Scale LNG Applications Tony Regan Tri-Zen International Pte Ltd 4 - - PowerPoint PPT Presentation

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Recent LNG Developments & Ten Year Outlook. Update on Developments of Small/Medium Scale LNG Applications

4th Annual LNG Transport & Storage, Bali 19-21 May 2014

Tony Regan Tri-Zen International Pte Ltd

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Introduction to TRI-ZEN

 TRI-ZEN is a consulting business focused on energy and utilities  We cover upstream & downstream, technical, commercial & financial  We offer a wide range of services:

 Consulting  Strategy  Feasibility studies  Business Development  Project Management  Organizational Development  Alliances  Due diligence for M&A, project finance and IPO’s

 Lead consultants located across Asia with a global extended network  Clients include the leading companies in energy and professional services based in Asia, Europe & North America

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2014 – 50th Anniversary of first commercial LNG shipment

R/P = 98 R/P = 265 R/P = 41

Algeria

Terminals LNG

Alaska Libya

Kenai 1969 Two trains 1.3 mill tn Arzew GL4Z 1964 3 trains 1.1 mill tn Skikda 1972 3 trains 3 mill tn Arzew GL1Z 1978 6 trains 7.7 mill tn

Brunei 1972

5 trains, 7 mill tn Marsa El Brega 1970 4 trains 0.75 mill tn Negishi 1969 Senbouku 1972 & 1977 Sodeguara 1973 Chita 1977 Tobata 1977 Himeji 1979 Canvey Island 1959 Barcelona 1969 La Spezia 1971 Fos 1972 Everett 1971 Bontang 1977 2 trains 3.3 mill tonnes Arun 1978 3 trains 5.1 mill tonnes

1978 Azrew, Arun 1977 Bontang 1972 Skikda, Brunei 1970 Libya 1969 Alaska 1964 Arzew 3

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R/P = 98 R/P = 265 R/P = 41 Trinidad Algeria Nigeria Abu Dhabi Australia Malaysia Indonesia

LNG

Egypt

• Eq. Guinea

Angola Russia Peru Norway Libya Alaska Yemen Brunei Oman Qatar

Under construction

PNG

LNG liquefaction plants 2014

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Global LNG Imports

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50 100 150 200 250 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Million tonnes

• N. America

Cent & S. America Europe Asia Middle East

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Asian LNG Imports

20 40 60 80 100 120 140 160 180 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Million tonnes China India Indonesia Japan South Korea Taiwan Thailand

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 Asia leaps back  US dwindles  Europe weak  New entrants in Asia:

 Thailand  Indonesia  Malaysia  Singapore

 Asian sales 173 million tonnes

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Global Market Share 2013

• N. America

3% Cent & S. America 6% Europe 17% Asia 72% Middle East 2%

2013

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Liquefaction capacity under construction

8 Project Mill tonnes FID Start Up Arzew Algeria 4.7 2008 2014 PNG LNG Papua New Guinea 6.9 2009 2014 Qld Curtis Australia 8.5 2010 2014 Pacific Rubialas FLNG Colombia 0.5 2012 2015 Donggi-Senoro Indonesia 2 2011 2015 Gladstone LNG Australia 7.8 2011 2015 Sarawak FLNG Malaysia 1.2 2012 2015 MLNG Train 9 Malaysia 3.6 2013 2015 Australia Pacific T1-T2 Australia 9 2011/12 2015/16 Gorgon T1-T3 Australia 15 2009 2015/16 Sabine Pass T1-2 USA 9 2012 2015-16 Prelude Australia 3.6 2011 2016 Wheatstone Australia 8.9 2011 2016 Sabine Pass T3-4 USA 9 2013 2016/17 Ichthys Australia 8.4 2012 2017 Yamal LNG Russia 16.5 2013 2017/19 Sabah LNG Malaysia 1.5 2014 2018 Total 114.6 Santos, Petronas, Total, KOGAS Main shareholders Liquefaction capacity under construction Shell Chevron, Apache, Tokyo Elec INPEX, Total Novatek, Total, CNPC Petronas Cheniere Energy Petronas Petronas Origin, ConocoPhillips, Sinopec Chevron, Shell, ExxonMobil Cheniere Energy Sonatrach ExxonMobil, Oil Search, Santos BG, CNOOC Mitsubishi, Pertamina, KOGAS Exmar

