The role of LNG in the Northeast Gas Market

Liquefied natural gas (LNG) is natural gas (primarily methane) that has been liquefied by reducing its temperature to minus 260 degrees Fahrenheit. It can be compressed, stored and transported over long distances, by ship; and then stored on land in specially designed storage facilities.

The liquefied gas can then be reheated, converted to vapor,
and injected into a pipeline system, for distribution throughout a gas system. It can also be transported to local utility storage tanks via truck.

LNG has traditionally been used for supplemental supplies, particularly for winter peak periods. It is also important in particular areas (like parts of New England) to help maintain system pressures at different points of the regional natural gas system. It has increasingly become a base load fuel with multiple applications.

There has been growing interest in LNG in the last few years in the region and nationally— to meet growing demand for natural gas, and to provide supply flexibility to an increasingly competitive natural gas and energy marketplace.

LNG has an excellent safety record in all its facets - shipping, trucking and storage. The Northeast Gas Association (NGA) runs an annual program with the Massachusetts Firefighting Academy on LNG. The school has been in operation over 20 years, training personnel from utilities, pipelines, and local fire departments.

There are currently 4 on-shore LNG import facilities in the continental U.S., in thefollowing states: Everett, Massachusetts (Distrigas/SUEZ LNG NA) Cove Point, Maryland (Dominion) Elba Island, Georgia (El Paso) Lake Charles, Louisiana (CMS Energy)

The MA and LA facilities have been operating for decades; the other two were reopened in recent years after being inactive for several years. A fifth import facility, located offshore Louisiana in the Gulf of Mexico, operated by Excelerate, went into operation in 2005.

In addition, there are several proposals for new receiving terminals throughout North America - coastal U.S. (including New England, New Jersey and New York), Canada and Mexico.

The leading supply areas to the U.S., ranked by volume, 2005, were:
	Trinidad & Tobago
	Algeria
	Egypt
	Malaysia
	Nigeria

Use of LNG in the Northeast

LNG is a major fuel for New England - providing nearly 30% of daily peak supply in the winter. LNG provided about 20% of New England's total gas supply in 2005, according to U.S. Department of Energy statistics.

There is no underground storage located in New England, for geological reasons. LNG is an important part of the region's supply and deliverability network.

There are liquefaction and satellite storage tanks in localities in the region that are owned and operated by the local distribution companies (LDCs).

In 2005, according to NGA, the LNG storage capacity in New England among the local distribution companies (LDCs) was 15 Bcf (which does not include the storage at the Distrigas terminal). Vaporization capacity for daily sendout was approximately 1.3 Bcf/day; and liquefaction capability by the LDCs was 45,000 MMBtu/day.

LNG is also important to New York's natural gas market, particularly in the downstate area, although not nearly to the extent as in New England. (Unlike New England, New York has underground storage, and is well-situated to the even larger gas storage fields in Pennsylvania and Ontario.)

LNG in New York is obtained by liquefaction of pipeline gas. Two LDCs maintain LNG peak-shaving plants. The facilities provide service area system reliability as well as assist in meeting Peak Day Requirements. These facilities have storage capacity of approximately 3.2 Bcf, liquefaction capability of 16,800 Mcf/day, and a vaporization rate of approximately 26,100 Mcf/hr.

LNG is also utilized by several LDCs in New Jersey, with total state storage capacity of about 3.5 Bcf.

LNG Imports to New England

According to data from the U.S. Department of Energy, Office of Natural Gas Import and Export Activities, in 2005 Distrigas imported 63 cargoes totaling 169 Bcf, down slightly from 174 Bcf in 2004.

LNG imports into New England have risen substantially in recent years: 169 Bcf in 2005 compared to 37 Bcf in 1998.

The U.S. Department of Energy reports that LNG represented about 14% of total U.S. natural gas imports in 2005, compared to 5.6% of the U.S. total in 2002. LNG represented about 3% of all U.S. natural gas consumption in 2005.

Future Potential of LNG

In a December 2001 report on U.S. natural gas markets, the U.S. Energy Information Administration (EIA) included the following observations about LNG:
	"LNG has becomes a more viable source of future natural gas supply because of the extent of world natural gas resources and the significant decline in LNG costs in all segments of the supply chain."
	"Between 1996 and 2000 the cost of a new [LNG] tanker dropped by approximately 30 percent. The construction costs for regasification terminals have seen similar decreases. Because of the capital-intensive nature of LNG trade, more than 70 percent of the cost of regasified, delivered natural gas is made up of processing and transportation costs."
	"The results of EIA's analysis suggest that increased imports of LNG could have a positive effect on U.S. natural gas markets, especially in an environment of high demand. LNG can meet demand that otherwise would have to be met by higher costs sources, thus tempering price increases."
In a January 2003 report, EIA noted, among other points:
	"[I]n New England and the coastal areas of the Middle Atlantic states, where underground storage is lacking, LNG is a critical part of the region's supply during cold snaps."
	"LNG facilities throughout the world generally have had an excellent safety record."
	"The need for additional supply sources to meet projected U.S. demand generally coincides with numerous developments in LNG trade on a worldwide basis. These developments include lower liquefaction costs as well as lower shipping costs.
	LNG storage facilities will also continue to be important in meeting peak demand needs of local utilities and as a way to store gas until needed."