The Role of Liquified Natural Gas in the Global Energy Mix

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The Role of Liquified Natural Gas in the Global Energy Mix

You have probably heard of it. Liquefied Natural Gas serves as a solution for locations far away from pipelines. It is natural gas that has been cooled to a liquid state, at about -162° Celsius, for shipping and storage and in recent times it is considered an alternative because of its lighter effect on the environment and the sudden closures of pipelines due to the Ukraine war. Is LNG here to stay? 

Table of Contents

Is LNG a fossil fuel?

According to the U.S. Energy Information Administration, burning natural gas (including LNG) produces fewer emissions of sulfur dioxide, nitrogen oxides, and particulate matter compared to coal and oil. First, it emits fewer pollutants when burned, which can improve air quality and reduce the health risks associated with air pollution. Second, LNG has a higher energy density than other fuels, which means that it can provide more energy per unit of volume. This makes it a more efficient fuel source, especially for transportation.

Also, based on heat content, the carbon dioxide emissions from burning natural gas are between 50 and 60 percent lower than those from burning coal. Hence, switching to natural gas from coal or oil can aid in lowering greenhouse gas emissions and limiting climate change. It’s crucial to keep in mind that natural gas is still a fossil fuel and produces greenhouse gases when used, making it unsuitable as a long-term source of energy.

Before a complete switch to renewable energy, it can assist rising power demands in industrialized and developing nations.

What is the actual situation of the LNG industry?

The rise of LNG as an energy source has been driven by several internal and external factors, including increasing demand for energy, the desire to reduce greenhouse gas emissions, and the growth of natural gas production in countries such as the United States and Australia. Nowadays, the former is the biggest exporter of LNG worldwide. We cannot forget to mention the impact the pandemic had on the industry as the closure of important pipelines and the need to decrease reliance on Russian gas is pushing for the construction of liquefied natural gas terminals throughout Europe.

map of lng infrastructure across Europe

Note: Some of the terminals, including both planned terminals in Germany, have already opened at the time of writing this article.

Source: European Comission

Nowadays, the global energy mix is composed of several types of energy. In the case of liquified natural gas, the proportion of its use has seen a high increase in the last years. Natural gas now accounts for about a quarter of global energy generation. Aditionally, its production has increased by nearly 3% in 2021, reversing the decline in 2020 and buyers are opting for it after the decrease in price in the last months.

graph containing progression of prices for liquified natural gas in 2022

Source: International Energy Agency

How is the future looking for Liquified Natural Gas?

As we mentioned earlier, liquified natural gas is considered a great alternative for medium-term energy production and as an aid to move towards the energy transition. Additionally, as we see in the map above, the construction and establishment of liquified natural gas terminals is increasing in Europe. We also have to consider government actions in the form of treaties and policies that may not include liquified natural gas in the clean energy mix. 

According to Shell, Asia is expected to lead growth in LNG demand through 2040, seeing approximately 70% in growth and Term LNG contracts more than doubled from 2020 to 2021. The industry is growing from inside while expanding its infrastructure and demand is expanding at the same time. However, it seems that growth will be determined by policy makers.

Conclusion

To recap,  liquefied natural gas (LNG) has emerged as a viable alternative to traditional fossil fuels due to its reduced emissions and higher energy density. While LNG is still a fossil fuel and not a sustainable long-term energy solution, it can serve as an intermediate energy source in the transition to cleaner energy.

The rise of LNG as an energy source is driven by multiple factors, including the increasing demand for energy, the need to reduce greenhouse gas emissions, and the growth of natural gas production in countries like the United States and Australia. However, the future of the LNG industry will depend on a variety of factors, including government policies and climate change mitigation efforts. As the world seeks to transition to a low-carbon energy future, it will be essential to evaluate the role of LNG in the energy mix and promote sustainable development.

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