Not enough to meet 2020 demand Slow progress to sanctioning projects – only one so far in 2014

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R/P = 98 R/P = 265 R/P = 41

Australia Norway Algeria Nigeria

• Eq. Guinea

Trinidad Peru Oman Qatar Yemen Abu Dhabi Brunei Malaysia Indonesia Egypt Libya Russia

Global LNG liquefaction capacity 2015

Angola Colombia PNG

Global liquefaction capacity 313 million tonnes

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R/P = 98 R/P = 265 R/P = 41

Europe 47 mill tn Middle East 7 mill tn North America 9 mill tn Caribb, Cent & S. America 21 mill tn

Forecast LNG Demand 2015

LNG demand (million tonnes) Asia 216 mill tn

Estimated global demand 300 million tonnes

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R/P = 98 R/P = 265 R/P = 41

Euro 47 mill tn North America 9 mill tn Caribb, Cent & S. America 21 mill tn

Forecast LNG Supply & Demand 2015

LNG demand (million tonnes) Asia Pacific 111 mill tn Africa Middle East 7 mill tn Liquefaction capacity (million tonnes) Asia Pacific 216 mill tn (Existing, under construction, planned) Europe

Liquefaction Capacity 313 million tonnes Base case demand 300 million tonnes

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Demand Forecast (Base Case)

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100 200 300 400 500 600 Million tonnes North America Central Amer/Caribb South America Europe Asia Middle East

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R/P = 98 R/P = 265 R/P = 41

Australia Norway Algeria Nigeria

• Eq. Guinea

Trinidad Peru Oman Qatar Yemen Abu Dhabi Brunei Malaysia Indonesia Egypt Libya Russia

Global LNG liquefaction capacity 2025

China Angola Liquefaction capacity (Existing, under construction and planned) but note slide 16 Canada USA Russia PNG Tanzania Mocambique Colombia

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USA

R/P = 98 R/P = 265 R/P = 41

Europe 89 mill tn North America 16 mill tn Caribb, Cent & S. America 55 mill tn

Forecast LNG Supply & Demand 2025

LNG demand (million tonnes) Asia Pacific 235 mill tn Africa Middle East 11 mill tn Liquefaction capacity (million tonnes) (Existing, under construction & planned but note slide 16) Asia Pacific 460 mill tn

Liquefaction Capacity 752 million tonnes Base case demand 530 million tonnes

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Global liquefaction capacity

Mill tonnes

 Existing projects 27 277  Under construction 14 116  Planned/Proposed 41 359  Speculative 32 277  Total 114 1029

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200 400 600 800 1000 1200 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Liquefaction capacity Million tonnes Existing Under construction Planned/Proposed Speculative

Far too much on offer – 1,029 million tonnes to meet 2025 demand of 530 million tonnes Not all the planned and proposed will go ahead – perhaps only about half

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Cove Point MD 7.8 mtpa Elba Island GA 3.7 mtpa Lake Charles LA 15 mtpa Lake Charles LA 0.7 mtpa Cameron LA 12 mtpa Cameron LA 1.4 mtpa Cameron LA 1.5 mtpa

