Liquefied Natural Gas – Resources Page

Posted on November 30, 2011




Liquefied natural gas or LNG is natural gas (predominantly methane, CH4) that has been converted temporarily to liquid form for ease of storage or transport.

Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless, non-toxic and non-corrosive. Hazards include flammability, freezing and asphyxia.

A typical LNG process. The gas is first extracted and transported to a processing plant where it is purified by removing any condensates such as water, oil, mud, as well as other gases such as CO2 and H2S. An LNG process train will also typically be designed to remove trace amounts of mercury from the gas stream to prevent mercury amalgamizing with aluminium in the cryogenic heat exchangers. The gas is then cooled down in stages until it is liquefied. LNG is finally stored in storage tanks and can be loaded and shipped.

The liquefaction process involves removal of certain components, such as dust, acid gases, helium, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed into a liquid at close to atmospheric pressure (maximum transport pressure set at around 25 kPa/3.6 psi) by cooling it to approximately −162 °C (−260 °F).

LNG achieves a higher reduction in volume than compressed natural gas (CNG) so that the energy density of LNG is 2.4 times that of CNG or 60% of that of diesel fuel.  This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic sea vessels (LNG carriers) or cryogenic road tankers are used for its transport.

LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It can be used in natural gas vehicles, although it is more common to design vehicles to use compressed natural gas. Its relatively high cost of production and the need to store it in expensive cryogenic tanks have prevented its widespread use in commercial applications.

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Shell expects global gas demand to jump by 50% between now and 2030….. And global LNG demand is likely to double just in this decade, driven by imports into a host of countries in Asia, the Middle East and Europe.

Pricing and Global Markets

Glossary of LNG Terms

for full glossary download from above link….

Abandoned well: a well (oil, natural gas, or water injection) not

in use because it was a dry hole originally, or because it has

ceased to produce economical quantities of oil and/or natural

gas, or has become unusable. Regulations require the plugging

of abandoned wells to prevent the seepage of oil, gas, or water

from one stratum of underlying rock to another.

Able-bodied seaman (AB):  a member of an LNG crew, with

three years of sea service, certified by examination to perform

all the duties of an experienced seaman. A typical LNG ship

carries five ABs in her crew complement. See Crew

Acid gas: a gas that contains compounds, such as CO2, H2S, or

mercaptans, that can form an acid in solution with water.

Acquiring shipper: in the context of capacity release, a shipper

who acquires firm capacity rights from a releasing shipper. Also

known as replacement shipper. See Capacity (gas)

Adiabatic: a term describing a thermodynamic process in which no

heat is added to or removed from the system.

Admeasurement:  the confirmed or official dimensions of an

LNG ship.

Advanced turbine systems (ATS): industrial gas turbines,

approximately 5 and 15 megawatts (MW) in capacity, for

distributed generation, industrial and cogeneration markets;

and gas turbines, combined-cycle systems, 400 MW, for

large, baseload, central-station power-generation markets.

ATS expectations are to meet or exceed 60% system

efficiencies in the utility market, and to increase efficiencies

of industrial turbines by 15%. The new turbines emit far less

nitrogen oxides, carbon dioxide, and unburned hydrocarbons

than current gas turbine systems. See Combined-cycle gas

turbine (CCGT)

Agency service: an arrangement that allows a gas buyer to give

an agent authority to act on the buyer’s behalf to arrange or

administer pipeline transportation and/or sales services.

Aggregate receipt points:  1) a hub where different supply

sources intersect on a gas pipeline; 2) multiple producer

meters entering a pipeline. See Hub or Market centre

Aggregator:  1) acts on behalf of groups of producers to collect

producer supplies and sell the gas in commingled blocks

to end-users. Prior to deregulation, a limited number of

aggregators operated. Aggregators do not take title to the

gas but simply find markets and negotiate prices for pools of

producers. Also called core transport agent; 2) also a firm that

bargains on behalf of a large group of consumers to achieve

the lowest possible price for utilities such as electricity and gas.

The firm “aggregates” or combines many smaller customers

into one large customer for purposes of negotiation and then

purchases the utility commodity on behalf of the group.

Annual contract quantity: the annual delivery quantity

contracted for during each contract year as specified in a gas

sales or LNG contract.

Annual delivery programme (ADP): a key document for both

the buyer and seller in determining how they will work together

over the life of an LNG project to achieve the efficient delivery

and receipt of LNG cargoes; normally agreed between the

parties before the beginning of each contract year.

For an exship sale, the ADP deals with the dates on which the sellers’

LNG ships will deliver LNG to the buyers’ terminals. For a Free

on board (FOB) sale, the ADP covers the dates of arrival of the

buyers’ ships at the LNG plant. Whether the sale is ex-ship or

FOB, the ADP provides a basis for decisions on how buyers

and sellers will operate their facilities during the contract year

covered. Usually, the procedures to be adopted to develop the

ADP are agreed upon in the Sales and Purchase Agreement

(SPA). See  Sales and Purchase Agreement (SPA), CIF

contract, Ex-ship contract, and FOB contract

Arbitrage:  the simultaneous purchase and sale of an asset in

order to profit from a difference in the price, usually on different

exchanges or marketplaces.  Where appropriate infrastructure

exists, LNG offers the opportunity for price arbitrage between

different gas markets.

Articles of agreement: the document containing all particulars

relating to the terms of agreement between the Master of the

LNG vessel and the crew. Sometimes called ship’s articles or

shipping articles.

Asian Development Bank (ADB): a major multilateral financing

institution engaged in LNG project finance. See Export-credit

agencies (ECAs) and Multilateral institutions

Ask: the average price asked by those persons recently willing

to sell a commodity at a point in time. The asking price is

considered by commodity purchasers in a market-making or

price-discovery context.

Associated gas: natural gas found mixed with oil in underground

reservoirs, that comes out of solution as a by-product of oil production.

In these fields, natural gas production fluctuates

with oil production. See Non-associated gas

Associated-free natural gas: in immediate contact, but not

in solution, with oil in the reservoir. One usually distinguishes

between associated (free) gas, dissolved gas and nonassociated gas.

Atlantic basin market: See LNG markets

At-risk condition: a certificate condition that places the

responsibility for under-recovery of costs regarding pipeline

expansion or new construction on the pipeline sponsor, rather

than on the pipeline’s other customers.

Average daily quantity (ADQ):  the monthly contracted

quantity of gas divided by the number of customers’ operating

days in that month.

Average day: the temperature condition corresponding to a

typical day in an average temperature year. The gas sales or

requirements for an average day are annual totals divided by 365 days.

Average demand: measure of the total of energy loads placed by

customers on a system divided by the time period over which

the demands are incurred.

Average temperature year:  long-term average recorded


Backhaul: a natural gas transportation service that requires

movement of gas from a point of receipt to a point of delivery

such that the contractual direction of movement on the pipeline

is in a direction opposite to the flow of the gas.

Back-stopping: arranging for alternate supplies of gas in the

event the primary source fails to be delivered.

Backwardation: a market where the price for nearby delivery

is higher than for further forward months. The opposite of

backwardation is contango – a market situation where prices

are higher for forward delivery dates than for nearer delivery


Balance:  the amount of natural gas put into the pipeline and the

amount of gas taken out of the pipeline are equal on a fixedtime basis.

Balancing service:  gas-balancing service accommodates

imbalances between actual customer usage and gas delivered

for that customer’s use.

Balancing: 1) the requirement imposed by both electricity grids

and natural gas pipelines that supply and demand be equal

over a certain time period; 2) the practice by shippers of

offsetting (balancing) their gas deliveries from the pipeline

with injections of gas supplies into the pipeline on a regular


Ballast: heavy substances loaded by a vessel to improve stability,

trimming, sea-keeping and to increase the immersion at

the propeller. Seawater ballast is commonly loaded in most

vessels in ballast tanks, positioned in compartments right at

the bottom and in some cases on the sides, called wing tanks.

On a tanker, ballast is seawater that is taken into the cargo

tanks to submerge the vessel to a proper trim.

Ballast tank:  compartments at the bottom of a ship or on the

sides that are filled with liquids for stability and to make the

ship seaworthy. Any shipboard tank or compartment on a

tanker normally used for carrying salt water ballast. When

these compartments or tanks are not connected with the

cargo system, they are called segregated ballast tanks or


Bare-boat charter: a charter in which the bare ship is chartered

without crew; the charterer, for a stipulated sum takes over

the vessel for a stated period of time with a minimum of

restrictions; the charterer appoints the master and the crew

and pays all running expenses.

Barrel (b/bl/bbl):  a volumetric unit of measure for crude oil and

petroleum products equivalent to 42USgallons or 158.978

litres. See Barrel of oil equivalent (boe)

Barrel of oil equivalent (boe): the oil equivalence of natural

gas is normally based on the amount of heat released when

the gas is burned as compared with burning a barrel of oil.

For a typical natural gas, burning 6,000 standard cubic feet

liberates about the same amount of heat as burning one barrel

of an average crude.

Barrels per calendar day (b/cd): total throughput divided by

number of calendar days. The total divided by actual number of

days in operation (i.e., stream days) gives the stream-day-rate,

which equals or exceeds the calendar-day-rate. Calendar day

is a term describing the throughput of a facility that occurs on

a daily basis averaged over a long period of time. A calendar

day rate times 365 gives the average annual rate.

Barrels a day (b/d, bpd, or bbl/d): a unit of measurement used

in the industry for the production rates of oilfields, pipelines and


Base gas: gas required in a storage pool to maintain sufficient

pressure to keep the working gas recoverable.

Baseload capacity: the generating equipment normally operated

to serve loads on an around-the-clock basis.

Base period: in theUSunder FERC regulations, a recent 12-month

period that serves as the “sample” period for demonstrating

pipeline operational costs on which the pipeline’s future rates

will be based.

Base pressure: standard unit of pressure used in determining

gas volume. Volumes are measured at operating pressures

and then corrected to base-pressure volume. Base pressure

is normally defined in any gas measurement contract. The

standard value for natural gas in theUSis 14.73 psia,

established in 1969 by the American National Standards

Institute as standard Z-132.1. Also called base conditions.

The standard pressure specified in US state regulations on

base pressure varies slightly from state to state.

Base temperature:  an arbitrary temperature to which

measurements of a volume of gas are referred. The standard

value in theUSis 60°F (520°R) for natural gas as established by

the American National Standards Institute as standard Z-132.1.

bcf: acronym for billion cubic feet. Used to measure the volume of

large quantities of natural gas.

Beach gas: natural gas transported through offshore pipelines to

a number of gas gathering and processing terminals at or near

a coastal region.

Beach price: price applying to natural gas at landfall.

Best bid: in the context of bids for firm transportation capacity to

be released, the highest bid that qualifies under the specified


Bid: the purchase price suggested by those in a market to purchase

a commodity from suppliers.

Bid-Ask Spread: The market-making differential between buyers

and sellers of a commodity. Narrow spreads are a sign of

market liquidity.

