a brief history of lng - British Chamber Of Commerce Singapore

A BRIEF HISTORY OF LNG
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 1
BG Group
Connecting Singapore
to the global LNG market
CONTENTS
Programme & Acknowledgements04
Patron's Message05
President's Message06
E&U Chairperson's Message07
A Brief History Of LNG08
Energy & Utilities Business Group22
ABOUT BRITCHAM
The British Chamber of Commerce (BCCS) is one of the largest foreign business networks in Singapore with a
long and proud history celebrating its 60th Anniversary this year. The Chamber plays a pivotal role in raising the
profile of British companies, establishing robust connections with the Singapore business community as well
as facilitating business opportunities for companies in Singapore and the UK.
BCCS has also recently became a member of the UK business network, created by the British Chambers of
Commerce and UK Trade & Investment, providing practical support for UK exporters.
With more than 400 corporate members, represented through currently 2,600 employees, the Chamber offers
various platforms for businesses and leaders to connect, drive and develop business, learn and exchange
insights. We are committed to delivering:
Building Networks - Provide a diverse and inclusive network to build opportunities for British, international and
local organisations in Singapore with ties to British business.
Connecting Businesses - Encourage British trade and investment in Singapore and the Asia Pacific region
and to be the authoritative voice of British business.
Creating Opportunities - Provide our member companies, and executives throughout their organisations,
with practical support and advice, delivered via a range of scheduled events, on-line communities and to share
knowledge and expertise.
COVER IMAGES:
(Left to right) Methane Princess approaching the North Thames Gas Board jetty at Canvey Island U.K., Photo Courtesy of
Singapore LNG Corporation; Prelude FLNG facility under construction; Photo courtesy of Shell Photographic Services, Shell
International Ltd
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 3
PROGRAMME
LNG 50: A celebration of the first commercial shipment of LNG
Tuesday 23rd September 2014
The British High Commissioner’s Residence at Eden Hall
19.00
Evening commences with champagne and canapés
20.00
Speeches & Toast
Welcome by Damian Adams, Vice President of Britcham and Chairperson of Britcham’s
Energy and Utilities Business Group
Opening remarks by The British Deputy High Commissioner Judith Slater
Reflection of the Past, Present and Future of LNG by Roger Bounds, Global Head of Shell LNG and
Steve Hill, President Global Energy, Marketing & Shipping, BG Group
Toast by Jerome Ferrier, Senior Vice President, Total and President of the International Gas Union
Closing remarks by Damian Adams
21.30
Carriages
ACKNOWLEDGEMENTS
Appreciation and thanks are due to all who have been part of the organisation of this event; to our sponsors Shell, BG, ExxonMobil
and the Chamber team and E&U Group sub-committee, and of course to all attendees. Without such support the event would
not have been possible.
We hope you will enjoy the video montage of LNG events, past and present that will be shown throughout the evening. We
would like to thank all those who contributed photographs including BG Group, Shell, Brunei LNG, GDF Suez, ExxonMobil,
Arthur Dixon AM, Excelerate Energy, Höegh LNG and the National Grid archive and to thank Keshav Sishta of Blackbird
Productions for pulling it all together.
Special thanks go to Tony Regan, of Trizen International for having authored ‘A Brief History of LNG’
A soft copy of the LNG montage is available from http://britcham.org.sg/events/past-events/2383.
GOLD SPONSOR
SILVER SPONSOR
BRONZE SPONSOR
4 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
PATRON'S MESSAGE
In 1959, the first LNG cargo was shipped from Lake Charles, Louisiana to
Canvey Island in the United Kingdom. This paved the way for development of
the sector in the UK and, in 1964, it became the world’s first LNG importer, at
which point the commercial LNG industry was truly born.
Today, over 400,000 jobs are supported by the oil and gas industry and few
industrial sectors have generated greater prosperity for the United Kingdom.
The importance of the LNG sector continues to increase, with natural gas
being an essential part of the UK’s energy mix as we move towards becoming
a low carbon economy and reduce our reliance on coal powered generation.
The UK’s industrial strategy for Oil and Gas reflects the Government’s
commitment to working with the industry to create the right conditions to
maximise opportunity and attract investment to the benefit of the whole UK
economy.
I am delighted that we are celebrating the last half century of this crucial
industry’s evolution in partnership with the British Chamber of Commerce,
Singapore. Here, too, there is a focus on creating a forward looking dynamic
LNG sector, with UK companies playing a key role. It is only appropriate that
we commemorate the key milestones of the past together whilst looking
forward to further successes in the future.
H.E. Antony Phillipson
British High Commissioner
Singapore
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 5
PRESIDENT’S MESSAGE
The British Chamber of Commerce is one of the largest overseas business
networks in Singapore, with a long and proud history that sees the Chamber
celebrating its 60th Anniversary this year. The Chamber plays a pivotal role in
raising the profile of British companies, by establishing robust connections
with the Singapore business community as well as facilitating business
opportunities for companies in Singapore and the UK.
Over the years, the Chamber has continuously adapted to the changing
business landscape both locally and internationally. Ten years ago, members
from the Energy & Utilities sector highlighted the need for more active
engagement within the membership network and beyond, which resulted in
the formation of our first Business Group. Today, we have twelve Business
Groups which have become important pillars in the Chamber's ability to
deliver its mission – Building Networks, Connecting Businesses and
Creating Opportunities.
The Chamber is delighted to celebrate the 50th anniversary of the first LNG
shipment – a key milestone in the history of the E&U sector. I would like to
thank HE Antony Phillipson for hosting us at his residence, our sponsors Shell,
BG Group and ExxonMobil for their contribution and the continuous support of
the E&U Business Group in making this event an incredible success.
