OVERVIEW OF THE LNG BUSINESS

Andy Flower

CWC School for Energy

LNG Markets, Supply and Pricing
Isle of Grain
April 4th to 6th 2016

www.cwcschool.com
©Andy Flower

LIQUEFIED NATURAL GAS - LNG

 LNG is natural gas cooled to around -161o Centigrade,

the temperature at which its main component methane
liquefies
 The volume is around one six-hundredth of its volume as
a gas
 It is stored and transported at atmospheric pressure as a
boiling liquid
 It is an odorless, colourless liquid
 Chemically, LNG is chiefly (>85%) methane, with smaller
amounts of ethane, propane, butane, together with
minor amounts of other substances

©Andy Flower 2

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 LNG IS STORED AS A BOILING LIQUID

Boil-off

Heat
Leakage

©Andy Flower 3

THE CHEMICAL COMPONENTS OF LNG

Methane (C1)
Gases

Ethane (C2)
LNG

Propane (C3)
LPG

NGLs

Butanes (C4)

Pentanes (C5)
Liquids

Hexanes (C6)
Condensate

Heptanes and
higher (C7+)

©Andy Flower 4

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 LNG COMPONENTS DETERMINE THE
HEATING VALUE

• The calorific value (CV) of gas is

the amount of heat produced when
Gross calorific value of
a given quantity is burned
LNG components
• For LNG the CV is usually
expressed in terms of energy per
Btu/scf
unit volume of gas, most commonly
Methane (C1) 1010 Btus/scf
Ethane (C2) 1770 • The CVs of different LNGs differ
according to their compositions and
Propane (C3) 2520 roughly range from 1020 to 1160
Butane (C4) 3260 Btu/scf
• LNG with more LPG components
(rich LNG) has a higher heating
value than LNG with less LPG
components (lean LNG)
©Andy Flower 5

MEASUREMENT OF QUANTITIES OF LNG

Metric tonnes (LNG statistics, plant

Weight capacities etc.)

Liquid – Cubic metres (storage and

ship capacity)
Volume
Gas – Cubic metres or cubic feet
(send-out from regas)

Energy MMBtu (MWh, GJ, kCal, toe etc.)

– contract quantities, prices

©Andy Flower 6

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QUICK EXERCISE

 An LNG ship has a capacity

of 140,000m3
 The gross calorific value of
the LNG is 1060 Btu/scf
 The LNG selling price is
$5/MMBtu

 What is the value of the

cargo?

 N.B 1m3 = 35.31ft3

WHY LNG?

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 TRANSPORTING NATURAL GAS

©Andy Flower 9

OPTIONS FOR DEVELOPMENT OF NATURAL

GAS RESERVES

 Pipeline to market
 Use gas to develop local industry (fertilisers, aluminium,
chemicals etc.)
 Recycle to produce liquids
 Inject in nearby oil field to enhance oil production
 LNG
 Convert the gas to liquids (GTL)

Or leave the gas in the ground for future generations

©Andy Flower 10

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 COST OF MOVING NATURAL GAS AND
OIL FROM WELLHEAD TO MARKET

Gas Pipeline - Offshore Gas Pipeline

Onshore
Cost

LNG

Oil Pipeline

Oil Tanker

Distance
©Andy Flower 11

©Andy Flower Source: KelloggBrownRoot 12

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 A BRIEF HISTORY OF LNG

 Early 20th Century – Liquefaction of gas to produce helium

 1938 – First LNG peak-shaving plant in, W. Virginia, USA
 1944 – First major LNG accident occurred in a peak-shaving plant in
Cleveland, Ohio. 128 people died
 1959 – Voyage of Methane Pioneer
from US Gulf to UK, first
international cargo of LNG
 1964 – CAMEL plant in Algeria
commissioned, first
commercial LNG deliveries
to UK (closed in 2010)

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©Andy Flower

A BRIEF HISTORY OF LNG (CONT.)

