The production of liquefied natural gas, or LNG for short, has revolutionized the energy industry. Many companies have rushed to get into the LNG market to make profits.

Indeed, the rush to produce LNG has led to some of the biggest and most expensive projects on which oil and gas companies have ever embarked. For example, Royal Dutch Shell (NYSE:RDS.B) is constructing the world's largest ship, Prelude, to produce LNG offshore.

Meanwhile, onshore Chevron (NYSE:CVX) is constructing the Gorgon LNG plant in conjunction with peer ExxonMobil (NYSE:XOM). The companies expect to commence production later this year, and construction has cost $54 billion so far.

Finally, ConocoPhillips (NYSE:COP) owns the Darwin LNG facility in Australia's Northern Territory and the Australia Pacific LNG project, a substantial coal-seam-gas-to-LNG operation in Queensland.

Demand rising faster than supply
Demand for LNG has surged during the past few years, and many predict that this growth will continue. Indeed, estimates claim that global natural gas demand has grown by about 2.7% per year since 2000. However, global LNG demand has risen by an estimated 7.6% per year over the same period.

What's more, estimates claim that global LNG demand could almost double from 2012 to 2030 as China, India, Japan and South Korean continue to grow and demand more energy.

This surging demand for the super-cooled natural gas has, unsurprisingly, pushed prices sky-high. According to ICIS, the world's largest petrochemical market information provider, the LNG contract for delivery last January closed at $18.78 per million British thermal units, mmbtu for short, for the highest monthly level ever recorded by the ICIS.

Costs exploding
One of the biggest concerns which has arisen during recent years is the rising cost of these LNG projects, some of which have cost tens of billions more than originally forecast.

For example, the Gorgon LNG project, a joint venture by Exxon, Chevron, and Shell, is currently running $15 billion over budget. Initially, projections estimated that the plant would cost $37 billion back in September 2009. Final estimates have put the cost at $54 billion.

These high costs, according to some, stem from the high cost of labor within Australia and the strong Aussie dollar. Poor rates of productivity have also seen the first expected date of export from the site pushed back to the first quarter of 2015 instead of late 2014.

Nonetheless, with demand for LNG set to rocket, major integrated oil and gas companies would be silly to let this opportunity pass them by. So, Shell is using its imagination and going offshore.

In particular, Shell is constructing the world's first floating liquefied natural gas facility, Prelude FLNG, off Australia's northwest coast.

The scale of this project is, in a word, huge: The Prelude vessel will be longer than 450 feet but it will have as much capacity as a conventional plant, albeit with a lower price tag. Prelude is the first of many FLNG vessels, and it should allow Shell to participate in the LNG boom while cancelling, or scaling back, some of its onshore projects.

According to analysts at Deutsche Bank,a conventional, onshore LNG plant would cost around $3.6 billion to build for every million tonnes of output produced per year. In comparison, a floating project would only cost $2.9 billion to construct to produce a similar output.

In the end it should pay off
Nevertheless, current predictions currently forecast that the price of LNG per mmBtu will average $14 for shipments to Asia and in excess of $12 for shipments to Europe from now until 2035. Fortunately, even though LNG projects have seen multi-billion dollar cost blowouts, the estimated final cost of production per mmbtu at the majority of these projects remains at a level that will allow oil and gas majors to turn a decent profit.

In particular, expectations project that the Gorgon projects will produce at around $12 per mmbtu and Prelude will produce for $8 per mmbtu. Remember, these projects will ship to Asia where expectations call for LNG prices to average $15 per mmbtu during the next few decades.

However, in comparison with ConocoPhillips' Darwin project, Gorgon and Prelude appear to be poor investments. Specifically, expectations state that the Darwin project will be able to produce LNG for only $3 per mmbtu, which implies a profit margin of 400% if it ships its output to Asia.

Foolish summary
All in all, demand for LNG is surging around the world and oil majors are seeking to capitalize on this. However, not all LNG facilities are created equal and it looks as if ConocoPhillips' Darwin project is set to be the most profitable project.

Still, Gorgon and Prelude are also well placed to help their owners benefit from the rapidly rising price of LNG.