LNG Transportation and Storage William Guo 10/11/2005

Overview Introduction Background Challenges Economic Feasibility Government Policy Conclusion

Introduction Increasing natural gas demand and cost Source for reliable, affordable energy Relatively mature technology Cooling natural gas to -260° F, changes it from a vapor into a liquid Reduces the space natural gas occupies by more than 600 times, making it a practical size for storage and transportation

Background Special designed LNG tankers with double hulls Ships unload LNG at specially designed terminals where the LNG is pumped to insulated storage tanks Converted back to gas at the terminal, which is connected to natural gas pipelines LNG is stored in double-walled, insulated tanks

LNG Tanker

LNG Terminal

LNG Tank

Challenges High initial cost ($5 Billion +) Lack of existing facilities and domestic markets Supplier reliability Transportation security

Producers & Markets

Economic Feasibility Costs (Two 3 trains facility, 6,500 miles distance, 10 TCF reserve for 20 years) Source gas: $1.3 Billion Liquefaction: $1.4 Billion Transportation: $1.8 Billion Re-gasification: $0.5 Billion Feasible with >3,000 mile distance and $5/MSCF outlet gas price

Government Policy Confirmed supports from federal, state, and local level FERC’s policy (2002) intends to remove economic and regulatory barriers to the development of onshore LNG import terminals

Conclusion In transition stage High potential due to increasing gas demand Largest risk is supplier stability Currently only feasible with long transporting distance

Questions?