LOGISTICS AND COSTS IN LNG OPERATIONS

Liquefied natural gas has been used to date as an economical source of supply for peak-load energy demands. It is a premium priced fuel to consumers, but offers the advantage of reducing air pollution in the future.Large gas reserves necessary to sustain LNG operations are remote from the two principal markets of Japan and the U.S.A. Higher prices have been negotiated for gas landed in the U.S.A. than elsewhere, but the increase in world demand is expected to see the cost of LNG landed in Japan at substantially increased levels by 1980.The largest LNG project to date is the supply of 1,500 MMcfd to the U.S.A. from Algeria. Starting after 1974, this will be the second base -load energy application for LNG. This trend is likely to become more common.LNG technology has become highly developed. New tankers have been constructed, the largest contracted to date being of a 750,000 barrel capacity. Provision of tankers will account for approximately one half of the funds necessary to establish any Australian operation.Future LNG demand will be strong, and considerable forward planning is needed. If an Australian commitment to supply LNG is negotiated in 1972, no revenue is likely to flow until 1976 or 1977. Very large capital expenditures are involved, and an extensive amount of long term debt finance will be required.The indicated minimum Australian venture, supplying 500 MMcfd, would consume five trillion cubic feet of reserves over 20 years. At the current Japanese landed prices for LNG, the economics of such a project are viable. With an increase in the scale of operations, or negotiation of the prices to be paid in the U.S.A., an Australian LNG project appears highly profitable.