LNG - The Future of Energy Supply?

LNG is primarily transported by ship.

Liquefied natural gas, often abbreviated as LNG, is a hotly debated topic that draws both supporters and critics. Nevertheless, reliable industrial valves are essential for LNG plants. These valves ensure the safe transport, storage, and processing of the liquid gas within the facilities.

LNG stands for Liquefied Natural Gas. It is natural gas that has been cooled to extremely low temperatures (-162°C or -259°F) to be converted into a liquid state. This process enables the transport of natural gas over long distances in special tankers or containers. The production of LNG takes place in specialized facilities called LNG liquefaction plants. In these plants, the natural gas is first purified to remove impurities such as water, sulfur compounds, and other substances. The purified natural gas is then cooled to very low temperatures until it reaches its liquid state. This process reduces the volume of the gas by 600 times, making transport much more efficient.

LNG is primarily used for the transport and storage of natural gas. It allows the transport of natural gas over great distances where pipelines are not economically or technically feasible. Additionally, LNG is increasingly used as a fuel for vehicles, ships, and even heavy machinery, as it offers cleaner combustion and lower greenhouse gas emissions compared to traditional fuels like diesel or gasoline.

Locations of the four state-leased floating LNG terminals in Germany.

Although LNG offers many advantages, there are also some challenges associated with its production, transport, and use. These include the high costs of the necessary infrastructure, safety aspects in handling the liquid gas, and potential environmental impacts related to the extraction and transport of natural gas.

Contribution to Energy Security

With the cessation of pipeline deliveries from Russia, Germany lost more than half of its needed natural gas supply. Norway, Belgium, and the Netherlands were able to provide parts of these amounts, but their capacities are limited and cannot be increased indefinitely. Therefore, the German government's decision to additionally build infrastructure for importing LNG was crucial to ensure energy security for Germany and our European neighbors.

Industrial valve specifically designed for LNG applications.

Unlike Spain, Italy, and the Netherlands, Germany had no infrastructure for importing liquefied natural gas before December 2022. In a short period, several terminals, network connections, capacity marketing, and the general operational basis had to be developed. With the phase-out of coal-fired power and nuclear energy, natural gas is essential as long as renewable energies in the form of electricity and alternative gases do not yet provide full supply. The task of the German government is to contribute to energy security and price stability for industry, commerce, and households in Germany and Europe. LNG imports also stabilize the economy and lay the foundations for the transformation to climate neutrality by 2045 at the latest.

Global LNG Demand to Grow Beyond 2040

Global LNG trade reached 404 million tons in 2023, compared to 397 million tons the previous year. The overall tight supply of LNG has slowed growth while keeping prices and price fluctuations above historical averages. While natural gas demand has peaked in some regions, it continues to rise globally. According to the latest industry estimates, LNG demand is expected to reach 625-685 million tons per year by 2040.

"China is likely to dominate LNG demand growth this decade as it seeks to reduce CO2 emissions in the industrial sector by switching from coal to gas," said Steve Hill, Executive Vice President of Shell Energy. "As China's coal-based steel sector emits more than the total emissions of the UK, Germany, and Turkey combined, gas plays a crucial role in tackling one of the world's largest sources of CO2 emissions and local air pollution."

The first stationary LNG terminal in Germany is planned to look like this.

In the next ten years, declining domestic gas production in parts of South and Southeast Asia could lead to an increase in LNG demand as these economies increasingly need fuel for power plants or industry. The countries in South and Southeast Asia would, however, need to invest significantly in infrastructure for gas imports. The Shell LNG Outlook 2024 shows that gas complements wind and solar energy in countries with a high share of renewable energy in their power generation mix, providing short-term flexibility and long-term energy security.

European Energy Security

LNG also played an important role in European energy security in 2023, following the drastic reduction of Russian pipeline exports to Europe in 2022. New regasification facilities helped improve energy supply security. European LNG imports remained at a similar level to 2022, even though overall European gas demand declined in 2023.

Relatively mild winter temperatures in countries dependent on gas for heating, along with well-filled gas storage, increased nuclear power generation, and a moderate economic recovery in China helped balance the global gas market in 2023. This helped lower and stabilize gas prices in key import regions in Europe and East Asia compared to the record highs and unprecedented volatility from late 2021 to 2022. However, gas prices and volatility in 2023 remained significantly higher than in the period from 2017 to 2020.

Despite a well-supplied global market in 2023, the lack of Russian pipeline gas deliveries to Europe and limited LNG supply growth compared to the previous year mean that the global gas market remains structurally tight.