Hugo Walkinshaw
President
British Chamber of Commerce Singapore
6 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
E&U CHAIRPERSON’S MESSAGE
Since being formed in early 2004 as the first business group of the British
Chamber of Commerce, the Energy & Utilities (E&U) Business Group has
strived to provide members of the Chamber and the wider energy community in
Singapore with high quality events, relevant topics and expert speakers. So too
with this landmark commemorative event, by which we mark 50 years since
delivery into the UK of the first commercial LNG cargo.
As you read through this booklet you will note a number of “firsts” in the history
of the LNG industry; the first liquefaction of methane, the first commercial
shipment of LNG to the UK and the world’s first purpose-built LNG tanker.
Equally, the evening itself represents a first for the E&U Group, namely the
first event of this scale and type conceived by a business group to mark an
historic event. As we look back on 50 years of the LNG industry, we also take
note of the present and look forward to what the future holds in store. Likewise
with the E&U group. Despite having a shorter history of just over a decade,
with over 1,700 people currently in the E&U network, a committed organising
committee and high levels of enthusiasm and interest shown by supporters of
our events, it is clear that the Group has a continuing role to play in bringing
together the energy community in Singapore and the region to network, discuss,
learn and celebrate.
Damian Adams
Chairperson of the Energy & Utilities Business Group
British Chamber of Commerce Singapore
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 7
PATRON’S MESSAGE
The liquefaction of methane. Cailletet 1878
Raoul Pictet’s (1846 – 1929) cascade process
A BRIEF
HISTORY
OF LNG
2014 marks the 50th anniversary of the first commercial shipment of LNG
from Arzew in Algeria to Canvey Island in the UK and the 136th anniversary
of the first liquefaction of methane by Louis Cailletet in 1878.
8 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
A BRIEF HISTORY OF LNG
EARLY DAYS
T he origins of liquefied natural gas (LNG) are
to be found in the nineteenth century and the
pioneering work done by Michael Faraday (17911867) in the early 1820’s on the liquefaction of
gases. Faraday was able to liquefy gases with
high critical temperatures such as chlorine,
hydrogen sulfide, hydrogen bromide, and
carbon dioxide by the application of pressure
alone but could not liquefy oxygen, hydrogen,
nitrogen carbon monoxide or methane. It was
not until a half century later, that researchers
found ways to liquefy gases with lower critical
temperatures, such as oxygen, nitrogen, and
carbon monoxide. The French physicist Louis
Paul Cailletet (1832-1913) first liquefied methane
by discovering that marsh gas liquefied at 180
atmospheres and 44.6 deg F in 1878 and the
Swiss chemist Raoul Pierre Pictet (1846-1929)
developed a cascade cooling apparatus for the
liquefaction of gases and was able to liquefy
oxygen. It was not until the end of the nineteenth
century that the two gases with the lowest
critical temperatures, hydrogen (-239.7°C) and
helium (-267.7°C) were liquefied by the work
of the Scottish scientist James Dewar (18421923) and the Dutch physicist Heike Kamerlingh
Onnes (1853-1926), respectively. By 1900 all
gases had been liquefied except helium which
was liquefied in 1908.
The first air liquefaction plant was built by the
pioneer of refrigeration, Carl von Linde (18421934) in 1895 utilising counter current cooling.
In 1915 Godfrey Cabot of the USA patented
a method for storing liquid gases at very low
temperatures. It consisted of a Thermos bottle
type design which included a cold inner tank
within an outer tank; the tanks being separated
by insulation. Cabot founded the Liquid Fuel
Company in West Virginia to use LNG for
welding but the plant was abandoned in 1921.
In 1937 Lee Twomey received
patents for a process for large
scale liquefaction of natural gas.
The intention was to store natural
gas as a liquid so it could be
used for shaving peak energy
loads during cold weather. The
Hope Natural Gas Company
built a trial plant in West Virginia
in 1939 that was able to liquefy
400,000 cu.ft/day but this was
dismantled in 1940 when The
East Ohio Gas Company built a
full-scale commercial LNG plant
in Cleveland, Ohio, This was the first such plant
in the world. Originally it had three spheres,
approximately 63 feet in diameter containing
LNG at -260 °F. Each sphere held the equivalent
of about 50 MMscf of natural gas. A fourth tank,
a cylinder, was added in 1942 with an equivalent
capacity of 100 MMscf of gas. The plant
operated successfully for three years but was
shut down after a cylindrical tank ruptured on
October 20, 1944, spilling thousands of gallons
of LNG over the plant and nearby neighborhood.
The resultant fire and multiple casualties delayed
further implementation of LNG facilities for
several years.
Over the next 15 years new research on lowtemperature alloys, and better insulation
materials, set the stage for a revival of the industry
which started in 1951 when William Wood Prince,
the President of the Union Stockyard Company
of Chicago set out to find a cheaper source
of gas for his power requirements than was
available from his current supplier. He decided
to access cheaper southern gas, liquefy it and
transport it via the Mississippi to his Chicago
stockyards to provide refrigeration for his cold
storage plant and fuel for power generation. He
commissioned the first FLNG unit - a barge to
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 9
A BRIEF HISTORY OF LNG
liquefy, store and transport LNG. Continental Oil
(now ConocoPhillips) came in to advise on gas
processing issues and a barge, the Methane with
a cargo capacity of 5,550 cubic metres (cu.m),
was built at the Ingalls Shipyard. Although the
initial economics looked good the partners soon
had reservations about the economic viability of
the project and it was not taken forward.
