Liquefied Natural Gas LNG Information

1
Liquefied Natural Gas (LNG) Information

• Answering questions about a proposed LNG facility
  at Sparrows Point, MD

2
What is Liquefied Natural Gas?

• LNG is natural gas that has been super cooled to
  minus 260 degrees F becoming liquid for easier
  storage and shipping
• LNG is a clear, odorless, colorless,
  non-corrosive and non-toxic liquid
• LNG takes up 1/600th of the space simplifying
  storage and transportation

3
Where is LNG Produced and Exported?

• The U.S. receives most of its LNG from Trinidad
  and Tobago
• Currently 12 countries export LNG
• The largest LNG exporters are in the Middle East
  and Asia
• Russia and Norway will begin exporting LNG in
  2007

4
Do Other Countries Import LNG?

• Fourteen countries currently import LNG
• Japan is the largest importer of LNG with 29 LNG
  terminals
• China and Britain have plans to import LNG
• Great Britain imported LNG briefly in the early
  1960s and now plans to re-establish that market

5
U.S. Marine Mainland LNG Import Terminals
6
What Does an LNG Terminal Look Like?
LNG tanks
Docks
7
How is LNG Transported by Sea?

• Specially-designed double-hulled tankers
• The double-hull provides increased structural
  safety
• The liquefying process allows for efficient
  transport in bulk about 3.0 billion cubic feet
  of gas per tanker
• Insulation allows the ships to act like thermos
  bottles to keep the LNG cold

8
Typical LNG Tanker
Holding tanks
9
How is LNG Stored at Marine Terminals?

• LNG is transferred from arriving tankers to
  secure storage tanks on land
• Storage tanks are double-walled a tank within
  a tank for safety
• Outer walls of tanks are made of carbon steel
  and prestressed concrete
• Safety walls are built around the tanks to
  contain full content spill

10
Cove Point LNG Terminal
LNG tanks
11
Cross-section of a Modern LNG Tank
12
Off-Loading at Cove Point
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Is LNG Stored at Other Locations?

• LNG storage has become commonplace across the
  U.S.
• Today, 96 LNG liquefaction, storage, and
  regasification plants operate in 29 states
• LNG tanker trucks, governed by U.S. Department
  of Transportation regulations, use many highways

14
LNG Storage in the U.S.
15
Where Are U.S. Natural Gas Processing Plants
Located?
16
Why is my Natural Gas Bill So High?

• Natural gas is now used to produce a great deal
  of electricity, in addition to traditional uses
  in home heating and industrial
• Many natural gas production fields in the U.S.
  and Canada produce less and less gas each year
• Less domestic natural gas supply and greater
  demand mean higher prices unless new sources,
  such as LNG, can be delivered

17
Natural Gas Consumption is Projected to Increase
Outstripping Domestic Production
18
Why do Importers Say There is a Benefit in
Importing LNG?

• It is becoming more difficult for producers to
  find natural gas in the U.S. or obtain it from
  Canada and Mexico
• Other countries have substantial natural gas but
  are located too far away to construct pipelines
  to the U.S.
• Natural gas is a relatively clean fuel for home
  heating, industrial processing and electricity
  production

19
Canadian and Mexican Natural Gas Exports to U.S.
are Slowing
20
What are the Chief Economic Reasons for
Increasing LNG Imports?

• More LNG increases natural gas supplies to meet
  U.S. demand
• New import facilities increases delivery
  capacity
• Expanded delivery capacity should help lower
  (and stabilize) heating and electricity costs

21
Does Maryland the Mid-Atlantic Area Need
Additional Natural Gas Capacity?
Mid-Atlantic
22
Who Regulates LNG Safety?

• The FERC (Federal Energy Regulatory Commission)
  is responsible for permitting new LNG onshore
  import and export terminals
• The U.S. DOT (Department of Transportation)
  prescribes LNG and pipeline safety standards
• The U.S. Coast Guard is responsible for the
  safety of the LNG tankers

23
Why is LNG Considered Safe to Import and Use?

• LNG has been safely delivered across the ocean
  for over 40 years
• 33,000 LNG carrier voyages have occurred,
  covering more than 60 million miles, without
  major accidents
• For example, a LNG tanker enters Tokyo Bay every
  20 hours with no spills
• The LNG industry maintains extremely high
  standards for safe and efficient operation
• The LNG industry continuously improves its
  operational standards

24
Why is LNG Considered to be Safe?

• In its liquid state, LNG is not explosive
• When LNG is heated and becomes a gas, the gas is
  not explosive if it is unconfined
• Natural gas is only flammable within a narrow
  range of concentration in the air (5 to 15)

