Q & A [KEPCO]

Q1. How is LNG produced ?

Through many years, the organic substance buried into the stratum becomes inflammable natural gas, with methane as a primary component.
The natural gas, existing about 3,000 meters under ground, contains impurities such as water, sulfur, and carbon dioxide. The "raw" natural gas first goes through refining stage to remove these impurities. Then, clean natural gas without impurities are cooled down to approximately 160

below freezing point, and high pressure is applied to become Liquefied Natural Gas (LNG).
Compared to natural gas in gaseous state, LNG is about 1/600 in volume and is better suited for transportaition and storage.

Q2. How is LNG transported to Kansai area?

First, in LNG producing countries, gaseous state natural gas is changed to liquid state LNG. Next, this LNG is loaded into a LNG tanker at the shipment port near the gas field, and is transported to LNG receiving terminals located in Himeji (Hyogo Prefecture) and Sakai (Osaka Prefecture). In order to transport LNG in super-low temperature, LNG tankers have various features. Finally, LNG is sent through pipelines from LNG receiving terminals to each thermal power plant.

Q3. How are petroleum fuels delivered to Kansai area ?

Crude oil is first transported by ocean-going tankers from oil producing countries to oil tank terminals, and then they are delivered to the tanks of each thermal power plant by coastwise tankers. In the case of heavy fuel oil and other petroleum products, which we procure from domestic oil companies and trading houses, they are delivered to the tanks of each thermal power plant by coastwise tankers.

Q4. How is the price of crude oil decided ?

The price of crude oil changes in response to the demand supply balance of the market. In the demand side, the business trend of the U.S., the greatest oil consumption country, and the oil demand for heating in Europe and the U.S. have significant influence on price. In the supply side, the trend of production of the major oil producing countries such as OPEC countries, Russia and Mexico becomes a key factor.
In the case of the price of a long-term or a mid-term contract, the price is mainly determined through the negotiation between a seller and a buyer.
However, the spot market trend gives significant impact on the price.

Q5. How has the price of crude oil fluctuated?

A.	The following chart shows trend of the recent years' West Texas Intermediate (WTI) price, which is the most popular index of the crude oil price.

WTI Crude Oil indicates the world crude oil market which is produced at western area in Texas State, USA. Its dealings is opperated at NYMEX(New York Mercantile Exchange) and its price influences the price of Brent , Dubai and so forth.

In the last few years, Crude Oil price has been rising because of the great demand in China and India, the instability of political situation in oil-producing countries, influx of speculative funds and so forth.

Q6. How long are oil and coal expected to last ?

The number of years during which we can mine energy resources, such as petroleum and coal, is called "ratio of reserves to production." Ratio of reserves to production is calculated by dividing the confirmed amount of energy resource already discovered by the amount of production.
The confirmed amount of energy resource means the amount that can be exploited among the underground resource already discovered using rational expense and the newest technology of the time.
Therefore, when underground energy resources are discovered newly or the mining technology is improved, the confirmed amount of resources may change. And since the amount of production also changes each year, the ratio of reserves to production itself changes.

(Source: BP Statistical Review of World Energy 2007)