Bill of lading (B/L):  a document by which the Master of a ship

acknowledges having received in good order and condition (or

the reverse) certain specified goods consigned to him by some

particular shipper, and binds himself to deliver them in similar

condition, unless the perils of the sea, fire or enemies prevent

him, to the consignees of the shippers at the point of destination

on their paying him the stipulated freight. A bill of lading specifies

the name of the master, the port and destination of the ship, the

goods, the consignee, and the rate of freight; documentation

legally demonstrating a cargo has been loaded. The bill of lading

is signed by the Master of the ship and the contract supplier.

Black start:  the initial operation of a facility that begins with no

utilities in service.

Block: the subdivision of a nation’s exploration and production

acreage. Blocks are generally defined in terms of latitude and

longitude, at one-degree intervals.

Blowdown: the depressuring of a reservoir through production

of gas. This can occur with either gas or oil reservoirs at any

stage in their lifecycle.

Blowout: an uncontrolled flow of natural gas, oil, or water from a

well caused by the release of pressure from a reservoir; may

be the result of the failure of the containment system.

Boatswain (Bosun): on an LNG vessel, tantamount to a foreman;

directly supervises maintenance operations. See Crew

Boiler:  a closed vessel in which a liquid is heated, or heated and

evaporated. Boilers are often classified as steam or hot water,

low pressure or high pressure, capable of burning one fuel or

a number of fuels.

Boil-off vapour: usually refers to the gases generated during the

storage of volatile liquefied gases, such as LNG. LNG boils at

slightly above –163°C at atmospheric pressure and is loaded,

transported and discharged at this temperature, which requires

special materials, insulation and handling equipment to deal

with the low-temperature and the boil-off vapour (heat leakage

keeps the cargo surface constantly boiling).

Booster station:  an installation built in an onshore or offshore

pipeline to increase the pressure of the fluid in the pipeline. Also

applies to oil and NGL pipelines. See Compressor station

Bottled gas: liquefied petroleum gas (LPG) stored in a liquid

state in steel containers at moderate pressure and ambient


Break bulk: to commence discharge of cargo.

British thermal unit (Btuan energy unit; the quantity of heat

necessary to raise the temperature of one pound-mass of

water one degree Fahrenheit from 58.5°F to 59.5°F under a

standard pressure of 30 inches of mercury at 32°F. The following

conversions would apply to gas that contains exactly 1,000

Btu/cf – approximately true for most gas delivered in theUS:

1 cubic foot (cf) = 1,000 Btu

1 therm = 100 cf = 100,000 Btu

mcf = 1 mmBtu

1 bcf = 1 trillion Btu

1 tcf = 1 quad = 1 quadrillion Bt

Broker: gas merchant who charges a fee for matching sellers to

buyers and who may help arrange gas transportation, but does

not take title to the gas.

Bubble point: the temperature and pressure at which a liquid first

begins to vapourise to gas.

Bulk cargo: any liquid or solid cargo loaded on to a vessel without

packaging (for example, oil or LNG).

Burner tip: the point at which natural gas is used as a fuel.

Buy/Sell arrangement: whereby a party sells gas at the wellhead

to a party with priority space in the pipeline queue and then

repurchases the gas downstream, paying transmission costs

and any prearranged differentials.

Calendar month: the period beginning on the first gas day of the

calendar month and ending on the first gas day of the next

calendar month.

Calorific value: the quantity of heat produced by the complete

combustion of a fuel. This can be measured dry or saturated

with water vapour, net or gross. The general convention is dry

and gross. See Heating value

Capacity: unit of volume of infrastructure and shipping, usually

quoted in billions of cubic metres (cm) or millions of tonnes (t).

Capacity allocations: allotment of space in a pipeline or

regasification infrastructure.

Capacity assignment: the process by which an entity that holds

the rights and obligations to pipeline capacity transfers those

rights and obligations to another entity.

Capacity brokering: the assignment of rights to receive firm gas

transportation service.

Capacity constraint: a restriction or limitation at any point along a

pipeline system that affects acceptance, movement or subsequent

redelivery of natural gas. A pipeline company determines the

sufficiency of its capacity to deliver gas to customers.

Capacity emergency: a condition that exists when a system’s or

pool’s load exceeds its operating capacity and cycling reserve

margin, plus firm purchases from other systems and available

imports from adjacent systems.

Capacity release:  enables a shipper (releasing shipper)

who has reserved firm transportation capacity to release

– sell – excess capacity to a replacement shipper. The

revenue received from the replacement shipper can be

used to offset some of the costs associated with reserving

firm transportation. Although capacity-release deals can

be negotiated between shippers, the preferred method of

releasing capacity is with the use of a pipeline’s electronic

bulletin board through a closed bidding process. Capacity

release has created a secondary market and has increased

efficiency in the gas transportation market. Capacity release

can also occur in regasification terminals.

Capital lease (finance lease): a lease that transfers substantially

all the risks and rewards incidental to ownership of an asset. Legal

title of the asset may or may not eventually be transferred.

Capital investment: money spent for an asset expected to

produce income over its useful life.

Captive customer: buyer that can receive natural gas from only

one service provider, with no access to alternate fuel sources;

usually describing a residential or small commercial user, but

may apply to a large industrial and electricity utility user that is

attached to a single pipeline.

Carbon: the base of all hydrocarbons; capable of combining with

hydrogen in almost numberless hydrocarbon compounds. The

carbon content of a hydrocarbon determines, to a degree, the

hydrocarbon’s burning characteristics and qualities.

Cargo handling: the act of loading and discharging a cargo ship.

Cargo plan: a plan giving the quantities and description of the

various grades carried in the ship’s cargo tanks, after the

loading is completed.

Cash-out: a procedure in which shippers are allowed to resolve

imbalances by cash payments, in contrast to making up

imbalances with gas volumes in-kind. See Imbalance trading

Casinghead gas: unprocessed natural gas produced from a

reservoir containing oil.

Catalyst:  a substance whose presence changes the rate of

chemical reaction without itself undergoing permanent change

in its composition. Catalysts may be accelerators or retarders.

Cathodic protection: a method employed to minimize the rate

of electrochemical corrosion of pipelines or structures.

Celsius (C):  temperature scale based on the freezing (0°) and

boiling (100°) points of water at atmospheric pressure; formerly

known as Centigrade. To convert Celsius to Fahrenheit,

multiply the number by 1.8 and add 32.

Certificate of discharge:  an essential document for officers

and seamen; official certification confirming completion of the

employment for which engaged.

Certificate of registry: a document specifying the nation

registry of the vessel.

Charter party: contractual agreement between a shipowner and

a cargo owner, usually arranged by a broker, whereby a ship is

chartered (hired) either for one voyage or a period of time.

Charter rates: tariff applied for chartering tonnage in a particular trade.

Charterer: the entity to whom is given the use of the whole of the

carrying capacity of a ship for the transportation of cargo to a

stated port for a specified time. See Time charter party

Cherry-picking: pursuing desirable customers and ignoring less

desirable customers. The term is commonly used to describe a

company’s tactic of trying to secure the business of the largest

energy or service users.

Chief engineer: the senior engineer officer who generally oversees

functioning of all mechanical equipment on ship; calculates fuel

and water consumption and requirements, and co-ordinates

operations with shoreside port engineer. See Crew

Chief officer:  the officer next in rank to the Master. Also called

First Mate, Chief mate. See Crew.

Chlorofluorocarbons (CFCs):  family of manufactured

chemicals; also called chlorinated fluorocarbons.

City gas:  treated and conditioned gas for consumer use. Also

known as Sales gas.

City-gate rate:  the rate charged a distribution utility by its

suppliers; refers to the cost of the natural gas at the point at

which the distribution utility historically takes title to the natural

gas. Also called gate rate.

City-gate station (city gate):  the point or measuring station

at which a gas-distribution utility physically receives gas from a

pipeline or transmission company; the point at which the backbone

transmission system connects to the distribution system. There is

not necessarily a change of ownership at a city-gate station.

Class of service: a group of customers with similar characteristics

(for example, residential, commercial, industrial) that are

identified for the purpose of setting a rate for service.

Classification society:  private organisations that arrange

inspections and advise on the hull and machinery of a ship.

Supervise vessels during their construction and afterwards, in

respect to their seaworthiness, and places vessels in grades

or classes according to the society’s rules for each particular

type. It is not compulsory by law that a shipowner have his

vessel built according to the rules of any classification society.

In practice, the difficulty in securing satisfactory insurance rates

for an unclassed vessel makes it a commercial obligation. The

major classification societies – American Bureau of Shipping,

Lloyds Register of Shipping, Det Norske Veritas, Bureau Veritas

and Germanischer Lloyd – have included the International

Maritime Organization (IMO) LNG Gas Codes in their rules.

See International Maritime Organization (IMO)

Co-firing: the process of burning natural gas simultaneously with

another fuel. Co-firing can reduce sulphur dioxide (SO2) and

nitrogen oxides (NOx) emissions.

Cogeneration (Cogen): the simultaneous production of electrical

energy from the combustion of a single fuel source through two

means: gas turbines and steam turbines. See Combined-cycle

gas turbine

Combined-cycle gas turbine (CCGT): this is the

combination of simple gas turbines with a heat-recovery

steam generator (HRSG) and a steam turbine in a power

generation plant. Gas is combined with air and burned, with the

expanded gas turning the blades of the gas turbines to power

an electricity generator (the Brayton thermodynamic cycle). The

hot exhaust gases are passed to the HRSG, in which water is

converted to steam that is used in a single steam turbine to

power another generator (the Rankine thermodynamic cycle).

Also called combined cycle generation.

Combined heat and power (CHP):  the simultaneous

generation of two forms of energy from a single fuel source.

Electrical energy is produced through gas turbines and heat

energy (steam) is produced through a heat-recovery steam

generator. See Combined-cycle gas turbine

Commercial field: a hydrocarbons field that, under existing economic

and operating conditions, is judged to be capable of generating

enough revenues to exceed the costs of development.

Committed gas contract: a source-specific natural gas sales

contract that commits the seller to deliver natural gas, from

specific described reserves or sources.

Commodity charge: throughput or usage charge, a fee paid to

the pipeline operator, based on the number of decatherms

moved by the pipeline for the shipper. At the local market it is

referred to as the gas portion of the end-user’s bill – charged

at the burner tip; the component of rates charged to customers

that reflects the volume of gas actually transported by a utility

or the cost of gas actually purchased by the utility.

Common carrier: a facility obligated by law to provide service to

all potential users without discrimination, with services to be

prorated among users in the event capacity is not sufficient

to meet all requests. In theUS, interstate oil pipelines are

common carriers, but interstate natural gas pipelines are not

(they are open-access contract carriers).

Company-used gas: natural gas consumed by a gas-distribution

or gas-transmission company, or the gas department of a

combination utility, for example, fuel for compressor stations.

Complement:  the number of officers and crew employed upon a

vessel for its safe navigation and operation.

Compressed natural gas (CNG):  natural gas that has been

compressed under high pressures (typically between  3,000

and 3,600 psi) and held in a container; expands when released

for use as a fuel.

Compressibility factor: the ratio of the actual volume of a gas

divided by the volume that would be predicted by the ideal gas

law, usually referred to as the Z factor.