• W. Cameron LA 13.5 mtpa

Main Pass LA 24 mtpa Sabine Pass LA 16.5 mtpa Plaquemines LA 8 mtpa Pascagoula MS 11.2 mtpa Freeport TX 13.2 mtpa Corpus Christie TX 13.5 mtpa Brownsville TX 21 mtpa Brownsville TX 12 mtpa Brownsville TX 2 mtpa Lavaca Bay TX 3 mtpa Golden Pass TX 15.6 mtpa Lavaca Bay TX 10.3 mtpa Ingleside TX 8.2 mtpa Kenai AK 1.3 mtpa Valdez AK 14 mtpa Kitimat BC 10 mtpa LNG Canada 12 mtpa Douglas Island BC 0.9 mtpa Pacific NW LNG 10 mtpa Ridley Island BG 10 mtpa Aurora LNG 12 mtpa Grassy Point WCC LNG 15 mtpa Kitsault 20 mtpa Triton LNG 2.3 mtpa Woodfibre LNG 2.1 mtpa Oregon LNG OR 11 mtpa Jordan Cove OR 6 mtpa Kitimat LNG Apache, EOG Resources, EnCana Douglas Island BC LNG Export Co-op LNG Canada, Prince Rupert Shell , Mitsubishi, KOGAS, PetroChina Pacific NW LNG Petronas, Japex, IOC Petroleum Brunei Ridley Island, Prince Rupert BG Aurora LNG, Inpex/CNOOC Grassy Point, Woodside WCC LNG ExxonMobil Kitsault, Kitsault Energy Triton LNG, Triton, AltaGas, Idemitsu USA Valdez AL Elba Island GA El Paso Lake Charles LA Trunkline LNG Lake Charles LA, Magnolia LNG Cameron LA Sempra Energy Plaquemines LA CE FLNG Cameron Parish LA Waller LNG Services Cameron Parish LA, Gasfin Development Cameron Parish LA, Venture Global West Cameron LA Delfin LNG Main Pass LA, United Energy, Freeport-McMoRan Energy Sabine Pass LA Cheniere Energy Plaquemines LA, Louisiana LNG Energy Cove Point MD Dominion Pascagoula MS El Paso GE Energy Jordon Cove OR Jordon Cove Energy Warrenton, OR Oregon LNG Brownsville TX Gulf Coast LNG Export Brownsville TX Eos LNG, Barca LNG Brownsville TX Texas LNG Freeport TX Freeport LNG Corpus Christie TX Cheniere Energy Golden Pass TX QP ExxonMobil Lavaca Bay TX Excelerate Ingleside TX, Pangea LNG

Proposed capacity: Canada 109 mill tn USA 282 mill tn

Golboro 5 mtpa Melford 4.5 mtpa

Proposed LNG projects

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Main participants

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2005 2010 2015 2020 Qatar Petroleum 16.21 46.19 50.96 50.96 Shell 10.78 19.67 28.08 33.48 Sonatrach 20.70 22.00 28.80 28.80 Petronas 18.83 19.48 26.36 27.86 ExxonMobil 6.98 14.55 20.18 21.43 Total 5.17 11.80 14.26 19.58 Chevron 1.98 2.72 9.50 18.33 Cheniere 9.00 18.00 BG 5.62 7.11 16.32 16.32 NNPC 4.66 10.36 14.29 14.29 BP 8.71 14.19 12.49 12.49 Novatek 9.90 ConocoPhillips 1.05 5.18 7.51 7.51 Mitsubishi 5.00 6.86 7.51 7.51 Inpex 0.93 0.39 6.67 Woodside 1.98 2.72 6.55 6.55 ENI 5.21 6.86 6.43 6.43 Pertamina 15.46 16.17 6.08 6.08 Oman Govt 5.07 5.07 5.10 5.10 Gazprom 4.80 4.80 133.41 211.86 274.62 322.10 Equity share in liquefaction capacity

10 20 30 40 50 60 Equity share in liquefaction capacity (Top 10) Mill tonnes 2005 2010 2015 2020

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Fleet configuration

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LNG tanker FSRU Vessel size Delivered On order Delivered On order Total < 125 k 28 1 29 125-147k 197 1 7 205 147-160k 65 46 4 115 160-200k 25 59 8 92 200k> 45 45 Unconfirmed 1 1 Total 360 106 11 10 487

Data: Mitsui OSK Lines (as of Sept 2013))

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Short 160 vessels

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50 100 150 200 250 300 350 400 450 500

Global LNG Demand

Million tonnes North America Central Amer/Caribb South America Europe Asia Middle East

• N. America

2% C. Amer/Caribb 2%

• S. America

6% Europe 17% Asia 71% Middle East 2%

2020 2013 2014 2015 2016 2017 2018 2019 2020 Surplus fleet

• 1

19 17 6

• 14
• 51
• 106
• 160

Fleet data: Mitsui OSK Lines

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R/P = 98 R/P = 265 R/P = 41

Teeside (Excelerate) Bahia Blanca Enarsa Escobar, Enarsa Guanabara Bay Petrobras Pecem Petrobras Mejillones GNLM Bahia Petrobras Neptune GdF Suez Northeast Gateway Excelerate Israel Kuwait Excelerate Dubai, Golar Malaysia, Petronas Indonesia, Nusantara Regas Livorno

Existing FSRU’s

Gulf Gateway, Excelerate

2005 Gulf Gateway 2007 Teeside 2008 NE Gateway Bahia Blanca 2009 Pecem Guanabara Bay 2010 Neptune Mejillones 2011 Escobar Dubai 2012 West Java Israel 2013 Malacca

