LNG Basics

2011
What is LNG
Natural gas predominantly methane CH4 that has been converted temporarily to
liquid form to ease of storage or transport.
Liquefied natural gas takes up to 1/600th the volume of natural gas in the gaseous
state.
It is odorless, colorless, non-toxic and non-corrosive.
Hazards include flammability, freezing and asphyxia (oksijen yetersizliinden
boulma).
Liquefaction process involves removal of certain compnents, such as dust, acid gases,
helium, water and heavy hydrocarbons which would cause difficulty in downstream.
Condensed into aliquid at atmpspheric pressure (max. Transport pressure set around
25kPa/3.6psi) by cooling it to aproximately -162 oC (-260 oF).
It can be transported by sphereically designed cryogenic sea vessels (LNG carriers) or
cryogenic road tankers.
Reduction in volume makes it much more cost efficient to transport over long
distances where pipelines dont exist.
Energy density of LNG is %60 that of diesel fuel.
A Typical LNG Process

1. First produced and transported to a

processing plant.

2. Purified by removal of condenses such as

water, mud, oil,other gases like CO2 and
H2S and solids like mercurry.

3. Gas is cooled down in stages untill it is

liquefied.

4. Stored in storage tanks and is ready to be

loaded and shipped.
Basic Facts

It can be regassified and distributed via pipelines as natural gas.

It can be used in natural gas vehicles.
Density is roughly 0.4kg/l or 0.5kg/l depending on temperature, pressure and composition
compared to water 1kg/l
The heat value depends on the source of gas and the process that is used for liquefaction.
The higher heating value for LNg is estimated as 24MJ/l, the lower heating value for LNG is 21
MJ/l or 635 BTU/ft3
Energy density is 2.4 times grater than that of CNG which makes LNG more economical to
transport
The energy density of LNG is comparable to propane (C3H8) or ethanol (C2H6O)but is %60 of
diesel and %70 of gasoline.

propane ethanol
Production of LNG
Treated to remove water (H2O), hydrogensulfide, carbondioxide
(CO2) and other components that will freeze under the low
temperature such as benzene (C6H6).
Production
LNG typically contains > 90% methane (CH4) and small amount of LNG Plant Country
ethane (C2H6), propane (C3H8), buthane (C4H10) and some heavier (mmtpa)
alkanes Terrain 4 Trinidad and Tobago 5.2
Purification process can be designed to give about 100% SEGAS Egypt 5
methane
Qatargas II Qatar 7.8 X 2
Rare risk for LNG is RPT (rapid phase transition) which occurs
when cold LNG comes into contact with water mmtpa: million ton per annum
Important infrastructure is LNG plant consisting of one or more
terrains each of which is independent for gas liquefaction
Regassification terminals reheats the LNG and turns into gas
Regasification terminals are usually connected to storage and
pipeline distribution network to LDC (Local distribution
companies)or IPP (independent power plants)

benzene methane ethane buthane propane

LNG chain
LNG versus Pipeline Gas

Pipelines have point to point rigidity

LNG allow a better price competition
LNG may be a better option if pipeline is;
Long distance
Buyer has security of supply concerns
Borders to be crossed
Single buyer cannot support a purchase alone
LNG as a Market
All LNG plants are located in stranted areas not served by pipelines
Construction of an LNG plant costs at least 1.5 billion/1mmtpa and receiving terminal cost 1 billion/1bcf/d throughput capacity and LNG
vessels cost 0.2-0.3 billion USD
Commercial development of LNG is a style called VALUE CHAIN where LNG suppliers first confirm sales to the downstream buyers and
then sign 20-25 year contracts with strict terms and structures for gass pricing
LNG liquefaction business has been regarded as a game of th erich, where only strong fianacial and political resources could get involved
ExxonMobil, Shell, BP, BG Group, Chevron, Petramania, Petronas are active players
Natural gas market is about 60% of crude oil market (measured on heat equivalent basis) which LNG forms a small but rapidly growing
part
There has beem too much discussion regarding the creation of OGEC equivalent of OPEC
LNG counted for the 7% of the Worlds natural gas demand
1995-2005 the LNG trade increased for 7.4% / year
2005-2020 the LNG trade projection increased by 6.4% / year
By the end of 2007
There are 15 LNG exporting countries where the fisrt 3 exporters are Qatar (28MT), Malasia (22MT), Indonesia (20MT) LNG
There are 17 LNG importing countries where the first 3 impoters are Japan (65 MT), South KOrea (34MT), Spain (24MT) Country
Million tons

