N

atural gas is a premium, clean-burning fuel that is very much in demand in North America. The U.S. Energy Information Administration and other organizations forecast that the United States could face a natural gas supply gap of nearly 9 trillion cubic feet (Tcf)by 2025. With existing natural gas elds in North America continuing to mature and with signicant new discoveries difcult to achieve the United States will clearly need to nd new ways to provide clean-burning natural gas to fuel industry, generate power, and heat homes. As the search for answers continues, liqueed natural gas, or LNG, could play an increasing role in the energy mix of the United States, Canada, and Mexico.

CENTER FOR ENERGY ECONOMICS

Bureau of Economic Geology, Scott W. Tinker, Director Jackson School of Geosciences, The University of Texas at Austin

CENTER FOR ENERGY ECONOMICS

Center for Energy Economics at the Bureau of Economic Geology John A. and Katherine G. Jackson School of Geosciences The University of Texas at Austin presents

In 2002, the Center for Energy Economics, then known as the Institute for Energy, Law & Enterprise, under the direction of Dr. Michelle Michot Foss, established a research consortium to investigate the history, safety record, and supply-demand of natural gas and LNG. A result of this investigation is the comprehensive Guide to LNG in North America, which is available without charge to all interested parties at: www.beg.utexas.edu/energyecon/lng The Guide also includes supplemental papers, such as Offshore LNG Receiving Terminals and Interstate Natural Gas: Quality Specications and Interchangeability, which are also available on the website. Among the many ndings of the Guide to LNG in North America, one conclusion stands out: The United States will need to augment its domestic supplies of natural gas in coming years, and LNG represents an extremely safe and cost-effective means of importing additional supplies. Sponsors of the consortium at CEE include BG North America, BP Gas Americas, Cheniere Energy, Chevron Global Gas, ConocoPhillips Worldwide LNG, Dominion, El Paso Corporation, ExxonMobil Gas & Power Marketing Company, Freeport LNG Development, L.P., Sempra Global, and SUEZ LNG NA. The U.S. Department of Energy/Ofce of Fossil Energy helps to coordinate peer reviews with other Federal agencies and commissions. Technical advisors to the consortium include ABS, CHIV, DNV, Lloyds Register, ICF/PTL, and SIGTTO. The government of Trinidad & Tobago and the Nigerian National Petroleum Corporation participate as observers.

Michelle Michot Foss Chief Energy Economist and Head Center for Energy Economics Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin phone 281.313.9763 fax 281.340.3482 email [email protected] web www.beg.utexas.edu/energyecon

HIGHLIGHTS FROM THE COMPREHENSIVE

For Additional Information: Center for LNG www.lngfacts.org Federal Energy Regulatory Commission http://www.ferc.gov/industries/lng.asp National Association of Regulatory Utility Commissioners The U.S. Department of Energy (DOE)/National Association of Regulatory Utility Commissioners (NARUC) Liqueed Natural Gas Partnership page http://www.naruc.org/displaycommon.cfm?an=1&subarticlenbr=30 Society of International Gas Tanker & Terminal Operators http://www.sigtto.org/ U.S. Department of Energy/Ofce of Fossil Energy LNG: Understanding the Basic Facts http://www.fe.doe.gov/programs/oilgas/publications/lng/LNG_primerupd.pdf Liqueed Natural Gas page http://www.fe.doe.gov/programs/oilgas/storage/index.html

GUIDE TO LIQUEFIED NATURAL GAS IN NORTH AMERICA

AVAILABLE IN PDF FORMAT VIA THE INTERNET
A thorough review of current trends and prospective outlooks suggests that North America will need new natural gas supplies from a diverse array of sources, and that LNG represents an important component of the overall natural gas supply portfolio.
Excerpt from The Role of LNG in North American Natural Gas Supply and Demand

The delivery of LNG requires signicant investments in the LNG value chain, which includes operations that are highly linked and interdependent.

CEE GUIDE to LNG in NORTH AMERICA

Based on a series of three brieng papers on LNG prepared by the Center for Energy Economics
Executive Summary Introduction Overview: What is LNG? Does the U.S. Need LNG? Is LNG a Competitive Source of Natural Gas? Brief History of LNG Composition of Natural Gas and LNG The LNG Value Chain How Much Does LNG Cost? Is LNG a Safe Fuel? Appendix 1: Conversion Table Appendix 2: Other Fuel Terminologies Appendix 3: Glossary of Terms