Compression ratio: the relationship of absolute outlet pressure

at a compressor to absolute inlet pressure.

Compression:  the act or process of contracting a volume of gas

into a smaller space.

Compressor station: a booster station associated with a

natural gas pipeline that uses compressors to increase

the gas pressure. When gas turbines are used to provide

compressor power, stations can use some of the gas moving

through the line as fuel.

Compressors: a mechanical device used to raise the pressure of

a gas. Compressors can be of three types: axial, centrifugal,

or reciprocating. The usual means of providing the required

power are electrical motors, steam turbines, or gas turbines.

Condensate: a hydrocarbon liquid that forms by precipitation

from a gas. When the liquid precipitates in the reservoir

during pressure depletion, the liquid is referred to as

retrograde condensate. Surface production of hydrocarbon

liquids through primary separation facilities is referred to

as condensate when it comes from a gas reservoir. Natural

gas condensates consist primarily of pentanes (C5H12) and

heavier components; there will be some propane and butane

dissolved within the mixture.

Confirmed nomination: verification by a pipeline company that

a change in a customer’s level of transportation service will be

matched by a change in supplier quantities.

Consignee: the entity to whom cargo is consigned as stated on the

bills of lading.

Consignor:  the entity named in the bill of lading as the one from

whom the goods have been received for shipment.

Consumer:  the ultimate end-user of natural gas at their burner

tip as contrasted with a customer who may purchase natural

gas for resale.

Contingent asset/liability: a possible asset/liability that

arises from past events and whose existence will be

confirmed only by the occurrence, or non-occurrence, of one

or more uncertain future events not wholly within the control

of the entity.

Contract price (CP): price agreed between sellers and buyers.

Contract term: the term of effectiveness of a contract.

Contracted reserves:  natural gas reserves dedicated to fulfil

gas contracts.

Conventional gas: 1) natural gas occurring in nature, as opposed

to synthetic gas; 2) gas produced under present-day technology

at a cost not greater than the current market value.

Core customer: buyer that can purchase natural gas from only

one supplier, with no access to alternate fuel sources; usually

describing a residential or small commercial user, but may

apply to a large industrial and electric utility user as well.

Usually pays a higher rate for assured service.

Cost of capital: the weighted average cost of financing investment

projects, primarily through debt and/or equity financing.

Cost of development/boe (COD): the unit cost ($/boe)

required to develop a project. Calculated by taking the total

unescalated net development investment including seismic,

technical data, drilling and completion costs, and costs of

incremental surface facilities divided by incremental net proved

developed reserves.

Cost, insurance and freight (CIF): used in international

trade statistics and sales contracts, transactions on CIF

basis mean the purchase price includes all costs of moving

the goods from the point of embarkation to their destination.

With respect to LNG shipping, this means that the buyer

purchases the gas at the point of vessel loading or during

its transit to the receiving terminal, while the agreed price

includes shipping charge and insurance for the load. See

ex-Ship contract and Free on Board contract

Crew:  the company of officers and personnel on board ship.

Although operations are similar to other types of ships, there

is more emphasis on crew training for steam turbine plant

and LNG cargo handling operations, as well as planned

maintenance procedures.

Critical pressure: 1) for a pure component, the pressure above

which separate liquid and gas phases cannot exist; 2) the

vapour pressure of a substance at its critical temperature;

partial liquefaction can occur below the critical pressure even

at the critical temperature.

Critical temperature:  for a pure component, the temperature

above which a liquid phase cannot exist.

Cryogenics: the production and application of low-temperature

phenomena. The cryogenic temperature range is usually from

–150°C (–238°F) to absolute zero (–273°C, or –460°F), the

temperature at which molecular motion essentially ceases.

A most important commercial application of cryogenic gas

liquefaction techniques is the storage, transportation, and

regasification of LNG.

Cubic capacity: the volumetric measurement of the ship’s cargo


Cubic feet a day (cf/d): at standard conditions, the number of

cubic feet of natural gas produced from a well over a 24-hour

period, normally an average figure from a longer period of time.

Generally expressed as mcf/d = thousand cubic feet a day;

mmcf/d = million cubic feet a day; bcf/d = billion cubic feet a

day; or tcf/d = trillion cubic feet a day.

Cubic foot (cf): The amount of gas required to fill a volume of 1

cubic foot under stated conditions of temperature, pressure

and water vapour.

Cubic metre (cm):  unit of measurement for gas volume. The

amount of gas required to fill the volume of one cubic metre.

Curtailment: an action by which the customer receives less than

the contract quantity of natural gas or services because of a

system-wide shortage.

Cushion gas: the volume of gas that is required in an underground

storage field to maintain minimum field pressure. This cushion

gas (or base gas) is not available for withdrawal unless

replaced with immiscible injectant to maintain field pressure.

Custody transfer measuring system (CTMS): LNG ships

are fitted with high-accuracy liquid-level, temperature and

vapour-pressure measuring equipment. The cargo tanks are

calibrated by an independent measurer so that the volume of

cargo can be determined accurately. The CTMS is accepted

by the buyer and the seller of the cargo as the basis for the

quantity purchased or sold. Samples of the LNG cargo are

taken ashore and analysed to determine the cargo’s chemical

composition from which the heating value can be calculated.

The heating value is then multiplied by the volume loaded or

discharged from the ship to obtain the British thermal unit (Btu)

content of the delivered cargo, which is used as the basis for

cargo invoices, import duties and fiscal accounting.

Customer demand charge: the component of rates charged

to customers that is expected to cover the fixed costs incurred

by the pipeline. The other component of rates is the commodity

charge. This charge is also referred to as a reservation charge.

Cycle volume: volume of natural gas that can be withdrawn from

underground storage during the winter season and then be

replaced during the summer season.

Daily average send-out:  total volume of natural gas delivered

during a proscribed period of time, divided by the total number

of days in the period.

Daily contracted quantity (DCQ): the average daily quantity

of natural gas that is contracted to be supplied and taken.

Day-one-gains: Under International Financial Reporting Standards,

the best evidence of the fair value of a financial instrument at

initial recognition is the transaction price, unless the fair value of

that instrument is evidenced by comparison with other observable

recent market transactions. The application of this standard may

result in no gain or loss being recognised on the initial recognition

of a financial asset or financial liability. The unobservable part of

any fair value calculated at inception of a contract (also known as

day-one-gains) should be deferred over the life of the contract.

Deadfreight factor: percentage of a ship’s carrying capacity that

is not utilised.

Deadfreight: space booked by shipper or charterer on a vessel,

but not used.

Deadweight tonnage (DWT): a measure of ship carrying

capacity: 1) the number of metric tonnes (2,204.6 pounds) of

cargo, stores and bunkers that a vessel can transport; 2) the

difference in weight between a vessel when it is fully loaded

and when it is empty (in general transportation terms, the net)

measured by the water it displaces when submerged to the

deep-load line.  A vessel’s cargo is less than its DWT.

Dedicated design-day capacity (DDDC): the maximum volume

of gas dedicated to a customer’s use and based on the maximum

number of therms recorded by meter on the most demanding day

– typically the coldest day – of the year; expressed as a decimal

number. Also known as premise demand factor.

Degree days: measured as the number of degrees above or below

a standardised temperature on any given day.

Dehydration: the removal of water from a fluid.

Dehydrator: natural gas processing equipment that removes water

vapour. Typically, glycol dehydration units are used to dry gas

before it is sent to a gas transmission line. If the gas is to be

sent to a cryogenic expander plant or LNG plant, then the gas

is typically dehydrated using molecular sieves.

Deliverability (LNG ships):  one major aspect of LNG project

planning consists of estimating the transportation capacity

required, taking into account the time necessary for each

function in the chain of events within a typical round voyage of

an LNG carrier. A typical delivery calculation for a 137,500-cm

LNG carrier might be:

One-way distance (nautical miles) 6,000

Ship ‘service’ speed (knots) 19

Sea days (round trips) 26.1

Port days (round trips) 2

Total days in voyage (28.31) 29

Operating days in year 350

Voyages per year 12.07

Ship capacity (net cm) 135,000

Less: heel (cm) 3,000

Discharge quantity (cm) = 132,000

Annual delivered quantity (cm) = 132,000 x 12.07

= 1,539,103 cm

LNG specific gravity varies depending on gas composition,

but is typically about 0.45, therefore, the annual deliverability

of the vessel is 0.45 x 1,593,103 = 716,896 tonnes. If the

Dmaximum output of the liquefaction train is 3.3 million tonnes

a year (mmt/y), this would equal a maximum daily production

of 10,000 tonnes over the 330-day annual operating period.

The deliverability of a 137,500 cm ship is 59,400 tonnes,

which means it can cater for a daily production of 2,048

tonnes on this route, or five ships can carry 10,240 tonnes,

slightly more than maximum production.

Deliverability: the volume of natural gas that a pipeline or

distribution system can supply in a given period normally

during a 24-hour period.

Delivery point: designates the point where natural gas is

transferred from one party to another.

Delivery-point operator: the operator responsible for balancing

loads and allocating natural gas quantities received at delivery

points to parties who have contracted to receive deliveries at

the point.

Demand charge: a fixed fee, generally paid monthly, to reserve

capacity space in a pipeline, storage, or distribution facility.

Demand forecast: estimate of the level of energy or capacity that

is likely to be needed at some time in the future.

Demurrage: a fee, per day or per hour, agreed to be paid by

the charterer or receiver of the cargo, for the detention of a

vessel, loading or unloading, beyond the laytime allowed in

the charter party.

Department of Energy (DOE): theUSfederal department

that manages programmes of research, development

and commercialisation for various energy technologies,

and associated environmental, regulatory and defence

programmes. DOE announces energy policies and acts as a

principal advisor to the President on energy matters.

Deregulated gas: natural gas no longer subject to sales and/or

price regulation.

Deregulation: the process of removing restrictive regulations on

previously regulated power and utility companies.

Desulphurisation: processes by which sulphur and sulphur

compounds are removed from gases or petroleum liquid


Development agreement (DA): one of the range of agreements

between governments and petroleum-resource developers is

the DA or one of its variants – the Development and Fiscal

Agreement (DFA) or the Development and Production Sharing

Agreement (DPSA).

Dewpoint: the temperature, at a given pressure, at which a vapour

will form a first drop of liquid on the subtraction of heat. Further

cooling of liquid at its dew point results in condensation of part

or all of the vapour as a liquid.

Disabled ship: a vessel impaired so as to be incapable of

proceeding on her voyage.

Discount: an amount agreed between buyer and seller to be

subtracted from an existing benchmark.

Dispatch:  the monitoring and regulation of an electrical or natural

gas system to provide co-ordinated operation; the sequence in

which generating resources are called upon to generate power

to serve fluctuating loads.

Displacement gas: 1) in pipeline transportation, the substitution

of a source of natural gas at one point for another source of

natural gas at another point. Through displacement, natural gas

can be transported by backhaul or exchange; 2) in natural gas

marketing, the substitution of natural gas from one supplier of a

customer with natural gas from another competing supplier.

Dissolved gas: natural gas in solution in oil in the reservoir.

