Overview of LNG industry in the U.S.

Fisoye Delano

 What is LNG? Is LNG a safe fuel? The LNG value chain How much does LNG cost? Does the U.S. need more LNG? Conclusion
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Outline

 LNG is liquid form of the

What Is LNG?
Typical LNG Composition

natural gas used for cooking, heating and power generation. LNG is commonly used in the U.S. for peakshaving. LNG is used as an alternative transportation fuel.

Methane 95%

Others 5%

LNG COMPOSITION (Mole Percent)

Source Alaska Algeria Baltimore Gas & Electric New York City San Diego Gas & Electric Methane 99.72 86.98 93.32 98.00 92.00 Ethane 0.06 9.35 4.65 1.40 6.00 Propane 0.0005 2.33 0.84 0.40 1.00 Butane 0.0005 0.63 0.18 0.10 Nitrogen 0.20 0.71 1.01 0.10 1.00

Source: Liquid Methane Fuel Characterization and Safety Assessment Report . Cryogenic Fuels. Inc. Report No. CFI-1600, Dec. 1991

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Is LNG A Safe Fuel?

LNG is odorless, colorless, non-corrosive,

and non-toxic.

LNG has been safely handled for many

years.

Natural gas vaporized from LNG can cause asphyxiation in an unventilated confinement.

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Is LNG A Safe Fuel?

Worldwide LNG Facilities:

17 LNG export (liquefaction) terminals. 40 import (regasification) terminals. 136 LNG ships altogether handling approximately 120 million metric tons of LNG every year. Over 240 peakshaving and LNG storage facilities, some operating since the mid-60s.

The U.S. has the largest number of LNG facilities

in the world.

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Is LNG A Safe Fuel?

113 active LNG facilities in the U.S.
U.S. Liquefied Natural Gas Facilities

Source: EIA

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LNG facilities in the U.S.

The types of LNG facilities in the U.S. are:

Baseload LNG plants: large facilities providing long, steady supply of LNG to customers. There two types,
Baseload LNG liquefaction plants
Baseload LNG regasification terminals

Peak-shaving liquefaction and storage

Satellite LNG storage

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LNG facilities in the U.S.

Baseload LNG liquefaction plants. The only export plant in the U.S. is

the ConocoPhillips/Marathon plant

located in Kenai, Alaska.
Source: ConocoPhillips

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LNG facilities in the U.S.

Baseload LNG regasification terminals The four marine LNG import terminals in the U.S. represent base load LNG facilities.

Source: CMS
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LNG facilities in the U.S.

Peakshaving LNG facilities liquefy and store natural gas in the summer for
57 Peakshaving Plants in the U.S.

eventual regasification during the

coldest days of winter. The storage tank volumes in these facilities can be very

large capable of storing 1.0 to 2.0 BCF

of natural gas. In the US, LNG has
Source: CHIV International

been utilized by LDCs for peakshaving

for more than 60 years.

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LNG Facilities in the U.S.

Satellite LNG facilities do not contain liquefaction units, but only storage and
39 LNG Storage facilities in the U.S.

re-gasification equipment. Some of

these units are used for satellite peakshaving duties, while others are

dedicated to vehicle fuel transfer

systems. LNG is delivered from marine terminals or satellite facilities, usually

Source: CHIV International

by truck.
Source: CHIV International

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LNG Facilities in the U.S.

U.S. LNG STORAGE FACILITIES CAPACITY

2% 18% Marine Export Terminal, 2.3 bcf Marine Import Terminal, 18.8 bcf 80% LNG Peak Shaving and Satellite Storage, 86 bcf

Source: EIA
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U.S. LNG Regulations

Regulations are designed to prevent incidents from occurring and if they do occur, from human or other error, to protect the public from any impact.

