Liquefied Natural Gas: Current Trends and Future Directions ASPO Boston World Oil Conference October 26, 2006 Ezra D. Hausman, Ph.D.
What s in store with LNG? LNG Basics Current and Future Sources of LNG Global competition for LNG US Natural Gas Production LNG and Security Issues US Untapped Reserves 2
LNG Basics Gas is liquefied by cooling to -259 F / -161 C Volume decreased by a factor of 600 95% pure methane (NG is ~80% methane) Extremely capital intensive infrastructure Cost effective relative to pipelines for long distances (800 mi offshore, 2000 onshore) 3
Global LNG Trade as of 2002 From EIA 2003 report, The Global Liquefied Natural Gas Market: Status & Outlook 4
Global Production Capacity 5
Global Production Capacity 6
Global Production Capacity 7
Where are the gas reserves? 8
Growth in LNG Demand Worldwide 9
US vs. Competing LNG Importers From EIA 2003 report, The Global Liquefied Natural Gas Market: Status & Outlook 10
AEO 2006 Projects growth in LNG Imports 30. 25. tcf per year 20. 15. 10. 5. LNG Net pipeline imports Domestic 0. 2003 2005 2007 2009 2011 2013 2015 2017 Year 2019 2021 2023 2025 2027 2029 11
Interest in the US 12
80 70 60 50 40 30 20 10 0 Everett, MA Cove Point Elba Island Lake Charles Gulf Gateway 80 70 60 50 40 Recent US LNG Imports Jan-04 13 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 30 Month 20 10 0 Jul-06 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Aug-06 Source: Compiled from EIA monthly LNG reports Trinidad Australia Malaysia Nigeria Oman Qatar Algeria Egypt Month bcf per month
Trends in Natural Gas Use Source: AEO 2005 Source: AEO 2006 14
Change in 2020 Outlook? 2003 2006 2020 (AEO 2004) 2020 (AEO 2006) Domestic Dry Gas Production 19.04 18.16 23.79 21.44 Supplemental gas 0.07 0.07 0.1 0.07 Net Pipeline Imports 2.85 2.63 2.33 1.32 Net LNG Imports 0.44 1.02 4.01 3.70 Total Supply 22.40 21.88 30.36 26.54 15
AEO Natural Gas Prices and Price Forecasts NG Price (Y2005$/mmBtu) 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Actual AEO 2004 AEO 2005 AEO 2006 NYMEX Oct 2005 NYMEX Oct 2006 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Source: Compiled by Synapse from EIA s AEO reports and NYMEX website. 16
9.0 Some Uncertainty in Gas Price Forecasts 8.0 NG Price (Y2005$/mmBtu) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1990 1992 1994 1996 1998 2000 Actual 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Source: Compiled by Synapse from EIA s Annual Energy Outlook reports. 17
Domestic Gas Reserves 14.0 12.0 10.0 8.0 6.0 4.0 2.0-1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year Source: EIA 18 Proved Reserves (years)
Sources of US Discoveries 20,000 18,000 16,000 14,000 Extensions New Field Discoveries New Reservoirs in old Fields # of Discoveries 12,000 10,000 8,000 6,000 4,000 2,000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year Source: EIA 19
Safety Concerns Reasons for optimism Industry has superb safety record Gas in liquid form is NOT flammable Leaks will disperse as gas Reasons for concern Industry structure changing rapidly, disaggregating Gas in vapor form IS flammable Leaks will disperse as gas 20
In brief Worldwide, Regassification capacity is growing faster than liquefaction capacity Competition for supplies and short-term contracting means no good deals on LNG New capacity in the US extends the high end of the supply curve Is there a cheaper, more reliable way to meet our natural gas needs? 21
What About Proven Reserves of Negatherms 300 250 Combined Heat and Power Gas DSM New York RPS New York Energy Efficiency Additional Savings from Repowering Inefficient Gas Plants Billion Cubic Feet per Year 200 150 100 50 Expected Growth in Gas Demand, 2004-2012 Connecticut RPS Connecticut Energy Efficiency Gas Savings Potential: Electricty Demand Management Gas Savings Potential: Gas Demand Management 0 Source: 2006 Synapse Energy analysis of need for proposed Broadwater LNG terminal 22