LNG Transportation LNG Transportation and Storageand StorageWilliam GuoWilliam Guo10/11/200510/11/2005

OverviewOverview IntroductionIntroduction BackgroundBackground ChallengesChallenges Economic FeasibilityEconomic Feasibility Government PolicyGovernment Policy ConclusionConclusion

IntroductionIntroduction Increasing natural gas demand and costIncreasing natural gas demand and cost Source for reliable, affordable energy Source for reliable, affordable energy Relatively mature technologyRelatively mature technology

Cooling natural gas to -260° F, changes it Cooling natural gas to -260° F, changes it from a vapor into a liquidfrom a vapor into a liquid

Reduces the space natural gas occupies Reduces the space natural gas occupies by more than 600 times, making it a by more than 600 times, making it a practical size for storage and practical size for storage and transportationtransportation

BackgroundBackground

Special designed LNG tankers with Special designed LNG tankers with double hullsdouble hulls

Ships unload LNG at specially designed Ships unload LNG at specially designed terminals where the LNG is pumped to terminals where the LNG is pumped to insulated storage tanksinsulated storage tanks

Converted back to gas at the terminal, Converted back to gas at the terminal, which is connected to natural gas which is connected to natural gas pipelinespipelines

LNG is stored in double-walled, insulated LNG is stored in double-walled, insulated tankstanks

LNG TankerLNG Tanker

LNG TerminalLNG Terminal

LNG TankLNG Tank

ChallengesChallenges High initial cost ($5 Billion +)High initial cost ($5 Billion +) Lack of existing facilities and Lack of existing facilities and

domestic marketsdomestic markets Supplier reliabilitySupplier reliability Transportation securityTransportation security

Producers & MarketsProducers & Markets

Economic FeasibilityEconomic Feasibility Costs (Two 3 trains facility, 6,500 miles Costs (Two 3 trains facility, 6,500 miles

distance, 10 TCF reserve for 20 years) distance, 10 TCF reserve for 20 years) – Source gas: $1.3 BillionSource gas: $1.3 Billion– Liquefaction: $1.4 Billion Liquefaction: $1.4 Billion – Transportation: $1.8 Billion Transportation: $1.8 Billion – Re-gasification: $0.5 BillionRe-gasification: $0.5 Billion

Feasible with >3,000 mile distance Feasible with >3,000 mile distance and $5/MSCF outlet gas price and $5/MSCF outlet gas price

Government PolicyGovernment Policy Confirmed supports from federal, Confirmed supports from federal,

state, and local levelstate, and local level FERC’s policy (2002) intends to FERC’s policy (2002) intends to

remove economic and regulatory remove economic and regulatory barriers to the development of barriers to the development of onshore LNG import terminals onshore LNG import terminals

ConclusionConclusion In transition stageIn transition stage High potential due to increasing High potential due to increasing

gas demandgas demand Largest risk is supplier stabilityLargest risk is supplier stability Currently only feasible with long Currently only feasible with long

transporting distancetransporting distance

Questions?Questions?