North American LNG 2006 - pmaconference.com

North American LNG 2006

Market and technology analysis

“Our ability to expand our use of liquefied natural gas is limited because today we have just five receiving terminals…around the United States.”

- George W. Bush – US President

Reference Code: LNG/0106

Publication Date: February 2006

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CONTENTS

TABLE OF CONTENTS

Executive summary 9

Introduction 12

Existing import terminals 12

US natural gas market fundamentals 16

LNG economics 16

Import terminal cost considerations 17

US natural gas demand 19

US natural gas production 20

US natural gas prices 20

US LNG demand 21

LNG pricing 28

Global natural gas demand 28

Conclusions 29

US LNG developments 30

Introduction 30

Energy Policy Act 30

Conclusions 33

North American LNG project summary 34




CONTENTS Gulf Coast projects 36

East Coast projects 38

West Coast projects 39

LNG project overview 39

Project opposition 40

Conclusions 41

Offshore regas technologies 43

Introduction 43

Catalyst for development 44

Offshore LNG receiving technologies 45

Gasification systems utilized by offshore facilities 46

Offshore economics 48

Conclusions 49

Gravity-based systems 50

Key points 50

Introduction 50

LNG projects planning to use gravity-based terminals 53

GBS engineering firms 55

Conclusions 57

Existing oil/gas platforms 59

Key points 59




CONTENTS Introduction 59

Platform conversion projects 60

Conclusions 70

Floating Storage & Regasification Units (FSRU) 72

Key points 72

Introduction 72

Operational issues 74

FSRU projects 78

FSRU economics 80

Conclusions 82

Regasificaiton vessels 83

Key points 83

Introduction 83

Excelerate Energy – Energy Bridge System 84

Advanced Production and Loading 88

Hoegh LNG 88

Conclusions 89

Recommendations & Conclusions 90

Introduction 90

Summary of offshore LNG strengths and weaknesses 91




CONTENTS

FIGURES

Figure 1: US natural gas production, 1990-2004 20

Figure 2: US wellhead natural gas prices, 1990-2004 21

Figure 3: US LNG sector demand, 2015 22

Figure 4: Flow of US natural gas imports/exports, 2004 23

Figure 5: US LNG imports by terminal, 2004 26

Figure 6: US LNG imports by country of origin, 2004 (MMcf) 27

Figure 7: Average price of LNG imports, 1990-2004 ($/Mcf) 28

Figure 8: Current/planned deepwater LNG ports 31

Figure 9: Proposed/existing North American LNG projects, Jan. 2006 34

Figure 10: Offshore LNG facilities 43

Figure 11: LNG regas import terminals segmented by water depth 46

Figure 12: Offshore LNG regasification systems 47

Figure 13: Gravity based LNG regas structure 51

Figure 14: Isola di Porto Levante LNG receiving terminal 54

Figure 15: Aker Kvaerner depiction of a GBS LNG facility 56

Figure 16: Saipem offshore GBS LNG facility 57

Figure 17: Existing platform conversion to LNG terminal 59

Figure 18: Crystal Energy’s Platform Grace 60

Figure 19: Crystal Clearwater Port Project 61

Figure 20: Elevation view of Crystal Clearwater LNG project 62




CONTENTS

Figure 21: MPEH LNG receiving terminal 64

Figure 22: MPEH - upper deck configuration 66

Figure 23: MPEH - middle deck configuration 66

Figure 24: MPEH - lower deck configuration 67

Figure 25: MPEH - elevation view 68

Figure 26: Spectrum Energy Services – Apollo LNG terminal 69

Figure 27: LNG carrier berthed to an FSRU 73

Figure 28: LNG containment systems 74

Figure 29: FSRU - side by side offloading configuration 75

Figure 30: FSRU to shore LNG pipeline interface 75

Figure 31: Sloshing phenomena shown in membrane tank 76

Figure 32: Location of BHP Billiton’s Cabrillio Port LNG project 78

Figure 33: FSRU vs. Onshore LNG regas operating costs 81

Figure 34: Excelerate Energy – Energy Bridge System 84

Figure 35: Excelerate EBRV pipeline interconnections 85

Figure 36: APL submerged offloading buoy 86

Figure 37: Energy Bridge mooring system components 87

TABLES

Table 1: Summary of offshore regas characteristics 11

Table 2: Existing US LNG terminals 13

Table 3: Basic LNG Economics 17




CONTENTS

Table 4: US monthly waterborne LNG imports (Bcf) 24

Table 5: US LNG imports, monthly averages (Bcf/day) 24

Table 6: LNG cargo diversions from US terminals, 2005 (Bcf) 25

Table 7: Source of US LNG Imports, 1995-2000 (Bcf) 27

Table 8: North American LNG project details, Jan. 2006 (a) 35

Table 9: North American LNG project details, Jan. 2006 (b) 36

Table 10: Offshore/Onshore LNG regas terminal cost comparison 48

Table 11: Benefits of concrete and steel LNG storage 52

Table 12: MPEH operational expectations 65

Table 13: Typical FSRU design and operating specifications 74

Table 14: FSRU operating costs (US $) 81

Table 15: Summary of offshore regas characteristics 91




EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

