 Here's just pictures of four of the existing LNG import facilities that we have in the United States and you can actually see there's one off of Massachusetts one off of Georgia one off of Maryland and one of three that we have in the Gulf Coast region now What is liquefied natural gas? It's natural gas that's cooled to a minus 320 degrees Fahrenheit now What this does is it reduces the volume by over 600 times which it makes it easier to transport and store So in other words Let's just say if we had a cubic foot of natural gas There's a certain amount of BTU within that but the same cubic foot of liquefied natural gas would have six hundred times the heating value So you can see we're storing the liquid or transporting the liquid you are actually storing and transporting a much much higher Heating value than with pure methane So you can see here a ton of liquefied natural gas is equivalent to 47 MMB to user 47 million BTU and one ocean going LNG tanker can hold the equivalent of 3bcf of natural gas pricing around the world Various from region to region in Japan they price LNG landed off of the price of crude oil that's imported the so-called Japanese cocktail What it amounts to it's just the average price For the crude oil that's been purchased as cleared through their customs And so it really it's Japanese cleared customs crude pricing, but it's just referred to as the Japanese cocktail In Korea and Taiwan again, it's it's the price of LNG landed is tied to the BTU equivalent basket of crude oil postings In the UK continental Europe and Southeast Asia It's a combination of oil and coal prices again converted to BTU bases And then the pricing for LNG on a BTU basis is equivalent now in the United States and Canada We have been traditional importers and we have very limited export facilities But we have a competitive natural gas marketplace As you all know from you're studying in earlier lessons. We have the New York Mercantile exchange So we have an open active competitive marketplace for natural gas now Russia China in the Middle East They regulate the price the various the countries the governments do and they actually subsidize the price for their citizens You can see here that because of the growth in the shale gas We have you know steadily Declined our imports over the years Now the US as an exporter Some of the reasons that make sense for us. We do have a surplus gas supply the shale plays and the tight formations Have resulted in abundant relatively cheap supply of natural gas $3 or less as an extremely cheap price for natural gas and the EIA estimates that estimates that we're producing about 3 BCF a day More supply than we have market for and as I mentioned in the previous slide We have a competitive natural gas based pricing market This is actually causing some renegotiations of some of the existing global contracts in other words Japan sees the coming of LNG exports by the United States, and so they're already talking to some of their suppliers and saying, you know Look, we want to get off of this crude oil pricing type of mechanism in our contracts and convert over to some type of natural gas index We have existing LNG import facilities those pictures. I showed you in the beginning and we actually believe or not We are exporting virtually at the moment The since we no longer need Natural gas imports in the form of LNG What's happening is those entities in the United States who have contracted for tanker loads are literally selling them Mid-sea so to speak sending them to different ports rather than coming to the United States And then we actually have had for about 20 years a small LNG export facility off the coast of Alaska in a point called Kenai and that's opera been operated by Conoco Phillips You can see here now the Red squares represent existing LNG points again off of Massachusetts Cove point Maryland, Elba Island, Georgia, and then we have about four in the Gulf Coast area Now these are going to be the logical Facilities to export they have about 60 to 70 percent of the infrastructure in place already They can handle tankers for offloading. They have on Onshore storage they have connections with pipeline companies. So what they're doing is they're building the gasification Excuse me the liquefaction trains. We talked about the fact that The natural gas has to be super cooled. Well, that takes a liquefaction facility or train To be built. So in other words, they've got a lot of the infrastructure already in place So some of these other companies that believe they're going to dive into this particular arena Are not going to have the facilities. It's going to cost them a considerable amount more Investment you can see here, of course, the natural gas exports and re-exports by country again, we have declined In terms of our imports and then all of a sudden you can see we've actually started to to do some exporting and Then the ways that it's gets to market again. This is that logistics and value chain we talked about for natural gas in the case of Exporting LNG you can see here that the well head gas is going to move by pipeline to the liquefaction facility And then it gets shipped to a particular port of entry where it's re-gasified And then distributed to the various areas of need. So it's sort of the Opposite process that we've been used to for decades now where we actually receive the LNG and we re-gasify it and we utilize it through the pipeline system to the various end users Pricing wise again here in the United States We've got a financial natural gas forward market, which you're familiar with is the NYMEX provides price discovery So everyone knows where the price is now just currently based on the one-year average price for natural gas that Henry hub It's approximately three dollars and five cents at the time that I put this particular lecture together Now these are the estimated supply chain costs. Okay, and US dollars premium BTU Approximately two dollars and 15 cents represents the process for the liquefaction Shipping overseas is about a dollar twenty-five Regasification at the new port of entry is approximately 70 cents premium BTU So you have total costs of about four dollars and ten cents So in this particular situation, you're really around seven dollars and 15 cents and I apologize This still says 705 on it now when we compare that to world pricing You can see that there are not that many places in which current LNG exporters can make money at seven dollars and fifteen cents now throughout Asia. That's still a pretty good deal And they're still going to make money in parts of South America But over in Europe you could not at the present time Export LNG and make money over there now this situation has dramatically changed one of the Events that created impetus for the US to consider exporting LNG had to be back in March of 2011 with the Fukushima Nuclear power plant disaster in Japan as I mentioned earlier Japan is solely dependent on imports For natural gas and imports in the form of LNG well at the time they shut down all of their nuclear power plants So the demand for natural gas in Japan spiked and we were seeing prices upwards of 14 dollars per MMB to you So you can imagine at the time those planning the LNG export facilities at the United States were expecting Extremely lucrative business and very very large profit margins such as is not the case today and in fact Japan is looking at relicensing their nuclear power plants again