Liquefied Natural Gas Briefing for California Manufacturers and Technology Association

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Liquefied Natural Gas Briefing for
California Manufacturers and Technology
Association

• Commissioner James Boyd
• July 29, 2004

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Why the interest lately in liquefied natural gas?

• Canadian and Lower 48 states gas production is
  declining. Wellhead prices are rising.
• The U.S. is relying more on natural gas for
  cleaner power generation.
• Seasonal gas prices are volatile due to tight
  supply and pipes.
• LNG production and delivery costs have declined.

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The United States consumes 25 percent of the
worlds natural gas.

• 22,534 billion cubic feet in 2002
• 15 of supplies are imported
• LNG imports to U.S. doubled from
• 2002 and 2003 229 ? 506 Bcf

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Gas Consumption by California Manufacturers

• Top five gas-consuming industries
• Petroleum refining (41)
• Food processing (19)
• Stone, clay, glass, concrete (9)
• Paper (5)
• Primary metal (5)

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Why the interest in LNG in California?

• Average daily demand 6 Bcf
• Manufacturers (36)
• Electricity generators (35)
• 85 of natural gas supply is imported.
• Competes with interstate-pipeline-sharing states
• for the lowest-cost gas supplies.

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Why the interest in LNG in California?

• LNG terminals would give California
• a seat at the table to import gas from a
  diversity of Pacific Rim sources.
• LNG imports could foster price competition,
  leading to lower prices.
• LNG storage helps meet peak demand.

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The Top 20 Countries with Natural Gas
Reserves(in Trillion Cubic Feet)

• Russia 1,695
• Iran 929
• Qatar 400
• Saudi Arabia 214
• United Arab Emirates 204
• United States 177
• Algeria 156
• Venezuela 148
• Indonesia 147
• Nigeria 125

• Iraq 113
• Malaysia 82
• Canada 62
• Netherlands 58
• Kuwait 57
• Egypt 51
• Libya 46
• Australia 44
• China 42
• Norway 42
• Red Pacific Rim Suppliers

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The LNG Industry

• Approximately 30 years old
• Atlantic Basin buyers
• Belgium, France, Greece, Italy, Portugal,
  Spain, Turkey, and the United States
• Pacific Rim buyers
• Japan, South Korea, and Taiwan
• 40 receiving terminals, 17 liquefaction plants

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Prices for LNG in the U.S.( per Million Btus,
2003)

• Under long-term contracts
• ? Range 3.36 to 5.37
• ? Weighted average 4.55
• Under short-term contracts
• ? Range 3.03 to 7.70
• ? Weighted average 4.16

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Potential LNG Sources for the West Coast
Source Country Distance (One-way, _at_ 18.5 knot ship speed)
Oman 25 days
Australia 18 days
Malaysia 17 days
Indonesia 16 days
Brunei 16 days
Russia 11 days
Alaska 5 days
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Californias LNG Policies

• 2003 Integrated Energy Policy Report
• Encourage LNG facilities in California or
• Baja California, Mexico
• Ensure new facilities protect the environment and
  
• public safety
• Coordinate permit reviews and address local
  concerns
• Energy Action Plan
• Evaluate new supply options, such as LNG imports

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Is LNG a near-term supply source for the West
Coast?

• Earliest estimate 2006
• Process could take 4 to 7 years

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Proposed LNG projects underconsideration for
California
Name Location Status
Long Beach LNG Facility Sound Energy Solutions Port of Long Beach Joint EIS/EIR by FERC and Port of Long Beach.
Cabrillo Deepwater Port BHP Billiton 12 miles off shore of Ventura County Joint EIS/EIR by Coast Guard and State Lands Commission (SLC).
Crystal Clearwater Port Crystal Energy LLC 11 miles off shore of Ventura County Filed application with Coast Guard, SLC, and Marine Mineral Service.
Port Penguin ChevronTexaco Offshore Camp Pendelton Announced project.
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Proposed LNG projects underconsideration for
Baja California
Name Location Status
Terminal GNL Mar Adentro de Baja CA ChevronTexaco Offshore, Tijuana Obtaining permits.
Energia Costa Azul Sempra and Shell Ensenada Obtaining permits.
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Unresolved Issues

• Public perception of safety risks
• Jurisdiction re onshore terminals
• Higher Btu content than states gas quality
  standards
• Jones Act barrier to Alaskan imports
• Who will pay to expand Otay Mesa pipeline to
  bring in Baja imports terminal developers or
  ratepayers?

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Some Forums to Resolve Issues

• Safety risk perception Site-specific EIRs
• Dispute re Federal/State jurisdictional for
• onshore terminals Courts or Congress
• LNGs economic and pipeline-infrastructure
• impacts CPUCs Long-Term Natural Gas
• Supply proceeding, Energy Commissions
• 2005 IEPR

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For More Information

• Energy Commissions LNG Website
• http//www.energy.ca.gov/lng/index.html
• Import terminal project contacts
• http//www.energy.ca.gov/lng/documents/
• WEST_COAST_LNG_PROJECTS.PDF