Distribution company (gas): a gas utility that obtains the major

portion of its natural gas operating revenues from the operation

of a retail gas-distribution system, a gas distributor.

Distribution: the delivery of a utility (natural gas, electricity, water)

to a household or business.

Diurnal storage:  daily storage; refers to short-term or peak

storage in pipelines or natural gas holders, as opposed to

seasonal storage.

Diversion: the flexible routing of LNG cargoes where gas suppliers

will seek to move cargoes to markets. Diversion rights for

sellers and buyers in LNG supply contracts create opportunities

for physical arbitrage, depending on the correlation of such

demand and price variations between regional markets.

Downstream pipeline:  pipeline receiving gas from another

pipeline at an interconnection point. See Upstream pipeline

Downstream: commercial gas operations that are closer to the

end-user or burner tip, as opposed to upstream, which is closer

to production.

Draft: the depth of a ship in the water; vertical distance between the

waterline and the keel, expressed in feet in theUS, elsewhere

in metres; also Draught.

Dry (or lean) gas: 1) gas that has been treated to remove liquids

dissolved gas and inerts making it suitable for shipping in a pipeline; 2)

natural gas from the well containing no water vapour that will

liquefy at ambient temperature and pressure, i.e. the gas is

water dry. Gas is usually priced on a dry basis. See Pipeline

quality gas; 3) a gas whose water content has been reduced

by dehydration or; 4) a gas containing little or no hydrocarbons

that could be recovered as a liquid condensate.

Dry dock:  an enclosed basin into which a ship is taken for

underwater cleaning and repairing. It is fitted with water-tight

entrance gates which, when closed, permit the dock to be

pumped dry.

Dry gasfield: reservoir(s) consisting primarily of light hydrocarbons

and negligible quantities of condensate.

Dry-measurement basis:  method of measuring total heating

value, whereby one cubic foot of gas is measured absent

of water vapour under standard conditions of pressure and


EFET (European Federation of Energy Traders): a group

of more than 80 energy-trading companies from 18 European

countries focused on improving the conditions of energy

trading inEuropeand the promotion of a sustainable and liquid

European wholesale energy market.

Embedded derivative: a derivative instrument contained

within another contract – the host contract.  The embedded

derivative may change in value in different ways or to different

magnitudes than its host contract (as it may be linked to a

different price, asset or index).  IAS39 requires all derivatives

to be marked-to-market, placing explicit reporting requirements

on embedded derivatives to achieve enhanced transparency in

financial reporting.

Emergency-shutdown systems (ESD): a system, usually

independent of the main control system, that is designed

to safely shut down an operating system. For example, at

ship-shore interface, LNG cargo transfer between ship and

shore is accomplished by a series of shore-based articulated

loading arms, usually three or four liquid arms and a single

vapour arm. The configuration is similar at both the loading

and discharge terminals. These arms have flexibility in three

directions to allow for relative motion between ship and shore.

If this allowable motion is exceeded, alarms sound on the ship

and shore. Cargo transfer is automatically stopped, either by

the shore pumps shutting down during loading, or the ship’s

pumps shutting down during unloading.

Emissions trading: Emissions trading is emerging as a key

instrument in the drive to reduce greenhouse-gas (GHG)

emissions. Emissions trading is particularly suited to the

emissions of GHGs, which have the same effect wherever

they are emitted. This allows central government to regulate

the amount of emissions produced in aggregate by setting the

overall cap for the scheme, but gives companies the flexibility

of determining how and where the emissions reductions will

be achieved. By allowing participants the flexibility to trade

allowances, the overall emissions reductions are achieved

in the most cost-effective way possible. The EU Emissions

Trading Scheme (EU ETS) is a mechanism being introduced

acrossEuropeto reduce emissions of carbon dioxide and

combat the serious threat of climate change. Phase I of

the scheme began on 1 January 2005 and will run until  31

December 2007. Phase II will run from 2008-2012, to coincide

with the first Kyoto Protocol commitment period.

Enabling agreement: provides the general terms and conditions

for the purchase, sale, or exchange of LNG, pipeline gas and

electricity, but does not list specific contract details.

End-users: the ultimate consumers of natural gas, including

residential, commercial, industrial, wholesale, cogeneration

and utility electricity-generation customers.

Engineering, procurement and construction (EPC)

contract: 1) a legal agreement setting out the terms for

all activities required to build a facility to the point that it is

ready to undergo preparations for operations as designed. 2)

the final contracting phase in the development of the export

portion of the LNG chain that defines the terms under which the

detailed design, procurement, construction and commissioning

of the facilities will be conducted. Greenfield LNG project

development entails a wide variety of design, engineering,

fabrication and construction work far beyond the capabilities

of a single contractor. Therefore, an LNG project developer

divides the work into a number of segments, each one being

the subject of an EPC contract. For example, separate EPC

contracts are executed for construction of onshore LNG plant

and related infrastructure, for the offshore production facilities

and for the pipeline from the offshore location to the plant site.

See Front-end engineering and design (FEED) contract

Enriching:  increasing the heat content of natural gas by mixing it

with a gas of higher Btu content.

Ensign: flag carried by a ship to show her nationality.

Environmental-impact assessment (EIA): an assessment

of the impact of an industrial installation or activity on the

surrounding environment, conducted before work on that

activity has commenced. The original baseline study, a key part

of this process, describes the original conditions.

Environmental Protection Agency (EPA): theUSfederal

agency that administers federal environmental policies,

enforces environmental laws and regulations, performs

research and provides information on environmental subjects.

The agency also acts as chief advisor to the President on US

environmental policy and issues.

Equation of state: a mathematical relationship between pressure,

volume and the temperature of a fluid that permits the prediction

of the real volumetric and thermodynamic behaviour.

Equity gas: the proportion of gas to which a producing company is

entitled as a result of its financial contribution to the project.

Escalator clause: a clause in a gas purchase or sale contract

that permits adjustment of the contract price under specified


European Commission: the executive body of the European

Union. Its Directorate-General of Energy and Transport

develops community transport and energy policies, including

dealing with state aid, and is responsible for managing the

financial support programmes for the trans-European networks,

technological development and innovation.

Evergreen clause: a contract clause that extends the contract

beyond the initial term, until one of the parties gives a required

notice of termination.

Excess capacity: a pipeline that is operating at a point below

capacity. If a pipeline has excess capacity, it can receive

additional gas.

Exergy analysis: the evaluation of a thermodynamic process’

irreversibility and inefficiency. Exergy analysis is a fundamental

design mechanism to increase efficiency and reduce costs.

Export-credit agencies (ECAs): government agencies whose

mission is to facilitate the export sale of goods and services by

providing credits that are more attractive than those available

commercially and by providing security for credit and political

risk that may not be available at an economic cost from

privatesector finance sources. ECAs of theUS, Europe andJapan

have been consistent financing sources for LNG projects;

includes Export-Import Banks of the US (USEXIM) andJapan

Bank for International Cooperation (JBIC), theUK’s Export

Credit Guarantee Department (ECGD),Germany’s Hermes,

France’s Coface andItaly’s Sace. See Multilateral institutions

Ex-ship contract: in an LNG ex-ship contract, ownership of the

LNG transfers to the buyer as the LNG is unloaded at the

receiving terminal, payment is due at that time. See  Cost,

insurance and freight contract and Free on board contract

Extraction loss: the reduction in volume of wet natural gas

caused by the removal of natural gas liquids, hydrogen

sulphide, carbon dioxide, water vapour and other impurities

from the natural gas stream. Also called shrinkage.

Federal Energy Regulatory Commission (FERC): the chief

energy regulatory body of theUSgovernment. Responsible

for regulating LNG facilities in theUS. FERC is considered

an independent regulatory agency responsible primarily to

Congress, but is housed in the US Department of Energy.

Feedstock gas (feedgas): dry gas used as raw material for

LNG, petrochemicals and gas-to-liquids (GTL) plants.

FERC blanket certificate:  authorisation from FERC to the

interstate pipeline to offer a service to the public without

individual certification or approval filings.

FERC Order 497 – a 1988 FERC Order: to do with the activities

of marketing affiliates of interstate pipeline firms. Among

other things, it establishes guidelines for sharing of certain

insider information. It requires disclosure of certain information

regarding shared personnel and affiliate transactions.

FERC Order 636:  1992 order that unbundledUSpipeline

services, requiring pipelines to cease their merchant function

and instead become solely a transporter of gas.

FERC Order 637 – 2000 FERC Order:  required changes in

FERC regulation of interstate pipelines, changes designed

to encourage greater comparability between primary pipeline

capacity and the secondary capacity (capacity release) market.

Field natural gas: gas extracted from a production well prior to

entering the first stage of processing, such as dehydration.

Field: an area consisting of a single or multiple reservoirs all grouped on

or related to the same individual geological structural feature and/

or stratigraphic condition. There may be two or more reservoirs

in a field that are separated vertically by intervening impervious

strata, or laterally by local geologic barriers, or by both.

Fnancial-guarantee contract:  a contract that requires the

issuer to make specified payments to reimburse the holder

for a loss it incurs because a specified debtor fails to make

payment when due in accordance with the original or modified

terms of a debt instrument.

FIP: Free in pipe. LPG is sometimes sold on this basis.

Firm energy (contract):  energy sales guaranteed to be

delivered under terms defined by contract.

Firm transportation: a fixed obligation where the transporter is

obligated to provide a specified capacity without interruption.

First mate: directly responsible for all deck operations – cargo

handling and storage, deck maintenance and deck supplies;

ship’s medical officer. See Crew

Fixed-price contract:  contract in which a specific price is

agreed for commodities.

Flare: a flame used to burn off unwanted gas; a flare stack is the steel

structure on a processing facility from which gas is flared.

Flash point: the temperature under very specific conditions at

which a combustible liquid will give off sufficient vapour to form

a flammable mixture with air in a standardised vessel. Related

to the volatility of the liquid.

Flash vapours: gas vapours released from a stream of natural

gas liquids as a result of an increase in temperature, or a

decrease in pressure.

Force Majeure: a term commonly used in contracts to describe an

event or effect that cannot be reasonably controlled. This term

essentially frees one or both parties from liability of obligation

when an extraordinary event or circumstance prevents one or

both parties from fulfilling their contractual obligations.

Forward contract:  a commitment to buy (long) or sell (short)

an underlying asset at a specified date at a price (known as

the exercise or forward price) specified at the origination of

the contract.

Forward haul: a gas-transportation service that requires movement

of gas from a point of receipt to a point of delivery such that

the contractual direction of movement on the pipeline is in the

same direction as the flow of the gas.

Fossil fuel:  any naturally occurring organic fuel formed in the

earth’s crust, such as petroleum, coal, or natural gas.

Fractionation: the process of separating a fluid mixture into its

primary constituents, for example, separating a gas condensate

into ethane, propane, butanes and heavier components.

Fracturing: refers to a method used by producers to extract

more gas from a well by opening up rock formations using

hydraulic or explosive force. Advanced fracturing techniques

are enhancing producers’ ability to find and recover natural

gas, as well as extending the longevity of older wells.

