Liquefied/Compressed Natural Gas Pilot Development for the City of Bethel

Transcription

1 Energy Action Coalition 8 July 2011 LCNG A Bridge Solution to High Cost Fuels in Rural Alaska? Liquefied/Compressed Natural Gas Pilot Development for the City of Bethel Michael W. Moora, PE PDC Harris Group LLC 1

2 LNG Recent Press 27 June 2011, Petroleum News piece; 22 June RCA testimony by Utility + DonlinCreek Mine Study Group Supply shortfall starting 2014 Import LNG Negotiations for supply underway Cold Regions Design Forum, 16 Feb

3 Who is PDC Harris Group? Joint Venture, established 2002 PDC Inc. Engineers (Alaska, +30 years) Harris Group Inc. (Lower 48, also +30 years) Full-Service Engineer, JV Heavy Industrial Sector Upstream & Midstream Oil & Gas Anchorage & Fairbanks Utilities North Slope Power Generation Commercial Buildings/Facilities DOD Facilities & Power Transportation & Environmental Light Industrial Sector CWN Energy Action Coalition 3

4 Rural Energy Problem Rural AK Communities (esp. western AK) Dependent on petroleum-derived fuels Retail costs tied to crude $ Tight market economics Subject to market volatility Staggering impacts for residents Incomes low, fuel prices inflated Spending > 30% of income for fuel CWN Energy Action Coalition, 8 July

5 Mitigation Measures Renewable Sources Advantage Reduced (or zero) fuel cost Wind, solar, biomass, hydro, geothermal Capital cost significant Disadvantage Reduced emissions and carbon footprint Implementation complex, relatively long schedule Satisfy energy demand partially Residual dependence on petroleum distillates Solar & wind electric generation requires backup capacity CWN Energy Action Coalition, 8 July

6 Conundrum Renewable Resources in Rural Alaska: Decrease dependence on petroleum, but do not eliminate it Villages remain exposed to risks Market volatility Future price increases tied to tightening supplies CWN Energy Action Coalition, 8 July

7 Rural AK Fuel Prices Unlikely to Stabilize $5.50 Bethel Fuel Oil Pricing Forecast, $5.00 $4.50, $/gallon Retail price, $4.00 $3.50 ISER Paper , Alaska Fuel Price Projections , Jan $3.00 $2.50 $2.00 CWN Energy Action Coalition, 8 July

8 Fuel Substitution Displacing diesel/fuel oil with economic substitute Alternatives basket: Coal LPG (butane & propane) LNG/CNG (natural gas) Methanol/ethanol CWN Energy Action Coalition, 8 July

9 Natural Gas vs. Petroleum Pricing Trends Currently $100/bbl $ 4/ k ft 3 = 25 Ratio on BTU: historically about 100% to 170% of gas Ratio on BTU: crude oil is currently 430% of natural gas 2009: steep divergence between petro and natural gas pricing in US CWN Energy Action Coalition, 8 July

10 Hypothesis: Since diesel fuel is petroleum-derived, and LNG is gasderived, there may be a sufficient pricing differential to support LCNG substitution in remote Alaskan communities. CWN Energy Action Coalition, 8 July

11 Liquefied Natural Gas: Dry Conditioned cryogenic liquid What is LNG Cryogenic storage temperature Negative 260 F, atmospheric pressure Negative 117 F for pressurized storage (250 psig) CWN Energy Action Coalition 11

12 What is CNG CNG = compressed natural gas vapor temperature = ambient, not cryogenic Pressure psig cylindrical or spherical containers <1% of volume at atmospheric pressure energy density, BTU/gal ~42% of LNG, 2.5 gal = 1 gal LNG ~25% of Diesel, 4.0 gal = 1 gal Diesel Cold Regions Design Forum, 16 Feb

