U.S. Exports of LNG:           The Facts
Presenters    SKM Strategic Consulting    –   Bob Graham – Principal Consultant    –   Hope Stevens - Economist
Overview   Australian Government expectations   U.S. regulatory approval process   Lobbying for change   Are U.S. LNG expo...
“from my analysis, US gas if it’s allowed – because it isa very sensitive, ticklish political issue in the US atthe moment...
U.S. regulatory approval process    Department of Energy (DOE)    Federal Energy Regulatory Commission (FERC)
DOE approval    Section 3 of the Natural Gas Act of 1938, as    amended (NGA), 15 USC 717b    “The Commission shall issue ...
DOE approval timeframe – Sabine Pass     Application      • August 2010    FTA countries                     Approval for ...
FERC approval    Mainly focussed on environmental approval    FERC acts as lead agency and liaises with    other federal, ...
FERC approval timeframe – Sabine Pass  Pre-filing   • August 2010                Formal         • January 2011            ...
Lobbying for change    LNG exports are facing increased opposition    U.S. Congress Representative Edward Markey    (D-MA)...
Are U.S. LNG exports in the publicinterest?    The study “Macroeconomic Impacts of LNG    Exports from the U.S.” was commi...
Export scenarios    U.S. natural gas demand and supply scenarios    –   U.S. reference case (no LNG Export expansion)    –...
Export scenarios cont..    Export quota trajectories    –   Low/slow    –   Low/rapid    –   High/slow    –   High/rapid  ...
Key outcomes   The study showed net economic benefits to the   U.S. economy under all scenarios   –   Net economic benefit...
Key outcomes cont…   Impacts will not be positive for all groups in the U.S. economy   –   Some increases in U.S. domestic...
Key outcomes cont.…   U.S. exports are projected to displace some   exports from other LNG exporting regions    –   Drop i...
Existing approvals (under construction)                                                                Sabine Passhttp://f...
Proposed export terminals                                                                          East Coast             ...
U.S. Natural Gas Supply Basins Relative to MajorNatural Gas Pipeline Transportation Corridors, 2008
DOE and FERC approval statusProject                            DOE approval    FERC approvalSabine Pass                •  ...
Commercial arrangementsProject                   Commercial ArrangementsSabine Pass               •   20 year agreements f...
Capital cost considerationsProject                   Existing facilities                     Facilities requiredSabine Pas...
LNG shipping rates to Asian markets: $2010/MMBtu            To                                      From                  ...
Summary   After 2018, U.S. export projects are well placed to secure a   large portion of the projected global capacity sh...
Questions?    Bob Graham    +61 7 3026 8022
LNG exports from the USA
LNG exports from the USA
LNG exports from the USA
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LNG exports from the USA

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This presentation details the potential for US exports of LNG to reach Asian LNG markets at prices based on US gas prices.

