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Liquefied natural gas (LNG), long relegated to a few boutique markets,
is about to go mainstream.
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Click on the map above for a larger view of
US LNG terminals. |
Advances that have brought the cost of the supply source down—and,
at least as importantly, growing global demand that has brought the price
buyers are willing to pay up—have made LNG the hot new topic in
energy markets. With oil, natural gas and even coal prices at relatively
high levels, the search for alternatives is taking on increased urgency.
LNG has been a mainstay fuel in some markets, notably in Asia,
for decades, and even enjoyed a brief flurry of popularity in the US market
during the energy crisis of the late 1970s. But most consumption has been
fed by natural gas moved through pipelines to markets, even over considerable
distances such as Gazprom's shipments to Europe.
A couple of fundamental changes have led to the renewed interest in LNG,
which is natural gas supercooled to minus 260 degrees Fahrenheit, and
reduced to 1/600th of the volume occupied in its gaseous form. One is
technological improvements that have sharply reduced costs for the process
of liquefying gas, shipping it via specialized tanker to a market, and
then regasifying it.
According to the Gas Technology Institute, liquefaction costs have declined
35% to 50% in the past 10 years. Likewise, the cost of building an LNG
tanker has fallen by about 45% since the mid-1980s, and regasification
costs, while site-specific, have dropped as well, the US Energy Information
Administration (EIA) said in a recent
report on LNG. As a result, LNG can be brought into major markets
such as the US at a price around $3.50/MMBtu.
For most of the 1990s, that price wasn't competitive as markets were
awash in $2/MMBtu gas. But at least in the US, prices by late 2002 were
solidly in the $4-plus range and rising, leading potential LNG suppliers
to take a new look at the economics.
> Next page: LNG demand on the global market
Created: June 30, 2004
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