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What is LNG and why has it become so important?

2023-06-04 19:46:39 [Press center8] source:Reuters

Russia has slashed supplies of natural gas to Europe, forcing countries to find alternative sources of energy.

Many countries are relying on liquefied natural gas (LNG) to fill the gap, but so much is now being shipped that tankers are queuing up at ports.

LNG is methane, or methane mixed with ethane, cleansed of impurities and cooled to approximately -160C.

This turns the gas into a liquid, which takes up 600 times less space.

It is then shipped in tankers, like crude oil.

At its destination, it is turned back into a gas and used, like any other natural gas, for heating, cooking and power.

"Before LNG, gas could only be distributed through pipelines, and that put a limit on where it could be sold," says Carole Nakhle, of analysts Crystol Energy.

"LNG can be transported across oceans, and so it can get to many more destinations."

The world's largest exporters of LNG are Australia, Qatar and the US.

The US has more than doubled its LNG exports to Europe. It delivered 46 million tonnes in the first nine months of 2022, compared with 22 million tonnes in 2021. It has become the continent's biggest supplier.

Australia ships almost all its LNG to customers in Asia.

Qatar also supplies some LNG to Asia, as well as European countries such as the UK, Belgium, and Italy.

Qatar supplied 13 million tonnes of LNG to Europe between January and October 2022, but it sells almost all of its product on long-term contracts. It has been difficult to buy extra supplies from Qatar at short notice.

Countries such as Algeria also export LNG to Europe. So does Russia - even if it has cut supplies of gas through pipelines.

When Russia invaded Ukraine in February 2022, it was widely condemned by European countries.

In response, Russia cut exports of natural gas to Europe by about 80%.

The international price of gas increased more than fourfold and household bills soared.

Fearing power cuts, the EU signed a deal with the US to import more LNG.

Now, LNG accounts for 40% of all the gas EU countries use, according to the European Commission.

LNG also makes up half of all the gas which the UK imports - mostly from the US.

The extra supplies of LNG have helped to stop gas prices climbing even higher.

However, critics point out that the production and transportation of LNG emits ten times as much carbon as piping natural gas.

"American LNG helped Europe out of a tight spot," says Kate Dourian, of the Energy Institute.

"But now the market has been saturated because Europe has reached the limits of how much LNG it can take."

Countries which want to import LNG need plants to offload it and turn it back into gas form.

France, the UK, Italy and Spain have built these, but others such as Germany - Europe's biggest gas importer - have not.

A lack of LNG terminals in Europe has caused bottlenecks.

At the end of October, reports suggested there were 51 LNG tankers in European waters - a lot of them waiting to enter ports.

Countries such as Germany and the Netherlands have tried to solve this problem by hiring floating terminals to store and convert the gas.

However, even with these, they cannot process all the LNG which is arriving.

"These floating terminals are small scale. They cannot process large quantities of LNG quickly," says Ms Nakhle. "Because of that, queues of ships are building up."

There are other reasons why Europe cannot take all the LNG it is being sent.

"Countries can't take much more LNG because most of their storage facilities are already full," says Ms Dourian.

European nations have all been storing up gas for heating use as the weather gets colder, she says, but the weather has been relatively warm this autumn.

European countries are planning to build 17 more LNG terminals. This could increase capacity by more than 40%.

However, most will only come into operation in 2026.

(editor-in-charge:Press center8)

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