Energy for the 21st Century

Energy for the 21st Century

Opportunities and Challenges for Liquefied Natural Gas (LNG)

New Horizons in Environmental and Energy Law series

Susan L. Sakmar

Countries around the world are increasingly looking to liquefied natural gas (LNG) – natural gas that has been cooled until it forms a transportable liquid – to meet growing energy demand. Energy for the 21st Century provides critical insights into the opportunities and challenges LNG faces, including its potential role in a carbon-constrained world.

Chapter 2: The LNG value chain

Susan L. Sakmar

Subjects: environment, energy policy and regulation, environmental law, law - academic, energy law, environmental law


The intense interest and growth in LNG trade over the past decade warrants a brief discussion of the entire LNG value or supply chain since the LNG “boom” has affected every aspect of the business. In the past decade, the pressure on the LNG industry to successfully navigate the numerous operational, commercial and environmental issues related to the LNG value chain has been incredibly intense. On the construction end, there was intense pressure on the industry to construct new LNG infrastructure to meet rising demand. The demand for new liquefaction and regasification facilities led to constraints in engineering services and bottlenecks of delivery of certain equipment such as cryogenic storage. The intense demand affected the cost and schedule of construction and operations and many in the industry complained of skyrocketing costs and equipment delays. Nonetheless, during this time period, liquefaction capacity witnessed significant growth, as did the number of receiving terminals in construction, expansion projects and proposals. As demand for LNG grew, so too did the number of players seeking to enter the fast-growing LNG market. The growth led to a more competitive global LNG market, which in turn drove companies to seek cost savings and efficiencies along the entire value chain. The LNG value chain comprises a complex set of activities, all of which are capital intensive and require specialized knowledge in order to execute successfully.1 The LNG value chain begins with the drilling and production of natural gas from subsurface gas reservoirs – usually offshore.

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