25
Which Studies Speak to the Safety of LNG?

• According to the December 2004 report issued by
  Sandia National Laboratory
• Risks from accidental LNG spills, such as from
  collisions and groundings, are small and
  manageable within current safety policies and
  practices
• Risks from intentional events, such as terrorist
  acts, can be significantly reduced with modern
  engineering, enhanced security, planning,
  accident prevention, and on-going training
• Sandia National Laboratory primarily serves the
  U.S. Department of Energy

26
LNG-related Accidents Causes and Resulting
Safety Upgrades

• Cleveland, Ohio, 1944
• Cause Inadequate war-time material used
• Upgrade High quality stainless steel and
  modern construction techniques now used
• Cove Point, Maryland, 1979
• Cause Human error and inadequate electronic
  monitoring
• Upgrade Lessons learned led to changes in
  monitoring and practices that are now used
  industry wide
• Algeria, 2004 and 1977
• Cause Human error and a bad valve (1977)
• Cause Improper boiler repair (2004)
• Upgrade improved operating procedures

27
LNG-related Accidents Lesson Learned

• LNG accidents are rare
• In spite of an excellent record, the industry has
  not ignored those rare incidents
• The result is better containment, materials,
  procedures, monitoring and training
• The extremely low accident rate is the result of
  effective, industry-wide safety efforts

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Types of Potential LNG AccidentsExample 1 LNG
Explosion

• Explosions could occur if a sufficient amount of
  natural gas vapors release into a confined area
  and encounter an ignition source of sufficient
  strength
• Just like motor gasoline, propane, or even
  electricity, human error can cause problems
• Experience with LNG shows that this is highly
  unlikely because of on-going industry efforts to
  improve monitoring and training

29
Types of Potential LNG AccidentsExample 2 LNG
Pool Fire

• As a result of an accident at sea, LNG could
  seep out of the breached tank and form a pool on
  the surface of the water
• As the pool forms, some of the liquid will turn
  into LNG vapors
• If an ignition source is present, vapors could
  ignite, resulting in the ignition of the LNG pool
  on the surface of the water
• Experience shows that this scenario is unlikely
  because where severe collisions have occurred, no
  vessel tanks leaked

30
Possible Effects of a LNG Pool-fire

• Within up to 4,220 feet of an LNG-related fire
  people and major commercial/industrial areas
  could be seriously affected
• According to the Sandia Report, if the LNG is
  ignited, the impact of the fire should generally
  be low beyond 2,460 feet for small accidental
  spills and beyond 4,250 feet for large spills
• The proposed Sparrows Point facility would be
  approximately 7000 feet from the surrounding
  public areas

31
Effects and Types of Injuries Resulting from an
LNG Pool-fire?

• Radiant heat is the main hazard
• Up to 2,460 feet from the fire, the predominant
  injuries would be third degree burns
• Beyond approximately 2,460 feet victims would
  suffer lesser degree burns
• Beyond approximately 4,250 feet there would be
  little or no injury or property damage

32
Is a Terrorist Attack Likely?

• The U.S. will continue to face the risk of
  domestic terrorist attacks
• The energy industry continues to take extensive
  steps to protect critical infrastructure
• LNG components are built to much higher standards
  than many other energy facilities and are much
  harder to penetrate and damage
• Creating the events necessary to cause a
  significant LNG incident is unlikely
• No one can say a determined perpetrator would not
  try

33
Recapping the Benefits of LNG

• The potential to slow the increase, or reduce,
  natural gas prices in the Mid-Atlantic region and
  Baltimore
• Added assurance that there will be adequate
  natural gas for Maryland homes and industry
• Meet the growing demand for the use of natural
  gas to generate electricity in Maryland

34
Are There Other Benefits of LNG?

• Safety relative to other forms of energy such
  as stored motor gasoline
• Safety relative to other chemicals regularly
  shipped through the bay such as chlorine
• Reduced asthma and other air quality problems
  related to coal and oil fuels
• High quality, technical jobs and expertise in
  the local community

35
Preventing and Managing Spills

• LNG tanks and tankers are built to extremely high
  standards.
• Storage tank are built with extensive monitoring
  and alarm systems plus other safety installations
  required by the state fire marshal
• Company safety procedures are promulgated,
  checked continuously and personnel are trained
  regularly
• U.S. Coast Guard escorts minimize external threats

36
Final Words on LNG Safety

• The industrys operating history demonstrates
  that incidents at an LNG facility are extremely
  unlikely
• The proposed facility would be constructed and
  managed to minimize any harm to the public
• The LNG industry has a strong economic incentive
  to maintain and operate a safe facilities
• The proposed facility would be located a safe
  distance from neighborhoods and businesses