LNG Transportation and Storage

1. LNG Transportation and Storage William Guo 10/11/2005

2. Overview • Introduction • Background • Challenges • Economic Feasibility • Government Policy • Conclusion

3. Introduction • Increasing natural gas demand and cost • Source for reliable, affordable energy • Relatively mature technology • Cooling natural gas to -260° F, changes it from a vapor into a liquid • Reduces the space natural gas occupies by more than 600 times, making it a practical size for storage and transportation

4. Background • Special designed LNG tankers with double hulls • Ships unload LNG at specially designed terminals where the LNG is pumped to insulated storage tanks • Converted back to gas at the terminal, which is connected to natural gas pipelines • LNG is stored in double-walled, insulated tanks

5. LNG Tanker

6. LNG Terminal

7. LNG Tank

8. Challenges • High initial cost ($5 Billion +) • Lack of existing facilities and domestic markets • Supplier reliability • Transportation security

9. Producers & Markets

10. Economic Feasibility • Costs (Two 3 trains facility, 6,500 miles distance, 10 TCF reserve for 20 years) • Source gas: $1.3 Billion • Liquefaction: $1.4 Billion • Transportation: $1.8 Billion • Re-gasification: $0.5 Billion • Feasible with >3,000 mile distance and $5/MSCF outlet gas price

11. Government Policy • Confirmed supports from federal, state, and local level • FERC’s policy (2002) intends to remove economic and regulatory barriers to the development of onshore LNG import terminals

12. Conclusion • In transition stage • High potential due to increasing gas demand • Largest risk is supplier stability • Currently only feasible with long transporting distance

13. Questions?