regulation and investment in the u.s. robert j. cupina, deputy director office of energy projects...
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Regulation and Investment in the U.S.
Robert J. Cupina, Deputy DirectorOffice of Energy Projects
Federal Energy Regulatory Commission
GIE Annual ConferenceBratislava, SlovakiaSeptember 28, 2006
2
FERC
Office of Energy Projects
Basis of U.S. Regulation:Natural Gas Act
NATURAL GAS ACT
Section 3 Import/Export
Section 7(c)Interstate
• Pipelines• Storage
• LNG Terminals
3
FERC
Office of Energy Projects
Source: Based on Platts PowerMap
Pipeline Regulation
•Construction and Operation•Tariffs
•Rates•Rate Schedules
•Terms and Conditions of Service
4
FERC
Office of Energy Projects
•Construction and Operation•Tariffs
•Rates•Rate Schedules
•Terms and Conditions of Service
Storage Regulation
Source: Based on Platts PowerMap.
5
FERC
Office of Energy Projects
LNG Regulation
•Construction and Operation
•Ongoing Safety
•No Tariff•Any Business Model Acceptable
LAKE CHARLESLAKE CHARLES
ENERGY BRIDGEENERGY BRIDGE(Coast Guard Jurisdiction)(Coast Guard Jurisdiction)
ELBA ISLANDELBA ISLAND
COVE POINTCOVE POINT
EVERETTEVERETT
6
FERC
Office of Energy Projects
Evaluation of PipelineProposals
• Certificate Policy Statement– Existing Shippers Do Not Subsidize
New Facilities– Develop Record on Impacts
(positive and negative) and Allow Commission to Make Decision
• Environmental/Engineering Review
7
FERC
Office of Energy Projects
Evaluation of StorageProposals
• Storage Policy for Market-based Rates– Relevant product market for market
power analysis includes many substitutes, or
– MBRs allowed even if lack of market power has not been demonstrated in situations to encourage infrastructure
• Environmental/Engineering Review
8
FERC
Office of Energy Projects
Evaluation of LNG Terminals
• Environmental/Engineering Review• Safety Review• No Tariff
– Hackberry Decision (December 2002) no need for tariffs or third party access . Treats re-gas as production.
FERC
Office of Energy Projects
9
AOpen Access At
Delivery of Liquid to Terminal
LNGSupplier
s
LNGBuyers
AB
BOpen Access At
Delivery of Vapor into Interstate
Pipeline System
Liquid to Vapor Flow
9
Hackberry Decision
FERC
Office of Energy Projects
10
Major Pipeline Projects Certificated (MMcf/d)
January 2005 to September 2006
12.6 BCF/D Total903 Miles
ANR(168)
15
Petal (600)
Cheniere Corpus Christi(2,600)
Transcontinental (105)
CenterPoint(113)
CIG (105)
Vista Del Sol(1,100)
Golden Pass (2,500)
El Paso(502)
Mill River(800)
San Patricio(1,000)
2 43
1. TransColorado (300) 2. Rendezvous (300) 3. WIC (350) 4. Entrega (EnCana) (1,500) 5. Questar (102) 6. Northwest (450) 7. Questar Overthrust (550)
Northern Border(Chicago III)(130)
Dominion South (200)
Columbia (172)
Triple-T Extension(Tennessee) (200)
Jewell Ridge Pipeline(East Tennessee) (235)
Midwestern(120)
26.88 BCF/D Total1,511 Miles
Transcontinental (100)
McMoRan (1,500)
NE ConneXion(Tennessee)
(136)
Dominion(700)
Cypress Pipeline(Southern Natural) (500)Florida Gas
(160)
Cameron (1,500)Cheniere Creole Trail (3,300)
Port Arthur (3,000)
Cove Point Pipeline (800)
Logan Lateral(Texas Eastern)
(900) 6
Essex-Middlesex(Tennessee)
(82)
7
FERC
Office of Energy Projects
11
Compass Pass(1,000)
Algonquin(800)
Point Comfort(1,000)
Seafarer Pipeline(El Paso) (800)
Millennium(525)
Empire Connector(Empire Pipeline) (250)
2007 Expansion(Vector Pipeline) (245)
Gulf LNG Pipeline(1,500)
Broadwater Pipeline
(Broadwater) (1,000)
North Baja Expansion(North Baja Pipeline)
(2,700)
Major Pipeline ProjectsPending (MMcf/d)
September 2006
18.72 BCF/D Total1,976 Miles
Algonquin(325)
Carthage to Perryville(CenterPoint)
(1,237)
Market Access(Iroquois)
(100)
TIME II(Texas Eastern) (150)
Big Sandy Pipeline(Equitrans)
(130)
Maritimes Phase IV(Maritimes)
(418)
Rockies Express REX West(Rockies Express Pipeline)
(1,800) Blanco to Meeker(TransColorado) (250)
