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 U U
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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 Utilis Energy, Published 02/2006 Page 3
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 Utilis Energy, Published 02/2006 Page 4
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 Utilis Energy, Published 02/2006 Page 5
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 Utilis Energy, Published 02/2006 Page 6
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 Utilis Energy, Published 02/2006 Page 7
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 Utilis Energy, Published 02/2006 Page 8
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. Utilis Energy, Published 02/2006 Page 9
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 selfsupporting 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. Utilis Energy, Published 02/2006 Page 10
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/slo shing 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. Utilis Energy, Published 02/2006 Page 11
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