Understanding the Conflicting Views on Liquefied Natural Gas (LNG) Development Projects and Operations

Contents

Abstract

1. Introduction
2. Situating the Debate on LNG Development
2.1. Benefits of LNG based on the views of proponents
2.2. Giving voice to the critics of LNG Development

3. Environmental Impact Assessment (EIA) and Efforts to limit negative impacts of LNG on the environment

4. Social Impacts of LNG Projects

5. Final Remarks on the LNG debate
5.1. Principles of Social Impact Assessment (SIA)

6. Conclusion

References

Abstract

LNG development is currently amongst the most controversial projects around the world, strongly contested by opponents, generally consisting of environmental activists in communities where LNG operations are planned or on-going, who usually go to great lengths to present to dissuade governments from approving LNG projects, contrary to the views of LNG proponents.Because these conflicting views on the benefits and negative impacts of LNG continue to animate the debate, this paper is intended to examine salient issues of the debate for and against LNG, based on the views of both proponents and critics. The aim is to identify the major sources of the conflicting reactions and perceptions, and propose sustainable solutions for a mutually beneficial and peaceful cohabitation of LNG with the biophysical and social environmental concerns of stakeholder communities.

Two [DWJD1] important points have been established:

- That critics of LNG have been vital drivers of innovation in the LNG sector, forcing LNG developers to continuously thrive to design new environmentally friendly technologies.

- That EIA, an invaluable component of all major projects has evolved greatly in the spatial sense, since its introduction in the USA in the 1960s, but its content and methods have changed little over this time. Thus it still dwells strictly on bio-physical and economic considerations, with limited emphasis on social impacts. This is based on the illusion that money can compensate for all other consequences, and especially true of the cases of LNG projects presented here. In most cases the social impacts considered have been limited to such aspects as employment, health, safety, livelihoods, leaving out important cultural, spiritual, relational, emotional or psychological issues; an ominous omission.

This paper concludes that though LNG is a relatively new comer in the global conventional energy sector, it has been growing from strength to strength due to its importance in meeting surging contemporary and future global energy demands, in the face of dwindling oil resources, volatile oil markets, and the high cost of other clean energy sources such as nuclear, solar, and wind energy. It has therefore been recommended that by adopting the guidelines and principles for Social Impact Assessment (SIA), improving techniques of SIA and the inclusion of all major local stakeholders in all stages of LNG projects from planning to implementation (effective stakeholder participation) the rift between LNG development and community resistance could be significantly narrowed.

1. Introduction

Liquefied Natural Gas (LNG), made up essentially of methane gas^[1] that has been cooled to approximately -161°C (Sakmar 2010; Foss 2007; USDOE 2009; Al Busaidy 2008) or 261º F^[2], at which point it condenses to a liquid for high density transport from places like the Middle East, Russia, and Indonesia where it is produced^[3], made its entrance into the international energy scene in 1964 when the first liquefied natural gas (LNG) export was made from the Arzew GL4Z plant (or Camel plant) in Algeria to customers in the UK and France (Al Busaidy 2008). However, the first LNG plant was built in West Virginia, USA, in 1912 and began operation in 1917 (Foss 2007). Initially, most natural gas was consumed in the same region in which it is produced due to the costs and impracticality of transporting natural gas via pipeline over long distances (Sakmar 2010). The natural gas markets have historically been concentrated in the following three distinct regions: North American/Atlantic Basin Region, European Region and the Asia/Pacific Region, and by all estimates, global LNG trade is projected to accelerate over the next 25 years^[4]. Over the past decade, LNG has grown to become a significant component of the worldwide energy supply mix and recent reports suggest that global LNG demand is predicted to increase by 10% / year through to 2015^[5], especially with the oil and gas-rich Arab states coming into the scene (Al Ghanjah 2011). The fuel is now being developed and shipped or piped around the world in recent times more than ever before, requiring the construction of new facilities such as liquefaction plants and terminals, storage terminals and ports, etc. LNG experienced an unprecedented growth in demand by 22% in 2010, with countries like Qatar producing at its maximum capacity of 77 million tonnes per annum (MTPA) (IGU 2011).

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Figure 1. Worldwide Growth in LNG Demand [DWJD2] (1970 – 2004)

Source: Cedigaz (1970-1992); Cedigaz, BP Statistical Review of World Energy 2006; USDOE (2008)

The advantage of LNG is that it occupies approximately 1/600th of the volume of natural gas thereby creating more options for shipment and storage (Oman LNG LLC 2010 1, 2 & 3; Sakmar 2010; Al Busaidy, 2008). Figure 1 reveals that since 1970s, Japan has dominated the market demand for imported energy sources as well as LNG, and thus the major client of the LNG business for 30 years; but the size of the market and the number of importers is growing steadily (USDOE 2008). However, the LNG market was poised to experience a down-turn situation in 2011 because major importers like the USA turned from LNG to other domestic unconventional energy sources, as well as diminishing demand from the EU due to sluggish economic growth (IGU 2011). This downturn was however never experienced because the tragic earthquake which hit Japan in March 2011 became a “blessing” for the LNG industry; Japanese municipalities/local authorities temporarily shutdown all the 54 nuclear powered plants which led to the country having to rely on LNG to fill its energy vacuum, resulting in a 12% (about 79 MT) increase in Japan’s demand for LNG, and a further global increase in demand of about 8% in 2011 (a new high of 241.5 MT.), with 25 countries actively involved (IGU 2011).

