Is Liquid Natural Gas a sitting duck for terrorism?
Big, slow moving, expensive, explosive and highly disruptive if taken offline. This description of LNG looks and sounds vulnerable.
Few bits of infrastructure are as enticing as slow-moving leviathan Liquid Natural Gas tankers or their stationary coastal support facilities.
Given the ease with which small-scale Somali pirates have been wreaked havoc on Europe-Asia container shipping in recent years off the Horn of Africa it’s worth heeding the risk.
This is particularly so given that LNG is rapidly showing itself to be a financial albatross as well– particularly in Asia.
Given the shorter distances and more concentrated populations in Asia, a multilateral gas pipeline network for the region makes much more sense.
At present Australia, Indonesia, Papua-New Guinea are building or expanding LNG infrastructure to ship gas to China, Japan and South Korea. This represents a huge mistake both on economic and security grounds.
LNG is already suffers from excruciating capital costs. This in turn has required long-term delivery contracts, with prices distorted by pegs to an unrelated commodity: oil.
In addition to being safer, cheaper and more secure, pipelines also provide multi-point delivery of natural gas to more efficient markets. LNG can’t do this. Instead, LNG locks in high natural gas delivery prices for decades.
In coming years, however, downwardly-compounding renewable energy technology costs will ‘cross over’ those of natural gas. Consumers will pay the price for this misallocation of resources, not just for the gas — but also for the single-generation albatross infrastructure built to deliver it.
The disadvantages compound when the high greenhouse gas emissions of LNG are taken into account as well as the environmental damage LNG export infrastructure has caused to such irreplaceable natural wonders like Australia’s Great Barrier Reef.
But the silly economics of LNG really unravel when its clear ‘sitting duck’ security risk is factored in.
This is particularly so given that the shortest route for LNG tankers between Australia and Northeast Asia lies in passing through narrow waterways around Borneo, Java and Mindanao. These are three areas where bandits have terrorized ocean-going trade.
When all this risk is added up, pipelines make better sense.
Natural gas is a critical transition fuel for the next 5-15 years. After that point, natural gas will be relegated to the margins of the world’s energy markets. After 2035-2040 or, natural gas will be used merely as a legacy fuel for load-balancing. It will progressively be replaced by superior energy carriers such as hydrogen.
Pipelines enable the price, delivery and geographical flexibility to allow prices to clear markets efficiently in the future. This will lowering energy costs, increase supply security and encourage carbon emission reduction.
LNG, unfortunately, takes this process backward. It adds ‘sitting duck’ risk along the way.
A better solution lies in integrating natural gas into a increasingly competitive market with a transition path to low- and zero-emission renewables. This can be done with pipelines that already created a highly-competitive and flexible gas market in the continental United States.
Given the above, and the inherent security risk LNG poses, a rethink of LNG’s questionable credentials is warranted. This is particularly so for intra-Asia ‘shorter-haul’ delivery. In Asia, economically attractive but undeveloped oil and gas resources lie along the logical shipping routes from suppliers to consumers. A pan-Asian pipeline network will provide access to these.
Not only does this option create a more flexible, longer-lived infrastructure, but it would also opens new opportunities for exploration and production of natural gas in Asia, by reducing delivery costs.
Free in the deal would be a more secure infrastructure buried beneath the sea.
As the world confronts climate change, the need will expand for longer-term thinking than just 25-year depreciation periods and unpriced carbon — both characteristics of LNG.
In the case of Asia, a series of Joint Development Areas in the South China Sea could be connected by an open-access, common-carrier gas infrastructure connected to downstream markets.
This could then form the core of a pipeline network that could then stretch north to the East China Sea and to Japan and South Korea, as well as south through Indonesia, the Timor Sea and Australia’s Northwest Shelf and Queensland.