Liquefied Natural Gas Operations: Processes and Global Trends

Introduction and Background

Today, the liquefied natural gas (LNG) industry is generating an increasing amount of attention and investment from the private sector, and these trends are expected to continue in the future (Liquefied Natural Gas, 2012). These trends are not surprising given that LNG is a highly useful approach to the transportation of natural gas, requiring only about one-six-hundredth of the volume of gaseous natural gas (Liquefied Natural Gas, 2012). Moreover, innovations in technology are further reducing the costs associated with the liquefaction and regasification of LNG (Liquefied Natural Gas, 2012). Based on the cost advantages in transporting LNG compared to natural gas, LNG provides a viable approach for gaining access to otherwise-unreachable deposits of natural gas where pipeline construction would be cost prohibitive or unfeasible for other reasons, such as disputed political boundaries and environmental issues. For example, according to Ben-Moshe et al. (2009), "Natural gas liquefaction projects often take place in less developed countries in South America and West Africa, where political risk factors abound, including currency conversion risk, sovereign risk and environmental issues presented by investing in the global market" (p. 428).

There are additional advantages to reducing natural gas to a liquefied form. When gasified, LNG will only combust when concentration levels of 5 to 15% when mixed with air are achieved. Moreover, even in confined environments, LNG will not explode, and any vapors associated with the product will likewise not explode, thereby reducing the potential for ignition of spilled fuel (Liquefied Natural Gas, 2012). By eliminating all oxygen, water, and carbon dioxide from natural gas, the liquefaction process transforms natural gas into nearly pure methane (Liquefied Natural Gas, 2012). Based on these and other attributes, current projections by industry analysts indicate that future use of LNG will continue to increase despite the enormous infrastructure costs involved (Liquefied Natural Gas, 2012), with some industry analysts projecting a significant increase in demand over the next 25 years (Lebeck, 2006).

At present, natural gas has become a vital component of the network that provides the United States with its energy needs, representing more than one-fifth (21.92%) of all energy produced in the U.S. in 2003 (Lebeck, 2006). Currently, the main applications for natural gas in the U.S. include:

1. Electricity generation: 22.6% of natural gas delivered to end users;
2. Residential heating and cooking: 23.2% of natural gas delivered to end users; and
3. Industrial production and manufacturing: 36.9% of natural gas delivered to end users (Lebeck, 2006).

In addition, natural gas is regarded as a superior source of fuel for generating electricity compared to coal, since it creates fewer emissions, does not involve as much initial or long-term capital investment, and is more efficient in the combustion process (Lebeck, 2006). These attributes have resulted in increased consumption of natural gas at the global level over the past three decades, and comparably significant increases are projected for global demand for natural gas through 2030 (Lebeck, 2006). These projections are supported by other industry analysts such as Knowles, who reports, "Natural gas is forecasted to be the fastest growing component of global energy consumption, with projected average annual increases of 2.8% between 2001 and 2025. Global natural gas consumption is projected to increase from 90 trillion cubic feet (Tcf) in 2001 to 176 Tcf in 2025" (2009, p. 294).

These trends are further reinforced by recent initiatives by state and federal lawmakers in the United States, as well as other governments, that are pushing environmentally responsible energy solutions in response to climate change (Lebeck, 2006) and the need for additional energy sources to reduce dependence on foreign suppliers and promote national security (Ben-Moshe et al., 2009). These trends have special significance for LNG production and supplies for the next 25 years.

Statement of the Problem

Domestic consumption of natural gas is projected to increase significantly during the next 25 years, outpacing the overall demand for energy during this same period (Lebeck, 2006). Although a major LNG receiving terminal has recently been completed in Louisiana, the costs associated with launching and maintaining these facilities make their justification an important and timely enterprise, given the scarcity of alternative energy developmental resources. Moreover, with electricity accounting for the majority of natural gas applications during the coming quarter century, it will be critical to determine whether these investments are worthwhile in view of the projections concerning peak oil at mid-century and the availability of remote supplies of natural gas suitable for liquefaction and transportation as LNG (Lebeck, 2006). In sum, the growing demand for natural gas represents a wide range of supply issues given the current and projected production levels of natural gas in the United States (Lebeck, 2006), making the need for this type of study all the more timely and important.

Aims and Objectives

The overarching aim of this study was to determine the suitability of liquefied natural gas as an energy source for generating power by investigating the operational principles of liquefied natural gas and the associated risks involved. In support of this aim, the study was guided by two objectives:

1. To critically review the relevant literature concerning the processes involved in the extraction, production, and transportation of liquefied natural gas; and
2. To build a reference list of all resources and sources of data utilized for this project.