Methane Pioneer
loading at Lake Charles,
Louisiana 1959
Built by Pritchard (US)
and Technip (France)
1
William Wood Prince had set up
a research division that in 1952
became the Chicago Stock
Yards Research Company which
bought gas bearing properties
in Virginia and expanded
the research programme on
barges to include ocean-going
transport. In 1954 Continental
Oil reviewed the research programme and
concluded that although the proposed scheme
to supply the Chicago stockyard was not
economic, trans-ocean shipments might be.
In 1955 they joined Union Stockyards to form
the Constock Liquid Methane Corporation with
trans-ocean shipments in mind taking LNG
from the gas fields of Venezuela to the UK. This
caught the attention of the British Gas Council
who in 1957 agreed with Constock to jointly
convert a freighter into an LNG carrier. Constock
would liquefy the gas near Lake Charles and BG
would receive it at Canvey Island in the UK.
In January 1959, the world’s first LNG tanker,
The Methane Pioneer, a converted World War II
liberty freighter built in 1945 and originally called
the Marline Hitch, carried 5,000 cu.m of LNG
in five 7,000 bbl aluminum prismatic tanks with
balsa wood supports and insulation of plywood
and urethane from Lake Charles Louisiana to
Canvey Island in the Thames estuary. She took
a total of 8 cargoes of LNG from Lake Charles
to Canvey Island, the last being in March 1960.
In 1960, Shell joined Constock to form
Conch International Methane Limited (Shell &
Continental Oil Co 40% each, Chicago stock
Yard 20%) and attention moved from developing
Venezuelan gas reserves to developing newly
discovered gas reserves in Algeria. Conch
formed the Companie Algerienne du Methane
(CAMEL) with the French owners of the Hassi
R’Mel gas field in Algeria and announced plans
to build the Arzew LNG plant. Construction of
the 1 million tonne pa (mtpa) plant commenced
in 19611 and a Gas Supply Agreement was
signed with the British Methane Ltd (50/50 BGC
& Conch) in 1962.
FROM HASI R’MEL IN THE
SAHARA TO LEEDS
Canvey Island LNG terminal (BG Group)
The CAMEL liquefaction plant at Arzew was
completed on the 10th September 1964 and
was officially opened on 27th September. Conch
International Methane (Shell 40%, Continental
Oil 20%, Union Stock Year & Transit of Chicago
40%) had a 40% share in the plant. On the 7th
of October 1964, the first commercial cargo of
LNG was shipped from Arzew to Canvey Island
on the Methane Princess. The cargo arrived
on the 12th of October and the regasified
LNG was dispatched from Canvey Island via
the 250 mile Gas Council pipeline to eight gas
boards in London, Birmingham, Manchester
and Leeds. The Arzew plant had three parallel
liquefaction trains each capable of producing
10 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
A BRIEF HISTORY OF LNG
17,000 Bbls/day of LNG (about 1.5 MMscf/
day). The total cost of the CAMEL LNG project
was estimated to be US$89 million and the FOB
price for the first cargo was 53 cents/MMBtu.
Interestingly the delivered price was 76 cents/
MMBtu2 suggesting the freight was a far larger
component of the cost build up than it is today.
In March 1965 the first shipment to France
was made on the Jules Verne to Le Havre. Two
thirds of the production was now being sold to
the British Gas Council and one third to Gaz de
France.
Wolff shipyard in Belfast.
Both ships were fitted
with Conch independent
aluminum cargo tanks and
had a capacity of 27,000
cu.m. They were operated
for British Methane Ltd
by Shell Tankers UK and
between them they made
about 1,000 voyages. The
Methane Progress went out
of service in 1986 whilst the Methane Princess
remained in service until 1997. The Jules Verne
was built by the Le Trait shipyard and had cargo
capacity of 25,000 cu.m.
Methane Progress
“By the end of the next ten years there should
be some 20-30 methane carriers3 in operation
around the world, carrying, say 2,000 MMscf/d”
C.P.Coppack, Managing Director,
Conch Methane Services, Sept 1963.
THE GREAT RACE
Jules Verne, (GDF SUEZ)
In 1965 the Algerian government took a 20%
stake CAMEL and In 1977 CAMEL was acquired
by the Societe National pour la Recherche, la
Production, le Transport, la Transformation et
la Commercialisation des Hydrocarbures – or
Sonatrach.
The first purpose built LNG carriers was built in
1963. The Methane Princess was built by Vickers
Armstrong at Barrow in Furnace, launched in
1963 and entered service in 1964. This was
followed shortly by the Methane Progress which
was launched in 1964 from by the Harland and
In 1962 Phillips discovered natural
gas in the North Cook Inlet near
Kenai in Alaska, whilst in 1963 Shell
discovered the South West Ampa gas
field off Brunei. Both sought to monetize the
reserves as LNG and sought sales into Japan.
After an often bitter battle between the two
parties Philips and Marathon4 signed the first
Asian LNG sales and purchase agreement in
March 1967 with Tokyo Gas and Tokyo Electric
– at a price of 52 cents/MMBtu delivered Japan.
The first delivery of Alaskan LNG into Japan’s
first LNG receiving terminal at Negishi took place
in November 1969.
Negeshi LNG terminal
Tokyo, (Tokyo Gas)
A pint of beer in a
Canvey Island pub cost
6 pence (20 US cents)!
2
There were 12 LNG
carriers operating in
1973 and this number
rose to 18 in 1975
3
Philips and Marathon
had agreed to combine
their Alaskan gas
reserves in 1966
4
The two train, 1.3 mtpa liquefaction plant at
Kenai was built by Bechtel and cost considerably
more than the Arzew plant at an estimated cost
of US$200 million.
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 11
A BRIEF HISTORY OF LNG
1970’S –
EARLY DAYS
Brunei LNG
Although
Exxon’s
proposed
Marsa
el
Brega
LNG
plant in Libya had
concluded
sales
agreements
with
Italian and Spanish buyers in 1965 a number of
problems and issues delayed construction and
first commercial production was in April 1970.
