North American LNG 2003: Regulatory and Developmental Update
Utilis Energy, LLC, January 2003
North American LNG 2003: Regulatory and Developmental Update, outlines the current market for LNG imports and recent developments which will facilitate the construction of LNG import terminals and related infrastructure in Mexico, the Gulf of Mexico, the Bahamas and the Continental US.
North American LNG 2003: Regulatory and Developmental Update
North American LNG opportunities have never been more attractive. Regulatory and market developments at the close of 2002, combined with recent technology and infrastructure improvements, and rising natural gas prices, have made the importation of greater amounts of LNG a realistic and cost effective supply alternative.
This study offers a concise update on:
The Ferc’s changing view of LNG “open season” and “open access” regulations and its implication for import terminal development and operation
US Coast Guard opinions pertaining to the reactivation and expansion of US LNG terminal assets and the licensing of new deepwater LNG ports
A full text translation of long awaited Government safety standards for the design, construction, operation and maintenance of Mexican LNG terminals
A look at gas market fundamentals, supply/demand and price forecasts, and infrastructure development to import and distribute regassified LNG in the US market
North American LNG 2003, provides a critical update on North American LNG markets and is an invaluable tool for organizations requiring information to make informed decisions for the allocation of investment capital or considering entering into long-term natural gas supply or purchase agreements.
These groups include those:
Trading or supplying natural gas in North America
Involved with the financing and development of LNG infrastructure projects
Utilities and NUGs who consume natural gas to generate electric power
Large industrial and commercial end users of natural gas
<P>Introduction 6
Existing Import Terminals 6
North American gas market fundamentals 10
US Demand 10
US Natural Gas Prices 12
US LNG Demand 12
Mexican Demand 16
Worldwide Demand 17
North American LNG developments 19
FERC Regulatory 19
Mexican Safety Regulations 21
US Coast Guard 23
Update on proposed North American LNG projects 27
Proposed North American LNG Terminal Projects - Mexico 27
Proposed North American LNG Terminal Projects – Mexican Central Pacific Region 32
Proposed North American LNG Terminal Projects – Mexican Gulf Coast 32
Proposed North American LNG Terminal Projects – US Gulf Region 33
Proposed North American LNG Terminal Projects - US West Coast 34
Proposed North American LNG Terminal Projects - Bahamas 35
Project opposition 37
Public Opinion 37
LNG economics 39
New Import Terminal Cost Considerations 40
Conclusions 43
Mexican safety requirements for the design, construction, operation and maintenance of LNG storage plants (NOM-EM-001-
SECRE-2002) 45</P>
<P>FIGURES
Figure 1: US Natural Gas Production, 1990-2003 11
Figure 2: US Henry Hub Natural Gas Prices, 1990-2001 12
Figure 3: US LNG Sector Demand, 2015 13
Figure 4: US LNG Imports, 2000-2020 14
Figure 5: US LNG Price Forecast, 2000 - 2020 15
Figure 6: Mexican Natural Gas Consumption (tcf) 17
Figure 7: Height and Retaining Wall Distance Requirements 53</P>
<P>TABLES
Table 1: Source of US LNG Imports (bcf), 1995-2000 15
Table 2: Proposed North American LNG Receiving Terminals 28
Table 3: Basic LNG Economics 40
Table 4: Design Spill 56
Table 5: Distances Between Containment Areas And Buildings And Property
Boundaries 57
Table 6: Allowable/Acceptable Stress On Reinforcing Rods 69
Table 7: Environmental Factors 73</P>
<P>Ever increasing US energy demand is placing a corresponding pressure on existing domestic supplies. This trend of increasing demand is expected to continue for the foreseeable future and has been the primary driver behind securing additional energy supplies from both domestic and international sources. While the US has been importing a substantial amount (more than 50%) of its crude oil requirements from foreign sources for several decades, natural gas demand has mostly been meet from domestic supplies.</P>
<P>However, domestic supplies of natural gas are beginning to tighten due to increased demand from electric utilities, industrial, commercial and residential consumers and falling productivity from existing natural gas fields. Increased demand and dwindling supplies have led to significant natural gas price volatility with pricing ranging between $2.00 mmcf to $10.00 per mmcf over the past 2 years, with a steady upward movement in price.</P>
<P>Technological advances have been pushing costs throughout the LNG supply chain lower making it a much more attractive investment. All of these conditions have created an environment favorable for LNG importation.</P>
<P>While LNG only currently accounts for approximately 5 percent of the world's gas consumption, the United States consumes about 1 percent of this usage. In 2000, the US imported 226 billion cubic feet of LNG. This is miniscule when compared to Japan, which imported 2.6 trillion cubic feet the same year. Imports of LNG into the US have been steadily increasing, but are now becoming constrained by the existing import terminal capacity. While international supplies of natural gas and LNG are plentiful, the capacity of US import facilities limits the amount of gas that can be received and regassified.</P>
<P>Existing Import Terminals
In order to import LNG, specialized terminals are required for the safe handling, to regassify and distribute the natural gas. The US currently has four functioning LNG import terminals - located on the US East and Gulf Coasts with a total capacity of 2.4 bcf/d and one export terminal - located in Alaska.</P>
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