Introduction to LNG
This LNG overview includes topics on:
• Natural Gas Fundamentals, as important background
• What is LNG?
• The LNG Supply Chain, starting with feed treatment
• The Land-based Liquefaction Process, and
• FLNG – the Floating Liquefaction option
• LNG Storage & Transportation
• Regasification and Floating FSRU facilities that convert LNG back to usable natural gas.
Finally discussed is the positive demand outlook for both natural gas and LNG.
What is LNG?
So, what is LNG?
LNG is simply natural gas in liquid form.
LNG is primarily methane with some ethane.
When liquefied during a refrigeration process the gas does not change its chemical state. It then occupies only 1/600th the initial gas volume.
LNG is odorless, colorless, non-corrosive, and non-toxic, and it will not burn as a liquid.
Start learning about this critical component of the energy transition with our LNG 101 module. Part of our complete energy industry training courses.
Converting natural gas to a liquid is called liquefaction.
Let’s first see how that works at an onshore location.
Before liquefaction, natural gas must undergo what is called feed pretreatment to remove heavy hydrocarbons, contaminants like H2S and CO2, and especially water. Any condensation in the gas stream can crystallize, damaging critical heat exchangers in the liquefaction plant.
Natural gas liquefaction is the same process used in your refrigerator, but on a massive scale!
A refrigerant gas is compressed, cooled, condensed and lowered in pressure through a valve that reduces its temperature, by what is called the Joule-Thomson effect.
Using large heat exchangers, the chilled refrigerant gas drops the temperature of the natural gas feed to the point where the methane will liquefy.
Methane is the main, and desired, component of natural gas for industrial and residential customers.
Countries of origin for LNG liquefaction and exports include Qatar, where the LNG business has expanded the most rapidly of any country – and many others like Algeria, Australia, Indonesia, Libya and Nigeria.
The US is becoming a major LNG exporter, with its massive shale gas production.
LNG can be liquefied offshore as well.
FLNG, Floating Liquefied Natural Gas, refers to a water-based facility that produces and liquefies LNG while stationed above an offshore natural gas field.
It can store enough LNG to load a separate vessel that ships the LNG to market.
Unfortunately the FLNG term has also been loosely applied to FSRUs, Floating Storage and Regasification Units, discussed later.
The two facilities carry out very different functions.
Let’s start with FLNG, those floating liquefaction units used in offshore fields that have what is called stranded gas.
Here, the resource is too remote from a market, making pipeline construction prohibitively expensive.
Today, the industry is finding very large natural gas discoveries by pushing further offshore and into increasingly deeper waters.
For example, the Shell Prelude FLNG vessel operates 475 kilometers from the nearest land in West Australia.
FLNG facilities can be prohibitively expensive.
As of mid-2018, there are only three units operating, including: Petronas – Has the world’s first FLNG production facility, built for offshore Sarawak in Malaysia. Shell’s Prelude FLNG – Is the world’s second – it is the largest offshore facility ever constructed.
At full load, it displaces over 600,000 metric tonnes, more than double the size of the largest crude oil tankers.
The third is Golar’s FLNG unit in offshore Cameroon, which started commercial production in mid-2018.
With low global LNG prices in 2016 to 2018, many planned FLNG projects have been shelved. Moving LNG production offshore presents a demanding set of design and operating challenges.
Every element needed to produce onshore LNG must now fit into an area roughly onequarter the size of the land-based facility.
Construction costs range from one to three billion dollars using converted LNG tankers, to 12 billion dollars for the Shell Prelude new construction.
However, the Prelude can handle massive amounts of gas, house as many as 400 people, and is expected to remain onsite for 25 years.
LNG Storage Tank Design
Once liquefied, LNG is stored in large-volume above-ground storage tanks at the loading facility.
They are completely enclosed in a shell of reinforced concrete.
Inside, they are double-walled, with a carbon steel outer wall and a nickel steel inner tank. Nickel steel is needed because ordinary steel becomes too brittle when in direct contact with cryogenic LNG.
Many of these tanks have less than 5 PSI operating pressure.