North America, and in particular the US, requires additional sources of energy to meet expected increases in demand over the decades to come. While it is commonly known that the US has imported the majority of its crude oil for some time, it is a lesser known fact that US natural gas production has been unable to keep pace with domestic demand and that incremental increases in natural gas imports from Canada are not expected to offset future demand growth.

Such market fundamentals, in addition to recent price increases, create a favorable environment for increased imports of LNG – which, during 2004, amounted to 652 Bcf, roughly half the expected future demand. However, greater reliance on LNG is stymied by the lack of sufficient capacity at US regasification terminals. Only five such terminals are currently operation in the US and regulatory hurdles and opposition from both public and private bodies has hindered the construction of additional regasification infrastructure.

The US LNG market underwent a fundamental change when in August 2005, President George W. Bush signed the Energy Policy Act. This Act clarified the Federal government’s role in the siting and operation of onshore and near shore LNG import terminals and gives the FERC the ultimate authority over states on LNG issues.

By the end of 2005, the FERC had approved twelve LNG terminals and the US Coast Guard had approved two. Most of these proposed LNG terminals will be sited in the Gulf of Mexico, causing relatively little opposition from a region already accustomed to abundant petroleum industry infrastructure. Twenty more facilities are currently proposed, twelve under the authority of the FERC and the eight offshore under the authority of the Coast Guard.

To facilitate the importation and regasification of LNG there has been a rapid expansion in the range of alternative offshore LNG importation methods. These new methods are expected to compete with conventional onshore regasification terminals.

The catalyst for alternative, offshore LNG regasification centers on several issues and concerns shared by individuals, communities and governments. These can be broadly defined as:

Environmental;

Security and safety; and

Regulatory.




EXECUTIVE SUMMARY One of the most appealing features of offshore LNG import terminals is their lack of environmental impact on shorelines and population centers. An offshore LNG import terminal is a relatively small and isolated installation and in the unlikely event of an accident, few would be affected.

The enhanced security and safety of offshore LNG infrastructure is the result of their remoteness. Access to offshore LNG facilities can be monitored and restricted to a much greater extent than onshore installations.

US offshore LNG facilities are under the jurisdiction of the US Coast Guard not the FERC. The US Coast Guard is less bureaucratic and more efficient than the FERC generally, approving LNG project applications in one year, while it usually takes the FERC 18 months or more to approve an onshore facility.

Offshore receiving technologies can be defined by the following categories:

Offshore gravity based structures (GBS) - A GBS LNG import terminal consists of concrete or steel caissons located on the seabed. This type of installation is totally self-supporting with respect to its operation, utilities and power generation;

Platform based import terminals – The utilization of existing oil and gas platform structures, converting them to accommodate LNG deliveries;

Floating storage regas units (FSRU) – An LNG import terminal concept consists of a purpose built, permanently moored steel structure with LNG carriers shuttling between an export facility and the import site; and

Regasification vessels - A standard LNG carrier modified in order to enable the vessel to discharge regasified LNG to a subsea pipeline, through an internal turret arrangement connected to an offshore mooring buoy.

Each of these offshore regasification technologies have their own specific merits and disadvantages and their use will be highly dependent on various environmental factors, such as water depth and other logistics.




EXECUTIVE SUMMARY

Table 1: Summary of offshore regas characteristics GBS Platform FSRU Regas Vessel Advantage Concrete

construction Existing asset

Operates at greater depth

No visible fixed facility

Disadvantage Shallow

Depth operation No storage Loading

systems/sloshing

Requires specialized technology

Cost $650m $400-800m $400-800m $200m Time to operation 2-3 years 1.5 years 3 years 2 - 2.5 years Source: Utilis Energy UTILIS ENERGY

Evolving LNG market fundamentals, regulatory changes within the US government and innovative offshore regasification technologies are setting the stage for a promising future for LNG imports into the United States. These imports will play a significant role in helping the US greater diversify its sources of global energy supply.

This study explores the development of the US LNG market and its increasingly important role for America’s energy security. The study also considers other issues and provides a detailed evaluation of new offshore regas technologies.




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North American LNG 2006 - pmaconference.com