Natural gas liquefaction was first demonstrated by British scientist Michael Faraday in 1845. The first practical compressor refrigeration machine for natural gas was built in Germany in 1873 by engineer Karl Von Linde and by the mid-1900s LNG plants were in commercial use to allow above-ground storage of natural gas. In 1959 the world’s first LNG tanker, a converted World War II Liberty freighter called The Methane Pioneer, successfully carried an LNG cargo from Lake Charles, Louisiana, to Canvey Island in the United Kingdom. And over the next 14 months, seven additional cargos were delivered. These early voyages proved the viability of LNG transportation. In 1964 the United Kingdom began receiving regular shipments from Algeria.
By the late 1960s and early 1970s small terminals were operational in Spain, Italy, and France. However, cheaper pipeline supplies from Northern Europe and later the Soviet Union supplanted much of the LNG trade in the European market, leaving continued growth to Asian markets. Japan began importing LNG from Alaska in 1969. Following the Oil Crisis of 1973 Japan expanded its LNG capabilities, building new terminals and contracting for supplies from various countries including Australia, Brunei, Indonesia, Malaysia, Qatar, and the United Arab Emirates (UAE). Korea become the second major Asian importer in 1980 followed by Taiwan in 1990, leading Asia to dominate world LNG consumption.
The U.S. looked poised to join the league of major LNG importers in the 1970s. Four terminals were constructed between 1971 and 1980, but they were quickly mothballed or used minimally for gas surplus due to growth in domestic production. By the late 1980s, countries in Europe that were further from the vast Russian gas fields regained interest in LNG. By the mid-1990s Europe — led by Spain, France, Italy, Turkey, and Belgium — became a significant consumer of LNG.
In the early 2000s interest in LNG again grew, driven by rapid demand growth, rising gas prices, and perceptions that some traditional sources of natural gas supply were waning. Trading of LNG volumes grew by 64% between 2000 and 2008. Growth in demand for natural gas led to Argentina, Brazil, China, India, and Mexico joining the ranks of importers, the U.K. rejoining after earlier dismantling its facility, and expansion of LNG import capabilities in many European countries and the U.S.
Many existing exporting countries expanded liquefaction capacities and Australia, Equatorial Guinea, Egypt, Norway, and Oman joined the ranks of LNG exporters. During this time period some exporting countries had excess supply leading to a new phenomenon — an LNG spot market. This was a significant change from the traditional practice of long-term contracts between producers and consumers that kept most supply locked up. At times LNG prices fell below the price of pipeline gas in the U.S. and Europe, leading to increased imports in these regions. Later in the decade, LNG supplies became tight relative to demand. LNG prices soared along with oil resulting in LNG consumption only where no alternatives existed. Demand in Asia became a strong factor and many LNG cargos were re-directed to Japan, South Korea, and the growing economies of China and India.
In the 2010s trade in LNG continued to grow rapidly. Deliveries to Asia expanded significantly with the growth of economies in China and India, and the growth of gas-fired power generation in Japan and Korea. Europe continued to depend on LNG imports and some European countries previously receiving only pipeline gas opened LNG import terminals to diversify their sources of supply. Imports into South America also continued to expand.
Meanwhile on the supply side, the United States transitioned from an importer to become one of the largest exporters of LNG given excess supply driven by production of shale gas. Australia, Qatar, and Russia also significantly expanded LNG exports. By the early 2020s it appears that LNG trade will continue to expand.