Economic Impacts of LNG Imports to Atlantic Canada Study Release : February, 2006 Source : FERC 1
Purpose of Study What impact will the proposed LNG terminals or CNG deliveries have on several gas pipelines in the US Northeast, Quebec and the Maritimes. What is the landed cost of LNG for the proposed terminals accounting for liquefaction, shipping, storage and re-gasification. What is the landed cost of CNG sourced from the Grand Banks. What is the potential increase in market absorption of natural gas in Atlantic Canada as a result of the development of LNG terminals. What facilities will be required to transport excess volumes of gas to the US Northeast and US Mid Atlantic markets. What opportunities for the region could materialize as a result of LNG and CNG supply availability. Could LNG imports displace or delay future production from the East coast of Canada. What impacts on Atlantic Canada s economy could materialize as a result of the LNG terminal development. 2
Historical LNG Development North American LNG Import Price / Wellhead Price 14 US$/MMBTU 12 10 8 6 4 Cove Point, Everett, Lake Charles Elba Island constructed Plants mothballed Reactivated LNG Import Price 2 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Wellhead Price New Terminals 3
Today s LNG world LNG worldwide trade (2004) = 177.9 billion cubic meters = 6316 bcf/yr (17300 mmcf/d) North America imports (2004) = 18.47 billion cubic meters = 655 bcf/yr (1790 mmcf/d) Japan and South Korea import (2004) 65% of the LNG sold LNG is exported from 14 countries and imported by 12 countries (2004) 154 LNG carriers were used to transport LNG at the start of 2004 21 new LNG carriers entered service in 2004 all with a capacity of 150,000 cubic meters The order book for LNG carriers increased to 125 vessels by August 2005 12 of the LNG ships on order will have a capacity of 210,000 cubic meters Qatar has an option for 2 SuperFlex and Qmax ships (230,000 and 250,000 cubic meters) 4
LNG Supply by Country 3,000 2,500 2,000 1,500 1,000 500 0 5 Yemen Libya Algeria Egypt Nigeria Australia Brunei Indonesia Malaysia Norway Russia Abu Dhabai Iran Oman Qatar bcf/year Trinidad Venezuela Existing 2006 2007 2008 2009 2010
2016 2017 2018 2019 2020 LNG World supply 60.0 50.0 40.0 30.0 20.0 10.0 0.0 World LNG Supply 6 2015 2014 2010 2011 2012 2013 Year bcf/d 2004 2005 2006 2007 2008 2009
LNG Demand by Country 7 China India Indonesia Japan Phillippines South Korea Taiwan Belgium Cyprus France Greece Italy Netherlands Portugal Spain Turkey United Kingdom Bahamas Brazil Dominican Republic Honduras Mexico Bcf/day 0 5 10 15 20 25 30 Puerto Rico Canada United States existing 2005 2006 2007 2008 2009
Existing, Approved and Proposed 8
LNG Supply and Demand (AEO 2005) 80 70 60 50 bcf/d 40 30 20 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (1) World Liquefaction Rate (2) Total World Existing and Proposed LNG Regas terminals (3) EIA forecast US LNG Imports (4) Total World + EIA forecast US LNG Imports 9
LNG Supply Cost Supply Cost = Exploration and Production ($0.50 - $1.00 US dollars) + Liquefaction ($1.10 - $1.25 US dollars) + Shipping ($0.00016 * nautical miles) + Re-gasification ($0.30 - $0.35 US dollars) 10
LNG supply cost by distance LNG Costs vs. Shipping disance 2004 US$ / mmbtu 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 Algeria to Halifax Qatar to Halifax 1.50 1.00 Trinidad to Halifax 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 8500 9000 9500 Nautical Miles 11
CNG transportation options CNG Coselle 10.6 miles of 6 inch pipe coiled into a carousel, 108 carousels per ship Capacity approximately 345 mmcf CNG VOTRANS Volume Optimized Transport and Storage. Horizontal 40 inch dia, 118 feet in length Capacity 300-1,200 mmcf for retrofits, up to 2,000 for new construction CNG GTM Gas Transport Module. Horizontal composite reinforced 48 inch diameter pipes, 80 feet in length Initial designs are for small river barges with a capacity of 100-200 mmcf CNG CPVS Composit Pressure Vessel System. Vertical 42 inch diameter fiber reinforced plastic cylinders. Capacity 150-1,200 mmcf 12
CNG Supply Cost Supply Cost = Exploration and Production ($0.50 - $1.00 US dollars) + Compression and Shipping ($1.63 - $3.92 US dollars) + Terminal operation ($0.10 US dollars) 13
CNG supply cost by distance LNG and CNG Costs vs. Shipping disance 2004 US$ / mmbtu 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 Grand Banks to Halifax 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 8500 9000 9500 Nautical Miles 14