Northern Lights(Northern Natural)
(374)
Bradwood Landing(NorthernStar)
(1,300)
Potomac Expansion(Transcontinental)
(167)
Wamsutter Expansion(Questar Overthrust)
(750)
Phase III Project(Gulfstream)
(200)
East TXMississippi Expansion
(Gulf South)(1,700)
FERC
Office of Energy Projects
12
Sonora Pipeline(1,000)
Brookhaven Lateral(Iroquois)
(80)
Phoenix Lateral(Transwestern) (500)
Southern Expansion(Questar Pipeline)
(170)
Louisiana Pipeline(Kinder Morgan)
(3,395)
11.71 BCF/D Total2,386 Miles
Major Pipeline ProjectsPre-Filing (MMcf/d)
September 2006
GII Project(Guardian Pipeline)
(537)
Kanda & Mainline (WIC) (225)
Continental Connector(El Paso)(1,000)
Pacific Connector(Williams Pacific)
(1,000)
Southeast Supply Header(CenterPoint)
(1,000)
Rockies Express REX East(Rockies Express Pipeline)
(1,800)
Phase IV Project(Gulfstream)
(155)
Southeast Expansion(Gulf South)
(700)
Sentinel Expansion(Transcontinental)
(151)
FERC
Office of Energy Projects
13
Northwinds Pipeline(NFG) (500)
Dracut Interconnect (Tennessee) (250)
Coronado (500)Painter Lateral (Overthrust) (200)
EnCana Extension (Entrega) (1,000)Questar Expansion (160)Uinta Basin (WIC) (300)
Greasewood Lateral (Northwest) (200)
Panhandle Eastern (750)KM Illinois Pipeline
(Kinder Morgan) (360)Kinder Morgan (170)
Natural (232)Henry Hub Expansion (Natural) (200)
North Texas Expansion (Trunkline) (510)Carthage Pipeline(KM Interstate)(700)
A/G Line Expansion (Natural)(139)Mid-Continent Express (Kinder Morgan) (1,500)
Mid-Continent Crossing (CenterPoint) (1,750)Transcontinental (Mobile Bay) (700)
Boardwalk PL (1,000)Shenzi Lateral (Enbridge) (100)
Alaska (4,000)
Major Pipeline Projects On The Horizon (MMcf/d)
August 2006
15.22 BCF/D Total6,976 Miles
14
FERC
Office of Energy Projects
PipelineInfrastructure
• Least speculative gas infrastructure project– If approved, usually gets built– Cost-based rates required as an option, but
usually rates are negotiated• Contracts or binding precedent
agreements with shippers usually required by sponsor, not the Commission, prior to filing application.
• Since 2000, the Commission has approved 57.1 Bcf per day of capacity; over 9,000 miles of pipeline; and 2.2 million horsepower of compression– Estimated cost of $16.9 billion.
15
FERC
Office of Energy Projects
Pipeline InfrastructureApprovals 2000-2006
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006
Appro
ved C
apacit
y (
Bcf/
d)
0
500
1000
1500
2000
2500
3000
3500
Appro
ved M
ileage
Capacity Mileage
Short, high capacity pipelines todeliver regasified LNG to grid
Typical long-line and replacementpipeline projects
16
FERC
Office of Energy Projects
Pipeline InfrastructureFuture Additions
• The INGAA Foundation estimates that between 2006 and 2020, $50.9 billion will need to be invested in 26,000 miles of pipelines and 5.2 milllion HP in the U.S. and Canada – Replacement of facilities: $16.4 billion
• 9,300 miles, 1.2 million HP
– New facilities (16,900 miles): $34.5 billion• 16,900 miles, 4.0 million HP
– Alaska and MacKenzie Delta– Other facilities
FERC
Office of Energy Projects
17
Storage Projects(Capacity in Bcf)
Falcon MoBay (50.0)
County Line (6.0)
EnCana (8.0)
Bluewater(29.2)
Columbia (12.4)
Natural (10.0)
Dominion (9.4)
Texas Gas (8.2)
Freebird (6.1)CenterPoint (15.0)
Starks (19.2)Falcon Hill-Lake (10.4)
Liberty (17.6) Petal (5.0)
SemGas (5.5)
Certificated Since 1/1/05
On The HorizonCurrently Pending
Falcon Worsham-Steed (12.0)
Unocal Windy Hill(6.0)
Columbia (16.4)
Natural (10.0)
Bobcat (12.0)
Texas Gas (6.8)
Dominion (18.0)
Caledonia (11.7) Caledonia (1.7)
Arizona Natural Gas(3.5)
18
FERC
Office of Energy Projects
StorageInfrastructure Additions
• More speculative gas infrastructure project than pipelines– Not all gas users need storage service
• New storage pricing policy to promote storage development
• Since 2000, the Commission has approved 275 Bcf of storage capacity and daily deliverability from storage of 14.6 Bcf.
