Natural gas accounts for over one-fifth of global energy use. Where pipelines are unfeasible, natural gas can be transported economically by lowering its temperature and increasing pressure until it becomes a condensed liquid. A global market for liquefied natural gas (LNG) has existed since the 1970s. Strong growth in LNG markets is expected to continue as both new producers and consumers emerge, and terminal infrastructure costs continue to decline.
Natural gas offers distinct greenhouse gas benefits compared to coal and oil, although some of that benefit is lost due to the energy penalty of converting the gas to liquid form and vise-versa. A carbon value of perhaps $20 to $40 per ton of CO2 would provide powerful incentives to switch from coal to natural gas in electricity generation. Natural gas also has significant criteria pollution (oxides of sulfur and nitrogen, particulates, and carbon monoxide, for example) benefits compared to other fossil fuels.
Considerable uncertainty surrounds the future of liquefied natural gas in the United States. Natural gas production in the U.S. peaked in the early 1970s. While prices remained low for much of the 1980s and 1990s, recent price instability reflects supply uncertainty. Key variables surrounding future markets for LNG in the U.S. include:
- Climate change and environmental policies that will impact relative pricing of fuels
- LNG demand in key Asian and European markets
- Investment constraints in building new LNG liquefaction terminals in key gas producing countries such as Qatar, Nigeria, Russia, Iran, Algeria, Trinidad and Tobago, and others
- Public response to the siting and safe operation of LNG import terminals
- Developments of alternative technology, including “clean” coal, renewable, nuclear power, and gas-to-liquid (GTL) fuels
Global LNG trade is now expanding rapidly, and the U.S. appears set for rapid demand growth as well. The U.S. Energy Information Administration forecasts that U.S. LNG imports are projected to increase nearly 8-fold by 2030. While global markets are expected to increase in flexibility, there are very real concerns about energy security and relying on a small group of producers to provide the fuel.