The Liquefied Natural Gas (LNG) Puzzle: A Singular and Misunderstood Commodity in World Trade

Abstract

The ocean‐going trade in liquefied natural gas (LNG) is more than half a century old. The first US LNG project began commercial operation in 1971. World trade in LNG arose as countries and regions with warm climates, small populations, and no ready application for such a fuel as natural gas, like Algeria, Qatar, and Western Australia, sought to monetize their local natural resources by building large export facilities (usually at state expense) targeting industrial countries with cold winters and without indigenous fossil fuels, like Japan, Korea, parts of Europe, and New England. But great costs, complexities, paradoxes, and business failures have always accompanied the international LNG trade. Age‐old rules of thumb for other commodities in world trade do not apply to LNG.