19
FERC
Office of Energy Projects
Storage InfrastructureFuture Additions
• The INGAA Foundation estimates that between 2006 and 2020, $5.5 billion will need to be invested in underground storage.
• The NPC estimates that between 2005 and 2025, 492 Bcf of storage capacity needs to be added in the U.S. at an estimated cost of about $4.5 billion.
46
30
CONSTRUCTEDA. Everett, MA : 1.035 Bcfd (SUEZ/Tractebel - DOMAC)B. Cove Point, MD : 1.0 Bcfd (Dominion - Cove Point LNG)C. Elba Island, GA : 1.2 Bcfd (El Paso - Southern LNG)D. Lake Charles, LA : 2.1 Bcfd (Southern Union - Trunkline LNG)E. Gulf of Mexico: 0.5 Bcfd (Gulf Gateway Energy Bridge - Excelerate
Energy)APPROVED BY FERC1. Hackberry, LA : 1.5 Bcfd (Cameron LNG - Sempra Energy)2. Bahamas : 0.84 Bcfd (AES Ocean Express)*3. Bahamas : 0.83 Bcfd (Calypso Tractebel)*4. Freeport, TX : 1.5 Bcfd (Cheniere/Freeport LNG Dev.)5. Sabine, LA : 2.6 Bcfd (Sabine Pass Cheniere LNG)6. Corpus Christi, TX: 2.6 Bcfd (Cheniere LNG)7. Corpus Christi, TX : 1.1 Bcfd (Vista Del Sol - ExxonMobil)8. Fall River, MA : 0.8 Bcfd (Weaver's Cove Energy/Hess LNG)9. Sabine, TX : 2.0 Bcfd (Golden Pass - ExxonMobil)10. Corpus Christi, TX: 1.0 Bcfd (Ingleside Energy - Occidental Energy
Ventures)11. Logan Township, NJ : 1.2 Bcfd (Crown Landing LNG - BP)12. Port Arthur, TX: 3.0 Bcfd (Sempra)13. Cove Point, MD : 0.8 Bcfd (Dominion)14. Cameron, LA: 3.3 Bcfd (Creole Trail LNG - Cheniere LNG)15. Sabine, LA: 1.4 Bcfd (Sabine Pass Cheniere LNG - Expansion)16. Freeport, TX: 2.5 Bcfd (Cheniere/Freeport LNG Dev. - Expansion)APPROVED BY MARAD/COAST GUARD17. Port Pelican: 1.6 Bcfd (Chevron Texaco)18. Louisiana Offshore : 1.0 Bcfd (Gulf Landing - Shell)CANADIAN APPROVED TERMINALS19. St. John, NB : 1.0 Bcfd (Canaport - Irving Oil)20. Point Tupper, NS 1.0 Bcf/d (Bear Head LNG - Anadarko)21. Kitimat, BC: 0.61 Bcfd (Galveston LNG)MEXICAN APPROVED TERMINALS22. Altamira, Tamulipas : 0.7 Bcfd (Shell/Total/Mitsui)23. Baja California, MX : 1.0 Bcfd (Energy Costa Azul - Sempra)24. Baja California - Offshore : 1.4 Bcfd (Chevron Texaco)PROPOSED TO FERC25. Long Beach, CA : 0.7 Bcfd, (Mitsubishi/ConocoPhillips - Sound Energy
Solutions)26. Bahamas : 1.0 Bcfd, (Seafarer - El Paso/FPL )27. LI Sound, NY: 1.0 Bcfd (Broadwater Energy - TransCanada/Shell)28. Pascagoula, MS: 1.5 Bcfd (Gulf LNG Energy LLC)29. Bradwood, OR: 1.0 Bcfd (Northern Star LNG - Northern Star Natural
Gas LLC)30. Pascagoula, MS: 1.3 Bcfd (Casotte Landing - ChevronTexaco)31. Port Lavaca, TX: 1.0 Bcfd (Calhoun LNG - Gulf Coast LNG Partners)32. Hackberry, LA : 1.15 Bcfd (Cameron LNG - Sempra Energy -
Expansion)33. Pleasant Point, ME : 2.0 Bcfd (Quoddy Bay, LLC)34. Robbinston, ME: 0.5 Bcfd (Downeast LNG - Kestrel Energy)35. Elba Island, GA: 0.9 Bcfd (El Paso - Southern LNG)36. Baltimore, MD: 1.5 Bcfd (AES Sparrows Point – AES Corp.)37. Coos Bay, OR: 1.0 Bcfd (Jordan Cove Energy Project)PROPOSED TO MARAD/COAST GUARD38. Offshore California : 1.5 Bcfd (Cabrillo Port - BHP Billiton)39. Offshore California : 0.5 Bcfd, (Clearwater Port LLC - NorthernStar NG
LLC)40. Offshore Louisiana : 1.0 Bcfd (Main Pass McMoRan Exp.)41. Gulf of Mexico: 1.5 Bcfd (Beacon Port Clean Energy Terminal -