Japan (2005) 58.8

South Korea
22.1
(2005)
Taiwan
6.8
(2004)

Spain (2006) 8.2

Trade
LNG accoutns for the 7% of the Worlds natural gas demand
From 1995 to 2005 the trade of LNG increased at a rate of 7.4%/year
Projected growth in LNG in the base case is expected to increase at
6.7%/year from 2005 to 2020
By the end of 2007 there were 15LNG exporting countries and 17LNG
importing countires
LNG trade volumes increased from 140MT in 2005 to 158MT in 2009and
will increase about 300MT in 2012
6 new plants will come in to market
Northwest Self Train 5:4.4 mtpa
Sakhalin II: 9.6 mtpa
Yemen LNG: 6.7mtpa
Tangguh:7.6mtpa
Qatargas:15.6 mtpa
Rasgas Qatar:15.6 mtpa

EXPORTS IMPORTS
COUNTRIES
MT MT

Qatar 28 -

Malaysia 22 -

Indonesia 20 -

Japan - 65

South Korea - 34

Spain - 24
LNG Liquefaction Terminals

Natural gas market is 60% of the crude oil

market of which LNG forms a small but rapidly
groving part
Japan, South Korea, Spain, France, Italy and
Taiwan impoert large volluems of LNG due to
their shortege of energy
Japan imported 58.6 million tons of LNG
representing some %30 of the LNG trade
around the World in 2005
Liquefaction Terminals
Contractural Terms
Trade of LNG is by signing a Sale Purchase Agreement (SPA) between supplier and receiving terminal and signing a
Gas Sale Agreement (GSA) between receiving terminal and end user

Most of the contracts are DES or ex ship holding the seller responsible for the transport of the gas

Buyer may prefer to ensure reliable and stable supply however contracts with FOB term increased

FOB= Freight on Board: which party pays for which shipment and loading costs

Under such terms the buyers who often owns a vessel or sign a long term charter agreement with independent
carriers is responsible for the transport

LNG purchasing agreement is a long term contract and flexible with both in price and volume

If the annual quantity confirmed with the contract then the buyer is obliged to take and pay for it or even pay
when not take (TOP)

Oil index contract used in Japan, Korea, China

Oil, oil products and other energy indexed contract are used in Continental Europe

Market indexed contracts are used in UK and US

Formula:
CP=BP + X
Where BP: base price (constant part)
: gradient
X: indexation
Contractural Terms_cont
Oil parity is the LNG price that would be equal to that of crude oil on a barrel of equivalent basis
If LNG price > price of crude oil in boe terms then called broken oil parity
In most cases LNG price < crude oil price in boe terms
Coefficient of 0.1724 result in full oil parity
S-Curve: where the price formula is different above and below a certain oil price to dampen the impact of the high oil prices on
the buyer and the low oil prices on the seller
JCC: Japan Crude Cocktail : in most of the East Asian LNG contracts the price formula is indexed to a basket of crude importer to
Japan
ICP: Indonesian Crude Price: In Indonesian LNG contracts the price formula is linked to
In Europe the LNG price formula indexation does not fallow the same format. It varies from contract to contract. Brent crude
price B, heavy fuel oil price HFO, low fuel oil price LFO, gas oil price GO, coal price, electricity price and in some cases consumers
and producers price index are the indexation elements of the price formula
Usually there exists a clause allowing the prices to trigger the price revision or price reopening in the LNGSPAs.
In some contracts there are two options for triggering the price revision: regular and special. In regular there are set dates that
will be agreed and defined in LNGSPA for the purpose of price review.
LNG id destinated to a pre agreed destination and diversion of LNG is not allowed
If the seller and buyer make a mutual agreement then the diversion of the cargoes is possible but subject to the sharing of the
profits coming from such diversion
In Europen Union Jurisdiction it is not allowed to apply the profit sharing clause in LNGPSAs for any diverted cargoes in EU
territories.
Quality of LNG
The most important isseu in the LNG business is the quality of the LNG
Any gas which does not conform agreed specifications in the SPA is regarded as off specification or
off quality gas or LNG
Quality regulations is for:
To ensure that the gas distributed ,s non corrosive and non toxic which means it is below the
upper limits of H2S, CO2 and Hg content
To guard against the formation of liquids or hydrates in the networks through maximum water
and hydrocarbon dewpoints
To allow interchangeability of the gases distributed; content of inert gas, calorific values, Wobbe
index, Soot index, Incomplete Combussion Factor, Yellow Tip index
In case of off spec gas or LNG the buyer can refuse to accept the LNG or gasand seller has to pay the
liquidated damdges for the respective off spec gas volumes
The quality of the gas or LNG is measured at delivery point by using an instrument such as gas
chromotograph
The heating value of gas divides the market into three
Asia (Japan, Korea, Taiwan) where gas distributed is rich with an GCV > 43MJ/m3
UK and US where distributed gas is lean, with a GCV usually < 42 MJ/m3
Contienental Europe ehre the acceptable GCV range is quiet wide~29 to 46MJ/m3
Quality of LNG_cont

