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L IQUEFIED N ATURAL G AS C HAIN

Liquefied Natural Gas (LNG) currently represents the most exciting aspect of
the international gas landscape. Though the overall percentage of gas
transported as LNG is less than 10% of global gas trade, it is growing rapidly,
involving an increasing number of buyers and sellers. The past two decades
have seen phenomenal growth in the LNG trade—growth that is expected to
continue unabated this decade.

LNG is simply an alternative method to transport methane from the producer
to the consumer. Methane (C1H4) gas is cooled to –161.5° C (–260° F),
converting its gaseous phase into an easily transportable liquid whose volume
is approximately 600 times less than the equivalent volume of methane gas.
(The exact shrinkage is closer to 610 times, but 600 is commonly quoted.)
Thus 600 ft3 of methane gas will shrink to a volume of around 1 ft3 of clear
and odorless LNG. It is usually stored and moved at cold temperatures and at
low pressure.

Gas converted to LNG can be transported by ship over long distances where
pipelines are neither economic nor feasible. At the receiving location, liquid
methane is offloaded from the ship and heated, allowing its physical phase to
return from liquid to gas. This gas is then transported to gas consumers by
pipeline in the same manner as natural gas produced from a local gas field.

The LNG process is more complex than pipeline transportation. The “LNG
chain,” shown below, consists of discrete sections: upstream, midstream
liquefaction plant, shipping, regasification, and finally, gas distribution
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LNG technology is not new. The first commercial LNG facility was built in the United States in 1941 in Cleveland as a peak load shaving facility. Unfortunately. this plant was closed in Page 1944 due to a gas leak and subsequent explosion. Gas (delivered via pipeline to the plant) was liquefied during hours or seasons of low demand and heated back to gaseous phase to be pumped into the pipeline 2 grid during periods of high demand. The decision to commercialize a gas field by either LNG or direct pipeline is related to the distance to market from the gas reservoir. A rule of thumb commonly followed states that LNG could be a viable option versus pipeline transport when the following characteristics are present: .

7 bcf (1. or MTA) of LNG requires 48. more commonly. MMBtu). such as CO2 or sulfur.  The gas market is more than 2. One ton of LNG contains the energy equivalent of 48.  A marine port where a liquefaction plant could be built is relatively close to the field.  A pipeline alternative would require crossing uninvolved third-party countries and the buyer is concerned about security of supply. An LNG facility producing 1 million tons per year (million tons per annum. usually tons or million tons.000 km from the field. Million tons should technically be abbreviated MMT. This facility would require recoverable 3 Page reserves of approximately 1 tcf over a 20-year life. however.  The market price in the importing country is sufficiently high to support the entire chain and provide a competitive return to the gas exporting company and host country.) LNG ship sizes are specified in cargo volume (typically. . it is measured in mass units. Units used in the LNG trade can be confusing. but once it is converted into LNG.  The gas field contains at least 3 tcf to 5 tcf of recoverable gas  Gas production costs are less than $1/MMBtu.  The political situation in the country supports large-scale.  The gas contains minimal other impurities. (This is abbreviated as MMT or. the LNG industry uses MT to represent million tons. it is sold by energy units (in millions of British thermal units. delivered to the liquefaction plant. long-term investments.700 ft3 (1.38 bcm) of natural gas per year. Similarly. thousands of cubic meters). MT. and once the LNG has been reconverted to gas.380 m3) of natural gas. equivalent to 133 MMcfd. Produced gas is measured in volume (cubic meters or cubic feet). a 4-MTA LNG train would consume an equivalent of 534 MMcfd (requiring reserves of 4 tcf over 20 years).

