Is the Gap Closing between the Value of an LNG Cargo and an Equivalent Volume of Crude Oil?

Energy is an essential part of human life, irrespective of the source, whether Solar, Wind, Waves, Water (Hydro), Coal, Biomass, Petroleum, Natural Gas, Geothermal or Nuclear Fission. It is ubiquitous in present time to have the usable form of energy as electricity. Thus, to enhance efficiency of conversion from fuel to power with reduced or minimum pollution, choice of fuel at optimum cost is the deciding criteria. It would have been ideal to convert fuel directly to Electric Power but due to limitations of the prevailing technology, it has to be used first for prime movers like Diesel Engines, Natural Gas and Steam Turbines before conversion to Electric Power.

Coal and Petroleum fuels have been the major source of energy for centuries until exploitation of Natural Gas (NG) reserves and transportation by pipelines has become a commercially viable option. Since the start of transportation of NG as LNG by ships in 1959, LNG is the rising fuel for global use in generation of electricity. After 60 years of experience and technological innovations in the design of LNG Carriers (LNGC), and development of LNG storage and trading hubs, LNG has become a trading commodity since 2018 under the Energy Sector just like traditional commodities: Crude Oil, NG and other petroleum products.

How much of each type of fuel is required for a Unit of Electricity?

The quantity of fuel required to generate 1 Kilowatt-hour of electricity will depend on the heat value or calorific value of the fuel, and efficiency of the stages it has to pass through, and type of the prime mover used for conversion to electricity. The first factor the energy value is the key criteria for comparative pricing when procuring fuel. The type of fuel and unit of measure for trading creates confusion as it requires conversion to a common unit so that prices can be compared. The final output being electricity so unit of a fuel necessary to produce 1Kwh of electricity is most common criteria for comparison.

For example, (depending on the source of fuel and its calorific value), as on 27 Sep 2022 prices of the Energy Commodities:

Fuel Unit of Measure (UOM) Calorific Value, BTU/UOM BTU Required per kWh Quantity Required/ kWh Market Rate US$/ UOM Fuel Cost US$/ kWh,
Coal Ton 18934000 10,655 0.000562744 324.5 0.182610515
Crude Oil Barrels 5691000 11,259 0.001978387 89.32 0.17670952
NG SCF 1037 7732 7.456123433 6.92 0.05350544
LNG CBM 22500000 7732 0.000343644 20.15 0.1557998

The table above shows that Coal and Crude Oil remain the most expensive fuel for electricity generation, and Natural Gas is the cheapest source of energy. The cost of LNG as an imported fuel is higher than NG but still cheaper than Crude oil, as on 27 Sep 2022.

The data published by EIA in Electric Power Annual Report 2022, provides similar quantities of fuel consumed per kilowatt-hour of electricity generated in the Year 2021 by Power Plants in USA.

So, what is the answer to the question, LNG or Crude Oil?

In view of the closing gap between unit cost of production and environment friendly considerations, the answer to the question is as clear as The Writing on the Wall!

LNG trade is rising not year on year but day by day, as the demand for electric power and electric vehicles (which will no longer be called as automobiles), is increasing. This surge in demand means more LNG Terminals whether shore-based or floating terminals (FSU and FSRUs) will be required in Asia, Africa and Latin American Countries. It is impractical to assume that network of NG Pipelines would be cheaper than transportation as LNG, as time required for such a network worldwide or cross-country will be too long even if hypothetically feasible.


LNG is the fuel for the foreseeable future. Time for investing in LNG infrastructure and Gas fueled Power Plants is now before it is too late.

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