A Comparative Study of Sea-Going Natural Gas Transport

Abstract

Abstract Rapidly increasing worldwide natural gas demand and tight domestic supplies in many consuming countries suggest that trans-national transportation of gas will rapidly become important. From a technical perspective, the most economically attractive gas transport option depends on a specific project's reserve base, production capacity, and required shipping distance. This paper examines and quantifies how distance, reserves, and gas production rate affect the technology selection and project economics. Sea-going natural gas transport technologies are: liquefied natural gas (LNG), compressed natural gas (CNG), sub sea pipelines (PNG), gas-to-liquids (GTL), gas-to-wire (GTW), or gas-to-solids (GTS). Available data on capital, operating, and shipping costs for proposed, conceptual, and actual gas-transport projects are analyzed. These cost functions are then integrated into an economic model, which is used to determine the economic constraints of a number of theoretical developments that cover a range of gas rates and shipping distances. Given pricing, financing, and escalation assumptions, net present values (NPV) of the four options are generated over a range of daily gas rates and shipping distances. By examining which option delivers the highest NPV some conclusions are reached: Pipeline and CNG projects are best suited to maximize returns for shorter distances (e.g., 1,000-2,000 km); LNG is better suited for long distance projects. We find that meaningful comparisons between CNG and LNG are for relatively small volumes of gas, i.e., less than 500-600 MMscf/d. For large quantities and for any reasonable distances LNG is still by far the best option. For distances >3,000 km, it is necessary to have at least a >500-600 MMscf/d gas stream available for 20-30 years; this translates to a requirement of a reserve base on the order of 5-10 TCF to supply these long haul projects. For CNG much smaller reserve bases are attractive.