Market Snapshot: LNG projects have an energy efficiency advantage compared to other LNG producers in warmer locations

Release date: 2017-10-06

Canada could have a cost advantage in liquefying natural gas due to lower ambient temperatures compared to other competing regions. Facilities in cooler climates have lower operating costs for liquefaction.

Natural gas condenses into a liquid state when cooled to a temperature of -162 degrees Celsius. Liquefaction is the process of converting natural gas from a gas state to a liquid state. Higher ambient temperatures decrease the efficiency of the liquefaction process. Specifically, the natural gas turbine generators used to power a liquefaction plant’s processes are more efficient at lower temperatures.

British Columbia has a cooler average ambient temperature than most other LNG-producing regions such as Qatar, Australia and the United States (U.S.) Gulf Coast. As ambient temperature decreases by one degree centigrade, energy efficiency for power consumption increases by 1.7%.Footnote 1 Locations such as Prince Rupert and Kitimat in northern BC have an average temperature of 7 degrees Celsius. Therefore, a project located somewhere with an average temperature 20 degrees warmer would have a 34% energy efficiency disadvantage. The table below illustrates the approximate energy efficiency advantage that a liquefaction facility in BC could have compared to other regions, because of the difference in average temperature.

Table 1. BC’s energy efficiency advantage
for LNG liquefaction

Location Average temperature BC’s energy efficiency advantage
Australia 27 degrees Celsius 34%
Qatar 26 degrees Celsius 32%
U.S. Gulf Coast (Louisiana) 22 degrees Celsius 26%
Source

Source: LNG in British Columbia, an Update – Presentation given by Fazil Mihlar, Assistant Deputy Minister, Oil and Strategic Initiatives Division, Ministry of Natural Gas Development, February 2015.

While cooler ambient temperatures can lower liquefaction costs, very cold temperatures (-30 to -35 degrees Celsius) could increase total liquefaction costs. This is related to more facility electricity usage and the use of propane for precooling. In very cold temperatures, the production of LNG increases and efficiency increases, but this is offset by higher electricity consumption.

Efficiency increases from cooler temperatures are one cost factor for projects, but companies consider many factors when making investment decisions. The National Energy Board report Canada’s Role in the Global LNG Market – Energy Market Assessment explains some of the other advantages and challenges facing LNG facilities in Canada.

 

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