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CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
Liquefied Natural Gas Briefing
for California Manufacturers
and Technology Association
Commissioner James BoydJuly 29, 2004
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Why the interest lately in liquefied natural gas?
Canadian and Lower 48 states’ gas production is declining. Wellhead prices are rising.
The U.S. is relying more on natural gas for cleaner power generation.
Seasonal gas prices are volatile due to tight supply and pipes.
LNG production and delivery costs have declined.
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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The United States consumes 25 percent of the world’s
natural gas.
• 22,534 billion cubic feet in 2002• 15% of supplies are imported• LNG imports to U.S. doubled from
2002 and 2003: 229 → 506 Bcf
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
4 Gas Consumption
by California Manufacturers
Top five gas-consuming industries:
• Petroleum refining (41%)
• Food processing (19%)
• Stone, clay, glass, concrete (9%)
• Paper (5%)
• Primary metal (5%)
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Why the interest in LNG in California?
Average daily demand: 6 Bcf– Manufacturers (36%) – Electricity generators (35%)
85% of natural gas supply is imported.
Competes with interstate-pipeline-sharing states for the lowest-cost gas supplies.
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Why the interest in LNG in California?
LNG terminals would give California
a seat at the table to import gas from a diversity of Pacific Rim sources.
LNG imports could foster price competition, leading to lower prices.
LNG storage helps meet peak demand.
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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The Top 20 Countries with Natural Gas Reserves
(in Trillion Cubic Feet) Russia 1,695
Iran 929
Qatar 400
Saudi Arabia 214United Arab Emirates 204United States 177Algeria 156
Venezuela 148 Indonesia
147Nigeria 125
Iraq 113Malaysia 82
Canada 62Netherlands 58
Kuwait 57Egypt 51Libya 46Australia 44China 42
Norway 42
Red = Pacific Rim Suppliers
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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The LNG Industry
• Approximately 30 years old
• Atlantic Basin buyers: – Belgium, France, Greece, Italy, Portugal,
Spain, Turkey, and the United States
• Pacific Rim buyers: – Japan, South Korea, and Taiwan
• 40 receiving terminals, 17 liquefaction plants
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Prices for LNG in the U.S.
($ per Million Btus, 2003)
Under long-term contracts: Range: $3.36 to $5.37 Weighted average: $4.55
Under short-term contracts: Range: $3.03 to $7.70 Weighted average: $4.16
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Potential LNG Sources for the West Coast
Source Country Distance (One-way, @ 18.5 knot ship speed)
Oman 25 days
Australia 18 days
Malaysia 17 days
Indonesia 16 days
Brunei 16 days
Russia 11 days
Alaska 5 days
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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California’s LNG Policies
• 2003 Integrated Energy Policy Report – Encourage LNG facilities in California or
Baja California, Mexico
– Ensure new facilities protect the environment and public safety
– Coordinate permit reviews and address local concerns
• Energy Action Plan– Evaluate new supply options, such as LNG imports
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Is LNG a near-term supply source for the West Coast?
Earliest estimate ~ 2006 Process could take ~ 4 to 7 years
Select Site
EnvironmentalReview and
PublicHearings
Apply forPermits
PassInspection
Finance andConstruct
Facility
Obtain Permitsand Approvals
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Proposed LNG projects underconsideration for California
Name Location Status
Long Beach LNG Facility
Sound Energy SolutionsPort of Long Beach
Joint EIS/EIR by FERC and Port of Long Beach.
Cabrillo Deepwater Port BHP Billiton
~12 miles off shore of Ventura County
Joint EIS/EIR by Coast Guard and State Lands
Commission (SLC).
Crystal Clearwater Port
Crystal Energy LLC~11 miles off shore of
Ventura County
Filed application with Coast Guard, SLC, and Marine Mineral Service.
Port PenguinChevronTexaco Offshore Camp Pendelton Announced project.
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Proposed LNG projects underconsideration for Baja California
Name Location Status
Terminal GNL Mar Adentro de Baja CA
ChevronTexaco
Offshore, Tijuana Obtaining permits.
Energia Costa Azul
Sempra and Shell
Ensenada Obtaining permits.
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Unresolved Issues• Public perception of safety risks
• Jurisdiction re: onshore terminals
• Higher Btu content than state’s gas quality standards
• Jones Act barrier to Alaskan imports
• Who will pay to expand Otay Mesa pipeline to bring in Baja imports: terminal developers or ratepayers?
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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Some Forums to Resolve Issues
• Safety risk perception: Site-specific EIRs • Dispute re: Federal/State jurisdictional for
onshore terminals: Courts or Congress
• LNG’s economic and pipeline-infrastructure impacts: CPUC’s Long-Term Natural Gas Supply proceeding, Energy Commission’s 2005 IEPR
CALIFORNIA ENERGY COMMISSION STAFF – JULY 2004
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For More Information
Energy Commission’s LNG Website
http://www.energy.ca.gov/lng/index.html
Import terminal project contacts:http://www.energy.ca.gov/lng/documents/
WEST_COAST_LNG_PROJECTS.PDF
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