For th epurpose of increasing the heating value injection of propone and butane is a slution
For th epurpose of decreasing heating value ntrogen injection and extracting butane and methane
are proved solutions.
Wobbe index: indicator of the interchangeability of fuel such as natural gas, liquified petroleum gas
and town gas and is frequently defined in the specifications of gas supply and transport utilities
Iw= Vc / Gs
Where Iw= wobbe index
Vc is higher heating value or calorific value
Gs is the specific gravity
Soot index is the a linear measurement that measures the extent to which the oil has become
contaminated by fuel sootan unwanted by product of combussion
The dewpoint is a saturation temperature
Heating value of a substance usulally fuel or food is the amount of heat released during the
combussion of a specified amount on it
Cost of LNG Plant
Construction of a green field LNG projects increased from about 400$ / ton of capacity to 1000$ /
ton of capacity
Ongoing petroleum projects
High raw material prices as a result fo surge in demand for raw materials
Lack of skilled workforce for LNG
De evaluation of US dollar
4 liquefaction process available
C3MR (~APCI: air products and chemicals incorporation)
Cascade: designed by Conocophilips
Shell DMR
Linde
By the end of 2012 it is expected that there will be 100 liquefaction trains on stream with a total
capacity of 297.2 mmtpa
Majority use either APCI or Cascade
APCI technology used in 86 trains out of 100 on stream and under construction witha total
capacity of 243 mmtpa
Cascade technology is used in 10 trains witha total capacity of 36.16 mmtpa,
Shell DMR used in 3 trains witha total capacity of 13.9 mmtpa
Linde- Statoil process is only in 1 trains with 4.2 mmtpa
LNG Storage and Transportation
Storage tanks are fully containment type, prestressed concrete outer wall and high
nickel steel inner tank with extremely efficient insulation between walls

Pressure in cylindrical design storage tanks are low < 10kPa

Sometimes underground tanks are used for storage

Smaller quantities <700m3 may be stored in horizontal or vertical vacuum jacketed

pressure vessels. These tanks may be at pressure from < 50kPa to over 1700kPa

LNG must be kept cold to remain in a liquid independent of pressure

Despite insulation there will be inevitably be some heat leakage into the LNG resulting
in vaporization of LNG

This boil off gas acts to keep the LNG cold

The boil off gas typically compressed and exported as natural gas or is re liquefied and
returned to storage

Industry practice is to store the LNG as a boiling cryogen which is the liquid stored at its
boiling point for the pressure at which it is stored

LNG is transported is a specially As the vapor boils off heat for the phase change cools the remaining liquid
designed ships with double hulls
protecting the cargo system Insulation is very efficient so only a relatively small amount of boil off is necessary to
from damage or leak maintain temperature. This is called auto-refrigeration

LNG is transported usign both Boil off gas from land based LNG storage tanks is usually compressed and fed to natural
tanker , truck, railway, seagoing gas pipeline networks
vessels and pipelines
Some LNG cariers use boil off gas for fuel
Gas Supply By Region
LNG Chain