Liquefied natural gas (LNG) is natural gas that has been cooled to -260 degrees Fahrenheit, at which point it condenses to a liquid. Liquefaction reduces the volume by approximately 600 times, which makes it economical to transport LNG in specially designed gas carriers.

The history of LNG dates back to the nineteenth century, when British scientists started to experiment with liquefying different types of gases, including natural gas. The first LNG plant was built in West Virginia in 1912. The liquefaction of natural gas made it possible to transport it over longer distances and, in 1959, the first LNG tanker, the Methane Pioneer,¹ shipped a cargo of LNG from Lake Charles, Louisiana, to Canvey Island in the United Kingdom.

The first regular LNG trade was established between the U.K. and Algeria in 1964 and after the concept proved itself, additional liquefaction plants and import terminals were built in both the Atlantic and Pacific regions. Four terminals were built in the U.S. between 1971 and 1980 and LNG imports grew quickly. After reaching a peak in 1979, gas imports started to decline as a gas surplus developed in North America, and two of the four terminals were mothballed. Since 1969, the U.S. has also been exporting LNG from Alaska to Asia.

During the last 25 years, Asia has been the dominant market for LNG, with additional demand from Western Europe. In recent years, however, worldwide demand growth has accelerated, as there is a renewed interest for LNG imports in the U.S. due to rapid demand growth, coupled with dwindling domestic gas supplies, while new importers such as India and China have a growing presence in the trade.

On the gas supply side, significant new exporters have joined traditional suppliers such as Algeria and Indonesia. In the last 10 years, significant new liquefaction capacity has been constructed in Australia, Trinidad and Tobago, Nigeria, Oman and Qatar, and rapid further growth is planned.

Unlike the crude oil tanker market, which is dominated by the short-term volatility of the spot cargoes, LNG shipping is considered part of the LNG value chain and is still predominantly based on long-term contracts. As a result of the increasing demand for LNG, the world fleet of LNG carriers is also expanding rapidly. The LNG market is becoming increasingly competitive, with many new trades developing, more shipyards capable of building LNG carriers and an increasing number of shipowners active in this segment. Most existing LNG carriers have capacities of around 138,000 to 145,000 cubic meters (cbm). However, new vessels of 165,000 and 200,000 cbm and larger have been designed and are now under construction. For example, the Q-Flex vessels that OSG built for charter to Qatargas II are the largest and most sophisticated LNG carriers constructed with a capacity of 216,000 cbm and onboard reliquifaction.

^{1 The Methane Pioneer was a converted World War II liberty freighter with five 7,000-barrel aluminum prismatic tanks with balsa wood supports and insulation of plywood and urethane.}