2. Presenters
SKM Strategic Consulting
– Bob Graham – Principal Consultant
– Hope Stevens - Economist
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. “from my analysis, US gas if it’s allowed – because it is
a very sensitive, ticklish political issue in the US at
the moment – will not be material in terms of our
capacity to grow opportunities in Asia” - Martin Ferguson,
Minister for Resources, Energy and Tourism, at Australian
Resource Conference. AFR 14 Nov 2012.
5. U.S. regulatory approval process
Department of Energy (DOE)
Federal Energy Regulatory Commission (FERC)
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. 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. 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. FERC approval timeframe – Sabine Pass
Pre-filing • August 2010
Formal • January 2011
application • 5 months
FERC • April 2012
• 15 months
approval
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. Are U.S. LNG exports in the public
interest?
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. 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. 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. 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. 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. 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
18. Proposed export terminals
East Coast
Freeport
Corpus Christi
Trunkline
Cameron
Excelerate
liquefaction
Cove Point
West Coast
Jordan Cove
Oregon
http://ferc.gov/industries/gas/indus-act/lng/LNG-proposed-potential.pdf
21. U.S. Natural Gas Supply Basins Relative to Major
Natural Gas Pipeline Transportation Corridors, 2008
22. DOE and FERC approval status
Project DOE approval FERC approval
Sabine Pass • FTA & NFTA Yes
Freeport • FTA only No
• NFTA pending
Corpus Christi • Pending No
Trunkline (Lake Charles) • Pending No
Cameron • FTA & NFTA No
Excelerate Liquefaction • FTA No
• NFTA under review
Cove Point • FTA No
• NFTA under review
Jordan Cove • FTA No
• NFTA under review
Oregon • FTA No
• NFTA under review
24. Commercial arrangements
Project Commercial Arrangements
Sabine Pass • 20 year agreements for tolling service with
some take–or-pay /fixed component
Freeport • Tolling service
Corpus Christi • Not disclosed
Trunkline • Not disclosed
Cameron • Tolling service
Excelerate Liquefaction • Not disclosed
Cove Point • Tolling service
Jordan Cove • Tolling service
Oregon • Tolling service
25. Capital cost considerations
Project Existing facilities Facilities required
Sabine Pass • Two unloading berths • Two new liquefaction trains (potential for two more)
• 5 LNG storage tanks • One additional tank may be needed for fourth train
Freeport • Marine berth and manoeuvring area • Liquefaction plant at existing terminal
• Two LNG storage tanks • Widening of shipping channel
Corpus 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 pipeline
Cameron • 3 existing storage tanks • 1 additional storage tank
• Existing pipeline (58km) • 3 new liquefaction trains
• 2 berths
Excelerate 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
• Pier
Jordan Cove • None • 370km pipeline (0.9m diameter)
• 4 liquefaction trains
• Pipeline gas conditioning facility
• 2 LNG storage tanks
• Loading/unloading berth
• Other supporting infrastructure
Oregon • None • 140km of pipeline (0.9m diameter)
• 2 LNG storage tanks
• 3 liquefaction trains
26. LNG shipping rates to Asian markets:
$2010/MMBtu
To From
Oceania U.S.
$0.74 $2.81
China/India
$0.90 $2.54
Korea/Japan
$0.63 $2.61
Southeast Asia
Source: NERA Economic Consulting (2012)
27. 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