Liquefied natural gas poised to surpass oil as energy source

Liquefied natural gas poised to surpass oil as energy source
By Leah Bower, Special to Gulf News Published: December 24, 2007, 22:58

Oil may be the energy source on everyone's mind right now, but there is a good chance that liquefied natural gas (LNG) will surpass it as oil prices remain astronomical.

Once a bit of a backwater in the energy field, demand for LNG has been on a steady rise because it is relatively clean burning and because its liquefied state allows for transport to remote locations without construction of elaborate and expensive pipeline networks.

And while it can't hold a candle to oil's price, quite a few analysts seem to see it as the bandwagon of choice to jump on to.

Worldwide demand for LNG during the first half of 2007 was pegged at roughly 115 billion cubic metres (bcm), roughly nine per cent growth over the same period in 2006, and demand in East Asia has been growing even faster.

Calgary-based Ziff Energy says it expects demand for natural gas in North America will rise by 1.8 per cent a year through 2015, and US Energy Department data backs up that claim, reporting that they expect imported LNG to increase from three per cent of total gas consumption to 14 per cent by 2020.

Currently, Japan is the world's largest LNG consumer, importing 81.86 bcm of natural gas as LNG in 2006. South Korea is second and the US currently ranks as the fourth-largest consumer.

LNG is natural gas, but it is reduced to a liquid state by cooling it to about minus 160° Centigrade, which reduces the volume of the gas by about 600:1 and makes transportation far simpler. Before it can be used, LNG must be returned to its gaseous state at a regasification plant. For countries like Qatar, which is sitting on the world's largest natural gas reserves - 25 trillion cubic metres - the renewed interest in LNG is a boon, since there is no need for pesky pipelines that travel through neighbouring countries before reaching their destinations.

Just ask the Europeans, who saw their natural gas get cut off in early 2006. Russia, where the pipeline originated, and Ukraine, which hosted part of the pipeline, had a price dispute. The two countries disagreed and so did the Europe's energy supply. The dispute even resurfaced in 2007, although the gas continued to flow this time.

So LNG, with its ability to be shipped by sea or land, is slowly building a power base. And people like Qatar's Energy Minister, who once said it was "bad news" that the country only had gas reserves and no oil, are starting to change their tune.

The International Energy Agency (IEA) reported that by 2010 Qatar could own 20 per cent of the global LNG market.

Other countries with reserves are hopping on board as well.

The Australian government expects energy production growth down under will be led by LNG, with exports of the fuel set to grow by more than seven per cent yearly, through 2030. That would have LNG output rise from less than 16 million metric tonnes in 2007, to 24 million by 2012, and possibly reaching as high as 76 million by 2030 as new projects come online.

Without the ability to ship liquefied natural gas, this type of growth would have been almost inconceivable. Already the $16 billion) North West Shelf venture is expanding LNG capacity, while Perth-based Woodside is building the Pluto project, also in Western Australia.

Chevron is planning to expand its $10 billion liquefied natural gas project known as Gorgon, which now calls for three liquefaction production lines, instead of two. Inpex Holdings and BHP Billiton are also proposing new plants.

Get on board while the year is new.

The writer is a freelance journalist based in Alaska, USA.