49CFR Part 193 Liquefied

Natural Gas Facilities: Federal Safety Standards 33CFR Part 127 Waterfront Facilities Handling Liquefied Natural Gas and Liquefied Hazardous Gas NFPA 59A Standard for the Production, Storage, and Handling of Liquefied Natural Gas (LNG) NFPA57 Standard for Liquefied Natural Gas (LNG) Vehicular Fuel Systems
International Regulations BS7777 and EN1473
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U.S. LNG Regulators

DOE helps to coordinate across federal agencies that have regulatory and policy authority for LNG FERC is responsible for permitting new onshore LNG regasification terminals and ensuring safety at these facilities. DOT regulates offshore terminals and LNG tanker operations. USCG is responsible for assuring the safety of all marine operations at all LNG terminals and on tankers in U.S. coastal waters U.S. EPA and state environmental agencies establish air and water standards with which the LNG industry must comply. Others include: U.S. Fish and Wildlife Service U.S. Army Corps of Engineers for coastal facilities and wetlands U.S. MMS for offshore activities National Oceanic and Atmospheric State, county and local (municipal) agencies play roles to ensure safe and environmentally sound construction and operation of LNG industry facilities. Local police and fire departments.

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Is LNG A Safe Fuel?

The industry is not without incidents but it has maintained an enviable safety record, especially over the last 40 years. The few safety related incidents have harmed the industrys perception by those outside of the industry. The experience of the LNG industry demonstrates that normal operating hazards are manageable.
LNG Incidents 1944 Cleveland Ohio. LNG peakshaving plant. 128 people died in adjoining residential area. 1973 Staten Island NY: LNG peakshaving plant. 40 maintenance workers dies 1979 Cove Point MD: LNG Receiving Terminal. 1 operator died

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LNG Value Chain

Energy companies must invest in the LNG value chain.

EXPLORATION & PRODUCTION

LIQUEFACTION

SHIPPING

REGASIFICATION & STORAGE

Sources: BG, ALNG, CMS

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LNG Value Chain

Exploration and Production

Natural gas is found in the earths crust. Most of the time natural gas is discovered during the search for oil. Worldwide proved reserves of natural gas about 6000 Tcf. Much of this natural gas is stranded, a long way from market. Production operations delivers the gas to users.
Source: BG

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LNG Value Chain

Liquefaction

Natural gas is converted into a liquid state. The gas is cooled to LNG temperature of -256oF. The volume reduce by a factor of 600. Liquefaction makes natural gas more economical to transport.

Source: ALNG

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Shipping

LNG Value Chain

Ships built each year

LNG tankers are doublehulled ships specially designed and insulated to prevent leakage or rupture in an accident. LNG is a cryogenic liquid and it is stored in doublewalled tanks at atmospheric pressure. The LNG shipping market is expanding.

Source: BG

Number of LNG ships built 1965 - 2002

14 12 10 8 6 4 2 0
1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

Source: LNGOneWorld

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Storage and Regasification

LNG Value Chain

At the receiving terminal the LNG is pumped into a double-walled storage tank. Vaporized by warming in a controlled environment. Vaporized gas is regulated for pressure and enters the U.S. natural gas pipeline system. Residential and commercial consumers receive natural gas for daily use from local gas utilities or in the form of electricity.
Source: CMS

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How Much Does LNG Cost?

LNG Value Chain

EXPLORATION & PRODUCTION

LIQUEFACTION

SHIPPING

REGASIFICATION & STORAGE

$0.5-$1.0/MMBtu

$0.8-$1.20/MMBtu

$0.4-$1.0/MMBtu

$0.3-$0.5/MMBtu

Sources: BG, ALNG, CMS

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LNG costs are declining.

How Much Does LNG Cost?

Natural gas can be economically produced and delivered to the U.S. As LNG in a price range of about $2.50 - $3.50 per MMBtu depending largely on shipping cost.
Learning reduces capital costs
$ / tpa LNG Plant costs

LNG COSTS ARE DECLINING

Does not include feedstock prices

700 600 500 400

$/MMBTU

2.5
0.5

300

2 1.5
2.5

0.1

0.1

200 100 0 65-70 70-75 75-80 80-85 85-90 90-95 95-99

00

1 0.5 0
1980's Liquefaction Shipping Regasification and Storage

Source: BP
1.8

Trinidad Trinidad Train 1 Trains 2 and 3

Tanker Cost are Dropping

2000's
LNG carrier (125-135,000 cu.m) newbuilding prices

300 250

Sources: El Paso

200

$M

150 100 50 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002

So urce: LNGOneWo rld 2001

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Does The U.S. need more LNG?

