E xamining the N orth A merican M arket “ W hat is the P otential for F LNG”

Examining the North American Market “What is the Potential for FLNG”

2014 Houston Marine Insurance SeminarSeptember 23rd, 2014Constantyn Gieskes

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Presentation Overview• Braemar Engineering

• LNG 101

• North American Gas Market

• Proposed FLNG Projects Overview

• Why FLNG?

• Obstacles to FLNG Projects in North America

• Conclusions & Questions

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Braemar Engineering Overview

• Braemar Engineering is an engineering company specializing for 20+ years in the marine, offshore and land-based gas industries.

• Part of the Braemar Technical Services Group, supported by a worldwide network of offices with the ability to call on the support of over 400 technical staff of all disciplines.

• Braemar Technical Services Group is a wholly owned subsidiary of Braemar Shipping Services PLC, a London Stock Exchange (BMS).

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Braemar Technical Services (Engineering), Inc. February 2013

LNG 101

What is LNG?

Liquefied Natural Gas (LNG) is a clear, colorless, odorless, non-toxic liquid

LNG is natural gas that has been cooled and condensed to a liquid at -162 °Celsius at atmospheric pressure

LNG is less than ½ the weight of water

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LNG Makeup LNG almost has the same chemical make-up

as regular pipeline quality gas that is used residentially

Chemical Chemical Formula Low High

Methane CH4 87% 99%

Ethane C2H6 <1% 10%

Propane C3H10 <1% 5%

Butane C4H10 <0.1% >1%

Nitrogen N2 0.1% 1%

Other Hydrocarbons

Various Trace Trace

CO2 & H2S both removed prior to liquefaction

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Liquefaction Plant Process Overview


Pre-treatment

Gas Treating

Dehydration & Mercury Removal

NGL Removal

Liquefaction

Storage

Fractionation

Feed Gas

Acid Gas (CO2 & H2S)

H20 & Hg

Ethane

LPG

C5+ LNG

N2

Main principle of Liquefaction

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CondenserCompressor

Hot High Pressure VaporLow Pressure Vapor

LiquidCold Liquid + Vapor

Evaporator

Expansion Valve

Cold Air Warm Air

Work

Heat Rejected to Ambient

Why liquefied?

• Natural gas is liquefied to reduce volume for transportation & storage

LNG-162oC

610 1

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Components of the LNG Supply Chain

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From the Gas Field to the Consumer’s Pipeline System

EXPLORATION & PRODUCTION

LIQUEFACTION & STORAGE

SHIPPING REGASIFICATION & STORAGE

Typical LNG Export Facility


Source: Cheniere

So what is FLNG?

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Source: Hoegh LNG


Why Export LNG from North America?

North American LNG Export Boom

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Approved LNG Export Projects

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Proposed LNG Export Projects

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Proposed FLNG ProjectsSite/Project Name Location Capacity Type

EOS LNG Port of Brownsville, TX 4 MTPA Near-shore

Port Lavaca - Excelerate FLNG Calhoun County, TX 10 MTPA Near-shore

Delfin LNG Offshore West Cameron, LA 13 MTPA Offshore

CE FLNG – Cambridge Energy Plaquemine Parish, LA 8 MTPA Near-shore

Main Pass Energy Hub – United LNG Offshore, Venice, LA 24 MTPA Offshore

Douglas Channel LNG Kitimat, BC 1 MTPA Near-shore

South Texas LNG Export – Pangea LNG Corpus Christi, TX 8 MTPA Near-shore

Texas LNG Brownsville, TX 2 MTPA Near-shore

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Near-shore Example• Excelerate – Port Lavaca

– Eliminates motion from the equation– Opportunity to have land-based infrastructure to increase FLNG capacity

Source: Excelerate Energy

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Why Floating LNG?

• Permitting Advantages

• Construction Schedule, Cost & Labor Pool

• Conversion Opportunities

• Site Location Flexibility

• Plug & Play Opportunity

• Moveable Asset

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Why Floating LNG?

