Cooling natural gas down to around minus 160°C liquefies and shrinks it to 1/600th of its original size. This LNG can then be shipped cost-effectively to places too far away from the gas field to be reached by pipeline. When the LNG reaches its destination, the process is reversed: the LNG is warmed, becomes a gas again and is fed into the local natural gas grid. LNG technology allows more remote gas fields to be developed, lets more countries use cleaner-burning natural gas (see below) and gives users a wider choice of gas suppliers.
Directly or indirectly, we owned approximately 9% of the world’s LNG capacity as of March 2009. That is more than any other international energy company, and enough to meet the natural gas needs of around 40 million households. In 2008 and early 2009, we increased our capacity by nearly 25% compared to 2007 with Sakhalin II in Russia coming on line (see Sakhalin) and the fifth LNG unit at the North West Shelf project in Australia. Qatargas 4 and Woodside’s Pluto Train 1 in Australia (both under construction) will add the same amount of capacity again when they come on stream.
LNG TO INDIA AND CHINA
Between now and 2050, China and India are each expected to add more new power-generating capacity than the USA has in operation today. Both have large coal reserves and little domestic natural gas. So importing more natural gas to India and China to meet some of this power demand will be important for tackling local air pollution and slowing the rapid growth of their CO2 emissions. LNG is part of the answer. In 2008, we increased our LNG sales and supply commitments to both countries.
In India, the Hazira LNG terminal, where we are the majority shareholder, is only the second facility in the country for receiving and regasifying LNG. It began operating in 2005.
In China, we made two new long-term agreements in 2008 to import LNG. The first involved Qatargas, Shell and PetroChina. It was to supply 3 million tonnes of LNG per year to China from the Qatargas 4 LNG project for 25 years. Shell and PetroChina made another agreement to supply up to 2 million tonnes of LNG a year to China for 20 years, mainly from Shell’s interests in Western Australia. Together these agreements will supply enough natural gas to meet the power needs of more than 20 million households a year in China. We also participate in the Australian North West Shelf joint venture. It already supplies 3.3 million tonnes a year of LNG to China and delivered China’s very first cargo of LNG in May 2006. Another project in which we are a shareholder – Malaysia LNG Tiga – is expected to begin supplying 3 million tonnes a year of LNG to China during 2009.