Free-on-board (FOB) contract: in an LNG FOB contract, the

buyer lifts the LNG from the liquefaction plant and is responsible

for transporting the LNG to the receiving terminal. The buyer

is responsible for the shipping, either owning the LNG ships

or chartering them from a shipowner. In a FOB contract, the

seller requires assurance that the shipping protocols provide a

safe and reliable off-take for the LNG to prevent disruption to

the sales and purchase agreement (SPA). See Cost, insurance

and freight (CIF) contract, Ex-ship contract and Saleand

purchase agreement (SPA)

Freight: charge made for the transportation of a cargo.

Front-end engineering and design (FEED) contract: 1) a

legal agreement setting out the terms for all activities required

to define the design of a facility to a level of definition necessary

for the starting point of an engineering, procurement, and

construction (EPC) contract; 2) generally, the second contracting

phase for the development of the export facilities in the LNG

chain which provides greater definition than the prior Conceptual

design phase. In an LNG project, the most important function of

the FEED contract is to provide the maximum possible definition

for the work to be performed by the EPC contractor. This enables

potential EPC contractors to submit bids on a lump-sum basis,

with the least possibility that the contract cost will change through

undefined work or through claims for unanticipated changes in the

work. Clear definition of contract costs is important not only for

cost control purposes, but also for purposes of project financing –

LNG project lenders will normally limit their lending commitment to

a specific percentage of forecast project costs, and cost overruns

will have to be covered by the borrower’s equity investment. See

Engineering, procurement and construction (EPC) contract

Fuel gas: a process stream internal to a facility that is used to

provide energy for operating the facility.

Fuel loss: a proportion of natural gas received by a pipeline or local

distribution company that is retained to compensate for lost

and unaccounted for natural gas.

Fuel-switching capability: the ability of an end-user to readily

change fuel.

Full-cycle economics: economic analysis that includes all

costs of field development including seismic, lease cost and

construction, drilling, completion, development and, where

relevant, decommissioning and environmental restitution.

FGas cap: a free gas phase within a reservoir that overlies an oil


Gas condensate reservoir: a reservoir initially containing

natural gas that will precipitate hydrocarbon liquid (retrograde

condensate) during pressure depletion. To increase the

recovery of the condensate, gas may be re-cycled in early

years and produced at a later date.

Gas cycling:  process in which produced gas is re-injected into

the reservoir after removal of condensate in order to maintain

reservoir pressure and prevent condensate from condensing in

the reservoir (retrograde condensation) and becoming difficult

to recover.

Gas day: in theUS, a period of 24 consecutive hours, beginning at

09:00 Central Time.

Gas-distribution line:  a gas pipeline, normally operating at

pressures of 60 pounds per square inch (psi) or less, which

transports gas from high-pressure transmission lines to endusers.

Gasfield: a field or group of reservoirs of hydrocarbons containing

natural gas, but insignificant quantities of oil.

Gas-gathering system:  a system for collecting gas production

from different sources for delivery by pipeline to a central point,

such as a platform or processing facility. The gas sources could

be individual wells, smaller gathering systems, field facilities

and platforms.

Gas grid: 1) the system of pipelines from the wellhead to the

city gate; 2) the network of gas transmission and distribution

pipelines in a region or country, through which gas is transported

to industrial, commercial and domestic users.

Gas imbalance:  a discrepancy between a transporter’s receipt

and deliveries of natural gas for a shipper.

Gas lift: one of several methods of artificial lift. A mechanical

process using the continuous or intermittent injection of a

gas into the production conduit (tubing or casing) to aerate or

displace the produced fluids. This creates a reduction of the

bottom-hole pressure of the well, increasing or sustaining the

flow rate of the well.

Gas processing: the separation of oil and gas, and the removal

of impurities and NGLs from natural gas.

Gas reserves: those quantities of gas that are likely to be

commercially recovered from known accumulations from a

given date forward.

Gas revenue: the product of gas volume times gas price; gross

cash flow from sales of gas.

Gas send-out: the total natural gas produced or purchased

(including exchange-gas receipts), or the net natural gas

withdrawn from underground storage within a specified time

interval, measured at the point of production, purchase or

withdrawal, adjusted for changes in local storage quantity.

Gas treatment: removal of impurities, such as sulphur compounds,

carbon dioxide and water vapour from natural gas.

Gas-turbine power plant:  a power plant in which the prime

mover is a gas turbine. A gas turbine typically consists of an

axial-flow compressor that feeds compressed air into one or

more combustion chambers where liquid or gaseous fuel is

burned. The resulting hot gases are expanded through the

turbine, causing it to rotate. The rotating turbine shaft drives the

compressors as well as the generator, producing electricity.

Gas well: a well drilled and completed that primarily produces

natural gas.

Gas/condensate ratio: for a gas condensate reservoir, the ratio

of gas to condensate is reported in cf per barrel. The inverse

ratio (condensate-gas ratio, CGR) is also used, and is reported

in barrels per mmcf.

Gas to liquids (GTL):  a processing technology that converts

natural gas into high-value commodity liquid fuels and blending

agents, petrochemicals feedstocks and chemicals by changing

its chemical structure. GTL produces products that can be

easily traded as commodities on world markets.

Gas-to-oil ratio (GOR): the number of standard cubic feet of gas

produced per barrel of crude oil or other hydrocarbon liquid. In

some parts of the world, the units are cubic metres of gas per

cubic metre of liquid produced.

Gathering line:  network-like pipeline that transports natural gas

from individual wellheads to a compressor station, treating or

processing plant, or main trunk transmission line. Gathering

lines are generally relatively short in length and smaller in

diameter than the gas sales line.

Gigajoule (GJ): a joule is an international unit of energy defined

as the energy produced from one watt flowing for one

second. A very small unit of energy, there are 3.6m joules in a

kilowatt-hour. For gas, one gigajoule = 960 cf under standard

temperature and pressure conditions. Roughly, 1 gigajoule (Gj)

= mcf; one terajoule (Tj) = 1 mmcf; one petajoule (Pj) = 1 bcf;

one exajoule (Ej) = 1 tcf.

Gigawatt (GW): a unit of electric power equal to 1bn watts, 1m

kilowatts or 1,000 megawatts – enough power to supply the

needs of a medium-sized city.

Gigawatt hour (GWh): 1bn watt-hours.

Grandfather clause: a clause in a contract which maintains the

prior rule or policy where a new rule or policy would otherwise

be applicable.

Greenfield LNG facility: a new LNG facility constructed on a

new site.

Grid: a network of pipelines through which gas is transported.

Gross freight: freight cost excluding the expenses relating to the

running costs of the ship.

Gross gas withdrawal: the full volume of compounds extracted

at the wellhead, including non-hydrocarbon gases and natural

gas plant liquids.

Gross tonnage: common measurement of the internal

volume of a ship determined in accordance with prescribed

methods and formulas and expressed in units of 100 cf

(= 2.83 cm)

Grounding: contact by a ship with the bottom while she is moored

or anchored or under way.

Hague rules (1921): adopted by the International Law Association

at the Hague Conference in 1921, international code for

conditions for the carriage of cargo under a bill of lading.

Harbour dues: various local charges against all seagoing vessels

entering a harbour, to cover maintenance of channel depths,

buoys, lights; not all harbours assess this charge.

Hard aground: a vessel that has gone aground and is incapable

of refloating under her own power. Also referred to as Hard

and Fast.

Heads of agreement (HOA): a preliminary agreement covering

the outline terms for the sale and purchase of LNG or natural

gas. See Sales and purchase agreement (SPA).

Headstation: mainline receipt point on a pipeline.

Heat rate: the measure of efficiency in converting input fuel to

electricity. Heat rate is expressed as the number of Btu of fuel

(for example, natural gas) per kilowatt hour (Btu/kWh). Heat

rate for power plants depends on the individual plant design,

its operating conditions and its level of electricity output. The

lower the heat rate, the more efficient the plant.

Heating value: the amount of heat produced from the complete

combustion of a unit quantity of fuel. There are two heating

values: the gross (high) and the net (low) heating value.

The gross value is that which is obtained when all of the

products of combustion are cooled to standard conditions,

and the latent heat of the water vapour formed is reclaimed.

The net value is the gross value minus the latent heat of

vapourisation of the water.

Hedge for accounting purposes:  an accounting election,

subject to certain criteria, allowing a breach of two fundamental

principles of generally accepted accounting principles; either

allowing gains and losses on derivatives at fair value to be

deferred in equity; or allowing the measurement for financial

assets and liabilities to be recorded at fair value through


Hedge for commercial purposes: taking a financial position

by use of a derivative or non-derivative financial asset or

liability whose fair value or cash flows are expected to be

effective in reducing or eliminating changes in the fair value or

cash flows of a risk or a range of risks.

Hub: a contractual point where buyers and sellers execute

transactions for gas. Hubs can be notional or physical,

transregional (one or more transmission system operators (TSOs))

or within-country (one TSO). Hubs generally consist of a Hub

Services Agreement (operator) and Standard Trading Contract

(trader). Examples of notional hubs are the National Balancing

Point (NBP) in theUKand the Title Transfer Facility (TTF) in

theNetherlands. Physical hubs include the Henry Hub in the

US and the Zeebrugge Terminal (ZBT) inBelgium. See Market


Henry Hub: pipeline interchange nearErath,Louisiana,US, where

a number of interstate and intrastate pipelines interconnect

through a header system. It is the standard delivery point

for the Nymex natural gas futures contract in theUS, the

benchmark gas price in the US Gulf.

Hydrocarbon: an organic chemical compound of hydrogen and

carbon in gaseous, liquid, or solid phase.

HICE (IntercontinentalExchange): formerly the International

Petroleum Exchange, an electronic marketplace for energy

trading and price discovery. ICE provides market participants

with direct access to energy futures and thousands of

overthe-counter commodity products for oil and refined products,

natural gas, power and emissions.

Ideal specific gravity: the ratio of the molecular weight of a

gas to the molecular weight of air. Molecular weight of air =


Imbalance penalties: penalties implemented by a pipeline to

provide an incentive for shippers to maintain actual receipts

and deliveries at nominated and confirmed levels.

Imbalance trading: process by which shippers can acquire gas

from, or sell to, other customers to minimise or avoid cash-out.

Improved (enhanced) recovery:  the operation whereby

natural gas is recovered using any method other than those

that rely primarily on the use of natural reservoir pressure, gas

lift, or a pump.

Independent power producer (IPP): an unregulated power

generator that has no franchised retail service territories.

Indexing: tying the commodity price of natural gas in a contract to

published prices of other commodities or price indices.

Inert gas: a chemically inert gas, resistant to chemical reaction

with other substances.

Injected gas: natural gas placed in underground storage or

returned to the producing reservoir to maintain pressure.

Interconnector (the European): a 238 km pipeline providing

a strategic link between theUKand continentalEurope,

connecting the two gas transmission systems at Bacton, in the

UK, and Zeebrugge, inBelgium.

International load line certificate: a certificate that gives details

of the minimum freeboard granted to a particular ship and the

position of the appropriate load lines to be marked on her sides.

This certificate is issued by a government or duly appointed

person or organisation such as a classification society.

