The World of Energy

Chapter 21 Gas Transportation & Economics

21.3. LNG vs Other Transportation Options

Ch. 21 - 73

Cautions on Using Economic References

Economics & cost references are
Time specifics
Global economics situation (Bullish vs Bearish) Oil price of the day Geopolitics of energy

Site/Country specifics
Energy policy (Moratorium, Taxes & Incentives, Domestic Obligation) Geography

Trade specifics
Energy co-operation Country preferences (Why Indonesian LNG to Japan always have higher price than others?)

Author/Institution Bias /

Always re-check the validity of the underlying situation & assumptions used in economics or cost data
Ch. 21 - 74

LNG Plant Size vs Transport Distance

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Natural Gas Transportation Cost

As the distance over which natural gas must be transported increases, usage of LNG has economic advantages over usage of pipelines. Liquefying natural gas and shipping it becomes cheaper than transporting natural gas in offshore pipelines for distances of more than 700 miles or in onshore pipelines for distances greater than 2,200 miles.

$1.00 $1 00

$/MMBtu

$0.50

Gas Pipeline - Offshore Gas Pipeline - Onshore LNG

$0.00 0 620 1,240 1 240 1,860 1 860 2,480 2 480 Distance in Miles
Source: Institute for Energy, Law and Enterprise, University of Houston Law Center

3,100 3 100

3,720 3 720

4,340 4 340

4,960 4 960

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Where Does LNG Make Sense?

Comparison of Monetization Options vs. Distance
14

12

LNG Cost Subsea Pipeline Cost CNG Cost

Cost of Service $/MM MBtu

10

Note: field cost is not included, LNG cost includes the liquefaction plant + shipping + receiving terminal

Nautical Miles
0 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Algeria to Spain

Algeria to UK

Algeria to USEC

Algeria to USGC

Qatar to Spain

Qatar to UK

Qatar to USEC

Qatar to USGC

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LNG Costs Becoming Even More Competitive

Cost [USD/MMBTU] 4,0

Gas pipeline - Onshore

Gas pipeline - Offshore

3,0 30

LNG

2,0

1,0

0,0 0 1000 2000 3000 4000 5000 6000 7000

Distance 8000 [Km]

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Energy Transportation Economics

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LNG vs Fischer Tropsch Conversion

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LNG vs LC Methanol Conversion

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LNG vs Methanol Free Gas

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LNG vs LCM

Ch. 21 - 83

LNG vs Methanol Reduced Capex

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Gas Product Price vs Plant Capacity

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Viability of CNG Transportation

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GTL Product Cost Breakdown

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Gas Utilization & Capex

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Generic GTL FT Economics

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Capex Trend of FT GTL Technology

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EU-15 Natural Gas Supply Cost

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Middle East LNGSetting a New Global Cost Benchmark ($ per MMBtu)

<25 2.5

<3

<4

<4

<3

Source: Cambridge Energy Research Associates. 31001-10

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