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Hydrogen Will Disrupt the LNG Market

Hydrogen is the ultimate energy carrier. It can be produced carbon-free with renewables like solar and wind. It can also be stored and transported for multiple end-uses. On the other hand, liquified natural gas or LNG can do the same, but it’s a fossil fuel and emits CO2. Essentially, LNG is natural gas that’s been cooled down to liquid form for ease of storage and transportation. And that’s exactly why hydrogen will disrupt the LNG market.

LNG

LNG really got its start in the US back in 1959. The world’s first LNG carrier sailed from Lake Charles Louisiana to deliver LNG to Canvey Island, UK. This demonstrated that LNG could be safely shipped across the ocean with large quantities.

LNG carrier shipping liquefied natural gas across the ocean
LNG Carrier

As the market for LNG grew larger, it developed into three main global trading regions, Asia Pacific, Europe and the Americas. Currently, Japan is the largest importer of LNG, followed by South Korea and Taiwan.

In the 1970s, the US was an importer of LNG as supply of natural gas was constrained. However, in the 1980s, US LNG terminals were either mothballed or underutilized due to an oversupply. Then again, starting in the 1990s, a shortage was forecasted and LNG terminals were reactivated.

However, by 2010, it was apparent that the US was going to be a net LNG exporter due to the shale gas revolution. The shale gas revolution disrupted the natural gas market and kept prices low. That started a wave of approvals for natural gas liquefaction facilities to export LNG. Cheniere Energy (NYSE: LNG) is the largest exporter of LNG in the US.

U.S. LNG imports and exports from 1985 to 2019

Overall, the LNG market has been able to help meet strong demand for natural gas, especially in Asia, as pipeline infrastructure is lacking or insufficient to provide enough supply. Top consumers like Japan, South Korea and Taiwan are naturally constrained from importing pipeline natural gas.

Pipeline Infrastructure: Natural Gas (Red) – operating (solid), planned (dashed)

In 2020, the LNG market had a value of about $14 billion. Power plants make up a large part of the demand for LNG. That’s expected to grow as countries move away from coal.

Hydrogen

Hydrogen can be stored and shipped as well. However, there are a lot of things to consider for long-term storage of hydrogen. Hydrogen can cause embrittlement in steel. Compression of hydrogen is also more energy intensive than it is for natural gas. But now, the industry is looking at “green ammonia” as a way to solve those issues.

Green ammonia is produced just like hydrogen but with an extra step. Renewable energy, like solar or wind, is used to power electrolyzers to produce hydrogen. The solar or wind is also used to power an air separation unit to extract nitrogen from air. Through the Haber-Bosch process, the hydrogen and nitrogen are used to produce ammonia (NH3).

Green ammonia production and end uses
Source: Argus

Ammonia is more energy dense than hydrogen. As a liquid, ammonia has about 70% more energy content than hydrogen at a cryogenic state. That being said, hydrogen liquefies at a much lower temperature than ammonia, meaning more energy is needed. All in all, you can pack more energy with ammonia than hydrogen. Think of ammonia as a great energy carrier of hydrogen.

One of the reasons why there’s interest in green ammonia is because it could also serve as marine fuel. With stricter environmental regulations on emissions, the International Maritime Organization is looking to reduce the reliance on dirty bunker fuel that ships burn. If you correctly combust ammonia, it emits no CO2, just nitrogen and water. Ammonia fuel cells are also an option for powering ships.

Viking Energy supply vessel planned to run on ammonia fuel cells
Viking Energy Supply Vessel is Planned to Run on Ammonia Fuel Cells

Otherwise, when ammonia is shipped to its destination, it can be cracked into nitrogen and hydrogen. Hydrogen then can be supplied as a clean fuel for end-use, including many of the industries that LNG supplies.

Disruption

So will hydrogen disrupt the LNG market? There are some drivers that could make that happen.

  • Fracking ban
  • Continual decline in cost of renewable energy
  • Accelerating decarbonization of industries
  • Ammonia production technology breakthrough

The figure below shows a comparison of fuels, including LNG, ammonia and hydrogen, produced from natural gas. From a mass perspective, which matters in shipping, ammonia is competitive with LNG. Although, from an energy perspective, LNG is the lowest cost.

Production and transportation costs of fuels, including LNG, ammonia and hydrogen
Production and Transportation Costs with Effect of Adding Environmental Costs

However, keep in mind that if low-cost wind or solar is the feedstock for production instead of natural gas and those drivers happen, then that changes the game. That’s when you’ll see a huge shift in markets.

I’ve talked about green hydrogen being a game changer – check out my post here. Now watch out for green ammonia.

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