ConocoPhillips)42. Offshore Boston: 0.4 Bcfd (Neptune LNG - SUEZ LNG)43. Offshore Boston: 0.8 Bcfd (Northeast Gateway - Excelerate Energy)44. Gulf of Mexico: 1.4 Bcfd (Bienville Offshore Energy Terminal - TORP)45. Offshore Florida: ? Bcfd (SUEZ Calypso - SUEZ LNG)46. Offshore California: 1.2 Bcfd (OceanWay - Woodside Natural Gas)
Existing and Proposed North American LNG
Terminals
As of September 22, 2006
FERC
Office of Energy Projects
A
2 326
38
25
40
39
18
US Jurisdiction
FERC MARAD/USCG
* US pipeline approved; LNG terminal pending in Bahamas** Construction suspended
28
82711
C,35
4117
7
515
4229
E
19
22
20
2324
43
1031
9 1214
3334
1,32
44
36B,13
37
45
21
4,166
D
55
POTENTIAL U.S. SITES IDENTIFIED BY PROJECT SPONSORS47. Offshore California: 0.75 Bcfd, (Chevron Texaco)48. St. Helens, OR: 0.7 Bcfd (Port Westward LNG LLC)49. Philadelphia, PA: 0.6 Bcfd (Freedom Energy Center - PGW)50. Astoria, OR: 1.0 Bcfd (Skipanon LNG - Calpine)51. Boston, MA: 0.8 Bcfd (AES Battery Rock LLC - AES Corp.)52. Calais, ME: ? Bcfd (BP Consulting LLC)53. Offshore New York: 2.0 Bcfd (Safe Harbor Energy - ASIC, LLC)54. Offshore California: 0.6 Bcfd (Pacific Gateway - Excelerate Energy)55. Offshore California: ? Bcfd (Esperanza Energy - Tidelands)POTENTIAL CANADIAN SITES IDENTIFIED BY PROJECT SPONSORS56. Quebec City, QC : 0.5 Bcfd (Project Rabaska - Enbridge/Gaz Met/Gaz de France)57. Rivière-du- Loup, QC: 0.5 Bcfd (Cacouna Energy - TransCanada/PetroCanada)58. Prince Rupert, BC: 0.30 Bcfd (WestPac Terminals)59. Goldboro, NS 1.0 Bcfd (Keltic Petrochemicals)60. Énergie Grande-Anse QC: 1.0 Bcfd POTENTIAL MEXICAN SITES IDENTIFIED BY PROJECT SPONSORS61. Lázaro Cárdenas, MX : 0.5 Bcfd (Tractebel/Repsol)62. Puerto Libertad, MX: 1.3 Bcfd (Sonora Pacific LNG)63. Offshore Gulf, MX: 1.0 Bcfd (Dorado - Tidelands)64. Manzanillo, MX: 0.5 Bcfd 65. Topolobampo, MX: 0.5 Bcfd66. Baja California, MX : 1.5 Bcfd (Energy Costa Azul - Sempra - Expansion)
Potential North AmericanLNG Terminals
As of September 22, 2006
FERC
Office of Energy Projects
47
US Jurisdiction
FERC MARAD/USCG
49
4850
63
57
58
59
61
62
64
65
51
52
47
53
6056
54
66
22
FERC
Office of Energy Projects
LNGInfrastructure Additions
• Most speculative gas infrastructure project– Capacity usually reserved by
marketers
• Hackberry Decision encourages new LNG facilities by removing some of the economic and regulatory barriers to investment.
23
FERC
Office of Energy Projects
LNGInfrastructure Additions
(Cont.)
• Existing Deliverability = 5.8 Bcf per day
• Since Hackberry Decision:– Approved by FERC = 25.3 Bcf per day– Pending before FERC = 13.6 Bcf per
day
• Potential Deliverability = 48.9 Bcf per day
24
FERC
Office of Energy Projects
LNG InfrastructureFuture Additions
• The NPC projects up to 9 new terminals and 9 expansions in North America are necessary by 2025 to provide a total of 15 Bcf per day of LNG imports.
• The INGAA Foundation estimates that $9.4 billion in investment will be needed to develop LNG terminals in the U.S. and Canada between 2006 and 2020 to support LNG imports of about 19 Bcf per day.
25
FERC
Office of Energy Projects
Conclusions
• Infrastructure construction necessitates firm contracts for capacity.
• The Commission is a responsible and responsive regulator - to both the public and the industry-the public interest.
• We approve the siting of infrastructure, but the market ultimately decides what is built.
• Contact robert.cupina@ferc.gov
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