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Figure 2. LNG Trade volumes 1980 - 2011

Source: Cedigaz; USDOE; IGU (2011)

On the supply side, global LNG production has been categorized into two broad regional production and supply basins, namely: the Asia-Pacific Basin and the Atlantic Basin (USDOE 2008). In the Asia-Pacific Basin by 2006, Indonesia was the largest LNG producer and exporter, accounting for about 21 percent of the world’s total LNG exports, with the majority of its LNG being imported by Japan, with smaller volumes going to Taiwan and South Korea. Also within this basin, Malaysia, the world’s third-largest LNG exporter, ships primarily to Japan with smaller volumes to Taiwan and South Korea and about 90 percent of Brunei Darussalam’s output goes to Japan (Figure 3).

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Figure 3. Major LNG trade flows across the South China Sea (2011)

Source: U.S Energy Information Administration (EIA) URL: https://www.eia.gov/maps/

Meanwhile, in the Atlantic basin, Qatar emerged at the top of the global LNG supply chart, slightly exceeding Indonesia. Algeria was the world’s third largest LNG exporter serving mainly Europe (France, Belgium, Spain, and Turkey) and the United States via Sonatrach’s four liquefaction complexes (USDOE 2008). Russia became the newest Asia/Pacific Basin exporter, with its first LNG plant on Sakhalin Island off the country’s east coast, which was inaugurated on 18 February 2009, and had it first cargo loaded onto the LNG carrier Grand Aniva at the end of March 2009 (USDOE, 2008; Mosolova and Dyomkin 2009). No new country had joined the club of LNG exporters in 2011 since Peru became the 18th LNG exporter in 2010.

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Figure 4. LNG Trading by the geographic region (basins) in which it takes place (Line thickness indicates volume of trade and arrow heads indicates destination and tails, the source)

(Source: US Department of Energy – DOE, based on Energy Information Administration and British Petroleum, URL: https://energy.gov/sites/prod/files/2013/04/f0/LNG_primerupd.pdf )

Figure 4 reveals that the largest volume of trade in LNG takes place in Asia Pacific Basin (Both imports and exports), with S.E. Asia being the largest producer, seconded by the Middle East, while N.E. Asia (predominantly Japan), emerges as the major importer. The Middle East and Africa mainly supply the Atlantic Basin while North America, the less significant supplier but major importer - the USA -supplies mainly Japan from its LNG liquefaction plant in Alaska.

By the end of 2011, the configuration of the global LNG had changed drastically. 18 countries were exporting their gas resources as LNG while five countries, namely Belgium, Brazil, Mexico, Spain and the United States, were re-exporting LNG previously imported from another source. Moreover, Qatar had moved to become the undisputed leader in LNG production, supplying 75.5 MT of LNG to the market in 2011 – nearly one third (31%) of global supply and Malaysia also overtook Indonesia as the second largest LNG exporter in 2011(Figure 4). Together with Australia, these three Pacific Basin exporters accounted for about 27% of the world’s LNG supply (IGU 2011). Algeria was relegated to 7th, losing 3 places to Australia, Nigeria and Trinidad and Tobago respectively.

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Figure 4. Total production capacity and export of the 18 Global LNG producers 2006 - 2011

Source: US Energy Information Administration (USEIA) and British Petroleum (BP)

LNG development[DWJD3] (production and supply) has therefore experienced an exponential growth globally due to improved liquefaction techniques and handling convenience and as a result of these advantages, nations are increasingly viewing LNG as an important fossil fuel for a sustainable future. Considered a clean-burning fuel, many policy leaders and LNG operators have suggested that LNG can play an important role as the world struggles to meet growing energy demands using more environmentally sustainable fuels. However, critics claim that the safety and environmental impacts, including life-cycle emissions of LNG, may nullify any clean-burning benefit LNG might otherwise provide (Sakmar 2010), while communities at large have generally expressed more concerns about environmental and human health and safety issues associated with LNG processes. Based on available literature therefore, this paper attempts to: effectively analyse the conflict in order to enhance understanding on the positions of both camps thereby proposing options that may narrow the rift.

2. Situating the Debate on LNG Development

2.1. Benefits of LNG based on the views of proponents

Proponents of LNG have enumerated ambitious positive environmental, economic and financial benefits to be derived from LNG development, and in their views, LNG is no doubt the fuel that will reduce global over-reliance on the so-called dirty fossil fuels (Oman LNG LLC, 2010 (1, 2, 3); Peru LNG Project (n.d); Calypso LNG project, 2007; etc.). It is generally noted that LNG is clean, odourless, colourless, non-combustible, non-corrosive and non-toxic (Peru LNG project EIA; Kaganawa, 2007; Oman LNG LLC 2008; 2010). Therefore, LNG will not pollute land or water resources, and if LNG is released on water, it evaporates with no residual trace, as well as will not cause an explosion in case of a tank rupture [DWJD4] because it is stored at ambient pressure (Peru LNG project EIA, n.d.). This however, can be viewed as an attempt by LNG operators to mask the real danger because in case of a leak, this highly volatile gas might be diluted with air, the natural gas/air mixture would become potentially explosive when it comes in contact with any source of ignition^[6].

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^[1] Also contains Ethane, Propane, Butane, etc. (see footnote 37 for reference)

^[2] Natural Gas Ports and Pipelines : Putting Our Economy , Communities and Quality of Life at Risk available online at www.Nolng.net

^[3] Natural Gas Ports and Pipelines : Putting Our Economy , Communities and Quality of Life at Risk available online at www.Nolng.net ; accessed in December 2011

^[4] CERA LNG Roundtable 2008

^[5] Gulf Times, Aug. 19, 2008

^[6] Retrieved online at http://www.beachapedia.org/LNG_%28Liquified_Natural_Gas%29 accessed on 08/31/12