# Presentation: 010648

## LNG Imports and the Development of the 
North American Pipeline Grid

2006 EIA Energy Outlook and Modeling Conference
Washington, D.C.

Greg Hopper
Vice President
Lukens Energy Group, a Black & Veatch company 

**North American Pipeline Grid**
**2006 EIA Energy Outlook and Modeling Conference**
**Washington, D.C.**
**Greg Hopper**
- Vice President
- Lukens Energy Group, a Black & Veatch company

## Black & Veatch builds critical infrastructure and advises clients in the global energy markets

**Energy**

**Water**

**Information**

**Government**

-      Lukens Energy Group is part of B&V Enterprise Management Solutions
-      We advise provide commercial, regulatory and strategic advisory services to clients in the natural gas and electric industries

**Notes:**
We currently provide consulting, construction and engineering services to four primary market sectors:
Energy
Water
Information
Government 

## Today’s Discussion

- Pipeline development trends driven by LNG imports
- Producer integration to trading hubs
- Netback enhancement investments
- Less likely infrastructure projects
- Renewed impetus for storage

## Producer Integration to Trading Hubs – Cove Point

**Cove Point LNG**

**DTI/Cove Point Pipeline Expansion Project**
- - 47 miles 36” loop (MD), 81 miles 24” pipe and 33 miles 24” loop (PA, WV,NY)
- - Capacity: 800 MMcf/d (MD0, 700,000 Mmcf/d (PA,WV,NY)
- - Capex:: $402 MM
- - FERC Status: Filed on 2Q 2005
- - In-service: 3Q 2008

## Producer Integration to Trading Hubs – Elba Island

## Producer Integration to Trading Hubs – Energia Costa Azul

**Energia Costa Azul LNG**

**North Baja Pipeline / Gasoducto Baja Norte Expansions**
- - 80 miles of 42”, 48” pipe (Phase I), and  46 miles of 16” lateral (Phase II)
- - Capacity: Together the expansions will allow  to import up to 2.7 Bcf/d of gas into the U.S.
- - Capex: $291 MM
- - In-service Date: Phase I – Late 2007; Phase II – Mid 2009

## Producer Integration to Trading Hubs – Jordan Cove LNG

## Header strategies to enhance netbacks

- The total arbitrage value depends on operational characteristics – such as capacity and cost, as well as the price correlation between pricing points.
- The intrinsic value is captured by choosing the highest-valued delivery point at the beginning of each month.
- The realization of the extrinsic value depends on the market liquidity and portfolio management practice.

**Historical Basis to Henry Hub**

**Potential Header Value**

## Header System - Kinder Morgan Louisiana Pipeline

## Header System – Sempra Port Arthur Pipeline 

## Header System – Cheniere Creole Trail Pipeline 

## Header System – Texas Eastern Logan Lateral, BP Crown Landing

## Gulf Coast-to-Northeast long haul expansions are less likely

**Current Rates ~ $.55/dt, plus fuel**
**Incremental Rates ~ $1.40/dt, plus fuel**

## Maritimes & Northeast – Phase IV expansion uncertainty

| Shipper | Volume (MMBtu/d) |
| --- | --- |
| Anadarko LNG Marketing (Bear Head LNG) | 813,000 |
| Repsol Energy NA (Canaport LNG) | 750,000 |
| Total | 1,563,000 |

**Maritimes & Northeast Pipeline**
**Phase IV – Open Season Results**

## Interregional projects influence and are influenced by LNG

## West Coast LNG may be influencing Rocky Mountain producer pipeline decisions

**Comparison of Rates**
**Kern River vs. Rockies Express**

## Baseloaded LNG may drive summer/winter prices wider and promote more storage development

## Historical values of a Gulf Coast storage facility

## Thank You.

Greg Hopper
Vice President
713-590-2280
hoppergw@bv.com

**Greg Hopper**
**Vice President**
**713-590-2280**
**hoppergw@bv.com**