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“New Feedstock Sources? LNG and Renewables”. Agenda LNG Update – Then and Now Ethylene Feedstock from LNG Frontier Feedstocks – the Move to Renewables.

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Presentation on theme: "“New Feedstock Sources? LNG and Renewables”. Agenda LNG Update – Then and Now Ethylene Feedstock from LNG Frontier Feedstocks – the Move to Renewables."— Presentation transcript:

1 “New Feedstock Sources? LNG and Renewables”

2 Agenda LNG Update – Then and Now Ethylene Feedstock from LNG Frontier Feedstocks – the Move to Renewables Conclusions

3 LNG – Then and Now

4 Regasifcation Projects Then and Now Project Assumptions Needs analysisBuild them and LNG will come Supply development needed to justify new terminals Construction CostsFalling - $300 to $500 million each High & rising - $800 to $1 billion each Gas Prices$3.00-$4.25/Mmbtu$6.00 and higher Project Cycle – MOU to Startup 3 to 5 years5 to 7 years Business model for owners Take or Pay throughputTerminals in multiple markets Environmental IssuesConcerns can be satisifed Some locations will be off limits

5 Regasification Outlook through 2010 Keeping Pace With Supply Regas capacity is adequate to handle expected supply Through 2010 without more new construction starts Bcf/daly

6 Liquefaction Projects Then and Now Project Assumptions Needs analysisMarket will be strong; abundant gas reserves available for export Strong export market, but domestic demand growing fast Construction Costs (greenfield) $250/Ton of capacity and falling due to scale $900/Ton and higher due to scarcity of materials & people Gas Prices$2.75-$4.00/Mmbtu delivered - fixed $6+/Mmbtu – formula based Project Cycle – MOU to Startup (greenfield) 4 to 5 years5 to 10+ years (Arctic projects take longer) Business model for owners Long term contracts some spot; project sponsor marketing agreements to move project forward Blend of baseload & more spot ; increased control by reserve owners Risks/IssuesWorking out commercial terms for offtake Having enough reserves; cost escalation

7 Global Gas Demand LNG Market Share Growing, Slowly 7%9% 11% % from LNG

8 Atlantic Basin Eurasia Pacific Basin Supply 10.6 Regas Capacity 15.3 Supply 6.3 Regas Capacity 1.2 Supply 9.8 Regas Capacity 17.2 Room for More Terminals In India? Bcf/day 2007 India is closest distance for Middle East shipments, but Japan and Korea have more developed markets and usually pay higher prices

9 Regasification Terminals N. America - Then and Now Number of terminals planned 60+ (includes “planned” and permitted) 40+ (approved, planned or permitted) Number of terminals Built 9 (new builds, including offshore) Estimated Cost (land based) $400-$500 millionActual $700 million to $1.1 billion Throughput fees for users $.27-$.32/Mmbtu? Risks/IssuesPermitting, pipeline capacity Supply

10 LNG Import Trend – USA High Seasonality Relatively flat last 4 years except for summer 2007 – new trend or temporary? Enough to boost storage to higher levels and put pressure on prices

11 LNG Import Trend – USA 2006 V BCF of “Swing” Volume Coming Here Lake Charles emerging as the “swing” location for summer surplus

12 LNG Import Outlook – USA We’ll Have Enough Capacity Bcf/day

13 Feedstock From LNG N. America Feedstock From LNG N. America

14 LNG Processing for Feedstock Supply Processing Capacity Will Be Available: –Existing – Lake Charles Processing Facility –Likely – Point Comfort (Calhoun LNG) –Possible – Freeport, others if volume is there –Some processing possible on East Coast but will be C3+ recovery Supply depends mostly on ethane frac spread and volume: –Potential for 25-50M BPD incremental volume next few years –Most likely seasonal when storage arbitrage is good –Could compete with Rockies supply for market share; extraction costs lower from LNG than domestic gas

15 Frontier Feedstocks

16 What’s On The Horizon Plants to Plastics – Here Now: –Archer Daniels Midland renewables to chemicals business unit launched this year –Biodegradable plastics from corn (Dow and DuPont) –“PGR” – propylene glycol renewable – glycerin byproduct from biodiesel replaces propylene oxide as feedstock in Dow process, can also be used to make raw material for epoxy resins –BASF/DOW HPPO process to make Propylene Oxide with no co-products or isobutane feedstock Steam Cracker Replacements – Next Decade: –R&D in progress on ethylene production via another process

17 Conclusions

18 LNG Supply/Demand Trends: –Terminal capacity is adequate; supply is the issue –Higher construction costs & stronger than expected domestic demand may slow development of liquefaction in some producing regions –More LNG traded on spot markets – volatility will increase –U.S. Gulf Coast will be the clearing market for seasonal surplus until more storage is developed elsewhere (U.K., Dubai) Feedstock Issues: –Renewables beginning to replace some hydrocarbon feedstocks in limited volumes –Ethane on ethane competition possible in the future if extraction from LNG remains profitable


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