INTRODUCTION TO LNG
LNG is not new. For more than 4 decades, the LNG industry has established a noteworthy safety record. LNG is the liquid form of the same natural gas used in homes for cooking and heating, and it represents a competitive source of natural gas to meet growing U.S. demand. The highly regulated This brieng paper is the rst in a U.S. LNG industry has series that describes the liqueed a track record of more natural gas (LNG) industry than 4 decades of technology, markets, safety, security safe operations with its 113 active LNG and environmental considerations, facilities, including and the growing role LNG may play 1 export terminal, in the nations energy future. 4 land-based import terminals, 1 shipbased delivery system, and more than 100 sites owned and operated by local utilities to meet peak natural gas demands. New terminals are subject to a rigorous permitting process that addresses engineering design, safety and security of terminals and shipping, and potential environmental and socioeconomic impacts. More than a dozen Federal and State agencies are involved in these reviews, with the Federal Energy Regulatory Commission overseeing permitting for onshore projects and the U.S. Coast Guard and the U.S. Maritime Administration handling similar duties for offshore projects. The delivery of LNG requires signicant investments in the LNG value chain operations that are highly linked and interdependent.

Executive Summary Introduction Safety Considerations in LNG Operations LNG Properties and Potential Hazards How is a Safe, Secure LNG Value Chain Achieved? Conclusions Appendix 1: LNG FAQ Appendix 2: Descriptions of LNG Facilities Appendix 3: LNG Regulations Appendix 4: Who Regulates LNG in the U.S.? Appendix 5: Risk Perception Appendix 6: Major LNG Incidents Appendix 7: Glossary of Terms

LNG SAFETY AND SECURITY

The LNG industry owes its 40-year record of safe operations to a thorough understanding of technical and operational processes and procedures by the companies involved. Risks and potential hazards are well understood, and safeguards and mitigation measures are rmly entrenched. Every element of the LNG industry adheres to strict U.S. and global regulatory and industry standards and codes. Safety in the LNG industry is ensured by four elements that provide multiple layers of protection for the safety both of LNG workers and communities that surround LNG facilities: Primary containment using steel alloys and Our review of the LNG industry . . . other materials indicates that LNG can be safely Secondary containment including impoundments transported and used in the around facilities United States and North America Safeguard systems so long as safety and security such as emergency re standards and protocols are and gas detection maintained and implemented Separation distances with regulatory supervision. to protect people and property LNG has been safely transported in double-hulled LNG ships that have logged more than 45,000 voyages, covering more than 100 million miles, without a major incident involving release of LNG either in port or at sea.
Industry standards

Executive Summary Introduction The North American Energy Picture Understanding Price Trends: A Primer Natural Gas Supply-Demand Trends & Outlooks Key Considerations for Supply Key Considerations for Demand Balancing North American Supply Requirements with LNG Conclusions Appendix 1: Supply-Demand Issues Appendix 2: LNG FAQ Appendix 3: Why Gas Markets Are Liquid Appendix 4: Glossary of Terms Appendix 5: Conversion Table

THE ROLE OF LNG IN NORTH AMERICAN NATURAL GAS SUPPLY AND DEMAND
North America is the largest and fastest growing natural gas market in the world. Natural gas is an environmentally preferred energy source that can heat homes, generate electrical power, and provide industrial feedstocks. North America has abundant natural gas resources that will continue to satisfy most, but not all, of the natural gas demand for the next 2 to 3 decades. By investing in infrastructure that can handle larger quantities of imported LNG, the countries of North America can reduce the gap between supply and demand and resulting economic upheavals that occur when natural gas supplies fail to immediately meet the demands of industries and consumers. The LNG industry is now A conclusion of this report is that set to deliver new supplies North America needs new natural to North America. The gas supplies from a diverse array of combination of lower LNG technology costs and sources, and that LNG represents a higher North American critical component of future natural natural gas prices makes gas supply to the United States. LNG a competitive source of natural gas supplies. Recent forecasts point to LNG growing from 1% of U.S. supply over the past decade to approximately 15% by 2025.
40 35 30

History

Forecas

t Alaska Liquefied natural gas Net pipeline import Lower 48 unconventional Lower 48 conventional

Design / technology

Safety Security Environmental integrity

Gas (Tcf) SOURCES OF NATURAL GAS SUPPLY ( Tcf )

25 20 15 10 5
90

Regulations

LNG VALUE CHAIN Four interrelated elements compose the LNG value chain exploration and production, liquefaction (chilling the natural gas to its liquid form), shipping, and regasication to return natural gas to its gaseous form for pipeline transportation and end use. Continuous improvement of LNG safety, environmental, and security infrastructure by the industry and regulators is focused on protecting the public, LNG assets, and workers.

Industry experience and training

Consensus among data sources points to growing LNG imports rivaling Canadian pipeline supplies and becoming the primary source of U.S. natural gas imports. This consensus is based on (1) established patterns of consumption including changes in demand in response to price uctuations and (2) challenges in nding and delivering enough domestic production to meet demand.
19 19

95 20 00 20 05 20 10 20 15 20 20 20 25

Source: U.S. EIA AEO (2005)

www.beg.utexas.edu/energyecon/lng