Energy Investor Monthly – April/May 2025

INSIGHTS OF THE MONTH

U.S. LNG – Feeding the World’s Demand for Energy

Liquefied Natural Gas (LNG) is essentially natural gas (methane, CH4) that has been purified and then cooled to a liquid state, to about -260º F, for more efficient transportation and storage. In the U.S., most of the LNG produced is transported to destinations around the world by specially designed ships. Once the LNG reaches its final destination, it is re-gasified through careful reheating. It is then transported via pipelines or trucks to homes and businesses for heating, cooking, electricity generation, and other industrial uses.

The U.S. is currently the largest producer of global LNG, exporting nearly 11.9 billion cubic feet per day (Bcf/d) from more than 170 LNG facilities. Most domestic facilities produce LNG for export, while some provide natural gas to the U.S. interstate pipeline system or local distribution companies. Others are used to more efficiently store natural gas for later use during periods of peak demand.

When LNG is converted back to natural gas, it serves as an alternative to coal and diesel fuel, significantly reducing pollutants like sulfur dioxide, carbon monoxide, and particulate matter. More importantly, when compared to coal and other hydrocarbons, natural gas emits substantially lower greenhouse gas CO2 emissions. For this reason, LNG and the natural gas produced from it are considered clean energy, although there remains an active debate on their impact on total emissions.

Regardless of which side of this debate one favors, the fact remains that natural gas is a cleaner-burning, abundant, and affordable energy source, particularly for U.S. consumers.

Transportation of LNG

Because natural gas (methane, CH4) is, well, a gas, pipelines are still the most efficient way to transport large volumes domestically – from the wellhead to the end consumer. In regions without pipelines or an LNG infrastructure, Compressed Natural Gas (CNG) is the next most viable option for storage and transportation. Here, the natural gas is compressed (but not cooled) to less than 1% of its original volume. The CNG is then stored and transported in specially designed metal cylinders to be used for less intensive industrial uses and as a fuel for cars, trucks and buses.

In regions without pipeline infrastructure or across greater distances, however, the most economical way to move large quantities of natural gas is by first converting it to LNG. This is because, on a volume basis, LNG is roughly 1/600th that of natural gas. Also, from a safety standpoint, in the event of an unintended release or spill, LNG converts rapidly back into natural gas, which quickly dissipates into the atmosphere, thereby reducing the potential fire or explosion risk.

LNG Trains – What Are They?

The LNG industry has adopted a “train” analogy to more easily describe the series of processes and equipment that are used to remove any impurities from the raw natural gas stream as it is converted into LNG. Each stage is arranged sequentially, like the cars of a railroad train.

While the process used to create LNG can vary, they all tend to follow a similar sequence and use comparable equipment. When combined, LNG “trains” can vary in their complexity, depending on the purity and quality of the methane gas they are liquifying.

Initial Treatment

Before natural gas can be cooled to create LNG, it must first be processed to remove any impurities, which could damage expensive equipment and cause issues during the liquefaction process. Just a few of the impurities include dust, water, acidic gases such as hydrogen sulfide (H2S) and carbon dioxide (CO2), mercury, and even associated natural gas liquids. This initial treatment process typically involves cooling the natural gas using industrial processing methods, including amine absorbers and dehydrators, to remove any pollutants.

Distillate Removal

Once the initial treatment is completed, the natural gas moves to the next stage, where the heavier hydrocarbons, known as “distillates”, are removed, or “stripped.” This process involves alternating between heating and cooling the gas stream. Once removed, the distillates are stored on-site before being transported for further processing or sale. It is during this part of the LNG process that the remaining gas stream is cooled to around -31°F in a technique known as propane pre-cooling. This is because propane (C3H8) is used as the primary refrigerant to further cool the now-purified methane gas during the final LNG liquefaction phase.