Interruptible demand: the amount of customer demand that, in

accordance with contractual arrangements, can be interrupted

by direct control of the system operator, remote tripping, or

by action of the customer at the direct request of the system


Interruptible gas: gas sold to customers with a provision that

permits curtailment or cessation of service at the discretion of

the supplier; the opposite is firm gas.

Interruptible service: gas service that is subject to interruption

at the option of the pipeline or local distribution company


Interstate market: the market for natural gas that is consumed

outside the state in which it is produced or is transported by an

interstate pipeline.

Interstate Natural Gas Association ofAmerica

(INGAA):  trade organisation that advocates regulatory,

and legislative and individual positions of importance to the

interstate natural gas pipeline industry in theUS.

Interstate pipeline: a natural gas pipeline company in theUS

that is engaged in the transportation of natural gas across state

boundaries and is, therefore, subject to FERC jurisdiction.

Intrastate market:  the market for natural gas consumed in the

same state as it is produced.

Intrastate pipeline:  a natural gas pipeline company that is

engaged in the transportation of natural gas within the state in

which the gas is produced. Subject to regulatory oversight of

the applicable state.

Japan Crude-Oil Cocktail (JCC):  quoted by the Japanese

finance ministry, it is designed to represent the average CIF

price of all imported crude oil and raw oil in a specified trading

period. It is usually quoted on a monthly basis.

Joule-Thomson (J-T) effect:  the change in temperature of a

fluid that occurs when the fluid is allowed to expand in such a

way that no external work is done and no heat transfer takes

place. The case of most interest is cooling of a compressed

gas upon J-T expansion. Note that the J-T effect is not limited

to gases; also J-T expansion can, in some cases, produce an

increase in temperature, rather than a decrease, although this

is not frequently encountered.

Kilowatt (kW): a measurement of electric power equal to 1,000


Kilowatt year (kW-y): a unit of electrical capacity equivalent to

1 kilowatt of power used for 8,760 hours.

Kilowatt-hour (kWh):  the basic unit for pricing electricity, equal

to 1 kW of power supplied continuously for one hour (or the

amount of electricity needed to light 10 100-watt light bulbs for

one hour).

Knot: unit of speed in navigation, which is the rate of one nautical

mile (6,080 feet or 1,852 metres) per hour.

Kilowatt (kW)Laid-up tonnage:  ships not in active service; a ship that is out

of commission for fitting out, awaiting better markets, needing

work for classification. See Layup

Laytime: time allowed by the shipowner to the voyage charterer or

bill of lading holder in which to load and/or discharge the cargo.

It is expressed as a number of days or hours.

Layup: to dismantle or unrig a ship for a prolonged period of


Liquefaction plant: facility which converts natural gas at ambient

temperature and pressure to liquefied natural gas.

Line pack:  creation of storage within the pipeline by increasing

pressure above that which is required for transmission, but still

within a safe limit.

Liquefied natural gas (LNG): an odourless, colourless, noncorrosive and non-toxic product of natural gas consisting

primarily of methane (CH4) that is in liquid form at near

atmospheric pressure.

Liquefied petroleum gas (LPG): gaseous hydrocarbons at

normal temperatures and pressures, but that readily turn into

liquids under moderate pressure at normal temperatures; for

example, propane and butane.

LNG cargo-containment systems:  the method of storing

LNG during marine transport. One of four methods is normally

employed: Self-Supporting Prismatic Type ‘B’ (Conch/IHI), Dual

Membrane (Gaz Transport), Single Membrane (Technigaz),

and Self-Supporting Spherical Type ‘B’ (Kværner Moss).

LNG feedgas requirements to LNG plant: The amount of

gas reserves required to economically support the development

of an LNG liquefaction plant, allowing for gas lost in the

process of production, liquefaction and transport of the LNG to

end-markets (typically 10-15%).

LNG markets: there are two primary LNG markets: 1) theAtlantic

basin includesBelgium,France,Italy,Spain,Portugal,Greece,

Turkeyand the east coast of theUS; 2) the Pacific basin

includesIndia, Japan (world’s largest),South Korea,Taiwan,

Chinaand the west coast of theUS.

LNG project characteristics: primary LNG project components

are: 1) upstream development of long-term, natural gas supply

for feedgas to an LNG plant; 2) downstream development

of liquefaction, storage and loading facilities;  3) marine

transportation; and 4) further downstream, development of

receiving terminals for regasification and pipeline transportation

to market. Defining economic characteristics of LNG projects

include i. commercial activities organised around project

components in which the buyer and seller are closely linked for

20-25 years; ii. significant front-end infrastructure investment

for each tonne of LNG delivery capacity – the critical mass of

infrastructure for an LNG project must be very large in order

to achieve production quantities adequate for realisation of

economies of scale and to secure project financing; and iii.

long-term contracts based on large, proved gas reserves.

LNG refrigerant (for liquefaction) cycles: natural gas

liquefaction requires removal of sensible and latent heat over

a wide temperature range using a refrigerant. The refrigerant

may be part of the natural gas feed (an open-cycle process), or

a separate fluid continuously re-circulated through the liquefier

(a closed-cycle process). Three general types of refrigeration

cycle are used:

1 cascade refrigerant cycle: feedstock natural gas

is cooled, condensed and sub-cooled in heat exchange

with propane, ethylene (or ethane) and finally methane in

three discrete stages. The three refrigerant circuits generally

have multistage refrigerant expansion and compression, each

typically operating at three evaporation-temperature levels.

After compression, propane is condensed with cooling water

or air, ethylene is condensed with evaporating propane and

methane is condensed with evaporating ethylene.

2 expander cycle: in its simplest form, process refrigeration

in an expander cycle is provided by compression and

expansion of a single-component gas stream. High-pressure

cycle gas is cooled in counter-current heat exchange with

returning cold-cycle gas. The cycle gas is expanded through

an expansion turbine, reducing its temperature to a lower

temperature than would be given by expansion through a

Joule-Thomson valve.

3 mixed-refrigerant cycle (MRC):  uses a mixed

refrigerant(s) instead of the multiple pure refrigerants in

the cascade cycle. The mixture composition is specified so

the liquid refrigerant evaporates over a temperature range

similar to that of the natural gas being liquefied. A mixture of

nitrogen and hydrocarbons (usually in the C1 to C5 range) is

normally used to provide optimal refrigeration characteristics.

MRC provides greater thermodynamic efficiency, lower power

requirement and use of smaller machinery.

LNG storage tanks: vessels that are specially constructed to

contain LNG. The tanks are generally constructed of nickel

steel (steel containing 9% nickel) to withstand cryogenic

temperatures and are insulated to maintain the LNG at –161°C.

Some of the stored LNG boils off and the resulting vapour is

used as fuel gas for the plant. There are three main designs

of LNG storage tanks: single containment, double containment

and full containment. The difference in these systems lies in the

functionality of the secondary containment, when the primary

containment is breached. For single containment, neither

liquid nor vapour will be held by the secondary containment;

for double containment, liquid will be contained and for full

containment, liquid and vapour will be contained.

LNG value chain: in planning, funding and executing an LNG

project, each element of the complex chain that links the

natural gas in the ground to the ultimate consumer (from

the wellhead to the burner tip) is considered. The main links

are natural gas production, liquefaction, shipping, receiving

terminal (including regasification), distribution of the regasified

LNG and, lastly, consumption of the gas.

Load balancing: process of matching customers’ demand for

natural gas with producers’ ability to supply.

Loaded leg: that portion (or subdivision) of a ship’s voyage during

which the ship is carrying cargo.

Loading days: the number of days allowed to load a cargo defined

in the charter party.

Local-distribution company (LDC): a utility that takes natural

gas from a local delivery point (generally called the city gate)

and distributes it to local customers. A business entity that

obtains its primary revenues from the operations of a local

retail gas distribution.

Long ton (L/T): 2,240 pounds or 1,016.05 kilograms. See Tonne,

metric and Ton, long

Long-term gas contract: a supply contract in the physical

market covering natural gas deliveries.

Looping: laying additional pipeline beside and connected to an

existing pipeline in order to increase the capacity of the system.

Lost and unaccounted-for gas: the difference between the

quantity of natural gas received into a system and the quantity

of natural gas delivered out of a system over a specific period

of time.

Major interstate pipeline:  in theUS, a pipeline company

whose combined sales for resale and gas system throughput,

transported interstate or stored for a fee, exceeded 50 bcf in

the previous year.

Manifest: document containing a full statement of the ship’s cargo,

extracted from the bill of lading.

Manning scales: the minimum number of officers and crew

members that can be engaged on a ship to be considered as

sufficient hands with practical ability to meet every possible

eventuality at sea.

Manufactured gas: gas produced by certain processes from oil,

coal or coke.

Market centre: an interchange where multiple pipelines or electric

transmission lines interconnect and form a hub. See Hub.

Market clearing price: the price at which supply equals demand.

Market-area storage: storage or hub facilities located near

natural gas users (markets).

Market-based price: the price for natural gas as determined by

the decisions of many buyers and sellers in a market.

Marketing affiliate: a marketer who is owned or controlled by a

pipeline company. See FERC Order 497.

Master (Captain):  highest officer aboard ship who oversees

all ship operations; has general charge of the vessel, overall

responsibility. Handles all ship’s records and communications,

and receives and implements instructions from home office;

takes command of vessel in inclement weather and in crowded

or narrow waters. See Crew

Maximum allowable operating pressure (MAOP): the

maximum gas pressure at which a pipeline system or process

facility is allowed to operate.

Maximum capacity of pipeline: the maximum amount of

natural gas a segment of pipeline can contain at a given time.

Maximum daily quantity (MDQ): the maximum daily quantity

of natural gas that can be nominated for delivery to a

customer’s premises.

Maximum demand: the greatest of all demands of the load that

has occurred within a specified period of time.

mmBtu: one million British thermal units.

mcf, MCF, Mcf: a measurement of volume denoting one thousand

cubic feet of natural gas. 1,000 cf of gas = 1.03 mmBtu (also,

1 kWh = 3,412 Btu). See note under cubic foot for alternative


Megajoule (MJ or MMJ): equivalent to one million joules, or 3.6

MJ = 1kWh.

Megawatt (MW): a unit of electricity equal to 1m watts, or 1,000


Meter:  a mechanical device for automatically measuring and

recording quantities of gas.

Methane (CH4):  the simplest hydrocarbon and the main

constituent of natural gas, it is also known as C1 in the carbon

complexity chain. See Natural gas

Mid-term gas contract: a supply contract in the physical market

covering gas deliveries up to 18 months, although most mid-

term contracts are for one year or less. These contracts can

be characterized by 1) variable prices, where the cost of the

commodity is indexed over time to the futures price of some

published spot price; 2) fixed reservation fee and service fee;

and 3) mainly fixed volumes per day or per month with modest

variation. These contracts are of long enough term to hedge

price risk with financial instruments. These contracts are

important for local distribution companies (LDCs) because they

can extend over a heating season. See Physical gas contract

mol%: the molar composition of a sample of natural gas expressed

as a percentage of the whole.