13 LCNG Definition Integrated Combination of Liquefied & Compressed Natural Gas Liquefied Natural Gas (LNG) Pumping to high pressure Warming to Vaporize Compressed Natural Gas (CNG) Fuel for LNG vehicles (fleet) Fuel short haul CNG vehicles Distribute - conventional natural gas system Cold Regions Design Forum, 16 Feb

14 Bethel/Rural Alaska LCNG Concept to Gas Users CNG Bullets LNG pump LNG to CNG Heater On shore storage depot LNG Barge CWN Energy Action Coalition

15 Test hypothesis, price snapshot Fuel shopping basket: Diesel (FOB US & AK) LNG destination) Propane Diesel Wholesale, US Average Alaska Diesel, Wholesale FOB Refinery S. Korea Imports Average China Imports Average US Imports, Average Alaska Landed in Japan Alaska, Commercial Delivery ANC US Wholesale/ Resale FOB Date Feb-2011 Feb-2011 Sep-2010 Sep-2010 Feb-2011 Feb-2011 Jun-2011 Mar-2011 $/MM BTU Comparison CWN Energy Action Coalition, 8 July

16 Same data, bar graph: FOB refinery Landed basis per million BTU $ Diesel Wholsale US Average Diesel AKWholesale FOB Refinery LNG landed S Korea LNG landed China LNG US Import LNG Alaskan landed Japan Propane AK Commercial Delivery ANC Propane US Wholesale FOB CWN Energy Action Coalition, 8 July

17 Risk in relying on snapshot data What are the longer term trends of LNG versus diesel pricing? CWN Energy Action Coalition, 8 July

18 Historical Trend - Diesel $40 $35 Comparison of LNG & Diesel Price*, $/Million BTU * data from Energy Information Administration monthly reports $30 $25 $20 $15 $10 AK Diesel Wholesale, FOB Refinery* Cost of Fuel, US Dollars per Million BTU of Heating Value (HHV) $5 $0 CWN Energy Action Coalition, 8 July Mar-2003 Jun-2003 Sep-2003 Dec-2003 Mar-2004 Jun-2004 Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 AK Wholesale Diesel,FOB Refinery

19 Historical, AK Diesel & AK LNG $40 $35 $30 $25 $20 $15 $10 Comparison of LNG & Diesel Price*, $/Million BTU * data from Energy Information Administration monthly reports AK Diesel Wholesale, FOB Refinery* Cost of Fuel, US Dollars per Million BTU of Heating Value (HHV) $5 Alaska LNG Landed in Japan* AK LNG Delivered to Japan AK Wholesale Diesel, FOB Refinery $0 Mar-2003 Jun-2003 Sep-2003 Dec-2003 Mar-2004 Jun-2004 Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 CWN Energy Action Coalition, 8 July

20 Add LNG imported to the US $40 $35 Comparison of LNG & Diesel Price*, $/Million BTU * data from Energy Information Administration monthly reports $30 AK LNG Delivered to Japan AK Wholesale Diesel, FOB Refinery US Import LNG Landed $25 $20 $15 AK LNG Landed Japan* Imported LNG Landed US* $10 $5 $0 CWN Energy Action Coalition, 8 July Cost of Fuel, US Dollars per Million BTU of Heating Value (HHV) Mar-2003 Jun-2003 Sep-2003 Dec-2003 Mar-2004 Jun-2004 Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 AK Diesel FOB Refinery*

21 $60 $50 $40 $30 $20 $10 $0 Add $ for delivering diesel to Bethel Comparison of LNG & DieselPrice*, $/Million BTU * data from Energy Information Administration monthly reports AK LNG Delivered to Japan, $/million BTU AK Diesel FuelFOB ANC, including adjustment for shipping to $1.34/gal Alaska No 2 Diesel Through Company Outlets Price by All Sellers ($/MMBtu) Landed US LNG Import Price, $/MMBTU AK Diesel delivered to Bethel CWN Energy Action Coalition, 8 July Cost of Fuel, US Dollars per Mill lion BTU of Heating Value (HHV) Mar-2003 Jun-2003 Sep-2003 Dec-2003 Mar-2004 Jun-2004 Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 AK Diesel FOB* AK LNG Landed Japan* Imported LNG Landed US*

