LNG is a liquid form of natural gas that is converted by cooling it below minus 163ºC (minus 261ºF). As a result of the cooling it occupies 600 times less space compared to its gaseous state, which facilitates easy transportation. LNG use spans across all sectors from power generation and industrial processes to commercial and domestic applications for heating and cooking.

Once LNG is liquefied, it is ready to transport to end user points. However, there are challenges to shipping and transporting LNG because it requires special carriers. Also, once it reaches the consumption destination, additional facilities such as regasification and associated pipeline infrastructure are required because it is used in gaseous form by industry and domestic users. The first LNG carrier was launched in the Calcasieu River on the Louisiana Gulf coast in January 1959. The world’s first ocean cargo of LNG sailed to the UK for delivery.

Before we attempt to detail the challenges in shipping and distribution, let us briefly examine the LNG value chain. (For an introduction to the value chain, see Upstream, Midstream, Downstream: A Look at the Petroleum Industry.)

LNG Value Chain

The LNG value chain consists of four key areas. First, natural gas must be extracted from the earth. This process, known as exploration and production, is where gas reserves are first detected after detailed seismic analysis and a series of tests. (Learn more about this area in the article Seismic Mapping: Technology that has Changed Oil Production Surveys.) Before full-fledged drilling for natural gas, test wells are drilled and once they are found viable, commercial drilling operations are undertaken.

After the gas is extracted, it is filtered and purified. On completion, the gas is compressed to a liquid form so that it can be safely and easily transported in larger volumes. A liquefaction plant is built to convert the gas into liquid. This plant is also referred to as a “liquefaction train” that reduces the volume of the gas by a factor of around 600 through a multistage refrigeration process. In other words, one cubic meter of LNG at -163°C has the same energy content as 600 cubic meters of “gaseous” gas at ambient temperature and atmospheric pressure. This is the second stage of the value chain.

Third, LNG is loaded onto specially designed ships built around insulated cargo tanks that keep the LNG in a liquid state throughout the voyage. The gas is then shipped to centers of demand.

Finally, the process of receiving and distributing begins at LNG gas terminals. The terminals consist of storage tanks and regasification facilities where the liquid gas is converted back into the gaseous state through a process of heating called vaporization. After that they are transported to end users through pipelines and trucks. The last two processes are described in more detail in the ensuing paragraphs.

Anatomy of LNG Vessels

LNG tankers are double-hulled ships specially designed and properly insulated to prevent hull leaks and ruptures in the event of an accident.

A typical LNG carrier has four to six tanks located along the centerline of the vessel. Surrounding the tanks is a combination of ballast, cofferdams and voids giving the vessel a double-hull type design. These tanks can be broadly classified into three types based on their design, i.e., membrane tanks, spherical tanks and IHI prismatic tanks. Membrane tanks are built into the vessel and forms as a part and hold on to the hull with a series of insulations. The spherical and prismatic tanks are kept separately from the hull and are self-supporting structures. (Related reading: Bunkering Powering Marine Liners.)

The spherical and membrane tanks are accepted worldwide as cryogenic cargo containment systems. Membrane tanks dominate the world cargo capacity for LNG transport because they allow the construction of large capacity carriers of Q-flex (210,000 cu. m.) and Q-max (260,000 cu. m.) vessels.

The LNG is then offloaded at the destination point in one of two ways. LNG is converted into its gaseous form on board the vessel and then offloaded to the storage at the destination; these kinds of vessels have regasification facilities on board. Alternatively, it can be delivered in liquid form to the storage area of the regasification plant at the destination.

Key Challenges in LNG Transportation and Distribution

Is is less expensive to transport LNG in liquid form. However, the vessels needed to transport LNG must be have adequate insulation, which entails huge costs. Hence, the daily tanker tariff is also very high. During peak market conditions, the estimated daily rate of a LNG cargo vessel is in the range of about USD $90,000 per day depending on the size and type of the vessel.

Despite the best insulation there is always some boil-off of liquid during transportation. The liquid gas evaporates and hence there is a loss of product in transit. This is another challenge faced by the LNG operators.

At the destination point, establishment of regasification facilities is an essential prerequisite to make LNG a consumable product. This again requires additional investments in the infrastructure such as plant facilities, inbound pipelines, storage, outbound pipelines for distribution, etc. Also, during the process there is a handling loss (unaccounted for gas or UFG) of LNG that again adds to the financial burden.

From the distribution perspective, natural gas is consumed by industries and domestic end users. Therefore, multiple supply and distribution networks are established to ensure sustenance of the market. For domestic use, a piped gas network for houses must be built for easy and safe consumption while industrial customers require a massive pipeline network to receive and further process the natural gas. In some cases, such as supplies to vehicle gas stations, natural gas is distributed by trucks, which requires separate loading facilities at the regasification plant.

Conclusion

LNG requires exhaustive infrastructure to safely extract, ship and distribute the product. Also, the LNG industry is highly capital intensive and fraught with high risks such as volatile markets, geo-political situations, a long project cycle and lengthy payback periods. Despite these challenges, LNG stands out as a gift of nature to the community in terms of cleaner and cheaper fuel.