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Overview: What Is LNG?

Liquefied natural gas (LNG) is natural gas that has been cooled to the point that it condenses to a liq uid, which occurs at a temperature of approximately -256o F (-161o C) at atmospheric pressure. Liquefaction reduces the volume of gas by approximately 600 times5 thus making it more economical to store natural gas where other forms of storage do not exist, and to transport gas over long distances for which pipelines are too expensive or for which other constraints exist. Liquefaction makes it possible to move natural gas between continents in specially designed ships. Thus, LNG technology makes natural gas available throu ghout the world.

To make LNG available for use in a country like the U.S., energy companies must invest in a number of different operations that are highly linked and dependent upon one another. The major stages of the LNG value chain, excluding pipeline operations between the stages, consist of the following.

•  Exploration to find natural gas in the earth's crust and production of the gas for delivery to gas users. Most, but not all, of the time natural gas is discovered during the search for oil.

•  Liquefaction to convert natural gas into a liquid state so that it can be transported in ships.

•  Shipping the LNG in special purpose vessels.

•  Storage of LNG in specially made tanks, and regasification to convert the LNG from the liquid phase to the gaseous phase, ready to be moved to the final destination through the natural gas pipeline system.

Liquefaction provides the opportunity to store natural gas for use during high demand periods in areas where geologic conditions are not suitable for developing underground storage facilities. In the northeastern part of the U.S., LNG peak shaving is a critical part of the region's supply during cold snaps or heat waves. In regions where pipeline capacity from supply areas can be very expensive and use is highly seasonal, liquefaction and storage of LNG occurs during off-peak periods in order to reduce expensive pipeline capacity commitments during peak periods.6

3 LNG production, shipping and storage are generally reported in metric tons and cubic meters whereas natural gas is generally presented in standard cubic feet or standard cubic meters. One metric ton of LNG is equivalent to 48.7 thousand cubic feet of gas (Mcf). Note: exact conversion factor depends on gas molecular weight. A conversion table with more units is included in Appendix 2.

4 U.S. EIA, U.S. LNG Markets and Uses, June 2004.