Overview of LNG industry in the U.S. Fisoye Delano

1. Overview of LNG industry in the U.S.Fisoye Delano

2. Outline • 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

3. Typical LNG Composition Others Methane 5% 95% What Is LNG? • LNG is liquid form of the 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.

4. Is LNG A Safe Fuel? • LNG is odorless, colorless, non-corrosive, and non-toxic. • Natural gas vaporized from LNG can cause asphyxiation in an unventilated confinement. • LNG has been safely handled for many years.

5. 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.

6. Is LNG A Safe Fuel? 113 active LNG facilities in the U.S.

7. 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

8. Source: ConocoPhillips 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.

9. Source: CMS 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.

10. Source: CH·IV International LNG facilities in the U.S. 57 Peakshaving Plants in the U.S. Peakshaving LNG facilities liquefy and store natural gas in the summer for 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 been utilized by LDCs for peakshaving for more than 60 years.

11. Source: CH·IV International LNG Facilities in the U.S. 39 LNG Storage facilities in the U.S. Satellite LNG facilities do not contain liquefaction units, but only storage and re-gasification equipment. Some of these units are used for satellite peak-shaving duties, while others are dedicated to vehicle fuel transfer systems. LNG is delivered from marine terminals or satellite facilities, usually by truck.

12. LNG Facilities in the U.S.

13. 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 193Liquefied Natural Gas Facilities: Federal Safety Standards 33CFR Part 127Waterfront Facilities Handling Liquefied Natural Gas and Liquefied Hazardous Gas NFPA 59AStandard for the Production, Storage, and Handling of Liquefied Natural Gas (LNG) NFPA57Standard for Liquefied Natural Gas (LNG) Vehicular Fuel Systems International Regulations BS7777 and EN1473 U.S. LNG Regulations

14. 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. U.S. LNG Regulators

15. 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 industry’s 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 Is LNG A Safe Fuel?

16. EXPLORATION & PRODUCTION REGASIFICATION & STORAGE LIQUEFACTION SHIPPING Sources: BG, ALNG, CMS LNG Value Chain Energy companies must invest in the LNG value chain.

17. LNG Value Chain Exploration and Production • Natural gas is found in the earth’s 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.

18. 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.

19. LNG Value Chain Shipping • LNG tankers are double-hulled ships specially designed and insulated to prevent leakage or rupture in an accident. • LNG is a cryogenic liquid and it is stored in double-walled tanks at atmospheric pressure. • The LNG shipping market is expanding.

20. Source: CMS LNG Value Chain Storage and Regasification • 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.

21. How Much Does LNG Cost? LNG Value Chain Sources: BG, ALNG, CMS

22. How Much Does LNG Cost? LNG costs are declining. 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.

23. Does The U.S. need more LNG? • Bulk of the natural gas used in the U.S. comes from domestic production. • Many fields that are several decades old and are declining 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

24. Algeria 64 Nigeria 38 Qatar 23 Trinidad and Tobago 98 Does The U.S. need more LNG? Natural Gas Imports, Exports in 2001 Oman & Others U.S. DOE – Office of Fossil Energy, bcf 12 Australia 2 LNG Japan 66 166 Total U.S. Consumption = 22.7 tcf LNG is less than 1 percent 3728 LNG 10 239 140 Source: U.S. EIA

25. 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.

26. Proposed LNG Import facilities on U.S. West Coast • Mare Island • Bechtal/ • Shell abandoned project. • Ensenada • Sempra/CMS • Filed permit application with CRE. • Tijuana • Marathon led group • Filed permit application with CRE and selected EPC contractor. • Lazaro Cardenas • Tractebel • Conducting feasibility study. • Baja California • ChevronTexaco • Filed permit application with CRE.

27. 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. • Bahamas • AES • Resolving pipeline design and construction issues. • Port Pelican • ChevronTexaco • Filed with the DOT under Deepwater Port Act. • Altamira • El Paso/Shell • RFP issued by CFE. • Bahamas • Tractebel • Tractebel buys Enron interest. 0103-001

28. 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.

29. 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.

30. 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.

31. 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 Energy-Office of Fossil Energy provides critical support Ministry of Energy and Industry, Trinidad & Tobago participates as an observer. Sponsors of IELE LNG research consortium

32. Overview of LNG industry in the U.S.Fisoye Delano