 1969 – First deliveries of LNG to Japan (from Alaska)

 1970s – Libya, Brunei, Indonesia and Abu Dhabi start to export LNG
 1980s - Malaysia and Australia become LNG exporters
 1990s - Qatar, Trinidad and Tobago and Nigeria join the LNG
exporters club
 2000s - Oman, Egypt, Equatorial Guinea, Norway, Russia and
Yemen start exporting
 2010s – Peru, Angola and Papua New Guinea become exporters
 2014 – Annual trade 248mt (up from 100mt in 2000)

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©Andy Flower

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 WORLD LNG DEMAND 1964 – 2015
250
Rest of Americas
USA
Europe
200
MENA
Pakistan
in mtpa

150 S.E.Asia
China
India
100 Taiwan
Korea
Japan
50

0
1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
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©Andy Flower

LNG SUPPLY 1964 TO 2015

250

PNG
Angola
200 Peru
Yemen
Russia
Norway
Eq. Guinea
Egypt
150 Oman
in mtpa

Nigeria
Trinidad
Qatar
Australia
100 Malaysia
Abu Dhabi
Indonesia
Brunei
Libya
50 Alaska
Algeria

0
1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 16
©Andy Flower

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 QATAR IS THE LARGEST PRODUCER BUT
AUSTRALIA IS CATCHING-UP

80

60
In mtpa

40

20

97 99 01 03 05 07 09 11 13 15
19 19 20 20 20 20 20 20 20 20

©Andy Flower
Qatar Indonesia Algeria Malaysia Australia

The Role of LNG

in Natural Gas Supply

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 WORLD NATURAL GAS SUPPLY IN 2014

LNG
9.8% Pipeline
Trade
19.6%

Indigenous
70.6% Oil – around two-thirds traded
internationally
mainly by tanker
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©Andy Flower

SHARE OF LNG IN NATURAL GAS SUPPLY IN 2014

Firm
100

80
Percentage

60

40
Flexible
20

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©Andy Flower 20
N

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 THE LNG BUSINESS IN MARCH 2016

21

LIQUEFACTION PLANTS IN OPERATION AND

UNDER CONSTRUCTION IN MARCH 2016

Norway Russia (Yamal)

Alaska
Russia (Sakhalin)

Algeria Egypt
USA
Abu Dhabi
Qatar
Oman
Trinidad and Tobago Nigeria Yemen
Brunei
Equatorial Guinea Malaysia
Indonesia Papua New Guinea
Peru Angola
Australia

In Operation Under Construction

Not producing in March 2016 22

©Andy Flower

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 LNG IMPORTING COUNTRIES IN MARCH 2016
Europe
UK Portugal
France Netherlands
Spain Lithuania
Italy Poland
Belgium Greece
Turkey Malta

Canada
Jordan S. Korea
USA
Kuwait Japan
Israel China
Jordan UAE Taiwan
Puerto Rico Pakistan
Mexico Egypt Bahrain
Dominican Republic India
Jamaica Thailand
Colombia Malaysia
Ghana Singapore
Indonesia

Brazil

Chile Uruguay
Argentina

In Operation Under Construction

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©Andy Flower

LNG SHIPS IN OPERATION AND ON ORDER –

MARCH 2016
Capacity Existing On Order

18,900m3 to 30,000m3 9 3
- FSRU - 1
65,000m3 to 89,800m3 11 -
122,000m3 to 182,000m3
- LNG Trade 345 128
- FSRU/FSU* 21 8
- In Lay-up 13
210,000m3 to 217,300m3 31 -
263,000m3 to 266,000m3 14 -
- FSRU - 1
Floating Liquefaction - 8
Total 444 149
* Ships operating as FSRUs/FSUs i.e. excluding 3 Excelerate ships and
1 Hoegh LNG ship with onboard regasifiers currently trading LNG

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©Andy Flower

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THANK YOU

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