The four train Marsa el Brega plant used the then
novel mixed refrigerant liquefaction technology
provided by Air Products.
Shell, Mitsubishi and the Brunei government
finally managed to sign sales and purchase
agreements with Tokyo Electric, Tokyo Gas
and Osaka Gas in 1970 and Brunei LNG came
on stream in 1972. The plant, which initially
Canvey Island 1959
Le Havre 1964
Barcelona 1969
La Spezia 1971
Fos 1972
consisted of four trains able to produce 3.7
mtpa was significantly larger than its three
predecessors. Algeria’s second liquefaction
plant at Skikda also came on stream in 1972.
Perhaps the most significant development of the
1970’s was the development of major export
plants in Indonesia. In 1972 Pertamina, Huffco,
Mobil and Nissho Iwai teamed up to develop
Indonesian LNG exports based on two plants
that would be built simultaneously in Bontang
and Arun. Japan and the US were regarded as
the only markets that could possibly support
two plants but although Pacific Lighting Corp
of California expressed interest in a 20 year
purchase agreement with Arun they were unable
to secure US government approvals and the
focus turned to Japan.
The oil crisis of October 1973 heightened
Japan’s interest in LNG and in December of
that year Pertamina signed an SPA for a total of
8.18 mtpa with Chubu Electric, Kansai Electric,
Marsa El Brega 1970
4 trains 0.75 mill tn
ADGAS Abu Dhabi 1977
2 trains 3.2 mtpa
Alaska
Kenai 1969
Two trains 1.3 mill tn
Negishi 1969
Senbouku 1972 & 1977
Sodeguara 1973
Chita 1977
Tobata 1977
Himeji 1979
Everett 1971
Algeria Libya
Brunei 1972
5 trains, 7 mill tn
Arzew GL4Z 1964
3 trains 1.1 mill tn
LNG liquefaction plants
LNG receiving terminals
1964
Arew
1969
Alaska
1970
Libya
Skikda 1972
3 trains 3 mill tn
Bontang 1977
2 trains 3.3 mill tonnes
Arzew GL1Z 1978
6 trains 7.7 mill tn
Arun 1978
3 trains 5.1 mill tonnes
1972
Skikda, Brunei
1977
ADGAS, Bontang
12 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
1978
Arew, Arun
A BRIEF HISTORY OF LNG
First liquefaction projects 1964-1979
Mill tn
Start
Shareholders
Arzew GL 4Z T1-3
Algeria
1.1
1964
Sonatrach
Alaska
USA
1.3
1969
Marathon, ConocoPhillips
Marsa El Brega
Libya
0.8
1970
Sirte
Skikda
Algeria
3
1972
Sonatrach
Brunei LNG
Brunei
7
1972
Brunei Govt, Shell,
Mitsubishi
ADGAS
Abu Dhabi
3.2
1977
ADNOC, Mitsui, BP, Total
Bontang T1/2
Indonesia
3.3
1977
Pertamina
Arun T1-3
Indonesia
5.1
1978
Pertamina
Arzew GL 1Z T1-6
Algeria
7.8
1978
Sonatrach
32.6
Osaka Gas, Kyushu Electric and Nippon Steel.
Bechtel were contracted to design, engineer
and construct the two plants which were to
cost US$1.64 billion, considerably more than
the US$89 million the Arzew plant had cost ten
years earlier. The two train Bontang LNG plant
with a capacity of 3.3 mtpa came on stream in
1977 and the first cargo was delivered to Osaka
in August of that year. The larger, three train 5.1
mtpa Arun plant, was commissioned in 1978.
For the next twenty years Indonesia was the
world’s largest LNG exporter.
The first LNG plant in the Middle East was built
at Das Island in Abu Dhabi. The Gas Liquefaction
Project Agreement was signed in 1971, a 20year Sale Agreement with Tokyo Electric was
signed in 1972 and construction of the ADGAS
plant started in 1973. Trains 1 and 2 were
commissioned in 1977, each with an operating
capacity of 1.6 mtpa. A third 4 mtpa train, then
the largest and most advanced in the world, was
subsequently added in 1994. ADGAS is owned
by Abu Dhabi National Oil Co. (70%), Mitsui
(15%), BP (10%) and Total (5%).
Fifteen years after the start up of the first
commercial LNG plant in Algeria there were
eight liquefaction plants operating globally with
a total capacity of almost 33 mtpa and the first
plant at Arzew had been expanded to reach
a total capacity of 8.9 mtpa. In 1979 Algeria
exported 8.5 million tonnes of LNG and global
sales reached 24.7 million tonnes. 14 million
tonnes went to Japan and the second largest
buyer was the USA, taking 5.3 million tonnes.
The world fleet was then 52 ships.
THE US FALLS IN LOVE WITH
LNG (ACT 1)
The Canvey Island receiving terminal opened
in 1959, Le Havre in 1964, Barcelona and
Negishi in 1969 and the first US terminal,
Everett, Massachusetts opened in 1971. Gas
was not permitted as a power generation fuel
in the US causing a constraint on production
and the perception that there was a shortage
of gas. A number of companies therefore
sought to import LNG and between 1969 and
1976 six long term LNG supply contracts were
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 13
A BRIEF HISTORY OF LNG
North West Shelf LNG
Karratha WA
signed and three more receiving terminals were
built - Cove Point (1978), Elba Island (1978)
and Lake Charles (1982). Unfortunately, price
deregulation stimulated domestic production
and gas prices fell, making LNG imports
uncompetitive. Imports of LNG which had hit
5.3 million tonnes in 1979, fell to less than 2
million tonnes in 1980 and gradually declined
to zero by 1987. This had a major impact in
Algeria resulting in the Arzew and Skikda plants
operating at less than half capacity for more than
a decade and lengthy litigation as US buyers
sought to terminate their contracts.
