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The Future of LNG and the Permit Process. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas

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The Future of LNG and the Permit Process

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The Future of LNG and the Permit Process


5335 SW Meadows Rd., #220

Lake Oswego, OR 97035

(503) 624-2160

www.nwga.org

NWGA Members:

Avista Corporation

Cascade Natural Gas Co.

Intermountain Gas Co.

NW Natural

Puget Sound Energy

Duke Energy Gas Transmission

Terasen Gas

TransCanada’s GTN System

Williams NW Pipeline


Source: EIA Annual Energy Review 2005


Source: EIA 2006 Annual Energy Outlook


Gas Consumption (Tcf)

Source: EIA 2006 Annual Energy Outlook


Growth in Gas Demand by Region

Annual %

Source: EIA 2006 Annual Energy Outlook


An Interconnected Market


Gas Prices

Source: EIA


The Price of Oil Has an Impact…

Source: EIA


Price Drivers: Production

Source: Baker Hughes, 09/01/2006


Production per Rig - mcf/day

2500

2000

1500

mcf/day

1000

500

0

Jul-03

Jul-88

Jul-93

Jul-98

Apr-02

Oct-89

Apr-92

Oct-94

Apr-97

Oct-99

Jan-01

Jun-01

Jan-91

Jun-91

Jan-96

Jun-96

Feb-03

Mar-90

Feb-93

Mar-95

Feb-98

Mar-00

Aug-00

Sep-02

Dec-88

Aug-90

Sep-92

Dec-93

Aug-95

Sep-97

Dec-98

Nov-01

Nov-91

Nov-96

May-89

May-94

May-99

Production per Rig

Source: EIA, Baker Hughes Rotary Rig Counts


Gas Production by Region

Source: Lippman Consulting via AGA


Productive CapacitySource: Energy and Environmental Analysis, Inc.

Bubble

Tight Market


Putting It All Together:Growing Demand + Slowing Supply = LNG?


Why LNG?

  • Large reserves with little or no local market.

  • Pipelines to markets impractical

    (Source: BP Statistical Review of World Energy, 2005)


LNG enables long distance shipping

  • Liquefying natural gas:

    • Super-chilling it to -260°F

    • Reduces volume of gas 620 times

    • LNG weighs less than one-half that of water


It Must Make Economic Sense

Total = $2.00 - $3.70/MMBtu

(Source: Center for Energy Economics)


Existing/Under Construction

Proposed

Pacific Basin Sources of LNG

Kenai

Sakhalin

Qatar

Iran

Abu Dhabi

Oman

Yemen

Brunei

Arun

Donggi

Bintulu

Tangguh

Bontang

Darwin LNG

Bolivia LNG

Sunrise

Scarborough

Peru LNG

Browse Basin

Gorgon

Australia NWS 5

Australia NWS 1-4

Investment in new LNG liquefaction capacity is growing


NorthwestLNG Proposals

  • PortWestward LNG

  •  Skipanon LNG

  •  Jordan Cove LNG

  • Northern Star LNG

  • Tansy Point

  • Kitimat LNG

  • WestPac Terminal

  • Challenges include:

  • Local acceptance

  • Regulatory/Permitting

  • Commercial considerations:

    • economics/financing

    • takeaway infrastructure

    • worldwide competition

    • supplier commitment


A Bit About Process…

  • FERC is lead agency; consults w/state agencies

  • USCG serves as subject matter expert for maritime safety and security for EIS

    • USCG validates Waterways Suitability Analysis (WSA)

    • Provide USCG and Maritime Stakeholder input

    • USCG issues Letter of Recommendation (LOR)


Waterways Suitability Analysis

  • Risk-based analysis:

    • Identify risks that arise from introduction of LNG operations into port

      • What can go wrong?

      • What is the likelihood?

      • How severe are consequences?

  • The goals:

    • Understand individual risks in terms of:

      • probabilities, threats, vulnerabilities, consequences

    • Use info to develop effective risk management strategies


WSA Includes:

  • Transportation through the vessel’s arrival in US waters to LNG facility

  • Navigation and environmental safety issues

  • Safety and security issues that might affect entire port; detailed review of specific points of concern


Questions?


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