipelines are virtually eliminated in this segment of the market meaning that there is more LNG production with no more pipelines taking up land.  LNG plants are also more environmentally friendly because it again adds to LNG production while not needing land to be developed for roads, laydown areas, and accommodation facilities.

FLNG plants are becoming a significant part of LNG exploration. With their potential to provide more LNG, stimulate the Australian economy, and do so in a more environmentally responsible manor, this will likely become a much more popular form of exploration and extraction for companies around the world.

thenaturalgas ALTERNATIVE