Development (Woodside) Act in 1979, but it
wasn’t until 1981 that the project participants
were able to secure interest from Japanese
buyers. A downturn in the Japanese economy
and competition from other proposed projects,
including the Canadian Dome Project, made
it difficult to secure commitments, but in 1982
initial SPA’s were signed with five Japanese
buyers. Mitsubishi and Mitsui joined the North
West Shelf venture in 1984 and in May of 1985
formal SPA’s were signed with five Japanese
power co’s and three gas co’s allowing the
project to go ahead.
THE 1980’S – MALAYSIA AND
AUSTRALIA JOIN THE CLUB
There were six joint venture participants in the
North West Shelf Venture; Woodside, BHP
Billiton, BP, Chevron, Shell and Japan Australia
LNG (a JV between Mitsubishi and Mitsui) and
the plant at Dampier started up in 1989 with
three liquefaction trains with a total capacity
of 7.5 mtpa. The project, which included the
development of North Rankin A, then the largest
gas production platform in the world, and subsea
infrastructure to draw gas from the N.Rankin
and Perseus fields, cost $25 billion, and was,
at the time the largest resource development in
Australian history and the largest engineering
project in the world. A fourth train was added in
2004 and a fifth in 2008 bringing total capacity
up to 16.3 mtpa.
Shell discovered substantial gas reserves off
Sarawak in 1968, but it took ten years before the
development options could be agreed with the
government of Malaysia.
In 1978 Malaysia LNG Sdn
Bhd was incorporated to
develop the first Malaysian
LNG
project,
MLNG
Satu. Shareholders were
Petronas (65%) Shell &
Mitsubishi (each with
15%) and the Sarawak
State Government (5%)
and the project included 5
LNG carriers. SPA’s were executed with Tokyo
Electric and Tokyo Gas and the first cargo
sailed to Japan in January 1983. MLNG Satu
contained three liquefaction trains with a total
design capacity of 6 mtpa. MLNG Dua came on
stream in 1995 and MLNG Tiga in 2003. Total
capacity at Bintulu is now 24.4 mtpa.
Australia’s first LNG project had a similar lengthy
gestation period. Woodside discovered the
North Rankin gas in 1971, the West Australian
government passed the North West Gas
25 YEARS
In 1989, 25 years after the first shipment of
LNG from Algeria there were 10 liquefaction
plants operating in Algeria, Abu Dhabi, Australia,
Brunei, Indonesia, Libya, Malaysia and the
USA. Exports had reached 48 million tonnes,
Japan imported 32 million tonnes and the
second largest importer was France at 7 million
tonnes. The global LNG fleet now consisted of
70 vessels.
14 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
A BRIEF HISTORY OF LNG
THE 1990’S AND THE ENTRY
OF QATAR
The 1990’s were a period of rapid development
for the LNG industry with the entry of Qatar,
Oman, Nigeria and Trinidad. It hadn’t however
been a smooth entry. Weak demand in the
1980’s had made it very difficult for these
projects to secure customer support. The
Qatar Liquefied Natural Gas Company Ltd
was set up in 1984 by QGPC, BP and CFP
(now Total) but struggled to secure customer
interest, particularly as Australia’s NW Shelf
project was developed. Mitsui and Marubeni
joined the partnership in the late 1980’s and BP
relinquished its share in 1992 to be replaced by
Mobil who took a 10% interest. Qatargas was
able to secure its first SPA with Chubu Electric
in May 1992 and awarded the EPC contract
for the construction of the plant in May 1993
to Chiyoda. The three train, 10 mtpa Qatargas
plant came on stream in 1997. In August 1992
Ras Laffan Natural Gas Ltd (RasGas LNG) was
established with QGPC holding a 70% interest
and Mobil 30%. With support from Mitsui,
RasGas secured a 25 year SPA with Korea Gas
Corporation in October 1995 and the 6.7 mtpa
RasGas plant came on stream in 1999. The cost
of the LNG plant and upstream facilities was
US$3.26 billion. The early 1990’s was a sellers’
market allowing Qatar to secure additional SPA’s
and considerably expand both projects until,
in 2006, Qatar overtook Indonesia as the largest
LNG producer with a total production capacity
of 77 mtpa including six mega trains of 7.8 mtpa
each.
An LNG Working Committee was formed in
1985 in Nigeria to promote an LNG project and
in 1989 Nigeria LNG Ltd was formed owned
by NNPC, Shell, Total and ENI. It took several
years to secure customer support and arrange
the financing but in 1995 an EPC contract was
awarded to construct two trains with a capacity
of 6.6 mtpa. These were commissioned in 1999
and the plant was subsequently expanded by
the addition of train 3 in 2002, train 4 & 5 in 2006
and train 6 in 2007 to give it a total capacity
of 21.1 mtpa. In 1999 Trinidad LNG came on
stream to be closely followed by Oman LNG in
2000.
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 15
A BRIEF HISTORY OF LNG
New liquefaction projects 1991-2000
Mill tn
Start
Shareholders
Bontang TF
Indonesia
3.2
1993
Pertamina
ADGAS T3
Abu Dhabi
4
1994
ADNOC, Mitsui, Total
MLNG Dua
Malaysia
7.8
1995
Petronas, Shell, Mitsubishi, Sarawak
Govt.
