LNG is a liquid form of natural gas. It is converted into liquid form by cooling it below minus 163 degrees Celsius. As a result of the cooling exercise it occupies 600 times lesser space as compared to gaseous state and hence it facilitates easy transportation. LNG has a wide range of use spanning 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 for transportation to end user points. However, challenges lie in shipping and transportation of LNG as it requires special carriers. Also, once it reaches the destination of consumption, additional facilities such as re-gasification and associated pipeline infrastructure are required as mainly it is used in gaseous form by the industries 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 see the LNG value chain.

LNG value chain

LNG value chain consists of 4 key areas. Firstly, natural gas has to be extracted from the earth. This process is called as Exploration and Production where gas reserves are first detected after detailed seismic analysis and series of tests. Before full-fledged drilling of natural gas, test wells are drilled and once they are found viable, commercial drilling operations are undertaken.

Once the gas is extracted, it is filtered and purified. On completion of the above process, the gas is compressed to a liquid form so that it can be safely and easily transported in bigger volumes. A liquefaction plant is put up to convert the gas into liquid. This plant is also referred to as “liquefaction train” that reduces the volume of gas by a factor of around 600 through a multistage refrigeration process. In other words 1 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.

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

Lastly the process of receiving and distribution begins at LNG gas terminals. The terminals consist of storage tanks and re-gasification facilities where the liquid gas is converted back into the gaseous state through a process of heating called vaporization. After that, through pipelines and trucks they are transported to end users. 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 center-line 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 in the vessel and forms as a part and hold on to the hull with series of insulations. The spherical and prismatic tanks are kept separately from the hull and are self-supporting structure.

The spherical and membrane types are accepted worldwide as cryogenic cargo containment systems. Membrane tanks dominate the world cargo capacity for LNG transport as 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 has to be offloaded at the destination point and it is usually done in two ways. LNG is converted into gaseous form onboard and then offloaded to the storage at the destination. These kinds of vessels have re-gasification facilities onboard. Alternatively, it can be delivered in liquid form to the storage of the re-gasification plant at the destination.

Key challenges in LNG transportation and distribution

As discussed before, LNG has to be transported in liquid form so as to gain economics in transportation. However, the vessels needed to transport LNG have to be built with adequate insulations which entail huge costs. Hence, the daily tanker tariff is also very high. During the peak market conditions, the estimated daily rate of the LNG cargo vessel is in the range of about USD 90,000 per day depending on the size and type of the vessel.

However adequately the vessel is insulated, there is always a boil-off of liquid during the transportation process. 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 re-gasification facilities is an essential pre-requisite to make LNG a consumable product. This again requires additional investments in the infrastructure such as plant facilities, inbound pipelines, storage, outbound pipeline for distribution, etc. Also, during the process, there is handling loss of LNG which again adds to the financial strain. From the distribution perspective, natural gas is consumed by industries and domestic end users. Hence, multiple modes of supply and distribution network have to be established to ensure sustenance of the market. For domestic use, piped gas network for homes needs to be built for easy and safe consumption while industrial customers require massive pipeline network for receiving and further processing of the natural gas. In some cases, such as supplies to vehicle gas stations, natural gas is distributed through trucks. This requires separate loading facilities at the re-gasification plant.

LNG requires exhaustive infrastructure to extract, ship and distribute for safe and secure consumption. Also, LNG project is highly capital intensive fraught with high risks such as volatile market, geo-political situation, longer project cycle, lengthy payback period, etc. Despite these challenges, LNG stands out as a gift of the nature to the community in terms of cleaner and cheaper fuel.