FSRU’s Retired Existing

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Next phase

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Country Project Vessel Storage m3 Owner/Operator Start up Mill Tn Indonesia Lampung Hoegh Lampung 170,000 PGN Hoegh 2014 2 Lithuania Klaipeda Hoegh Independence 170,000 Klaipedos Nafta (FSRU) 2014 2.2 Uruguay Punta de Sayago MOL TBN 263,000 UTE, ANCAP, Enarsa 2015 1.6 Jordan Aqaba Golar Eskimo 160,000 Aqaba Development Corp 2015

3.6

Puerto Rico Aguirre Offshore GasPort Excelerate TBN 150,900 Puerto Rico Electric Power A 2016 1.5

PGN FSRU Lampung Golar Eskimo

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R/P = 98 R/P = 265 R/P = 41

Floating terminals Teeside (Excelerate) Bahia Blanca Enarsa Escobar, Enarsa Guanabara Bay Petrobras Pecem Petrobras Mejilones GNLM Bahia Petrobras Neptune GdF Suez Northeast Gateway Excelerate Israel Kuwait Excelerate Dubai, Golar Malaysia, Petronas Indonesia, Nusantara Regas Livorno

Existing, sanctioned & proposed FSRU’s

Gulf Gateway, Excelerate Uruguay Jordan Lithuania Puerto Rico Tianjin Quintero Colbun Colombia Lampung FSRU’s Sanctioned Existing Retired Proposed

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Global FSRU Capacity

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10 20 30 40 50 60 2008 2009 2010 2011 2012 2013 2014 Mill tonnes Argentina Brazil Chile China Dubai Indonesia Italy Israel Kuwait Lithuania Malaysia UK USA

US Capacity has been retired and redeployed

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FSRU Order Book

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Golar has converted four LNG carriers to FSRU’s but now all are focusing on new builds All built in Korea Shell expected to shortly place an order for a FSRU for Batangas

Vessel Capacity Delivery Shipyard Owner Charterer Golar Igloo 170,000 2014 SHI Golar LNG Kuwait Petco Hoegh Independence 170,000 2014 HHI Hoegh LNG Klaipedos Nafta Excelerate Experience 173,400 2014 DSME Excelerate Energy Petrobras Golar Eskimo 170,000 2014 SHI Golar LNG Jordan LNG PGN FSRU Lampung 170,000 2014 HHI Hoegh LNG PGN Hoegh Gallant 170,000 2015 HHI Hoegh LNG Hoegh LNG FSRU TBN 4 170,000 2015 HHI Hoegh LNG BW Gas FSRU TBN 1 170,000 2015 SHI BW Gas Excelerate FSRU TBN 170,000 2015 DSME Excelerate Energy Golar Tundra 170,000 2015 SHI Golar Energy Golar LNG Dynagas FSRU TBN 2 170,000 2015 STX Dynagas Dynagas FSRU TBN 1 170,000 2016 STX Dynagas BW Gas FSRU TBN 2 170,000 2015 SHI BW Gas Mitsui OSK TBN 263,000 2016 DSME Misui OSK GDF for Uruguay FSRU Orderbook

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FLNG projects under construction

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Leader Topsides LNG Hull Storage Project status Location (Constructor) Liquefaction mtpa Containment m3 Project Shell Technip 3.5 Barge 220,000 + FEED completed 2009 Australia (Samsung) Shell DMR Membrane 90,000 LPG + Sanctioned May 2011 Prelude 126,000 Condensate Start Up 2017 Petronas Technip/Linde 1.2 Barge FEED completed 2012 Malaysia (DSME) AP-NTM Membrane Sanctioned 2012 Sarawak Start up Q4 2015 Exmar Black & Vetch 0.5 Barge 16,100 + Sanctioned 2012 Colombia (Wison) SMR 140,000 floating storag Start up Q1 2015 Pacific Rubialas Petronas JGC 1.5 Barge FEED completed 2013 Malaysia (Samsung) AP-NTM Membrane Sanctioned 2014 Sabah Start up 2018

