Questions And Answers On LNG
What is LNG?
Liquefied Natural Gas (LNG) is manufactured from natural gas. The production process involves purging the natural gas of
unwanted constituents such as mercury, sulphur, carbon dioxide and condensate. The natural gas is then cooled to very
low temperatures (approximately -160°C) in a process that condenses it to a liquid state. This reduces the volume to
1/600th of what it was, making transportation and storage much more practical.
LNG is then transported in insulated tankers to its destination, where it is treated at a “regasification” plant. This
involves passing the LNG through water-heated pipes which turn it back into gas. It is then distributed through the
existing natural gas pipe networks to its end-use points.
Where do most LNG supplies come from?
Most of the world’s LNG is exported from Southeast Asia (63.9 billion cubic metres in 2002), the Middle East (33.4
billion cubic metres) and Africa (35.6 billion cubic metres). Indonesia and Malaysia are the most significant sources in
the Asia Pacific region. Australia is a substantial and growing participant, whose LNG exports are forecast to treble.
What are some examples of major LNG supply companies?
Royal Dutch/Shell, BP and ExxonMobil are major suppliers, along with other international petro-chemical companies, often
in joint venture with state-owned oil development corporations.
How safe is LNG?
In its stored form, LNG is a very stable, non-flammable liquid. After gasification, its properties are identical to
natural gas. The safety aspects and risk management of natural gas is well understood internationally and in New
Zealand, which has a long record of safely managing natural gas supply.
Why is LNG now being considered as a fuel for electricity generation, when for decades the international demand for it
has been low?
Many countries are increasingly seeking new sources of supply for natural gas. The advantage of LNG is that it allows
supplies to be brought from more remote regions to places where there is a need and demand. In the United States, for
example, as the demand for natural gas starts to exceed their ability to produce it domestically or pipe it from
neighbouring countries, there are plans to build or reopen 20 LNG terminals. This demand is driven by a marked trend in
the US towards gas-powered electricity generation, as an alternative to coal, oil or nuclear plants. The world’s largest
importers of LNG are Japan and South Korea, which have no indigenous gas resources.
Isn’t it an expensive alternative to other fuels?
In the past, LNG was seen as too expensive. But things have changed markedly in the past decade.
Worldwide, there is not much gas left within easy reach that can be transported by pipeline. New Zealand was lucky to
have a field the size of Maui located so close to shore. Alternative fields, both in production or known to exist, are
too small on their own to meet New Zealand’s future requirements for natural gas.
At the same time, LNG projects have become far more cost competitive at each processing stage. As a result, in 1996 –
2000, average liquefication costs per tonne more than halved, compared with the previous decade. In the same period, LNG
tanker costs also tumbled.
Our calculations suggest that LNG can be used to produce electricity at approximately the same cost as coal fired, wind
and hydro-powered stations, assuming a moderate carbon charge. It has the further advantage that it could be used in
conjunction with new, smaller natural gas fields in New Zealand.
How environmentally clean is it?
Natural gas is the cleanest of all the fossil fuels. Composed primarily of methane, the main products of the combustion
of natural gas are carbon dioxide and water vapour, the very same things humans breathe out. It creates fewer pollutants
than oil or coal when burned.
Does New Zealand have LNG storage and regasification facilities?
No.
How much would it cost to build a large-scale regasification plant in New Zealand?
That is one of the questions to which we will be seeking an answer in the feasibility study.