Liquefied natural gas - Wikipedia, the free encyclopedia
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and price. The buyers had more upward and downward flexibilities in TOP, and short-term SPAs less than 15 years came into effect. At the same time, alternative destinations for cargo and arbitrage were also allowed. By the turn of the 21st century, the market was again in favor of sellers. Sellers now propose rigid SPAs and would like an association similar to OPEC to be established to protect their interests. It is certain that the competition between sellers and buyers will go on.
Until 2003, LNG prices have closely followed oil prices. Since then, LNG prices to Europe and Japan, have been lower than oil prices, though the link between LNG and Oil is still strong In contrast, recent prices in the US and UK markets have skyrocketed then fallen as a result of changes in supply and storage.
Price arbitrage has not yet led to a convergence of regional prices and to a global market For the time being, the market is a seller’s market (hence net-back is best estimation for prices). The balance of market risks between the buyers (taking most of the volume risks through off-take obligations) and the sellers (taking most of the value risks through indexation to crude oil and petroleum products) is changing.
Receiving terminals exist in several countries (China is expected to move onto the list by 2006), allowing gas imports from other areas.
The U.S. Department of Energy's Energy Information Administration provides estimates of LNG trade in 2002 as follows:
In 2005, Egyptian NG production outpaced consumption and it joined the LNG exporting countries.
Global LNG demand is expected to reach 500 bcm/year by 2015 and 635 bcm/year in 2020. The International Energy Agency estimates that European imports of gas from Africa and the Middle East (mainly in the form of LNG) will quadruple by 2030 (source: Economist, 14/4/07, p39).
LNG environmental concerns
Natural gas can be considered as the most environmentally friendly of the fossil fuels, because it has the lowest CO2 emissions per unit of energy and because it is suitable for use in high efficiency combined cycle power stations. Because of the energy required to liquefy and to transport it, the environmental performance of LNG is inferior to that of natural gas, although in most cases LNG is still superior to alternatives such as fuel oil or coal. This is particularly so in the case where the source gas would otherwise be flared.
Some environmental groups argue strongly against the use of LNG. One (unspecified) study concluded that a proposed LNG terminal proposed near Oxnard, California will emit 25 million tons of greenhouse gases per year. On the West Coast of the United States where up to five new LNG importation terminals have been proposed, environmental groups, such as Pacific
Environment, Ratepayers for Affordable Clean Energy (RACE), and Rising Tide have moved to oppose them. Whilst natural gas power plants emit approximately half the carbon dioxide of an equivalent coal power plant, the natural gas combustion required to produce and transport LNG to the plants adds 20 to 40 percent more carbon dioxide than burning natural gas
alone. With the extraction, processing, chilling transportation and conversion back to a usable form is taken into account LNG is a major source of greenhouse gases. In addition to this many of the sites where LNG is being extracted, such as Sakhalin 2 have suffered fairly serious environmental destruction.
LNG safety and accidents
In its liquid state, LNG is not explosive. For an explosion to occur with LNG, it must first vaporize, then mix with air in the proper proportions (the flammable range is 5% to 15%), and then be ignited. Serious accidents involving LNG to date are listed below:
1944, 20 October. The East Ohio Natural Gas Company experienced a failure of an LNG tank in Cleveland, Ohio. 128 people perished in the explosion and fire. The tank did not have a dike retaining wall, and it was made during World War II, when metal rationing was very strict. The steel of the tank was made with an extremely low amount of nickel, which made the tank brittle when exposed to the extreme cold of LNG, and the tank ruptured, spilling LNG into the city sewer system.
1973, February, Staten Island, New York. While repairing the interior of an empty storage tank, a fire started. The pressure increased inside the tank so fast the concrete dome on the tank lifted and then collapsed falling inside the tank and killing the 37 construction workers below. No LNG was involved in this incident.
1979, October, Lusby, Maryland, at the Cove Point LNG facility a pump seal failed, releasing gas vapors, which entered
and settled in an electrical conduit. A worker switched off a circuit breaker, igniting the gas vapors, killing a worker and causing heavy damage to the building. National fire codes were changed as a result of the accident.
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