Saturday, August 15, 2009

LNG - Advantages and Disadvantages

Energy prices are going up all the time together with energy demand. The sharp rise in energy prices and fears about yet another episode of risky gas imports from Russia that were happening for the last couple of years have raised concerns about the security, diversity, reliability and affordability of the Em’s gas supply. Many energy experts see LNG (Liquefied Natural Gas) as the solution to this problem which is really no surprise since over the last decade LNG has become one of the world’s fastest-growing energy sectors. So let’s take a look at main LNG advantages and disadvantages.

Currently LNG represents 15% of the EU’s gas imports, which is not only good for securing ever-growing energy demand but also to ensure diversity of supply. Some energy experts believe that this is already optimal percentage and that increased use of LNG would likely negate positive effect primarily because supply is heavily concentrated in the hands of a small number of countries that control more than 85 % of total LNG supply.

Grain Liquefied Natural Gas terminal (near Rochester, Kent, UK). The terminal has facilities for unloading liquefied natural gas (LNG) from specially constructed ships. The LNG is stored in purpose-built tanks and is vaporised to form natural gas which is supplied to consumers via the high pressure transmission system.

One thing that LNG still misses is cost-competitiveness. LNG energy projects are among the most expensive in all energy sectors, and not only that they are also technically very challenging. Considering these two factors it is rational to expect that EU would face higher energy prices if LNG shipments would turn out to be far greater in years to come. Off course scientific discoveries and technology development could drastically improve technical as well as financial perspective of LNG projects.

Regarding the amounts of greenhouse gas emissions LNG supply chain emits more greenhouse gases than for instance the supply chain for pipeline gas, primarily because of the extra processing steps needed for LNG shipment. This difference tends to be much narrower when LNG is compared to remote pipeline deliveries. In most cases the greenhouse gas performance gap is smaller than the energy efficiency gap, largely due to the unavoidable methane leaks from pipelines. Generally speaking LNG isn't exactly something you would refer to as the ecologically acceptable fuel.

One thing that LNG is definitely superior to pipeline gas is its quality. This is because LNG is purer, has more methane as well as other energy content, and also because of its chemical structure since it has more stable composition than pipeline gas. It has to be also said that this superior quality of LNG has its price in higher costs in not only terms of energy but also in total amounts of greenhouse gas emissions.

Ships that are transporting LNG can be even longer than 300 meters. When being full, minimum water depth must be 12 meters for normal sail.

Of all the LNG advantages its shipping costs look to be the most favorable cost component in the overall LNG supply chain without which LNG supply would totally lack competitiveness. LNG is unlikely to cause significantly bigger shipping costs, even if more ships are needed to meet greater demand, unless stricter safety rules or some security rules for handling LNG carriers are introduced. The only real challenge to LNG ships is the fact that there are too little skilled crew available. With this on mind if LNG becomes more important energy source ships will need more maintenance and more crew which could result in more employment opportunities to many EU workers, especially in South Europe.

As you can see LNG has certain disadvantages that prevent its current usability, most notably high costs and large amounts of greenhouse gas emissions but on the other hand LNG still offers solid alternative to consider, and diversity is something that is always welcomed in energy world, especially now when both energy demand as well as energy prices are constantly going up.

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