Supply and Demand Canada United States 15
Canada 16000 14000 Gas Wells 12000 Wells Drilled 10000 8000 6000 4000 2000 0 1995 1997 1999 2001 2003 Year 16
Canada 16000 14000 Gas Wells 18500 18000 Gas Production 12000 17500 Wells Drilled 10000 8000 6000 4000 mmcf/day 17000 16500 16000 15500 2000 0 1995 1997 1999 2001 2003 Year 15000 14500 14000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year 17
United States 25000 20000 Gas Wells Well Count 15000 10000 5000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year 18
United States 25000 56500 20000 Gas Wells 56000 55500 Production 55000 Well Count 15000 10000 mmcfd 54500 54000 53500 53000 5000 52500 52000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year 51500 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year 19
Canada Canadian Natural Gas Supply and Demand 8 7 6 5 4 3 2 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 tcf/yr Mackenzie LNG Unconventional Newfoundland Nova Scotia Saskatchewan British Columbia Alberta Domestic and Export Canadian Domestic 20
United States Natural Gas Supply (AEO 2005) 32.00 30.00 28.00 LNG 18% 26.00 11% tcf/yr 24.00 22.00 20.00 5% 12% Canadian Imports 10% 79% 9% 73% 18.00 16.00 14.00 12.00 10.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 83% US Dry Gas Production 21
United States Energy Outlook (2006) United States Natural Gas Supply (AEO 2006) 32.00 30.00 28.00 tcf/yr 26.00 24.00 22.00 20.00 18.00 4% 14% Canadian Imports 11% 10% LNG 14% 6% 80% 16.00 US Dry Gas Production 14.00 82% 79% 12.00 10.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 22
Market absorption of Natural Gas 250 200 150 100 50 0 Point Tupper Halifax Moncton mmcf/day Fredericton St John Amherst Current Demand Incremental 2010 Incremetnal 2015 Incremental 2020 23
LNG TERMINAL DEVELOPMENT WHERE WHEN WHO COMPETITION 24
LNG Terminal Summary The US terminal send out volume for LNG is 3400 mmcf/d (July 2005) The North American terminal send out capacity under construction is 8500 mmcf/d (Dec 2005) including 2 Canadian terminals The North American terminal send out capacity licensed pending start of construction is 21,000 mmcf/d (Dec 2005) The North American terminal send out capacity proposed and in permitting process is 28,000 mmcf/d 25
Existing / Under Construction / Starting Construction 24000 22000 20000 18000 16000 LNG Terminal Development Ingleside Corpus Christi Vista Del Sol Golden Pass Sabine Pass Freeport Cameron mmcf/d 14000 12000 10000 8000 6000 4000 2000 Canaport Bearhead Ene rgy Bridge Lake Charles Elba Island Keyspan CovePoint 0 Eve re tt 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 AEO 2005 LNG Demand AEO 2006 LNG Demand 26
Cacouna Rabaska BearHead CanaPort Keltic 27
Bearhead Anadarko Canada Point Tupper, Nova Scotia, Canada Under construction (2005) Capacity 1000 mmcf/d Send out 750 mmcf/d Maritimes and Northeast Pipeline No plans for NGL s recovery Nitrogen injection to control heat content Deep water port (250,000 m3 ships) : Ice free Trinidad : 2080 miles : $3.08 US Algeria : 2980 miles : $3.23 US Qatar : 7550 miles : $3.96 US 28
Canaport Irving Oil Company / Repsol YPF Mispic, St John, New Brunswick Under construction Capacity = 1,000 mmcf/d Send out = 725 mmcf/d Maritimes and Northeast Pipeline No plans for NGL s recovery Nitrogen injection to control heat content Ship berth size = 200,000 m3 Trinidad : 2080 miles : $3.08 US Algeria : 2980 miles : $3.23 US Iran : 7875 miles : $4.01 US 29
Keltic LNG Keltic Petrochemicals Goldboro, Nova Scotia, Canada Part of a proposed petrochemical project. Resuming application Signed an agreement with Petroplus (Netherlands) Capacity = 1,000 mmcf/d Send out = 500 mmcf/d Connection to Maritimes and Northeast have not been worked out. Recovery of NGL s will control heat content Ship birth = 200,000 m3 Trinidad : 2080 miles : $3.08 US Algeria : 2980 miles : $3.23 US Iran : 7875 miles : $4.01 US 30
Rabaska Gas Metro / Enbridge / Gaz de France Ville-Guay/Beaumont, 20 miles from Quebec City, Quebec Capacity = 500 mmcf/d Waiting on regulatory process. Intended to start construction in 2007 Birth size limited to 160,000 m3 and ice reinforced for travel on St. Lawrence Connection to Trans Quebec and Maritimes pipeline is 25 miles Project is designed to take advantage of basis differential with Gulf of Mexico Trinidad : 2760 miles : $3:19 US Norway : 3235 miles : $3.27 US St Petersburg 4020 miles : $3.39 US 31