22 LNG Facts Technology for storage & distributing evolved thru US aerospace liquid rocket fuels Density is 45% H 2 O BTU content is 60% the equivalent volume of diesel fuel i.e. 1 gal diesel = 1.67 gal LNG Considered a safety hazard Temperature, flammability, vapor dispersion As are most fuels H 2 (-423 F) & O 2 (-296 F) 8 July

23 Add $ for double hauling LNG $60 Comparison of LNG & Diesel Price*, $/Million BTU * data from Energy Information Administration monthly reports Diesel $42.50/million BTU or $5.70/gal $50 AK Diesel delivered to Bethel Japanese LNG delivered to Bethel $40 Landed US LNG delivered to Bethel Japanese basis: $28.35/million BTU $30 $20 US basis: $20.22/million BTU $10 $0 CWN Energy Action Coalition, 8 July Cost of Fuel, US Dollars per Mill lion BTU of Heating Value (HHV) Mar-2003 Jun-2003 Sep-2003 Dec-2003 Mar-2004 Jun-2004 Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011

24 What about historical propane prices? $40 $35 $30 $25 $20 $15 $10 $5 Comparison of LNG, Propane & Diesel Price*, $/Million BTU * data from Energy Information Administration monthly reports AK LNG Delivered to Japan AK Diesel FOB Refinery AK Diesel FOB Refinery* AK LNG landed in Japan US Propane Wholesale/Resale Seasonal US Propane* AK LNG Landed Japan* Cost of Fuel, US Dollars per Million BTU of Heating Value (HHV) Imported LNG Landed US* $0 Mar-2003 Jun-2003 Sep-2003 Dec-2003 Mar-2004 Jun-2004 Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 CWN Energy Action Coalition, 8 July

25 Potential bridge solution to high cost fuel in rural Alaska? Perhaps: based on pricing advantage Needs study Identify real village supply chain economics Equipment costs for storage & distribution systems Develop permitting requirements Initiative chosen to advance CWN Energy Action Coalition 25

26 LCNG storage and fueling station, Norway LCNG Project Concept Bridge to Lower Energy Prices in Rural Alaska 26

27 LCNG Advantages Lowered emissions, especially CO2 Equipment available to suit small village to hub city Storage, transport & conversion technology fully-developed LNG nominally 20% to 50% Diesel, $/million BTU CWN Energy Action Coalition 27

28 The LCNG Concept Stage 1 Conceptual Design & Economics Concept design for stage 2 pilot equipment Capital cost estimate Supply chain economics Cooperative Development w/ City of Bethel CWN Energy Action Coalition 28

29 LCNG Initiative cont d Stage 2 Install Pilot System LNG depot + delivery barge Bethel Pilot Systems Pilot storage & distribution natural gas Retrofit boiler & furnace Retrofit diesel engine -generator CWN Energy Action Coalition 29

30 LCNG Concept Continued Stage 3 Large Scale Deployment Village-wide system design Capital & operating economics Install & monitor full village system CWN Energy Action Coalition 30

31 LNG & CNG Fuel Considerations Air emissions advantage compared to liquid fuels NOx, HC, PM & CO 2 Conversion from existing fuels Relatively simple Forced air home furnaces Boilers, residential and commercial Slightly more complex Otto-cycle (gasoline) More complex Diesel engine CWN Energy Action Coalition 31

32 Fuel Considerations, cont d Diesel Engine Retrofit fuel and controls to burn~ 90+% NG, <10% diesel Mobile (trucks, buses, heavy equipment) Stationary (power generation) Transportation Fuel Both CNG and LNG used extensively in Asia, Europe & S America. Energy density disadvantage of CNG limits use to shorter-haul CWN Energy Action Coalition 32

