Erin Dyer, Daniel Reinbott, Melanie Williams

project. It is the gas suppliers, some of whom may be affiliates of the LNG project
company, who will be parties to a production sharing or other concession contract
and who are involved in the exploration and production of natural gas.

4.3 Liquefaction
The liquefaction plant is the second of three large infrastructure projects involved in
the LNG business. After production, natural gas is transported by pipeline to a
liquefaction plant. Liquefaction is the most complex and capital-intensive
component of the LNG value chain, and involves super cooling the natural gas to
approximately –160°C, at which point it condenses into a liquid. The liquefaction
process occurs in units, commonly referred to as ‘trains’, and during the process
impurities such as nitrogen, oxygen, carbon dioxide and water are stripped out of the
natural gas. Approximately 10% of the natural gas received by a liquefaction plant is
consumed for its own operations.
The liquefaction link in the value chain may be performed by the gas producers
as part of an integrated natural-gas-to-LNG operation, or by an independent third-
party liquefaction entity under a tolling arrangement. The table below sets out
details of existing, and proposed liquefaction plants, along with those presently
under construction (including the plants detailed above).

Region Existing* Under Proposed*

construction*

Asia 9 2 7
Europe 1 1 1
Middle East and Africa 21 7 8
The Americas 4 1 2
Total 35 11 18

Source: Petroleum Economist LNG Data Centre 2008

*Status defined as follows:
Existing – Plant is currently built and producing LNG for the market.
Under construction – Plant has had all the necessary approvals and has started
construction.
Proposed – Any one of the following: plant has received all necessary approvals
but has not started construction; plant has received approval from local or
national government; plant has received firm financial backing; or plant has
had heads of agreement or letter of intent to deliver LNG to a third party.

After constructing the first liquefaction train, a liquefaction facility operator is

often able to add additional trains (and thus increase production capacity) at a lower
incremental cost. Significant unit-cost reductions resulting from economies of scale
have led liquefaction plant operators such as QatarGas to upsize their facilities. The
‘megatrains’ presently under construction and proposed by QatarGas are the largest

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