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.

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.