Most-favoured nation clause: a contract clause that recognises

a status accorded by one nation to another in international

trade. Typically this means that the receiving nation will be

granted all trade advantages, such as low tariffs, that any other

nation receives. They will, therefore, always be treated at least

as well as other nations.

mmt/y, Mtpa: million tonnes a year/per annum.

Multilateral institutions: a major source of LNG financing for

developing countries; includes Asian Development Bank (ADB),

European Bank for Reconstruction and Development (EBRD),

International Bank for Reconstruction and Development (IBRD)

and the International Finance Corporation (IFC). See Exportcredit

agencies (ECAs)

Must-take gas: natural gas supplies committed to a purchaser

under terms such as drainage protection or reservoir protection

clauses or other provisions that absolutely obligate a purchaser

to take natural gas from a supplier.

National Balancing Point (NBP): a notional point on theUK

Transco pipeline through which all gas is deemed to flow.

National Energy Board: Canadian regulatory body that oversees

inter-provincial gas trade and pipelines. Located inAlberta.

Native gas: natural gas in place in a producing reservoir when the

reservoir is converted into a gas-storage reservoir.

Natural gas (natgas):  a naturally occurring mixture of

hydrocarbon compounds and small quantities of various

nonhydrocarbons existing in the gaseous phase or in solution

with crude oil in natural underground reservoirs at reservoir

conditions. The principal hydrocarbons usually contained

in the mixture are methane, ethane, propane, butanes, and

pentanes. Typical non-hydrocarbon bases that may be present

in reservoir natural gas are carbon dioxide, helium, hydrogen

sulphide, and nitrogen. Under reservoir conditions, natural gas

and the liquefiable portions thereof occur either in a single

gaseous phase in the reservoir or in solution with crude oil and

are not distinguishable at that time as separate substances.

The principal constituent is methane (CH4) and is the simplest

of hydrocarbons.

Natural-gas heating value: the amount of thermal energy

released by the complete combustion of 1 cf of natural gas.

Higher Heating Value (HHV) or Gross Heating Value (GHV)

assumes that the water vapour produced in the combustion

process is condensed to liquid. Net Heating Value (NHV)

assumes the vapour produced in the combustion process

stays in the gaseous phase.

Natural gas liquids (NGLs):  liquid hydrocarbons, such as

ethane, propane, butane, pentane and natural gasoline,

extracted from field gas.

Natural-gas processing: 1) the purification of field gas at

gasprocessing plants (or gas plants), or the fractionation of mixed

natural gas liquids (NGLs) to natural gas products to meet

specifications for use as pipeline quality gas. Gas processing

includes removing liquids, solids, and vapours, absorbing

impurities and odourising; 2) the process of separating NGLs

by absorption, adsorption, refrigeration or cryogenics from a

stream of natural gas.

Natural-gas producer: a natural gas producer is generally

involved in exploration, drilling and refinement of natural gas.

Natural-gas resource base: an estimate of the amount of

natural gas available, based on the combination of reserves,

contingent resources and prospective resources. Reserves may

include proved, probable and possible commercial reserves.

Contingent resources include recoverable quantities from

known accumulations that are not commercial. Prospective

resources are those quantities of petroleum that are estimated

to be recoverable from undiscovered accumulations.

Natural-gas storage: a means of providing a reserve of natural

gas supplies to meet the seasonal demands of natural gas


Natural-gas transportation system: the pipeline

transportation system used to accept and transport natural


Net capacity (shipping): the number of tonnes of cargo that

a vessel can carry when loaded in salt water to her summer

freeboard marks. Also called cargo-carrying capacity, cargo

deadweight and useful deadweight.

Net gas: total produced natural gas times net working interest in

natural gas production.

Net tonnage:  the carrying capacity of vessels as prescribed by

government regulations and determined by measuring the

cubic contents of the space intended for revenue earning.

Netback price: the effective price to the producer of natural gas

at a defined point, based on the market price for the natural

gas less the charges for delivering the natural gas from the

defined point to market.

Nomination: an order slip to an interstate pipeline, stating the

volume of gas a supplier seeks to transport over a fixed period

of time. Most nominations are now submitted electronically

through pipeline EBB/Internet websites.

Non-associated gas: free natural gas not in contact with, or

dissolved in, crude oil in the reservoir. LNG projects require

large, proved reserves of non-associated gas to insure supply

over long contract terms.

Non-firm purchase:  purchase of a commodity such as natural

gas on an as-available basis.

No-notice service: a pipeline delivery service that allows

customers to receive gas on demand without making prior

nominations to meet peak service needs and without paying

daily balancing and scheduling penalties.

Non-performance: a contractual breach.

Odourising: a process whereby an additive is injected to natural

gas to provide a readily perceptible odour at a very low

concentration in air as a warning indication of the presence of

natural gas. Also called stenching.

Offload (shipping): discharge of cargo from a ship.

Off-peak gas: natural gas supplied during periods of relatively low

system demands.

Off-system supply: natural gas supply purchased from an

entity other than the delivering pipeline or local distribution


Offtake point: the point in a natural gas distribution system where

natural gas is taken by supply pipe to a major customer.

Ofgem:UKregulatory body that oversees electricity and gas trade,

pipelines and the power grid. Located inLondon. Combines

the former Offer and Ofgas regulators.

Oil equivalent gas (OEG): See Barrel of oil equivalent (boe)

Open-access transportation: natural gas transportation

service available to all shippers. Subject to capacity availability,

in a manner that is not unduly discriminatory.

Operating lease: an agreement whereby the lessor conveys the

right to use an asset for an agreed period of time to the lessee

(in return for a payment or series of payments).

Operational balancing agreements (OBAs): agreements

between pipelines and parties at delivery or receipt points,

whereby the parties agree to specified procedures for balancing

discrepancies between the nominated levels of service and the

actual quantities.

Operational-flow orders (OFOs): orders that are issued by a

pipeline to protect the operational integrity of the line.

Outer continental shelf (OCS): that portion of a continental

land mass that constitutes the slope down to the ocean

floor. The outer continental shelves are heavily sedimented

and are believed to contain a large portion of the earth’s

undiscovered gas.

Own-use exemption: the exemption to applying fair-value

accounting, under International Financial Reporting Standards,

to contracts that were entered into and continue to be held for

the purpose of the receipt or delivery of a non-financial item in

accordance with the entity’s expected purchase, sale or usage


P&I (shipping): protection and indemnity insurance.

Peak-day send-out: the largest volume of natural gas delivered

on any one day during the year.

Peak-shaving (or peak-lopping): the process of drawing gas

during peak-use periods from storage or peak-load plants to

supplement the normal amounts delivered to customers.

Petrochemicals feedstock:  feedstock derived from petroleum,

used to manufacture chemicals, synthetic rubber, and plastics.

Physical contract:  a natural gas contract where delivery and

receipt are expected.

Pipeline constrained: a condition in which the capacity of gas

pipelines is less than the demand for throughput.

Pipeline interconnection:  a point at which facilities of two or

more pipelines interconnect.

Pipeline-quality natural gas:  natural gas that meets the

specifications of a pipeline.

Pipeline:  a tube for the transportation of crude oil or natural gas

between two points, either offshore or onshore.

Postage-stamp rate: transportation rate for a given area (can be

a large part of a pipeline’s system) that does not vary according

to distance from the source of supply. Typically, postage stamps

for letters are at a fixed price, regardless of destination.

Pounds per square inch absolute (psia): the total pressure

in a system including atmospheric pressure.

Pounds per square inch gauge (psig):  the pressure

measured by a pressure gauge. The following formula

is used to convert gauge pressure to absolute pressure:

P(psia) = P(psig) + atmospheric pressure.

Price indexation:  a practice whereby a contract price is linked

to another, generally more liquid or less complex product price

or economic indicator. This allows the resulting price to vary in

accordance with another factor. Gas contract prices are often

linked to major crude oil indices, derivative prices, such as

certain fuel oil prices, or, less frequently, energy or economic

growth indicators, such as a country’s GDP.

Production costs (lifting costs): costs incurred to operate and

maintain oil or gas wells and related equipment and facilities,

including depreciation and applicable operating costs of support

equipment and facilities and other costs of operating and

maintaining those wells and related equipment and facilities.

They become part of the cost of oil and gas produced.

Production-sharing contract (PSC):  contract between a

government and a company, granting the company a contractual

right to explore and produce hydrocarbons in a specified area in

enabling the company to recover its costs and a certain profit.

Project financing:  most commonly used method to finance

construction of industrial infrastructure, because of the nonrecourse

(to project sponsors) nature of the debt financing

supporting the project. Typically, the developer pledges the

value of the plant and part or all of its expected revenues as

collateral to secure financing from private lenders. In the event

of financial distress, the debt holders have recourse only to the

project assets in place at that time.

Project-financed pipeline:  pipeline funded by pledging only

cash flow generated by the pipeline expected revenues to

cover the principal and interest on the debt.

Ratio of specific heats: for gases, it is the ratio of the specific

heat at constant pressure to the specific heat at constant

volume. The ratio is important in thermodynamic equations,

such as compressor horsepower calculations, and is given the

symbol k where k = Cp/Cv. The ratio k lies between 1.2 and

1.4 for most gases.

Real specific gravity: the density ratio between a gas and air

determined by measurement at the same temperature and


REC (regional electricity company): term used in theUKto

describe electricity-distribution companies.

Recoverable gas reserves:  the quantity of natural gas

determined to be economically recoverable from a reservoir or

reservoirs over a specific period of time.

Regasification plant: a plant that accepts deliveries of liquefied

natural gas and vapourises it back to its gaseous form by

applying heat so that the gas can be delivered into a pipeline


Regulation:  the governmental function of controlling or directing

economic entities through the process of rulemaking and

adjudication; a rule or law established by the federal or state

government that sets procedures.

Regulatory out clause: a contractual provision whereby a party

is excused from performance because of the actions of a

jurisdictional regulatory agency.

Reliability: a measure, expressed as a percentage, of the time

(excluding routine maintenance time) a facility (for example,

process plant, pipeline, transmission line or generating unit) is

capable of providing service.

Remote gas: natural gas in fields where infrastructure for

transportation of gas is some distance away, making production

of the gas field more complex. See Stranded gas

Reserves to production ratio (R/P):  an estimate used to

project the productive life of an oil or gas field (or company)

based upon the size of the field compared with the annual

production capacity.

Residue gas:  that portion of the natural gas stream that remains

after the extraction of ethane and heavier liquids and liquefiable

hydrocarbons, and impurities during processing, minus fuel,

incidental losses, by-passed natural gas and natural gas

reserved by a seller under a gas purchase agreement.

Right of first refusal:  process that allows any long-term

firm gas-transportation customer, including formerly bundled

city-gate sales customers, to continue receiving firm

gastransportation service by paying up to the maximum rate and

matching the length of a term offered by another customer who

is seeking service.

Rollover clause: a contract clause that permits a contract to

extend beyond the initial term.

Salefor resale: a sale of natural gas to a customer who will in turn

sell that gas to someone else.

