Liquefied Natural Gas (LNG)

Introduction

Liquefied natural gas (LNG) provides a relatively clean source of energy and is price-competitive with other fuels for distant markets. In recent years, LNG has turned out to be a critical element in meeting the world’s burgeoning energy needs. World natural gas consumption grew by 2.5 % in 2008 according to the BP statistical review of World Energy 2009.

The Role of the Government in the LNG Industry

An LNG project is a major undertaking because of its capital intensive nature and can have a significant impact on the national economy. The initiatives of the Government of Trinidad and Tobago to optimise its position in the LNG industry are geared toward revenue maximisation, extraction of value along the LNG value chain, as well as securing market share. These goals are in fulfilment of the Vision 2020 National Strategic Plan for the Energy Sector for Enabling Competitive Business.

The Government’s key position in the industry is defined through its role in:

• Resource ownership
• Design of the legal and fiscal system
• Approval and regulation of field development plans, project site, local content inputs and  shareholding
• Developer of associated infrastructure such as ports, roads and housing for workers
• Potential investor in the project.

The Government’s direct take in the LNG Industry comes from:

• Royalty (Exploration & Production Licences)
• Share of production (Production Sharing Contracts)
• Dividend Payments (State company shareholdings)
• Petroleum Profits, Corporation, Income and Withholding Taxes
• Other Taxes and Levies 
• Import/Export duties

Trinidad and Tobago entered the LNG business in 1999 when Atlantic LNG Train 1 was commissioned. Table 1 summarises some important details of the Atlantic LNG operations at Point Fortin, Trinidad.

The LNG Value Chain: What is it?

The range of activities involved in the LNG business is collectively referred to as the LNG Value Chain (see Figure 1).

• The upstream segment of the Chain involves gas exploration and production (E&P).
• The midstream segment comprises transportation via pipeline from the gas production facilities to the LNG plant for liquefaction. The Gas Merchant purchases gas from the E&P Company, for supply to the plant. LNG produced is sent to storage tanks before being loaded onto LNG tankers for shipment to the marketplace.
• In the downstream segment, the LNG Marketer purchases the LNG, ships it to an import terminal which regasifies the LNG before sending it into the pipeline networks where it is ultimately marketed to downstream customers.

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Exports of LNG

In 2008, Trinidad and Tobago continued to be positioned seventh in the global LNG trade despite being the largest exporter of LNG to the USA market.  The country’s trade accounted for approximately 8 % of world’s LNG exports (see figure 4)

Trinidad and Tobago’s LNG production for the fourth quarter was 197,681,473MMBtu, which brought the annual production for 2008 to 746,109,298MMBtu. This was a 2.48% increase on the 2007 figure of 728,032,064MMBtu.

In the quarter under review LNG exported was 188,605,68MMBtu, which was shipped to various destinations in North America, South America, the Caribbean, Europe and Asia. Exports during the fourth quarter brought the total LNG exported for 2008 to 731,633,534MMBtu, a 5.59% increase on the 2007 figure of 692,904,310MMBtu.

During the fourth quarter, 34% of the LNG exported from Trinidad went to the USA (Everett, Elba Island and Lake Charles terminals). The other major importers of LNG from Trinidad were Spain at 29%, Korea with 13% and UK 8%. In addition to those mentioned, other importers were the Caribbean (Dominican Republic and Puerto Rico) taking 7%, the other Asian markets (India and Taiwan) with 2%, while the remaining 7% of exports from Atlantic LNG went to Brazil, Belgium, Greece and Portugal. 

The total LNG production from the four trains for the fourth quarter was 197,681,473MMBtu (8,765,503m3) of LNG. This represented a 6.4% increase on the third quarter (July-September, 2008) which had a total production of 185,878,603MMBtu.

World LNG Production by country 2008. Source: bp’s Statistical Review of World Energy 2009

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