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Global LNG

LNG was first developed as a way for thirsty energy markets to access stranded natural gas resources throughout the world, because globally speaking, natural gas reserves are abundant, but tend to be in countries like Nigeria and Trinidad, a long way from the largest consumers.

The most practical and safe way of shipping the fuel across great distances over tidewater is through lowering it to a temperature of -160C and shipping it as a liquid.

The first commercial shipments of LNG started in the 1960s with regular cargo vessels bringing the product from Algeria to the United Kingdom and France. Now there are more than 20 export facilities around the world, as LNG has become a cleaner alternative to crude oil and coal.

Worldwide, there are also hundreds of LNG vessels and more than 45 import facilities which re-gasify the product so that it can be used by consumers.

According to the Canadian Association of Petroleum Producers (CAPP), world trade in LNG has more than tripled over the last 20 years, growing from 8.5 billion cubic feet per day in 1994 to nearly 32 bcf/d in 2013.

According to a 2015 CAPP report, in 2014 Qatar was the world’s largest exporter of LNG, followed by Malaysia and Indonesia at 9 per cent. These three countries, along with Nigeria, Trinidad, Algeria, Russia, Oman and Brunei made up 87 per cent of the world’s exports.

Meanwhile, the report shows Japan as the largest global LNG importer, followed by South Korea, China, India, Taiwan, Spain and the United Kingdom.

Source: Ernst & Young

Much of the increase in LNG trade is due to new demand for natural gas in electricity production as it burns cleaner than coal and produces less greenhouse gas emissions. According to the US Energy Information Administration (EIA), more than one third of worldwide natural gas consumption will be used for electricity generation by 2030.

The biggest change on the global market in the past decade has been the production of unconventional natural gas in the US, which has swapped the country’s status as an importer to an exporter. The production of shale gas in the US has put an abundance of gas on the market, which in turn dropped prices worldwide.

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From the wellhead to the carrier: How LNG works

Source: JWN LNG Guidebook

Canadian LNG

Canada’s natural gas supply currently exceeds domestic consumption, but as recently as 10 years ago, that was not where it was expected the future was headed.

In the early 2000s, facing forecasts for reduced domestic production but rising demand, both Canada and the United States started advancing projects to import liquefied natural gas (LNG) from around the globe.

Several facilities were proposed for the shorelines of Quebec and the Maritime provinces to receive LNG from Russia and other gas-producing countries.

By 2009, this trend was being reversed by surging shale natural gas production in the United States enabled by horizontal drilling and multistage fracking.

In Canada, just one LNG import project—the Canaport facility at Saint John, New Brunswick—was constructed, starting operations in June 2009. There are currently 12 LNG import terminals in the U.S., three of which have been authorized to re-export delivered LNG volumes.

With both Canada and the United States producing large quantities of natural gas, there was no longer a need to import LNG, and further projects were shelved.

According to the U.S. Energy Information Administration (EIA), in 2005 the United States produced 18 trillion cubic feet of natural gas. A steady rise in production brought this to 27 trillion cubic feet in 2015, and the EIA expects it to continue to grow to more than 40 trillion cubic feet by 2040.

In Canada, natural gas production has remained relatively flat around 5 trillion cubic feet annually over the same period, but with domestic demand around 3 tillion cubic feet and less opportunity to export into the U.S., producers and governments became increasingly eager to access new markets.

Canadian natural gas producers had typically shipped the vast majority of their product to the U.S. market via pipeline, but those shipments decreased as the U.S. started to become independent with its own production.

The focus in Canada and the United States shifted from importing to exporting LNG.

There are two operating LNG export terminals in the United States: ConocoPhillips’ Kenai project in Alaska, which has been operating since 1969, and Cheniere Energy’s Sabine Pass project in Louisiana, which started operating in 2016. There are none in Canada, although there are currently more than 20 proposed projects in various stages of planning and approval. The relatively small Woodfibre LNG project was the first to receive corporate sanction in November 2016, and is expected to be operational in 2020.

The majority of Canada’s LNG projects are proposed for B.C.’s coastline, designed to export surplus Canadian gas to Asia where it is in demand by countries looking for a cost effective and less GHG-intensive alternative to coal power.

One export facility is also planned for Nova Scotia, which would focus on supplying European, South American and Asian markets.

Although most project proponents continue to work towards execution of proposed LNG projects in Canada, their prospects of reaching a final investment decision are dimming as low gas prices and weakening markets persist, adding to the challenge of regulatory delays. With the exception of the Woodfibre LNG project, not one major facility has been sanctioned, and five projects — LNG Canada, Tsawwassen, Triton LNG, Douglas Channel LNG and Canaport LNG—have been cancelled. Analysts say there is a growing possibility that no new LNG projects will get receive a final investment decision before 2020.

Source: Daily Oil Bulletin

LNG and the Environment

LNG is increasingly being looked to around the world as a feedstock for electricity generation, due to the fact that natural gas is the cleanest burning fossil fuel, producing drastically less GHG and sulphur emissions than coal.

Electricity generating facilities from Asia to Europe, which have been moving away from coal, are also taking advantage of market conditions, which have seen LNG prices drop thanks to increased unconventional natural gas production in North America.

According to one study, replacing a 500-megawatt coal fired power plant with LNG power generation for one year would equal taking 557,000 cars off the road. Even new high-efficiency coal plants have been found to emit 92 percent more greenhouse gases compared to the highest intensity LNG plants.

Conventional coal-fired power plants have been found to produce between 139 and 148 percent more GHGs than LNG-fired power plants. While LNG-based power plants still do produce greenhouse gases, many experts see the technology as a stepping-stone towards cleaner power.

Critics counter that the associated upstream GHG emissions from natural gas production negate much of the benefit of lower-CO2 power.

LNG has the benefit of a much better transportation safety record compared to other fuels. It is transported in specifically designed ships and there has not been a major spill since the product was first shipped in the 1960s. If a spill at sea were to happen, the LNG wouldn't create a slick like crude oil does. Instead, the LNG, which is non-toxic, evaporates without residue.

However, the rise in usage of LNG as a fuel source is largely due to the price of the resource, which has sharply declined over the last decade due to the upstart of unconventional natural gas development in the U.S., a process that has attracted a lot of negative environmental attention.

The unconventional approach requires hydraulic fracturing, also known as fracking, which consists of injecting pressurized water and fluid into a well to extract the natural gas. Environmental concerns include large amounts of fresh water usage coupled with the storage and disposal of those same large volumes of wastewater that is potentially contaminated with the chemicals used

in fracking. There are also concerns about the natural gas leaking into and contaminating freshwater.

Several new advancements in unconventional technology have reduced those concerns over the past number of years. New drilling techniques have made it possible to extract more gas from a single natural gas deposit, meaning fewer wells and less water being used. There are also several solutions in development and already being used to both reduce the amount of fresh water being used and, in turn, the amount of wastewater that needs to be properly treated or disposed of.

One of those solutions is to recycle the frack water so it can be reused more than one. Other companies are investing in cleaner and more natural alternatives to the chemicals that are currently used in the process. Calgary-based company, GasFrac, has developed a process that doesn’t use any water at all, replacing it with a gel made from propane, which is already naturally occurring underground.

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