Qatargas
Qatar
10
1997
Qatargas, ExxonMobil, Total,
Marubeni, Mitsui
Bontang TG
Indonesia
3.2
1998
Pertamina
Bontang T H
Indonesia
3.2
1999
Pertamina
Atlantic LNG
Trinidad
3.2
1999
BP, BG, Repsol, NGC T&T, CIC
RasGas
Qatar
6.7
1999
Qatar Petroleum, ExxonMobil, Itochu,
LNG Japan, KOGAS
NLNG T1/2
Nigeria
6.6
1999
NNPC, Shell, Total, Agip
Oman LNG
Oman
7.1
2000
Oman Govt, Shell, Total, Korea LNG,
Mitsubishi, Mitsui, Itochu, Partex
55
2000-2010 - A DECADE OF
FAST GROWTH
The 1990’s saw 55 mtpa of new LNG capacity
come on line from ten projects but the next
decade saw a boom in LNG plant construction
with almost 160 mtpa of new capacity coming
on line from 17 projects in 14 countries. The
LNG business went truly global from Peru in
South America to Sakhalin on the Russian
Pacific coast via Snohvit in northern Norway.
The chief driver for this rapid expansion was US
demand – or in particular, forecast demand. In
2003 the National Petroleum Council forecast
that domestic gas production would only be able
to meet 75% of US demand, with the balance
having to be imported as LNG. By the end of
2003, 31 LNG receiving terminal projects had
been announced in the US, Canada and Mexico
and over the next few years 11 new liquefaction
projects were announced in Norway, Equatorial
Guinea, Yemen, Angola, Peru, Indonesia, Qatar,
Egypt and Trinidad with the assumption that
the bulk of their production would be supplied
to North America. The US reopened its 3
mothballed LNG import terminals and built 11
more but, for many, the LNG never arrived.
LNG imports peaked at 16 mtpa in 2007 and
declined thereafter due to the development of
domestic shale gas.
By 2010 global sales of LNG had reached 193
million tonnes from 24 projects in 18 countries.
The largest importer in 2010 was Japan (69
mtpa) followed by Korea (33 mtpa) Spain (20
mtpa) and the UK (14 mtpa). India started
importing LNG in 2003 and China in 2006 and
by 2010 imports into China had reached 9.5
16 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
A BRIEF HISTORY OF LNG
mtpa. Korea built its first LNG carrier in 1994
(HHI’s Hyundai Utopia) and by 2000 became
the world’s largest LNG shipbuilder constructing
10 out of 13 ships in that year.
THE PRESENT AND
THE FUTURE
Woodside’s Pluto LNG (5 mtpa) project in
Western Australia came on stream in 2012
and Angola LNG (5.3 mtpa) in 2013. The
latest addition to the LNG family is PNG LNG
(6.9 mtpa) which was completed in April 2014
and the first shipment left for Tokyo Electric in
May. Production reached full capacity in July by
which time 15 cargoes had been exported. BP
had first proposed an LNG project in PNG after
discovering the Hides Field in
1987. In the early 2000’s plans
to export the gas by pipeline to
Australia were developed but
in 2007 this plan was dropped
in favour of exporting as LNG.
In 2008 a Gas Agreement was
signed by the project sponsors
and the PNG government
which established the fiscal
and legal framework for the PNG LNG Project,
including a unique Benefits Sharing Agreement
to ensure economic benefits flowed to the PNG
people. The project was sanctioned in December
2009 and between December 2009 and March
2010 sales and marketing agreements were
signed with four major customers (Sinopec,
Spirit of Hela loading the
first shipment of LNG
from PNG LNG May
2014 (ExxonMobil)
New liquefaction projects 2000-2010
Mill tn
Start
Shareholders
NLNG T3
Nigeria
2.9
2002
NNPC, Shell, Total, Agip
Atlantic 2/3
Trinidad
6.6
2003
BP, BG, Repsol
MLNG Tiga
Malaysia
6.3
2003
Petronas, Shell, Nippon Oil, Mitsubishi
RasGas II
Qatar
4.7
2004
Qatar Petroleum, ExxonMobil
NWS T4
Australia
4.4
2004
Woodside, BHP, BP, Chevron, Shell, Mitsubishi, Mitsui
ELNG
Egypt
3.6
2005
BG, Petronas, Egas, EGPC, GdF Suez
ELNG T2
Egypt
3.6
2005
BG, Petronas, Egas, EGPC
SEGAS
Egypt
4.9
2005
Union Fenosa, ENI, Egas, EGPC
RasGas II T2
Qatar
4.7
2005
Qatar Petroleum, ExxonMobil
Qalhat LNG
Oman
3.7
2005
Oman Govt, Oman LNG, Union Fenosa,
Itochu, Mitsubishi, Osaka Gas
Atlantic LNG T4
Trinidad
5.2
2006
BP, BG, Repsol, NGC T&T
NLNG T4/5
Nigeria
7.6
2006
NNPC, Shell, Total, Agip
Darwin LNG
Australia
3.7
2006
ConocoPhillips, ENI, Santos, Inpex, Tepco,
Tokyo Gas
NLNG T6
Nigeria
4
2007
NNPC, Shell, Total, Agip
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 17
A BRIEF HISTORY OF LNG
New liquefaction projects 2000-2010
Mill tn
Start
Shareholders
Equatorial
Guinea
E. Guinea
3.4
2007
Marathon, Sonagas, Mitsui, Marubeni
RasGas II T3
Qatar
4.7
2007
Qatar Petroleum, ExxonMobil
Snohvit LNG
Norway
4.1
2008
Statoil, Total, GdF Suez, Hess, RWE-DEA
NWS T5
Australia
4.4
2008
Woodside, BHP, BP, Chevron, Shell, Mitsubishi, Mitsui
Qatargas II T1
Qatar
7.8
2009
Qatar Petroleum, ExxonMobil
Qatargas II T2
Qatar
7.8
2009
Qatar Petroleum, ExxonMobil, Total
Sakhalin LNG
Russia
9.6
2009
Gazprom, Shell, Mitsubishi, Mitsui
Yemen LNG
Yemen
3.4
2009
Total, Hunt, YGC, SK, KOGAS, Hyundai,
YGA
RasGas III
Qatar
7.8
2009
Qatar Petroleum, ExxonMobil
MLNG Dua Exp
Malaysia
1.7
2009
Petronas, Shell, Mitsubishi, Sarawak Govt
Tangguh
Indonesia
7.6
2009
BP, MI Berau, CNOOC, Nippon Oil, KG
Berau, LNG Japan, Talisman
RasGas III T2
Qatar
7.8
2010
Qatar Petroleum, ExxonMobil
Peru LNG
Peru
4.5
2010
Hunt, SK, Repsol, Marubeni
Qatargas III
Qatar
7.8
2010
Qatar Petroleum, ConocoPhillips, Mitsui
Qatargas IV
Qatar
7.8
2010
Qatar Petroleum, Shell
Yemen LNG T2
Yemen
3.4
2010
Total, Hunt, YGC, SK, KOGAS, Hyundai,
YGA
159.5
Osaka Gas, Tokyo Gas and CPC). Construction
work began in early 2010 and in April 2014,
the PNG LNG Project started production of
LNG ahead of schedule. The partners in PNG
LNG are ExxonMobil 33.2%, Oil Search 29%,
National Petroleum Company of PNG Limited
(NPCP) 16.6%, Santos 13.5%, JX Nippon Oil
4.7%, MRDC (PNG landowners) 3%.
