Energy and natural resources
LNG (liquefied natural gas)
Natural gas cooled into a liquid so it can be shipped across oceans.
Facts checked against sources onWhat does LNG (liquefied natural gas) mean?
LNG is natural gas cooled to about minus 162 degrees Celsius, which turns it into a liquid about 600 times smaller in volume, so it can be carried by special ships. The chain has three expensive steps: liquefaction plants (trains) at the export end, shipping, and regasification terminals at the import end. The United States, Qatar and Australia have been the largest exporters; Japan, China, South Korea, India and Europe are large buyers. Example: gas bought at 3 per million British thermal units (MMBtu), plus 2.5 for liquefaction, 1.5 for shipping and 0.5 for regasification, arrives at a cost of about 7.5. Much LNG is sold on long-term contracts, often priced against oil, with the rest traded on the spot market.
Where does it come up in case interview prep?
- The Gulf for case solversLesson in Regions for case solvers: the big markets of the world
- How oil and gas works: from the well to the fuel pumpLesson in Oil and gas
- Oil and gas economics and supply chain: breakeven, refining margin, operationsLesson in Oil and gas
- Oil and gas players, trends 2024 to 2026, and how to crack the casesLesson in Oil and gas
Related terms
- Barrel of oil equivalent (boe)A unit that converts gas into barrels of oil by energy content, so oil and gas can be added together.
- NetbackWhat a producer keeps per barrel after transport, royalties and production costs.
- Force majeureA contract clause that excuses a party when an extraordinary event outside its control stops it from performing.
- Capex (capital expenditure)Spending on long-lived assets such as machines and buildings.
- Lifting costThe cost of producing oil or gas from wells that already exist, per barrel.
- Full-cycle breakevenThe oil price a project needs to cover all its costs, including building it, and earn its required return.
- Fiscal breakeven oil priceThe oil price a government needs to balance its budget.
- Crack spread (refining margin)The gap between the price of crude oil and the prices of the fuels made from it.
Learn it in context
See LNG (liquefied natural gas) at work in a lesson from Regions for case solvers: the big markets of the world, with checks as you go.
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