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Proposed FLNG projects

26 Country Project MTPA FID Start up Partners Australia Greater Sunrise 4 2020 Woodside, Shell, ConocoPhillips, Osaka Gas Australia Cash Maple 2 2013 2016 PTT Australia Bonaparte 2 2015 2019 GDF Suez, Santos Australia Scarborough/Pilbara 6 2014 2020 ExxonMobil, BHP Canada BC FLNG - Douglas Channel 0.7 2015 Haisla Nation and Douglas Channel Services Indonesia Abadi 2.5 2015 2018 Inpex, Shell Israel Tamar 3 2013 2018 Noble Enegy, DorGas, Isramco, Pangea, Delek, Avner USA Port Lavaca 4 2013 2017 Excelerate Energy, RWE USA GofM FLNG 1 2014 2017 EDF Trading, Exmar 25.2 Proposed and planned FLNG projects

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FLNG projects under development

27 Project MTPA FID Start up Partners Australia Browse 12 2015 2018 Woodside, Shell, BP, PetroChina, MIMI Australia Evans Shoal Shell, ENI, Petronas, Osaka Gas Cameroon Cameroon LNG Project 3 GDF Suez & SNH (PSA?) Gabon Shell East & West Africa 1 2021 Shell Iraq Majnoon FLNG 4 2021 Shell, South Gas, Mitsubishi Mauritania Banda NW & West Tullow Mozambique Rovuma Basin Petronas, Total + Pangea? Namibia Kudu Phase 2 1.5 2013 2017 Tullow, Itochu, Namcor Nigeria Progress LNG Peak Petroleum USA Plaquemines LA 2 2020 Cambridge Energy Holdings USA Ingleside, Corpus Christi FLNG 8 2018 Pangea USA Main Pass 24 2014 2018 United Energy, Freeport-McMoRan Energy USA Waller Point 1.25 Waller Energy USA Port Arthur 3 2016 Sempra Energy USA West Cameron FLNG 14 Delfin LNG USA Brownsville 4 Texas LNG 59.8

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FLNG Projects

5 10 15 20 25 2014 2015 2016 2017 2018

FLNG units Mill tonnes

Pacific Rubiales Petronas I Shell, Prelude Petronas II Excelerate, USA PTT Cash/Maple Noble/DSME, Israel Inpex/Shell, Abadi GdF Bonaparte

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Four under construction, another five hope to take FID shortly. Potentially almost 20 mill tonnes production from FLNG units by 2018

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LNG Trade Flow

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LNG Production Small Scale (<1 mtpa) [100+ Plants] LNG Production Large Scale (2-8 mtpa) [25 Plants] Vessels [357 LNG Carriers] Trucks Trains Floating Terminal [10 Terminals] Onshore Terminal [100 Terminals] Power Industry Domestic Transport Trucks Ships

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What is driving the demand for small scale LNG

Same as for large scale LNG:

 Environmental concerns – reducing emissions  Regulatory push – US Cross State Air pollution Rule, IMO on marine fuels  Substitution of coal by gas in power sector – gas fired power generation 50% more energy efficient than coal equivalent  Growing interest in LNG as a transportation fuel  Improving supply security – long term supply agreements, multiple sources  Low entry costs for buyers – quick/cheap floating receiving terminals  Geopolitics – reducing dependence on Russian gas  Concern about nuclear power – greater demand for gas/LNG BUT, in particular  The pull from the transportation fuel market  Enabling gas supply to small/remote power generators/mines

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Economic Driver

 Gas/LNG cheaper than oil  Widening of differential between oil and gas  Oil prices have more than doubled since 2009  Gas prices have fallen  Widest in USA – Henry Hub at circa 70% discount to WTI  Huge growth of US gas market  Europe – narrower differential but gas at circa 45% discount to Brent

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5 10 15 20 25 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

US crude and gas US$/MMBtu

Gas Henry Hub Crude WTI

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 Gas : Oil differential not as wide in Europe and Asia as in North America  But:

 LNG still the cheapest fuel  Gasoil can be more than double LNG  Even with higher delivery costs, LNG is still cheaper than diesel and LPG

 This is driving the creation of a new market – LNG as a transportation fuel and creating the need for small/medium scale LNG solutions

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Economic Reality

5 10 15 20 25 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 LNG v fuel oil & gasoil - Korea US$/MMBtu 180 cst Fuel Oil Gasoil LNG 5 10 15 20 25 30 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 NW Europe (US$/MMBtu) 1% fuel oil Gasoil LNG

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Economic Drivers

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5 10 15 20 25 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Crude v Natural Gas Chart US$/MMBtu Brent Crude US WTI Crude US Henry Hub gas UK NBP gas