Algeria. Because LNG requires gas to be cooled to very low temperatures. care must be taken to remove all impurities. the Caribbean. and field processing facilities. wellheads. Asia. As of early 2006. The diagram below shows the layout of a typical LNG liquefaction and loading facility. Middle East. with identical gas wells. and Alaska. LNG chain: Upstream and Midstream The upstream and midstream sections of the LNG chain are identical to traditional gas systems. such as CO2 and sulfur. there were at least 17 plants producing LNG in Africa. Though each plant is unique in design and size. 4 Page Gas received into the LNG facility must be free from impurities and as close to pure methane as possible. . they share many common features. In 1969. especially water. in 1964 and went online in 1965. Phillips constructed the Kenai LNG plant in Alaska. Australia. Any other components. from the methane stream prior to processing by the liquefaction plant. LNG chain: Liquefaction Plants The first large-scale LNG plant was built in Arzew.

are low. Rising LNG prices are also encouraging development of gas resources previously considered uneconomic. are blamed for the reversal in the long-term declining cost trend. Rising demand for steel and nickel. and perceived advantages. however. Because 8%–10% of gas delivered to the plant is used to fuel the refrigeration process. The choice of process may depend on individual company choice. have announced costs that are five times greater than plants built a few years ago. Shell. uneconomic Page projects if prices come down from the current levels. and others. similar to FPSO production for oil . such as Woodside’s Pluto project. and high demand for engineering resources. and the precooled propane mixed refrigerant MCR process (promoted by Air Products. Recently announced plants. Because economies of scale can be significant. license fees. and. Since then. may damage the refrigeration units or decrease the quality of the produced LNG. and used by the majority of LNG plants). ethylene. in the case of adjoining plants (such as in Qatar) have shared facilities. overall operating costs are high even though other costs. such as labor and maintenance. Various studies have shown that the efficiency of the main processors of both processes is similar. The global LNG fraternity has adopted two main liquefaction processes: the pure refrigerant cascade process (also known as the Phillips process). Liquefaction plants are typically the most expensive element in an LNG project. This alarming trend will force project promoters to make increasingly aggressive LNG price forecasts and 5 will undoubtedly result in project cancellations and possibly. Smaller and more remote fields could be developed using converted or specially constructed ships that will combine LNG production and storage systems. more efficient trains. the majority of large base load projects have been based on Air Products’ propane Multi-Component Refrigerant (MCR) cryogenic heat exchangers. minimizing unit costs. or both. and methane as refrigerants. newer LNG plants have larger. The first LNG plants in Algeria and Alaska were based on the Phillips cascade process using propane.

probably in West Africa or S. store the LNG until required. and pipeline link to the local gas grid. which operate at much higher pressures). There are numerous technical challenges. Insulation around the tanks maintains the temperature of the liquid cargo. as the LNG short-term and spot trade increases. most importantly the effect of ‘sloshing’ on partial filled tanks – while LNG is being produced – and the offloading of LNG from one floating vessel to another floating vessel. and the remaining members of the fleet are either en route to the buyer’s regas facility or on the way back to the LNG plant to pick up new cargo. LNG chain: Regasification Terminals 6 Page LNG receiving terminals. operating a “virtual” pipeline.1%–0. fields.E Asia / Australia. and send out gaseous methane into the local pipeline grid. On a typical voyage. However. receive LNG ships. ships are loading LNG from different plants and discharging their cargoes wherever the prices are best at the time. also called regasification facilities or regas facilities. LNG chain: Transportation LNG is usually transported to the gas consumer by specially designed refrigerated ships. The ships operate at low atmospheric pressure (unlike LPG carriers. LNG storage tanks. vaporizers to convert the LNG into gaseous phase. an estimated 0.25% of the cargo converts to gaseous phase daily. Most LNG plants have their own dedicated fleet of LNG ships. Because most older ships do not have active refrigeration systems onboard. There are a number of companies that are promoting their FLNG (Floating LNG) concepts. away from . ships use the produced boil-off gas as engine fuel. The main components of a regas facility are the offloading berths and port facilities. transporting the LNG in individual insulated tanks. As a ship is being loaded. with first production likely in 2011-2012. LNG tankers may also be offloaded offshore. keeping the boil-off (conversion back to gas) to a minimum. a sister ship may be discharging its cargo.

