DEFINITION of 'Liquefied Natural Gas (LNG)'

Liquefied natural gas (LNG) is a composition of methane and some mixture of ethane used to convert natural gas to liquid form for ease and safety of storage transport. It is cooled to approximately -256 degrees Fahrenheit so that it can be transported from countries with a large supply of natural gas to countries that demand more natural gas than they produce. In its liquid state, natural gas takes up 1/600th of the space, making it much easier to ship and store when pipeline transport is not feasible. As world energy consumption increases, experts anticipate that the LNG trade will grow in importance.

BREAKING DOWN 'Liquefied Natural Gas (LNG)'

Liquefied natural gas is primarily used to transport natural gas from one source to another. Exporters use this method when shipping to different countries and across bodies of water when pipelines aren't available. There are two main approaches to liquefy natural gas in large quantities: the cascade process and the Linde method. The cascade process refers to the cooling of one gas by another gas, resulting in a cascading effect. 

Despite having one of the world's largest reserves of natural gas, the United States imports a small percentage of its natural gas as liquefied natural gas from Trinidad and Tobago, Egypt, Norway, Qatar, and Nigeria. Other major exporters of LNG include Indonesia, Russia, Yemen, and Norway. Russia has the world's largest supply of natural gas, followed by Iran and Qatar. In 2008, Japan was the world's largest importer of LNG. The main method of transportation is storage tanks ashore to vessel tanks.

Once the cargo is delivered, the natural gas is allowed to expand and convert back to its gaseous form. Regasification terminals are used to help convert temperatures back to a natural gas state. 

Liquefied natural gas is best known as a transport tool, but it is starting to gain mainstream adoption. The automotive industry is evaluating the usefulness of the gas as fuel for internal combustion engines in over the road trucking, off-road vehicles, marine vessels and railways. China is one of the largest supporters of liquefied natural gas transportation with a fleet of over 100,000 vehicles. 

Future of Liquefied Natural Gas

Global demand experienced rapid growth from near zero levels in 1970 to meaningful market share today. Consumption was expected to reach 280MMt in 2017, representing an 8.8% increase from the year prior. Average annual growth is predicted to hover at 4% until 2020 when demand will reach about 314MMtpa. Soon thereafter, the market may reach overcapacity, marked by greater supply, pricing pressure and lower volume.

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