Why buy fuel linked to this price when you can buy it linked to gas

Widening differential between oil and gas

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LNG Bunker Uptake

 Maritime Environmental Legislation is driving change in bunker fuel supply  Traditional high sulphur fuel oil and marine diesel can no longer be supplied in an Emission Control Area (ECA) and rest of world from 2020*  Substantial reduction in permitted sulphur levels in an ECA in Jan 2015 when limit goes down to 0.1%  Rest of the world currently expected to go to 0.5% sulphur in 2020*  Current limit in ECA not too difficult to meet but causes some increase in fuel cost (switch from HSFO to LSFO)  The move to 0.1% sulphur in an ECA in 2015 and 0.5% in ROW from 2020 will massively increase fuel costs (circa +60%)  Ship owners considering alternatives:

 LNG – fully compliant with current and anticipated environmental legislation. More expensive than HSFO but far cheaper than diesel  HSFO plus scrubbers – CAPEX plus OPEX cost. More expensive than HSFO but cheaper than diesel. Compliance issue – each vessel will have to prove it is compliant

 Vessel owners undecided about what to do (hoping 2020 reduction will be put off) and therefore pace of change has been slow

* Date still to be confirmed by IMO

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Environmental Drivers

 First ECA – northern Europe  International Maritime Organisation’s MARPOL Annex VI regulations:

 Restrict the emission of Nitrous Oxides (NOx), Sulphur Oxides (SOx), Particulate Matter (PM) and other greenhouse gases, such as Carbon Dioxide (CO2)  Emissions Control Areas (ECAs) established 2005 (Baltic, North Sea, English Channel), with strictly enforced emissions limits

 Cannot use traditional bunker fuels  Have to switch to low sulphur diesel

• r fuel oil (max 1% sulpur)

 Stimulated the use of LNG as a bunker fuel

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Environmental Drivers

 The second ECA  North American coast declared an ECA Aug 2012  Puerto Rico included from 2013  Impacts far more shipping than the first ECA  Where next?

 Southern Europe?  Japan?  Korea?  Australia?

 No firm plans but Pearl River Delta emerging as favorite to be the third ECA Seven of the top twenty bunker ports are now within an ECA

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Source: DNV

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ECA’s Driving Change

 ECA’s are driving change  1.5% fuel sulphur limit introduced in 2005  Fuel sulphur limit reduced to 1% in 2010  Goes to 0.1% in 2015  Rest of world goes to 0.5% sulphur in 2020 (subject review in 2018)  LNG meets all emission targets without the expense of ultra low sulphur gasoil “LNG is the only viable option to allow the shipping industry to meet its emissions targets.” Siim Kallas, vice president of the European Commission (Dec 2012)

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2 4 6 8 10 12 14 Sox g/kWh Nox g/kWh PM g/kWh CO2 cg/kWh HSFO 3.5% S MDO 0.5% s Gasoil 0.1% S LNG

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LNG Bunker Status

 LNG developing within ECA’s  Initial users ferries, offshore service vessels, coastguard – vessels

• perating within the ECA

 50 LNG fuelled ships* currently in operation, mainly in Scandinavia  50 LNG fuelled ships on order for delivery 2013/14  Starting to move beyond Scandinavia – orders from Korea, China, Spain, Saudi Arabia, Argentina as well as USA and Canada  Ferries & offshore service vessels dominate order book but first order for container vessels placed by TOTE (USA)  Several major ferry operators in US & Canada have plans to convert substantial portion of fleet to LNG by 2015

* Excludes LNG carriers and inland waterway vessels

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LNG as a transportation fuel

 Gas has been used as a vehicle fuel since the 1930’s  Natural gas vehicle fleet about 16 million units  About 1.5% of total vehicle fleet  Includes about 1 million buses & medium/heavy duty trucks  Main markets –Pakistan (3.1 mill), Iran (2.9 mill), Argentina (2.1 mill), Brazil (1.7 mill), India (1.5 mill) China (1.2 mill)  Mainly fuelled by compressed natural gas (CNG) but growing awareness that LNG is a more suitable fuel for trucks & buses  Cheaper than petroleum fuels. In the US:  Average CNG price at the pump is about 64% of the gasoline price  Average LNG price at the pump is 30-40% cheaper than diesel  First movers to adopt LNG as a road fuel – USA, China and Australia  Potentially huge market opening up for LNG

