Powering a country is not easy work. It may seem like a simple task for a relatively small country like the UK, but when you don’t have the landmass, or the right kind of geography, it can be complicated.
The UK produces around a third of what’s needed from its surrounding seas but needs to rely on outside sources as well. The gap is mostly filled by pipelines from other countries, but liquefied natural gas, or LNG for short, helps bring up the rear so that the UK has just enough. And gas is quite important there, since most days between 30-50% of the UK’s electricity is generated by gas.
It’s all there in the name, but simply put, LNG is a gas that has been liquefied so that it can be transported easily across oceans where pipelines may not be able to reach.
Although scientists had been attempting to change gas into liquid since the 17th century, it wasn’t until 1908 that they succeeded in liquefying all gases. Soon after, in 1915, a method for storing gases at very low temperatures was patented. Then, in 1937, another patent came along, one that allowed for large-scale liquefaction of gas.
When natural gas is liquefied, first it is purified to contain mostly methane gas and some traces of other gases such as propane and butane. It is possible to have almost 100% methane, but certain countries prefer their LNG to have traces of other gases as they help their gas burn hotter.
After the purification process, which happens at an LNG plant, the methane is chilled to -162°C, turning the gas into a liquid. A small percentage of it is lost in the process as it is used to power the plant itself.
The LNG is then stored in storage tanks with plenty of insulation to keep the gas at its liquid state.
Since LNG is mainly shipped to countries where pipelines are not feasible, it is transported primarily over the water in specially insulated LNG tankers.
It is bought and sold both on long-term contracts and through “spot” buying.
Long-term LNG contracts typically last for 20-25 years and both the quantity and cost are fixed. The buyer is obliged to pay for the gas that has been delivered, whether or not they use all of it.
Spot buying, on the other hand, is “instantaneous”, bought on the same day at competitive prices. The highest bidder receives the shipment, and countries with the greatest demand are willing to pay whatever it takes to keep their energy supply secure.
With spot buying, a tanker may even be diverted mid-course to its destination. This tends to happen if an importer is experiencing some sort of crisis when demand jumps. They will offer a higher price for a shipment in order to divert the cargo to their shores. This is a rare occurrence but one that happens nonetheless.
There are currently 18 countries exporting LNG. Qatar, Australia, and Malaysia are the world’s biggest producers, and together they meet around 60% of global demand. Qatar has been holding on strongly to the position of the biggest exporter since 2006. In 2010 alone, they exported almost one-third of the world’s LNG. Australia looks to become the world’s number one LNG producer by the end of the year
Japan, China, and South Korea take the lead out of the 19 countries that import LNG. Japan became a major importer following the Fukushima nuclear disaster, which also led to Qatari exports increasing by 56% in 2011 over their last year’s levels.
The UK imports 13% of its gas via LNG tankers. The majority of the shipments come from Qatar, but in 2017, the UK also received cargoes from the US, Nigeria, the Dominican Republic, and Peru. In the last few months of 2017 and into 2018, LNG imports have reduced to one or two per month due to higher demand from countries such as China, India, South Korea, and Japan. Their demand is only expected to raise, especially since China and India are pushing heavily towards discouraging coal use.
For more information on how LNG has fared in 2017, read the most recent International Gas Union (IGU) report.
Sources: IGU, Shell, Rigzone, OilPrice.com, Wikipedia, Centrica