Bulk of the natural gas used in the U.S. comes from domestic production.
U.S. Gas Supply

Many fields that are several Domestic decades old and are declining Production, 85% rapidly.
New natural gas reserves are being discovered, but with advanced recovery technologies these fields are quickly depleted.
74% from Gas Wells 26% from oil wells

Canada, 14% LNG, 1%

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Does The U.S. need more LNG?

Natural Gas Imports, Exports in 2001
Algeria Nigeria Oman & Others

U.S. DOE Office of Fossil Energy, bcf

64 Qatar

38

12 Australia

LNG Japan 66 166

23

2 Trinidad and Tobago

Total U.S. Consumption = 22.7 tcf LNG is less than 1 percent

98 3728

10 140

LNG

239

Source: U.S. EIA

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Does The U.S. need more LNG?

Estimated shortfall in supply of natural gas of about 8 Tcf by 2025. Increased imports of natural gas will be required. Canada may not be able to sustain increasing volumes of exports to the U.S. LNG imports is expected to reach 2.1 Tcf a year by 2025, or about 6% of our total consumption. LNG is currently less than 1% of total U.S. Gas consumption. Demand for LNG is growing.

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Proposed LNG Import facilities on U.S. West Coast

Mare Island Bechtal/ Shell abandoned project.

Tijuana Marathon led group Filed permit application with CRE and selected EPC contractor.

Ensenada Sempra/CMS Filed permit application with CRE.

Lazaro Cardenas Tractebel Conducting feasibility study.

Baja California ChevronTexaco Filed permit application with CRE.

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Proposed LNG Import facilities on U.S. Gulf &

East Coast
Hackberry Dynegy Received preliminary approval from FERC.
Energy Bridge El Paso Applied with USCG for deepwater mooring buoy.

Freeport Cheniere Announced three Gulf Coast sites.

Port Pelican ChevronTexaco Filed with the DOT under Deepwater Port Act. Altamira El Paso/Shell RFP issued by CFE.

Bahamas AES Resolving pipeline design and construction issues.

Bahamas Tractebel Tractebel buys Enron interest.

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Does The U.S. need more LNG?

Alternative sources of natural gas supply.
North slope of Alaska - pipeline to the lower 48 U.S. States. Rocky Mountain region. Offshore resources, the pacific, the Atlantic, the eastern Gulf of Mexico outer continental shelf (OCS).

Access restriction.
Offshore resources in the eastern Gulf of Mexico. Rocky Mountain region (limited or prevented).

Supply gap in will remains even after the delivery of Alaskan gas commences.

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Conclusion

LNG technology makes natural gas available

throughout the world. It is important for citizens, industry and government to develop and communicate appropriate understandings of relative risks associated with LNG facilities and shipping. Demand for LNG is growing.

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IELE Commercial Frameworks for LNG in North America

The 1st briefing paper was published in Jan. 2003
Available for download, http://www.energy.uh.edu/lng/ .

The 2nd paper. LNG safety and the environment is in progress The 3rd paper. U.S. supply-demand balances and energy security: A role for LNG?

Guide to LNG in North America.

All three papers and more information will be compiled in a complete fact book to be issued by summer 2003.
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Sponsors of IELE LNG research consortium

BP Energy Company-Global LNG
BG LNG Services ChevronTexaco Global LNG Shell Gas & Power ConocoPhillips Worldwide LNG El Paso Global LNG ExxonMobil Gas Marketing Company

Tractebel LNG North

America/Distrigas of Massachusetts. The U.S. Department of EnergyOffice of Fossil Energy provides critical support Ministry of Energy and Industry,

Trinidad & Tobago participates

as an observer.

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Overview of LNG industry in the U.S.

Fisoye Delano