Sales and purchase agreement (SPA): a definitive contract

between a seller and buyer for the sale and purchase of a

quantity of natural gas or LNG for delivery during a specified

period at a specified price. See  Annual delivery programme

(ADP) and Heads of agreement (HOA).

Sales gas: natural gas treated and conditioned to meet gas

purchaser specifications.

SCADA system (supervisory control and data

acquisition):  a computerised automation system that

brings together the following technologies: telemetry,

telecontrol, supervisory control, and data acquisition, analysis

and presentation. When a SCADA system is employed in an

LNG process plant or pipeline, information from remote data

gathering devices is made available to a central location.

Moreover, information gathered can be used by a human

operator as the basis for issuing commands to the remote


Scheduling:  process by which nominations are first consolidated

by receipt point and by contract, and verified with upstream

and downstream parties. If the verified capacity is greater

than or equal to the total nominated quantities, all nominated

quantities are scheduled. If verified capacity is less than

nominated quantities, nominated quantities will be allocated

according to scheduling priorities.

Seaworthiness: statement on the condition of the vessel for the

trade or service in which it is employed.

Seaworthiness certificate: certificate issued by a classification

society surveyor to allow a vessel to proceed after she has

met with a mishap that may have affected her seaworthiness.

It is frequently issued to enable a vessel to proceed, after

temporary repairs have been effected, to another port where

permanent repairs are then carried out.

Second mate: ship’s navigation officer; keeps charts (maps) up to

date and monitors navigation equipment on bridge. See Crew

Secondary market: in the gas industry, this is the market for

reselling unneeded pipeline-transportation capacity.

Send-out capacity:  the volume of natural gas that can be

converted by a liquefaction facility and subsequently shipped

over a specified period of time.

Separator: a vessel used to separate a multiphase mixture of

fluids into its separate phases, for example, vapour, oil, water,


Ship-or-pay clause:  contract clause requiring payment for the

transportation of the natural gas even in case the natural gas

is not transported.

Ship’s agent: person or firm that transacts all business in a port on

behalf of shipowners or charterers. Also called shipping agent

or agent.

Shipper: any gas-market participant that holds a contract to

transport gas on a pipeline or local distribution company.

Short-term supplies: natural gas purchases usually involving

30-day, short-term contract or spot gas.

Shrinkage: the reduction in volume of wet natural gas caused by

the removal of natural gas liquids, hydrogen sulphide, carbon

dioxide, water vapour and other impurities from the gas.

Sour gas:  natural gas that contains significant amounts of

hydrogen sulphide (usually greater than 16 ppm) and possibly

other objectionable sulphur compounds (mercaptans, carbonyl

sulphide). Also called acid gas.

Specific gravity:  the ratio of the density of a substance to the

density of a reference substance, both at specified physical

conditions. As applied to gas, air is the reference substance

and the physical conditions are a specified temperature and

atmospheric pressure.

Spot gas: natural gas that is available and purchased on a

shortterm basis and is furnished to customers on an as-available


Spot gas market: short-term buying and selling of natural gas.

Spot voyage: a charter for a particular vessel to move a single

cargo between specified loading port(s) and discharge port(s)

in the immediate future.

Standard metering: base standard conditions, plus agreed

corrections, to which all natural gas volumes are corrected for

purposes of comparison and payment.

Storage: a means of maintaining a reserve of natural gas supplies

to meet seasonal demands.

Straddle plant: a gas-processing plant constructed near a

transmission pipeline downstream from the fields where the

natural gas in the pipeline has been produced.

Stranded gas: gasfield located in area where there are no

transportation services or markets within any economically

reasonable distance. See Remote gas

Supplier: a party that sells a commodity (for example, natural gas).

Suspended gas discovery: a gasfield identified by a discovery

well, but not being produced or developed.

Sweet gas: natural gas that contains such small amounts of

hydrogen sulphide (and other sulphur compounds) and carbon

dioxide that it can be transported or used without purifying, with

no deleterious effect on piping and equipment.

Swing gas: natural gas bought on short notice to meet unexpected

daily demands not covered under long-term contracts.

Synthetic natural gas (SNG): methane obtained from sources

other than naturally occurring reservoirs of natural gas, such

as by crushing and gasifying coal at high temperature, refining

heavier hydrocarbons, or processing rubbish or other organic

materials. Gases other than natural gas or liquid or solid

hydrocarbons converted to a gaseous fuel of heat content,

compatibility and quality equivalent in performance to that of

natural gas.

System capacity: the physical limitation of a gas pipeline or

storage system to flow gas to end-users. Also called normal

system capacity.

System supply: natural gas supplies purchased, owned and sold

by the supplier.

Tail gas:  the exhaust gas from any processing unit that is at a

low pressure and is usually vented, treated for contaminant

removal or combusted.

Take-or-pay (TOP) clause:  contract clause in a sales and

purchase agreement (SPA) requiring a minimum quantity of

natural gas to be paid for, whether or not delivery is accepted

by the purchaser.

Taps: Trans-Alaska Pipeline System, the line fromPrudhoe Bay, on

the North Slope, to the terminalportofValdez, on the south

coast ofAlaska.

Tariff gas:  additional natural gas sold to a customer if the total

amount of natural gas needed exceeds their original estimate.

tcf (trillion cubic feet):  volume measurement of natural gas

approximately equivalent to one Quad. See Btu, bcf, and mcf

Therm: a unit of heating value equal to 100,000 Btu, in common

use in theUK; about 56 therms are derived by setting fire to

a barrel of crude oil; one therm has around the same heat

content as 100 cf of natural gas.

Third-party access (TPA):  obliges companies operating

gastransmission or -distribution networks to offer terms for the

carriage of gas on their systems by other gas distribution

companies or particular customers, subject to capacity

availability. See Open access

Throughput (pipeline): the volume of gas flowing (or transported)

through a pipeline.

Throughput (processing): average amount of raw material

that is processed in a given period by a facility, such as

a natural gas processing plant, a crude oil refinery or a

petrochemicals facility.

Time charter: a form of charter party issued when an LNG vessel

is chartered for an agreed period of time. A time charter party

is the contract between owner and charterer, and identifies

the salient characteristics of the ship and the obligations of

the shipowner; specifically the shipowner provides a ship

capable of the specified performance and operates the ship

according to that performance standard set by the charterer.

The charterer pays the owner for the hire of the vessel at an

agreed rate.

Tolling agreement:  an agreement whereby one party owns

(and bears the risks on) the inputs to and outputs from a

process, as well as the rights to a portion of the process

capacity (the tollee). Another party agrees to operate the

process or facility and charges a tolling fee per unit of input

that is transformed, or per unit of capacity to which rights

are granted (the toller). Under an LNG liquefaction tolling

agreement, one company sends a volume of feed gas to a

liquefaction facility, wherein the gas is liquefied in return for

a pre-established tolling charge.

Tonne mile: a measurement used in the economics of transportation

to designate 1 tonne being moved 1 mile; useful to the shipper

because it includes the distance to move a commodity in the


Ton, long (LT): a long ton is 2,240 pounds. Typically used as the

unit measure for sulphur sales.

Ton, short (ST): a short ton is 2,000 pounds.

Tonnage: a shipping term referring to the total number of tonnes

registered or carried or the ship’s carrying capacity.

Tonne, metric: a metric tonne equals 1,000 kilograms or 2,204.6

pounds. The capacity of an LNG baseload plant is typically

expressed in tonnes and the unit capital costs for producing

LNG are expressed as $/tonne.

Trader: gas merchant who purchases natural gas from a producer,

supplier or another trader and resells it to a pipeline, utility

or end-user, usually taking title and assisting in arranging

transportation. See marketer

Train (liquefaction): an independent unit for gas liquefaction.

An LNG plant may comprise one or more trains.

Transfer pricing:  a transfer price is the amount of money

that one unit of an organisation charges for goods and

services to another unit of an organisation. Perhaps the most

important aspect in this area is the Arm’s Length Principle

regularly challenged by fiscal authorities, a common principle

in International Accounting Standards to see that a transfer

price has been calculated and agreed according to normal, fair,

equitable, business principles.

Transmission: the transport of large quantities of natural gas at

high pressures, often through national or regional transmission


Transmission company:  company that obtains the major

portion of its operating revenues from the operation of a

natural gas transmission system and/or from mainline sales to

industrial customers.

Transmission line:  pipeline transporting natural gas from

principal supply areas to distribution centres, large-volume

customers or other transmission lines.

Transportation: the movement of natural gas for third parties

through pipeline facilities for a fee.

Transportation contract:  contract setting forth the terms

and conditions applicable to natural gas or electricity

transportation services.

Transporter:  pipeline company that transports natural gas for a


Transport-or-pay contract: a contract between a natural gas

producer and a pipeline company that requires the pipeline

company to pay for a set amount of natural gas whether or not

the buyer takes delivery of the full amount.

Treating plant: facility that treats raw natural gas to remove

undesirable impurities such as carbon dioxide, hydrogen

sulphide and water vapour.

Turnaround: a period of brisk activity at a plant or receiving

terminal when processing units, or portions of them, are shut

down either for scheduled maintenance or for the installation of

new equipment and systems.

Turnback of capacity:  a situation that occurs when shipper

contracts expire, without renewal or re-contracting. Shippers

turn back all or part of their firm contracted capacity to the

pipeline company.

Ultimate customer: customer that purchases energy for

consumption and not for resale. See End-user

Unconventional gas: natural gas that cannot be produced using

existing technologies.

USAC: tanker market term for US Atlantic coast.

USG:  tanker market term for US Gulf, more properly known as the

Gulf of Mexico.

Utilisation factor: a ratio of the maximum demand of a system

or part of a system to  its rated capacity.

Vapour displacement:  release of vapours that had previously

occupied space above liquid fuels stored in tanks. These

releases occur when tanks are emptied and filled.

Vapour pressure:  the pressure exerted by a vapour that is in

equilibrium with a liquid.

Variable price: a contracted price that can change by the hour,

day, month, etc.

Volume flexibility: provides a contractual option to buy or sell

a non-financial item in a purchase and sales contract that can

be settled net in cash or through another financial instrument.

Such a contract, under International Financial Reporting

Standards, can generally not apply the own use exemption

to applying fair-value accounting to contracts. See  Own use


Wellhead: the equipment installed at the surface of the wellbore. A

wellhead includes such equipment as the casinghead, tubing

hanger, and various valves to control flow from the well.

Wet gas: a gas containing condensable hydrocarbons or other

liquids. The term is subject to varying legal definitions as

specified by applicable statutes. Natural gasoline, butane,

pentane and other light hydrocarbons can be removed by

chilling and pressure or extraction. Usually maximum allowable

is 7 pounds/mmcf for water content and 0.02 gallons/mmcf for

natural gasoline. Also known as associated gas.

Wobbe Index: it represents a measure of the heat released when

a gas is burned at a constant pressure, and is defined as the

gross calorific value divided by the square root of the density

of the gas relative to the density of air.

Working gas: volume of natural gas expected to be cycled from a

gas-storage facility.

World-scale rates:  a schedule of nominal freight rates against

which tanker rates for all voyages, at all market levels, can be

compared and readily judged.