Natural gas has come to the forefront of the international energy debate. The reasons include increasing demand in the United States, China and India and a changing worldwide preference in power generation because of environmental concerns. As a result, the transport of natural gas becomes important. Currently, 70 percent of gas is transported to market by pipeline and 30 percent as liquefied natural gas (LNG).

Pipelines are attractive but, offshore, their feasibility is greatly hindered by distance limits and terrain restrictions. On the other hand LNG facilities are expensive to construct and the process is complicated, costly and energy wasteful. It is applicable primarily for long distances and large volumes of gas.

Sea-going compressed natural gas (CNG) is an alternative that has been proposed in recent years but has not made substantial headway for two reasons:

  1. the emphasis for investments by producers and large consumers has been primarily on LNG;

  2. CNG boat designs and projects have been envisioned to eke a bite out of the LNG pie which is not necessarily a good approach.

CNG must make a niche in smaller markets and shorter distances. Here we present definitive economics by performing a specific case study for Sakhalin Island, Russia. Results delineate the landscape where this mode of transport is attractive and how it can be deployed with specific requirements of distance, market size and size distribution. Our studies show that for shorter distances (e.g., 500 km, about 300 miles) and even relatively large volumes, LNG cannot compete with CNG and at longer distances (e.g., 2,000 km, about 1,250 miles) CNG is far more attractive at small volumes, assuming that offshore pipelines are not feasible. For volumes such as 1 to 2 billion cubic meters per year (about 35 to 70 billion cubic feet per year), CNG is the only feasible solution to bring this energy source to many markets. These findings suggest that many parts of the world (such as the entire Mediterranean basin, the Scandinavian peninsula, Sakhalin Island, South-East Asia and the Caribbean) would be better served by CNG even if LNG projects have already been approved and under construction.

We also performed a sensitivity study on gas price (both at the source and at the market) impacts on the value of both CNG and LNG projects and determine the breakeven points under a given gas demand of e.g., 1.5 Bcm/yr (about 50 Bcf/yr) and a distance of 1,500 km (about 900 miles). For example if the source price is $6/MMBtu then the breakeven price for CNG is $10.05 whereas for LNG it will have to be $14.24, a 40% increase.


Arguably, natural gas is becoming a more and more important resource of energy, with its share in global consumption expected to increase dramatically over the next two decades. According to the most recent data available (Energy Information Administration, EIA, 2008), world consumption of natural gas is more than 105 Tcf (Trillion cubic feet), about 3,000 Bcm, an increase of 28% in a decade (compared with, approximately, 16% increase for oil and a 5% for coal). In the late 1990s analysts began to predict radical increases in the world natural gas energy share. Particularly aggressive was the forecast provided by Economides and Oligney (Economides et al,2001), who predicted that by 2020 natural gas will make up 45 to 50% of the world energy mix, starting from a 22% share in 2000. Such increases in demand will be excruciating and will be the result of massive restructuring of the transportation sector to use natural gas either as CNG directly or, indirectly, by electrifying vehicles.

Besides the U.S, Europe, Japan and Korea, historically the leaders in natural gas consumption and whose demand will increase significantly, fast evolving large Asian economies such as China and India will definitely become new players in this rapidly expanding market. The dominant exporter of natural gas is and will be by far Russia, with its leading position in proved reserves (1,680 Tcf, about 50,000 Bcm) and production (over 23 Tcf, about 650 Bcm, produced in 2006) (EIA, 2008).

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