Liquefaction

Finally, the now purified and stripped natural gas is ready to be liquefied. This occurs in a unit known as a Main Cryogenic Heat Exchanger (MCHE). The MCHE uses a mixture of refrigerants to cool the gas using a two-stage process. In the first stage, the liquid refrigerant moves with the gas stream through the MCHE, where the refrigerant absorbs heat and then vaporizes, further cooling the remaining methane. This vaporized refrigerant is then recycled through the shell of the MCHE, where it continues to extract heat from the remaining gas stream. Once the remaining natural gas is cooled to -162°C (-260°F), or just below the temperature at which pure methane becomes a liquid, it is ready to be moved into storage. Again, at this point, the converted natural gas, now LNG, has only about 1/600th the volume it had at room temperature.

Storage

LNG is typically stored in specially made tanks or containment vessels located above or below ground or in LNG carriers. They are constructed as a tank within a tank, similar to a thermos bottle, with the inner tank being made of a nickel alloy designed to withstand low temperatures and an outer tank made of pre-stressed concrete or carbon steel. This double-tank design helps prevent leaks and is self-refrigerated, as any LNG that boils away is removed and then recycled back into powering the cooling units. LNG storage tanks typically hold around 160k m³ of LNG, or roughly 3.5 billion cubic feet (Bcf) of natural gas.

From here, the LNG can finally be loaded onto ships (or sometimes trucks) and transported to locations worldwide or to a regasification site, where the process is reversed.

U.S. LNG – Feeding the World’s Energy Demand

U.S. LNG has become a critical energy resource by helping to satisfy the global demand for natural gas while allowing it to be transported in large volumes economically to anywhere in the world where it is needed. All without the need for an extensive pipeline infrastructure.

Thanks to the ongoing energy revolution here in the U.S., over the last 20 years, the United States has moved from being a net importer to the world’s largest exporter of LNG. This shift has allowed the U.S. to become the global leader in providing an abundant, secure, and reliable source of natural gas. In fact, the rise in U.S LNG exports has increased the world’s access to cleaner power generation while, at the same time, it has been a significant source of reducing global greenhouse gas emissions. We continue to believe that investments in U.S. LNG facilities, along with the domestic energy midstream companies that supply and operate them, are the right solution for both investors and the global economy.

Sources:

• https://cameronlng.com/wp-content/uploads/2018/10/Natural-Gas-and-the-Liquefaction-Process-CLNG.pdf
• https://www.clarksons.com/glossary/regasification/
• https://en.wikipedia.org/wiki/Compressed_natural_gas
• https://www.cheniere.com/about/lng-101
• https://www.icc-commonwealth.com/lng-tanks-construction
• https://www.eia.gov/energyexplained/natural-gas/liquefied-natural-gas.ph

ENERGY MARKETS BY THE NUMBERS

U.S. Total Crude Oil Production and U.S. Crude Rotary Rig Count (as of April 25, 2025):

1. West Texas Intermediary (WTI) oil price was $63.02 per barrel (-8.5% m/m)
2. U.S. oil production was 13.5mm bbl/d (-0.8% m/m)
3. U.S. oil rig count was 483 (-0.2% m/m)

The U.S. Commercial Crude Oil Inventories (excluding those in the Strategic Petroleum Reserve) and Inventory Changes (As of April 25, 2025):

• Inventory increased by 616 thousand barrels month over month to 440.4 million barrels (2.1% below the 5 year average).
• Total crude stockpiles, including the Strategic Petroleum Reserve (“SPR”), increased by 2.7 million barrels month over month to 839.0 million barrels.

U.S. Imports and Exports (as of April 25, 2025):

1. U.S. crude oil 4-week average imports were 5.5 mm bbl/d, down 1.0% month over month.
2. U.S. crude oil 4-week average exports were 4.0 mm bbl/d, down 2.5% month over month.

U.S. Refinery Inputs and Utilization Rates (as of April 25, 2025):

1. U.S. crude oil refinery inputs averaged 16.1 mm bbl/d. Four-week inputs averaged 15.8 million bbl/d, less than 0.1% lower than the same time a year ago.
2. Refinery Utilization Rate was 88.6%, up from 88.0% for the previous month. This is higher than the same period last year, which was an 87.5% utilization rate.