LNG Supply Chain Explained: From Liquefaction to Regasification

The LNG Value Chain

Stage 1: Upstream Production

Natural gas is extracted from gas fields or as associated gas from oil production. Composition varies — Qatari gas is rich in ethane; US shale gas is leaner.

Stage 2: Liquefaction

The gas is cooled to −162 °C, condensing it to 1/600th of its gaseous volume. Major liquefaction trains (Qatar's QatarEnergy LNG, US Sabine Pass, Australia's Gorgon) cost USD 10–20 billion each.

Stage 3: Shipping

LNG carriers are double-hulled cryogenic vessels (Moss spherical or membrane). Typical capacity: 145,000–266,000 m³. Voyage from US Gulf to Northeast Asia: ~25 days via Panama Canal.

Stage 4: Regasification

At the import terminal, LNG is reheated using seawater or ambient air and injected into the national gas grid at high pressure.

Stage 5 & 6: Distribution & End-Use

Pipeline distribution to power plants, industrial users, and LDCs (local distribution companies).

Pricing Mechanisms

LNG contracts price against:

• JKM (Japan-Korea Marker) — Asia spot benchmark
• TTF (Title Transfer Facility) — European hub price
• Henry Hub — US gas benchmark (+ liquefaction tolling fee)
• Brent-linked slope formulas (S-curve agreements common in long-term Asian contracts)

Procurement Considerations

Procurement teams sourcing LNG cargoes or term tranches must evaluate: shipping availability (charter rates spike with seasonal demand), regas terminal slot allocation, force majeure history of the loadport, and credit ratings of the marketer.

What Intermediaries Provide

Non-asset support firms coordinate counterparty introductions, validate vessel and terminal credentials, and structure commercial diligence — without taking cargo title or transferring funds.