LNG is also being offloaded offshore. Vaporizers warm LNG from –161. allowing the temperature to rise. which can be spaced closely together. convert the LNG to methane which will be directly piped to the local grid. Ship-to-ship LNG transfer is still in its early stages and all the technical hurdles have yet to be fully ironed out. This is accomplished using a floating mooring system (similar to that used for oil imports) via undersea insulated LNG pipelines to a land-based regas facility.5°C to more than 5°C. we could see large ships discharging to smaller ships offshore. either above ground or semi-buried. In conventional onshore-based regas facilities. The largest component of receiving terminal capital cost is the vaporizer process equipment. congested and shallow ports. offloaded LNG is stored in large tanks. until gas is required by consumers. Conceptually. Contact with seawater in warmer climates or heated water in colder climates keeps the heat exchangers warm. These ships have the ability to discharge gaseous methane directly into a pipeline grid or discharge LNG by offshore moorings into cryogenic pipelines for gasification onshore. Large volumes of seawater are kept flowing through the system to avoid ice buildup on the panels. as well as conventional LNG offloading to a shore facility by fixed arms. Once this process will become conventional. where land is scarce. usually by modified LNG tankers that also have regasification units on board. converting methane from liquid phase into gas. vaporizers are relatively simple units in which LNG is pumped through tubular or paneled heat exchangers. 7 Page . Semi-buried tanks. are most common in Japan. and these smaller ships will be able to come directly to port.

FLOATING LNG 8 Page .

Prelude is expected to produce 3. The facility is scheduled to begin production in 2016.6 million tonnes (0. W HY FLOATING LNG PRODUCTION ? Over the last years available liquefaction capacity has become the 9 bottleneck in the LNG chain. 74 metres wide and 600. so its not clear what the view of maritime insurers is of the likelihood of the project suffering significant damage from cyclones or rogue waves during its lifetime. never been deployed offshore. to date. At 488 metres long.000 m3 of cold seawater each hour to cool the gas The project will be the world’s first floating LNG development and the facility will be the largest floating structure ever built. More gas reserves can be developed Page by monetising fields that are marginal due to magnitude and location.3 million tonnes of condensate and 400.allowing around 50. The vessel will be built by South Korea's Samsung Heavy Industries. in the last ten years a number of oil companies and independent services providers such as Höegh LNG have .6 billion ($11. as Shell executive director Malcolm Brinded put it). A base-load liquefaction plant has. However.000-year" tropical cyclone. with the $US12.175 tcf) per annum of LNG. as well as 1.000 tonnes of LPG.8bn) project receiving final investment approval. F LOATING LNG: T HE F INAL F RONTIER OF THE G AS A GE Shell recently announced that their Prelude floating LNG project off northwest Western Australia has passed another milestone.000-tonne in weight it will be longer than four soccer fields laid end-to-end and will be six times heavier than the world's largest aircraft carrier. The gas will be cooled by cold water pumped from about 150m below the ocean’s surface . The vessel will be permanently moored about 200km off the coast for its 25 years of production and is designed to withstand severe category 5 cyclones (or a “one-in-10. Shell has self-insured the project.

etc. The main drivers of the FLNG sector are as follows:  An increasing desire to monetize gas fields that are located far from existing infrastructure (pipelines. onshore LNG export facilities.  Companies are now actively looking at export and production options that avoid gas flaring and un-necessary re-injection. committed substantial investment into conceptual and engineering studies to take the concept towards reality.FLNGs can now compete with equivalent onshore projects. The addition of an FLNG also reduces the need for other on-field infrastructure lowering overall project cost. gas processing. At the present no FLNGs are in commercial operation and therefore much emphasis has been placed on developing specific technology such as sloshing-resistant containment systems. 10 Page .  Onshore liquefaction projects have seen continuing delays and massive EPC cost rises the recent years. in certain circumstances. process topsides and offloading systems.) or where the cost of installation of such infrastructure is not competitive. Offshore solutions are part of these options. Many floating LNG companies are confident that. These areas are the focus of much of the industry’s research and development.

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