Concrete wall Insulation LNG Containing Ni Steel Inner Shell Tank Bottom – Ni Steel Steel Bottom Concrete Roof Bottom Insulation Insulation
LNG Ships – LNG Carriers
From the liquefaction plant storage tanks, LNG is then loaded onto specialized vessels for shipment to global markets.
These LNG carriers have the double-walled, pressure-insulated, spherical-shaped storage tanks. Spherical tanks help keep LNG in its liquid form for safe transport.
Recently, there has been a large increase in the size of LNG vessels, to as much as 250,000 cubic meters, or 3 billion cubic feet – at a cost of $250 million dollars. Larger LNG carriers reduce overall LNG delivery cost – the same logic that is used for larger and larger crude ships.
The LNG ship size can also impact the design of the LNG liquefaction plant and receiving terminals.
LNG Receipt and Regasification
Let’s now see what happens at an LNG receiving facility.
LNG is first offloaded from vessels into storage tanks at the re-gas terminal.
There must be enough terminal storage to both accommodate the vessel and provide uninterrupted flow into the natural gas pipeline.
Smaller LNG tanks at a regas facility can often be less than 70,000 gallons. They store LNG at a higher pressure, up to 250 PSI.
Again, they are usually encased in concrete, vacuum-jacketed, with double-walled tanks, and an inner wall of aluminum.
The imported LNG is then re-gasified using equipment to accomplish a series of pressure and temperature changes; thus the term regas terminal.
Current regas facilities tend to be very large and very expensive.
Newer terminals in Europe and the US can cost upwards of one billion dollars; and deliver one billion cubic feet per day.
Floating Storage & Regasification Units
A new trend is the development of Floating Storage and Regasification Units, called FSRUs. Here, the re-gas equipment gets mobility by being put on a vessel, perhaps an underutilized and converted LNG tanker.
FSRUs are either berthed at shore or moored offshore.
The gas is transported the remaining distance by pipeline.
A recent industry report estimated that approximately 50 FSRUs could be in operation by 2025, with the capacity to process 60% of the world’s recent LNG production.
This rapid growth is due to their lower cost, faster construction times, commercial flexibility and the reusablity feature of an FSRU.
FSRUs have two commercial advantages:
1. They offer producers new opportunities to sell LNG into smaller markets, and
2. FSRUs have been commissioned to supply feed gas to power plants to meet customer needs.
Today, FSRU vessels are owned or chartered by both LNG operators and major customers. Some shipowners have converted spare LNG carriers; others continue to construct new vessels.
Substantial FSRU fleets are owned by:
• Golar and Höegh, based in Norway
• Excelerate and Dynagas, based in the US
LNG and Natural Gas Demand Outlook
LNG Supply and Demand
Today, natural gas accounts for roughly a quarter of global energy demand, of which about 10% is supplied as LNG.
Natural gas has the cleanest combustion profile of all fossil fuels. Therefore, power generation is one of the largest, and growing, industrial uses of natural gas.
It is clean burning, and has lower carbon dioxide emissions than coal. Natural gas has become the fuel of choice as the world balances the need for increased power to match growing populations and economies, with ambitious climate change initiatives.
Extensive fields of the US shale supplies, like the Pennsylvania Marcellus play, have increased the potential to make natural gas the most important hydrocarbon to supply future global energy demand.
We might need to rename the industry to the gas and oil industry!
To keep up with LNG supply and demand growth, the need for LNG vessels is also increasing. In 2017, 439 tankers delivered a record 258 million metric tons of LNG worldwide – up from only 140 tankers in 2008.
LNG as Bunker Fuel
Last, but certainly not least, LNG is increasingly seen as a vital bunker fuel for vessels.
The International Maritime Organization has announced that by 2020, the maximum allowed level of marine fuel sulfur must be reduced to only .5% by weight.
LNG can be the answer for some shippers on some voyages.
In 2016 at Rotterdam, one of the world’s busiest ports, a third LNG fueling berth was installed, as the benefits of switching to LNG to reduce emissions became increasingly apparent.