33 LCNG Fueling Station El Paso s Sun Metro LCNG fueling station completed 2002 (compliments of North Star) Cold Regions Design Forum, 16 Feb

34 LNG Commerce 1 st piloted in WV 1917 Process developed nearly 100 years ago 1940s to 1980s moderate growth Cleveland 1 st commercial plant st LNG tanker, L Charles/UK 1959 Algeria/UK 1965, Algeria/France st Asian import, Kenai/Japan st US import (Algeria to Boston) st Asian production (Malaysia) 1983 CWN Energy Action Coalition 34

35 US LNG Commerce 1970s: initial imports Everett MA 2 more re-gas plants in GA and MD 1978: deregulation of natural gas industry Domestic production LNG imports GA & MD facilities shuttered 1980 LA re-gasification plant opens 1981, closes 1982 US Trends, 70s -80s Unstable Market CWN Energy Action Coalition 35

36 US LNG Commerce Low import volumes Zero US imports in s Surplus of Inexpensive Natural Gas Late 80s to Early 00s Bubble Disappears MA resumes import of Algerian LNG 1988 Rapid increases in importation 18 BCF BCF 2001 CWN Energy Action Coalition 36

37 Recent LNG Trends 2000 to 2007 Increased US LNG shipments Increases in US gas demand US gas supply tightens Decreases in world-wide LNG $ GA reopens 2001 MD reopens 2003 Numerous regasification plants planned for US East, West and Gulf coast In the wings: Development of shale gas completion technology CWN Energy Action Coalition 37

38 LNG Trends Cont d US = chaotic Declining US Gas Pricing Demand destruction in US Surplus domestic production shale based Many canceled LNG re-gasification projects in US Some completed LNG re-gasification plants shutdown Declining LNG imports & pricing US price low (parity w/ $4/mm Kenai LNG plant mothballed (2011) 2008 Present CWN Energy Action Coalition 38

39 LNG Safety No denying risk of LNG handling & storage Cryogenic temperatures Dispersion vapor cloud formation Flammability Other fuels share some of same risks CWN Energy Action Coalition 39

40 LNG Accidents Most notable, Cleveland 1944 Failure of low Ni steel LNG tank (lack of stainless in WWII) Liquid entered sewer system & ignited 128 deaths Recap and Summary of Accidents + Safety Studies Ca Energy Commission: CWN Energy Action Coalition 40

41 LNG Safety cont d Array of codes, standards & guidance to mitigate risk Terrorist threat (Ship & Port Security Code, 2003), (US Maritime Transportation Security Act, 2002) Safety of US land-based systems (DOT, FERC) Safety of US waterfront systems (US Coast Guard) CWN Energy Action Coalition 41

42 LNG Shipping , LNG ships -33,000 voyages worldwide 2,400 to or from U.S. ports. 3 billion cubic meters of LNG. Types of tanker accidents include engine room fires collisions groundings loss of containment embrittlement-cargo spillage There have been no cargo explosions, fires, or shipboard deaths. CWN Energy Action Coalition 42

43 LNG Safety cont d Recent permitting of regasification in US Reactivated east coast units New GOM units Enhanced scrutiny New methods of assessment (risk based) Risks can be reduced to extremely low levels CWN Energy Action Coalition 43

44 What Isn t Known (read: Study Scope of Work) Supply Chain CAPEX $ LNG Source OPEX $ CWN Energy Action Coalition 44

45 Path Forward Stage 1 Supply Chain Study Funding - AEA Emerging Energy Technology Grant Other Sources Federal DOE Stage 2 Village Pilot Program Proof of concept Confirm supply chain economics Stage 3 Scale Up Hub to satellite network Economy of scale CWN Energy Action Coalition 45

46 QUESTIONS? Mike Moora PDC Harris Group CWN Energy Action Coalition 46