LNG is the “Glue” Linking Global Gas Markets

Susan L. Sakmar's picture
Susan L. Sakmar, Independent consultant, author and adjunct law professor, University of Houston Law Center
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Policy makers around the globe continue to grapple with issues related to energy security, energy affordability, and an expected increase in demand for all energy sources.  At the same time, concerns about global climate change and reducing greenhouse gas emiss ions remain in focus as the world struggles to define the path to a sustainable energy future. Regarding it as an abundant, affordable, and clean-burning fuel, many countries around the world are increasingly looking to natural gas to play a key role in powering the future.  The prospects for natural gas are so promising that the International Energy Agency (IEA) has suggested that the 21st century could be the “Golden Age of Gas” with demand for natural gas projected to increase by more than 50 percent from 2010 levels and account for over 25 percent of the world’s energy supply mix by 2035.

Along with the increased demand for natural gas comes a corresponding increase in international trade in natural gas, with most of the increased trade expected to be in the form of liquefied natural gas or LNG.  LNG is natural gas that has been cooled to approximately −161 °C, at which point it condenses to a liquid that can then be shipped via LNG tanker anywhere in the world. Since the majority of natural gas reserves are located away from key demand markets, LNG offers an important solution for the global gas markets in terms of moving natural gas to markets where it is most needed.

In recent years, the significant increase in interregional LNG trade has led many to question whether the gas markets were “globalizing” and whether LNG would someday trade as a global commodity.   (Fig. 1)

graph of LNG trade volumes

The general consensus that seems to have emerged is that while LNG markets are “globalizing” in terms of the increase in trade and the number of countries now involved in LNG trade (Fig. 2 & 3), LNG is still not likely to become a global commodity anytime soon for lack of a single pricing structure.

Map showing 89 liquefaction trains planned in 18 exporting countries

Figure 3 Regasification Terminals

Global map showing 93 regas terminals across 26 importing countries

Nonetheless, there is widespread recognition that LNG is the “glue” linking global gas markets and, indeed, the Golden Age of Gas would not be possible without LNG.  (Figure 4)

Major global gas trade flows

The most recent book on LNG, Energy for the 21st Century: Opportunities and Challenges for Liquefied Natural Gas (LNG) explores the growing role of LNG in the world’s energy supply mix and identifies the key opportunities and challenges for the LNG industry in the context of a number of competing drivers, including economic development, energy security, and climate change.

Going forward, the pace and scale of demand growth for all forms of energy, including natural gas and LNG, ultimately will rest on the climate and energy policies adopted by countries, the global economic recovery, and industry investment. Perhaps the most difficult to predict is global energy policy since decisions about energy policy are inextricably linked to economic, environmental and national security policy, and have significant consequences in all three areas.

Though the pace and scale of the global economic recovery remains uncertain with energy policies in a state of flux in  most regions around the world, over the long term, demand for natural gas and LNG is likely to continue to grow as more countries look to meet rising demand for energy with lower emission fuels. Accordingly, it seems likely that LNG will play an increasingly large role in the world’s energy future.

Book jacket for Susan Sakmar's book on LNG

 

 

"Energy for the 21st Century: Opportunities and Challenges for Liquefied Natural Gas (LNG)"  by Susan L. Sakmar can be ordered from Amazon or Elgar Publishing.

 

 

 

 

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