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The market

 “Return to base” vehicles - buses, refuse trucks, trains. Set up base fuelling station  Medium & heavy duty trucks – set up fuelling stations on main highways  LNG fuelled truck in North America typically costs about US$80,000 more than conventional truck but annual saving in fuel cost between US$20 and US$30k  Assuming mileage of 100,000 miles/annum payback period is around 3-4 years  Major truck manufacturers already offer LNG fuelled version  LNG fuelling station – about US$1 mill each in China, US$1.4-2.2 mill per station in North America

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 America’s Natural Gas Highway

 Clean Energy has opened 70 LNG fuelling stations on US highways, target of 150 by 2015  Shell and TravelCenters of America developing a U.S. nationwide network of LNG fueling centers  FedEx plans to convert majority of its 90,000 vehicles to CNG/LNG

 BNSF trialing LNG fuelled locomotives (rail companies second largest diesel user in US after military)  EnCana has launched mobile fuelling stations  Volvo & Shell collaborating in N. America & Europe  Shell building two small scale liquefaction plants to support fuelling network

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North America

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 Natural gas is the fastest growing transportation fuel in the U.S.  The EIA predicts an average annual growth rate of 11.9 percent from 2011 to 2040  Heavy duty vehicles ("HDVs"), which include long-haul trucks, tractor trailers, buses, and heavy-duty pickups and vans will lead the growth in natural gas demand  Natural gas fuel consumption by HDVs increases from almost zero in 2011 to more than 1 quadrillion Btu in 2040: an average annual growth rate of 14.6 percent

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North America

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China

 China – the largest & fastest growing market for LNG as a truck fuel  Transportation (road & marine) is a preferred category for gas consumption  Government encouraging use of natural gas as a vehicle fuel  Industry “taking off”:

 “After the National Energy Administration (NEA) formulated technology standards for LNG fueling stations at the end of last year, provincial government agencies have sped up examination and approval of LNG fueling station projects. So far, there have been nearly 300 LNG fueling stations under

• peration in China.”

 “China’s top three oil giants, namely, PetroChina, Sinopec and CNOOC, have worked out their own expansion plans for LNG fueling stations. PetroChina will put 162 LNG fueling stations into operation this month, boosting the total number of its LNG fueling stations to 232. In the long run, the company will have more than 5,000 LNG fueling stations around China.” June 2012  “Kunlun Energy Co. Ltd. plans to have 1,515 liquefied natural gas (LNG) refilling stations across China

• ver the next three years, a 10-fold increase from the company’s present number of stations. 28 June

2012  China Association of Automobile Manufacturers forecast that 100,000 new LNG fuelled trucks will be hitting the road annually by 2015

 By 2015, 220,000 heavy trucks and 40,000 coaches are expected to be LNG fuelled

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 First steps  Shell & BOC to install 8 LNG fuelling points in existing truck stops on busiest truck route in Australia by 2015 (Hume Highway)  EVOL LNG has opened refueling station at Caltex Wodonga, north- east of Melbourne. The first of five new stations planned for Victoria  Road trains – perfect market for LNG  Mining sector also a prime target

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Australia

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 Shell’s first large scale LNG for Transport project  Supply to trucks, oil & gas and mining sectors in Alberta  Build out to British Colombia  National agreement in place for JV – Shell Flying J  First truck fuelling site opened March 2013  Construction mini LNG liquefaction plant (250,000 tpa) in Jumping Pond Gas Processing Plant, Calgary. Opens 2014

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Canada

Canadian Green Corridor USA Shell developing Great Lakes Corridor & Gulf Coast Corridor Providing LNG for marine, trucking, oil & gas and possibly rail Partnership with Travel Centers of America – (100 LNG fuel sites) & Waller Marine

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Small scale versus large scale

 Don’t assume these markets will be supported by conventional LNG liquefaction plants and terminals  But will see more LNG plants/terminals putting in truck loading gantries  LNG terminals unlikely to provide a bunkering service but may support a satellite terminal or supply bunker storage vessels  Many ports may be reluctant to have LNG storage facilities within their perimeter or allow across berth delivery. Thus may find floating storage becomes the norm with delivery by bunker barges  LNG for fuelling stations is generally coming from local small scale liquefaction plants  Huge roll out of small scale liquefaction in China  Can tap into the grid or utilise gas from small scale conventional and unconventional gas (CBM and shale gas already going into small scale LNG plants)  Substantial increase in the use of trucks and trains to deliver LNG

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The End Users

LNG Fuelled … …

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