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LNG exports from the USA

  1. 1. U.S. Exports of LNG: The Facts
  2. 2. Presenters SKM Strategic Consulting – Bob Graham – Principal Consultant – Hope Stevens - Economist
  3. 3. Overview Australian Government expectations U.S. regulatory approval process Lobbying for change Are U.S. LNG exports in the public interest? – Review – “Macroeconomic Impacts of LNG Exports from the U.S.” Existing and proposed projects (U.S.) – Approval status – Total potential volume of U.S. exports vs. capacity shortfall – Capital cost considerations – Commercial arrangements Summary
  4. 4. “from my analysis, US gas if it’s allowed – because it isa very sensitive, ticklish political issue in the US atthe moment – will not be material in terms of ourcapacity to grow opportunities in Asia” - Martin Ferguson,Minister for Resources, Energy and Tourism, at AustralianResource Conference. AFR 14 Nov 2012.
  5. 5. U.S. regulatory approval process Department of Energy (DOE) Federal Energy Regulatory Commission (FERC)
  6. 6. DOE approval Section 3 of the Natural Gas Act of 1938, as amended (NGA), 15 USC 717b “The Commission shall issue such [export] order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest”
  7. 7. DOE approval timeframe – Sabine Pass Application • August 2010 FTA countries Approval for • September 2010 FTA countries • 1 month Application non FTA • September 2010 countries Conditional • May 2011 approval non • 8 months FTA countries Final approval • August 2012 non FTA • 15 months
  8. 8. FERC approval Mainly focussed on environmental approval FERC acts as lead agency and liaises with other federal, state and local agencies Decides approval to proceed, monitors construction and issues final authorisation to proceed Methods of approval – Traditional process – Pre-filing followed by formal application (now 80% of proponents)
  9. 9. FERC approval timeframe – Sabine Pass Pre-filing • August 2010 Formal • January 2011 application • 5 months FERC • April 2012 • 15 months approval
  10. 10. Lobbying for change LNG exports are facing increased opposition U.S. Congress Representative Edward Markey (D-MA) has proposed: – Keep American Natural Gas Here Act – North America Natural Gas Security and Consumer Protection Act Both bills were not enacted
  11. 11. Are U.S. LNG exports in the publicinterest? The study “Macroeconomic Impacts of LNG Exports from the U.S.” was commissioned by DOE, and conducted by NERA Economic Consulting (2012) Global natural gas model, NewERA energy- economy model Export scenarios Key outcomes of the study (overall macroeconomic impacts, price impacts, socioeconomic impacts)
  12. 12. Export scenarios U.S. natural gas demand and supply scenarios – U.S. reference case (no LNG Export expansion) – High shale estimated ultimate recovery (EUR) • Optimistic • EUR per shale gas well for new, undrilled wells 50 % higher than in the reference case – Low shale EUR • Less optimistic • EUR per shale gas well for new, undrilled wells 50 % lower than in the reference case
  13. 13. Export scenarios cont.. Export quota trajectories – Low/slow – Low/rapid – High/slow – High/rapid – Low/slowest – No export constraints (exports based entirely on relative economics)
  14. 14. Key outcomes The study showed net economic benefits to the U.S. economy under all scenarios – Net economic benefits increase with the level of exports Incomes of natural gas resource owners increase (including superannuation funds)
  15. 15. Key outcomes cont… Impacts will not be positive for all groups in the U.S. economy – Some increases in U.S. domestic gas prices • Price is constrained by the global market – Prices do not rise to oil parity or levels observed in competing regions – Exports expected to be ~10 to 15% of US market – The largest increase in wellhead prices occurs in 2020 - $1.11/Mcf (thousand cubic feet) » Real, 2010, USD 1 Mcf ~= 1.08GJ • U.S. natural gas consumption – Serious competitive impacts confined to narrow segments of industry – Shifts in employment across industries
  16. 16. Key outcomes cont.… U.S. exports are projected to displace some exports from other LNG exporting regions – Drop in wellhead and city gate prices where U.S. exports are competitive Drop in city gate prices in importing regions leads to increased consumption
  17. 17. Existing approvals (under construction) Sabine Passhttp://ferc.gov/industries/gas/indus-act/lng/LNG-approved.pdf
  18. 18. Proposed export terminals East Coast Freeport Corpus Christi Trunkline Cameron Excelerate liquefaction Cove Point West Coast Jordan Cove Oregonhttp://ferc.gov/industries/gas/indus-act/lng/LNG-proposed-potential.pdf
  19. 19. U.S. Natural Gas Supply Basins Relative to MajorNatural Gas Pipeline Transportation Corridors, 2008
  20. 20. DOE and FERC approval statusProject DOE approval FERC approvalSabine Pass • FTA & NFTA YesFreeport • FTA only No • NFTA pendingCorpus Christi • Pending NoTrunkline (Lake Charles) • Pending NoCameron • FTA & NFTA NoExcelerate Liquefaction • FTA No • NFTA under reviewCove Point • FTA No • NFTA under reviewJordan Cove • FTA No • NFTA under reviewOregon • FTA No • NFTA under review
  21. 21. Commercial arrangementsProject Commercial ArrangementsSabine Pass • 20 year agreements for tolling service with some take–or-pay /fixed componentFreeport • Tolling serviceCorpus Christi • Not disclosedTrunkline • Not disclosedCameron • Tolling serviceExcelerate Liquefaction • Not disclosedCove Point • Tolling serviceJordan Cove • Tolling serviceOregon • Tolling service
  22. 22. Capital cost considerationsProject Existing facilities Facilities requiredSabine Pass • Two unloading berths • Two new liquefaction trains (potential for two more) • 5 LNG storage tanks • One additional tank may be needed for fourth trainFreeport • Marine berth and manoeuvring area • Liquefaction plant at existing terminal • Two LNG storage tanks • Widening of shipping channelCorpus Christi • None • 3 liquefaction trains • 3 storage tanks • Pipeline (37km x 1.2m diameter)Trunkline • Storage facilities • Liquefaction plant at existing site (3 liquefaction trains) • Existing pipeline • < 1km pipelineCameron • 3 existing storage tanks • 1 additional storage tank • Existing pipeline (58km) • 3 new liquefaction trains • 2 berthsExcelerate Liquefaction • None • Two floating liquefaction, storage and offloading units • Supporting infrastructure • 44km of pipeline (0.9m diameter)Cove Point • 140km pipeline • 1 new liquefaction train • 7 LNG storage tanks • 25MW of new compressors • PierJordan Cove • None • 370km pipeline (0.9m diameter) • 4 liquefaction trains • Pipeline gas conditioning facility • 2 LNG storage tanks • Loading/unloading berth • Other supporting infrastructureOregon • None • 140km of pipeline (0.9m diameter) • 2 LNG storage tanks • 3 liquefaction trains
  23. 23. LNG shipping rates to Asian markets: $2010/MMBtu To From Oceania U.S. $0.74 $2.81China/India $0.90 $2.54Korea/Japan $0.63 $2.61Southeast AsiaSource: NERA Economic Consulting (2012)
  24. 24. Summary After 2018, U.S. export projects are well placed to secure a large portion of the projected global capacity shortfall Use of existing tanks, pipelines and marine facilities, and would enhance the economics of some of these projects compared to Australian and other competitors – Capital cost for greenfield projects in U.S. is generally significantly lower than Australian projects (NERA Economic Consulting, 2012) Cost assumptions in NERA Economic Consulting (2012) report indicate Australia remains competitive with regards to LNG transport costs
  25. 25. Questions? Bob Graham +61 7 3026 8022

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