by Bob Shively, Enerdynamics President and Lead Facilitator

The winter of 2016/2017 was the first winter season with liquefied natural gas (LNG) exports from the continental U.S. Historically the U.S. exported small amounts of LNG from a facility in Alaska, but the first LNG exports from the Lower 48 began in February 2016 with a shipment from Louisiana’s Sabine Pass facility. Exports continued through the year and dramatically increased beginning in November. Countries receiving U.S. LNG supplies in the first year included China, India, Japan, Jordan, Kuwait, Mexico, Portugal, Spain, and Turkey.

Going forward through the remainder of the decade, export capacity is expected to continually increase with the completion of multiple projects. By 2020 export capacity will reach 8.6 Bcf/d, which if fully utilized would roughly be equivalent to 12% of the average annual demand of U.S. gas consumers.

In the Part Two of this two-part article, we will explore how LNG demand is expected to grow and how it may impact gas markets. But first, we will go back to the basics and review what LNG is and how it is produced.

What LNG is

In its natural state at atmospheric pressure and normal temperatures, natural gas is in gaseous form. It is most commonly transported via pipeline as it is too voluminous to be transported by truck or ship in quantities that are meaningful for most consumption.  But when natural gas is cooled below approximately -260 degrees Fahrenheit (-162 degrees Celsius) it becomes liquid and its volume is reduced by a factor of about 610.  The resulting liquid is called liquefied natural gas or LNG. Because its volume has been reduced dramatically, LNG can often be economically transported via ship or truck, and it can also be stored in above-ground tanks for use as gas distribution peaking supplies.

How LNG is Produced and Delivered

(For a downloadable version of the above graphic, visit Enerdynamics’ website.)

Natural gas is produced from underground reservoirs, brought to the surface, and processed to remove impurities and valuable natural gas liquids (NGLs). To make LNG, natural gas from the production field is first processed and then cooled in a liquefaction plant. The LNG is stored at atmospheric pressure in double-walled cryogenic tanks that keep the gas cooled in a liquid state until a tanker is available.

LNG is then shipped in an LNG tanker, which is a double-hulled ship specially designed to keep the natural gas cool. Tankers move the LNG from the production area to a regasification terminal near the point of consumption. In most cases, regasification takes place at a terminal although in some cases this process occurs aboard the tanker (if the tanker is a regasification vessel).

If regasified on board the vessel, the gas is then put directly into an undersea pipeline that connects to the onshore pipeline grid. When not regasified on board, the LNG is off-loaded from the tanker into a storage tank similar to those used at the liquefaction plant.  When the gas is needed, it is taken from storage and sent through a regasification plant where it is warmed in a carefully controlled environment so that the LNG reverts to a gaseous state, and the pressure is increased to match the pressure of the pipeline it is entering. Finally, the gas is put into the pipeline where it is commingled with other gas supplies and delivered to consumers.

Why does LNG matter?

With the development of new LNG export facilities, there is the potential the U.S. could become the world’s largest exporter of natural gas by 2030. This could prove to be an economic boom to U.S. gas producers, but it also may put pressure on the environment and the price paid by U.S. gas consumers. Now that you understand how LNG is produced and delivered, our next blog post will more thoroughly explore the future of U.S. LNG exports.