Many of the recent developments in the
industry have been driven by technological
advancements including:
The development of horizontal drilling and
hydraulic fracturing in North America, which
has enabled gas and oil to be extracted from
shale. The rapid ramp up of production has lead
to a significant number of parties developing
plans to export the gas as LNG. 26 LNG export
facilities have been proposed in the USA and
20 in Canada. Two, Sabine Pass (18 mtpa) and
Cameron LNG (12 mtpa) have been sanctioned
and these hope to start up in 2015 and 2018.
18 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
A BRIEF HISTORY OF LNG
Queensland Curtis LNG facility,
Queensland (BG Group)
Unconventional gas production in Australia
has put Australia on track to becoming the
world’s largest LNG producer by about 2018.
Seven LNG projects are under construction
in Australia with three, (Queensland Curtis,
Gladstone LNG and Australia Pacific) being built
on Curtis Island at Gladstone in Queensland
using coal bed methane as their feedstock. The
world’s first CBM to LNG plant, BG’s 8.5 mtpa
Queensland Curtis facility is expected to be
completed in Q4 2014.
The first floating storage and regasification
vessel (FSRU) went into operation off Louisiana
in the USA in 2005. Floating storage has proved
to be much cheaper than conventional onshore
storage terminals and can be deployed in
months rather than the 3-4 years it takes to build
a conventional onshore terminal. 17 FSRU’s are
now in operation around the world with five
more scheduled to go into service in 2014/15
in Lithuania, Jordan, Egypt, Uruguay and Puerto
Rico.
These have been a real “game changer” and
now the majority of terminal proposals assume
utilising an FSRU.
The next big “game changer” will be the
introduction of “floating liquefaction” plants
(FLNG). Shell sanctioned the first floating
liquefaction project, Prelude, in 2011 to be
followed by Petronas and Exmar in 2012. Four
FLNG units are now under construction with
two expected to start up in 2015. Eight more
FLNG projects are at the pre FEED/FEED stage
of development with 20 more at the planning/
development stage. The Prelude FLNG unit will
be the largest vessel ever built and is designed to
produce 3.6 mtpa of LNG,
1.3 mtpa of condensate
and 0.4 mtpa of LPG. It
is being built at Samsung
Heavy Industries’ Geoje
shipyard in South Korea
and once constructed
the facility will be towed
to its location over
the Prelude gas field,
approximately 475 kilometres north-northeast
of Broome, Western Australia where it will
remain permanently moored at the location for
around 20-25 years before needing to dock for
inspection and overhaul. The shareholders are
Shell 67.5%, Inpex 17.5%, CPC 5% and Kogas
10%. Petronas has sanctioned two FLNG units
the first of which is scheduled to go into service
off Sarawak in 2015.
Today:
• There are 29
liquefaction projects
in 20 countries with
a total capacity of
310 mtpa.
• F ou rt e e n n e w
liquefaction
projects are under
construction plus
additional trains at
Arzew and Bintulu
bringing on over
120 mtpa of new
liquefaction capacity between now and
2018.
• Seven of the new plants are in Australia
and by 2018 liquefaction capacity there will
reach 86 mtpa and Australia may overtake
Qatar as the largest LNG producer.
• An unprecedented 65 proposed projects
are offering in excess of 600 mtpa of new
LNG FSRU
(Hoegh LNG)
Prelude FLNG (Shell)
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 19
A BRIEF HISTORY OF LNG
Floating liquefaction projects under construction
Leader
(Constructor)
Topsides
Liquefaction
LNG
mtpa
Hull
Containment
Storage
m3
Project status
Location
Project
Shell
(Samsung)
Technip
Shell DMR
3.6
Barge
Membrane
220,000 +
90,000
LPG +
126,000
Condensate
FEED completed
2009
Sanctioned May 2011
Start Up 2017
Australia
Prelude
Petronas
(DSME)
Technip/
Linde
AP-NTM
1.2
Barge
Membrane
FEED completed
2012
Sanctioned 2012
Start up Q4 2015
Malaysia
Sarawak
Exmar
(Wison)
Black &
Veatch
SMR
0.5
Barge
Sanctioned 2012
Start up Q1 2015
Colombia
Pacific
Rubialas
Petronas
(Samsung)
JGC
AP-NTM
1.5
Barge
Membrane
FEED completed
2013
Sanctioned 2014
Start up 2018
Malaysia
Sabah
16,100 +
140,000
floating
storage
LNG capacity into the project pipeline
with over 530 mtpa being offered from
five countries – USA, Canada, Russia
Mocambique and Tanzania.