Energy Cacouna TransCanada Corp / Petro-Canada Gros Cacouna, Quebec, Canada Capacity = 500 mmcf/d Waiting on regulatory process. Intended to start construction in 2007 Connection to Trans Quebec and Maritimes pipeline is 125 miles Project is designed to take advantage of basis differential with Gulf of Mexico Deep water port (250,000 m3 ships ice reinforced for travel on St. Lawrence) Trinidad : 2760 miles : $3:19 US Norway : 3235 miles : $3.27 US St Petersburg 4020 miles : $3.39 US Petro-Canada has agreement with Gazprom to develop LNG liquefaction terminal in St Petersburg. 32
Competition 33
Pipelines Maritimes and Northeast TransQuebec and Maritimes pipeline Portland natural gas pipeline Iroquois Pipeline 34
Pipelines Eastern Canada LNG Import Terminal Projects: Impacts on Pipeline Infrastructure Rabaska Lateral (45 km) Quebec City Gros-Cacouna Lateral (240 km) NB Anadarko Lateral (55 km) Goldboro Montreal PIPELINE LEGEND MNP Canada MNP US Joint M&NP / PGTS Algonquin Gas Transmission Tennessee Gas Pipeline PNGTS TQM East Hereford TransCanada s Mainline VT Sources: MNP, company websites MA NH Dracut Keltic Petrochemicals NS Irving Lateral (145 km) INFRASTRUCTURE LEGEND Proposed LNG Terminal Anadarko lateral Boston Irving lateral Gros-Cacouna lateral Rabaska lateral 35
Maritimes and Northeast Sable Offshore Energy Project = 350 mmcf/d Bearhead LNG terminal = 750 mmcf/d Canaport LNG terminal = 725 mmcf/d Canaport lateral, bullet line to Baileyville Canadian demand = 234 mmcf/d 2010 Toll (US $ / mmbtu/d) M&NP : United States zone 0.75 0.7 0.65 0.6 0.55 0.5 0.45 0.4 0.35 0.3 0 500 1000 1500 2000 2500 3000 Flow Determinant (mmbtu/d) 2010 Toll (US $ / mmbtu/d) M&NP : Canadian Zone 0.55 0.5 0.45 0.4 0.35 0.3 0.25 500 1000 1500 2000 2500 Flow Determinant (mmbtu/d) 12.5 megawatt and 16 megawatt compressors 30 inch looping in Canada 32 inch looping of 24 inch mainline in US 12.5 mega watt compressors 36
TransQuebec and Maritimes Base case flow = 180 mmcfd Lachenaie to Saint- Nicolas Base case flow = 300 mmcfd Lachenaie to East Hereford LNG terminal(s) cause flow reversal to Lachenaie Base case flow = 230 mmcf/d at East Hereford 7.5 mega watt compressor station additions 24 inch loop (1450 psi) Booster station to Interconnect with M&NP Booster station to interconnect with TQM south TQM : Canadian Zone PNGTS : United States Zone 0.7 0.7 2010 Toll (US $ / mmbtu/d) 0.6 0.5 0.4 0.3 0.2 2010 Toll (US $ / mmbtu/d) 0.6 0.5 0.4 0.3 0.2 0.1 0.1 400 600 800 1000 1200 1400 1600 200 400 600 800 1000 1200 1400 1600 Flow Determinant (mmbtu/d) Flow Determinant (mmbtu/d) 37
Iroquois Gas Transmission System Base case flow = 1185 mmcf/d IRQ : United States Zone Huntspoint minimum presssure = 500 psi 5.5 megawatt, 7.5 megawatt compressor additions 30 inch looping 2010 Toll (US $ / mmbtu/d) 0.7 0.6 0.5 0.4 0.3 0.2 0.1 1000 1200 1400 1600 1800 2000 2200 2400 Flow Determinant (mmbtu/d) 38
Impacts of LNG on Atlantic Canada Security of supply to support domestic consumption Terminal construction Support services for terminal infrastructure industrial development, manufacturing and petrochemical industries. LNG distribution to remote areas Increased producer net back prices Government royalty revenues Pipeline construction Encourage continued development on the Scotian Shelf 39
Change in Basis differential Market 'Basis' different ial by Year 1.5 1 US$ / mcf 0.5 0-0.5 2005 2010 2015 2020-1 Year Ontario Quebec New York Atlantic Cana 40
Price Forecast 13.00 12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Natural Gas Price Forecast (AECO C) 41 1997 1999 2001 2003 2005 2007 2009 CDN $ / mmbtu 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039
Summary The variety of LNG supply countries, and the size of the reserves backstopping the liquefaction terminals coupled with the expanded development of the LNG shipping fleets will lead to a secure energy supply system into the future. LNG can be delivered to Atlantic Canada at a cost of $3.00 to $4.00. Pipeline expansion will increased net back prices. Deep Panuke and CNG development could be delayed if LNG terminal development in Canada and the Northeast over load the Northeast market and pipelines remain capacity limited. LNG terminals in Quebec offer a second source of supply and would experience a positive $0.80 producer netback over supplies delivered to the Gulf of Mexico. The most direct impacts of LNG terminal development in Atlantic Canada is the security of supply, potential for industrial, and commercial developments and increased royalties from the SOEP project. 42
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