LNG exports were 241 million tonnes in
2013.
Growth over the next 5 years is going to be
mainly in China and India with uncertainty about
Japan. China will overtake Korea as the second
largest LNG importer with imports of about 50
mtpa by 2018.
Demand had been expected to double between
2010 and 2020 but after three years of flat
growth (2012-2014) it now looks unlikely that it
will. However it could be close, which means that
despite all the new capacity coming on between
now and 2018, there is a need for several more
projects to be sanctioned in the next couple of
years to bring on a further 35 million tonnes by
2020.
We are also on the cusp of the development of
a major new market for LNG – the transportation
sector. There is growing awareness of the
economic and environmental drivers favouring
the adoption of LNG as a transportation fuel
with it looking as if in many countries truck,
train and heavy plant operators may be able to
reduce fuel bills by about 30% by using LNG
rather than diesel. First movers were in the US
•
20 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG
A BRIEF HISTORY OF LNG
and Canada, but the largest and fastest growing
market is in China. There is a focus on offering
LNG as marine fuel in Europe and North America
ahead of a significant reduction in permitted fuel
sulphur levels in 2015, but in China the focus is
on the truck market, in Indonesia the focus is on
remote power and mining plants and in Australia
to mines and road train operators. LNG is a very
attractive diesel replacement in many countries
and potentially this market could be as large,
and possibly larger, than the traditional power,
city gas and industrial markets.
The “Golden Age of Gas” is leading to the
“Golden Age of LNG”. LNG exports now account
for 10% of world gas consumption and this
share will grow over the next few year. LNG is no
longer a niche business with producers, mainly in
Asia and the Middle East focusing on the market
in NE Asia but is rapidly becoming global. LNG
liquefaction is no longer the preserve of major
NOC’s and multinational oil companies with
new independent players entering the market.
Instead of LNG having to be delivered into large
import terminals before distribution to multiple
end users it can now be delivered to individual
plants and customers. Nearly every country that
does not currently import LNG seems to have
plans to build LNG receiving terminals. On 7
August the Ministry of Energy in Myanmar gave
eight companies permission to import LNG and
the first small parcel of 1,780 tonnes arrived on
the 23rd August marking Myanmar’s entry as
an LNG importer. Vietnam and the Philippines
hope to follow shortly and, from there being no
LNG importers in South East Asia in 2010, we
could find that all South East Asia countries, with
possible exception of Cambodia and Laos, will
be importing LNG by 2020.
The future looks bright for LNG and we have
come a very long way since the first commercial
shipment in October 1964.
Tony Regan of TRI-ZEN International would like
to thank Arthur Dixon AM for his early history of
liquefaction, BG and Shell for their valued contributions
and, in particular, Philip Weems of King & Spalding
LLP for permitting the inclusion of material from his
paper “LNG at 50, History and Projected Future for
Natural Gas Exports.
LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 21
ENERGY & UTILITIES BUSINESS GROUP
The Energy and Utilities Business Group has regular events open to members, their guests and the invited wider energy-related
community. Activities are often coordinated and shared with other energy-interest groups in an attempt to provide a truly
broad and open forum. Over the past few years events have seen distinguished energy business figures address the issues
that are impacting the business in our region. Speakers have come from across the sector including from multi-nationals,
such as Shell, ExxonMobil, BG and BP; thought leaders such as Lord Oxburgh, economic gurus from Energy Intelligence,
Platts and Petroleum Argus as well as Singapore LNG, DNV-GL, Flex LNG, the Energy Studies Institute and the Indonesian
Petroleum Association.
COMMITTEE MEMBERS
Chairperson
Damian Adams
Simmons & Simmons
Group Representative
Benjamin Arnott
Standard Chartered Bank
Group Representative
Anthony Barker
BG Asia Pacific Pte Ltd
Group Representative
Richard Bailey
DNV GL - Oil & Gas
Group Representative
Philip De Waal
Maxwell Drummond International
Group Representative
Nicola Hewett
British High Commission
Group Representative
Don Mackay
BW Maritime
Group Representative
Bree Miechel
Simmons & Simmons
Group Representative
Tim Rockell
KPMG
Group Representative
Tony Regan
Tri-Zen International Pte Ltd
PAST E&U BUSINESS GROUP EVENTS
3 July 2012:
Energy and Environment
in a Changing Climate
Speaker: Lord Oxburgh KBE
22 October 2012:
Global LNG Market Forward Outlook
Speaker: Matt Schatzman - Executive
Vice President, Global Energy Marketing
and Shipping, BG Group
1 November 2013:
The Outlook for Energy:
A View to 2040
Speaker: Rob Gardner - Manager,
Economics & Energy Division,
Corporate Strategic Planning
Department, ExxonMobil Corporation
Fifty years ago, Shell was proud to
have been involved in the world’s
first commercial liquefaction plant
in Algeria and the voyage of the
first commercial liquefied natural
gas (LNG) cargo. Now, Shell is
at the forefront of the next first for
the LNG industry: floating LNG
(FLNG), which will allow gas to
be liquefied at sea.
LEARN MORE
ABOUT THE
PIONEERING
PRELUDE FLNG AT:
www.shell.com/flng
HALF A
CENTURY OF
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