• Permitting Advantages• Construction Schedule, Cost & Labor Pool




• Moveable Asset

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Permitting Advantages

• Federal Energy Regulatory Commission (FERC) vs United States Maritime Administration (MARAD)– Near-shore vs. offshore difference

• ~2 miles off the coast is under MARAD’s jurisdiction– MARAD defined timeline vs. indefinite FERC timeline

• Smaller footprint– Less public opposition– Potential for less environmental impacts

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Why Floating LNG?


• Schedule, Cost & Labor Pool• Conversion Opportunities



• Moveable Asset

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Schedule, Cost & Labor Pool

• Potential for shortened construction schedules– Fabrication yards vs site stick-

built

• Site location– Weather impacts – Canadian projects are relatively

remote Second-coming of Australian

cost escalation? Work camps required?

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Schedule, Cost & Labor Pool

• Labor pool uncertainty– Enough labor/talent in Western

Canada? How many projects feasible at one

time?– Competition in the Gulf Coast

Includes new chemical plant construction

Over $70 billion in CAPEX forecasted in US downstream sector through 2020

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Why Floating LNG?



• Conversion Opportunities• Site Location Flexibility


• Moveable Asset

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Conversion Opportunities

• FPSO conversions provide some level of comfort

• Several concepts out for FLNG conversion opportunities utilizing retiring Moss LNGCs

• Potential for lower CAPEX and time-to-market advantage

• Limited liquefaction capacity

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Why Floating LNG?




• Site Location Flexibility• Plug & Play Opportunity

• Moveable Asset

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Site Location Flexibility

• Footprint vs. available land space – Douglas Channel (steep terrain – lack of buildable land)

Source: Douglas Channel Energy

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Why Floating LNG?





• Plug & Play Opportunity• Moveable Asset

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Plug & Play Opportunity

• One-size does fit all?– No, but the project

design basis differences are much more minor than typical liquefaction projects

– Pipeline quality gas Less variability

than typical liquefaction projects

– More opportunity to design a solution that’s flexible enough for several locations

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Why Floating LNG?






• Moveable Asset

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Moveable Asset

• Once upon a time…

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A Look Back…

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Moveable Asset

Source: Shell

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Obstacles to FLNG

• Financing - Cost Uncertainty, Completion Guarantee & Insurance

• Technical Challenges

• Cooling Requirements

• Efficiency vs. Safety

• General Issues Within North America

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Obstacles to FLNG






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Financing• FLNGs are relatively unproven

– Only a few in construction and no existing FLNG’s in operation CAPEX/OPEX uncertainty

• Limited market capacity for risk– Unless a Major (ie. Shell, ExxonMobil, etc.)

that can self-insure• Completion guarantee complexity

– Hull, Topsides, Turret, Commissioning Consortium may be required

• Weather impact on insurance– Hurricanes

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Obstacles to FLNG






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Technical Challenges

• LNG storage capacity limits• Motions (offshore)

– Impact to process & unloading operations Pre-treatment is most sensitive to

motion Loading windows

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Obstacles to FLNG






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Cooling Requirements• Environmental permitting

requirements in North America are unlikely to allow for open-loop water-cooling systems– Alternative options include air-

cooling, closed loop water-cooling, cooling towers

• Space requirements of air cooling are significant– Need to avoid re-circulation– Efficiency losses

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Obstacles to FLNG






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Efficiency vs. Safety• Liquefaction process

selection – Efficiency at the cost of

safety? Flammable

refrigerants present greater risks

– Safety gap requirements Eats up valuable deck

space– Incoming gas has a known

present value

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Obstacles to FLNG





• General Issues

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General Issues

• Pipeline Projects– Western Canada projects all face

pipeline challenges• Panama Canal Expansion

– Uncertainties in transit fees and completion dates

• Competition– Limited appetite for LNG export

projects?• Long-term Henry Hub pricing

– Impacts of domestic gas uses increasing

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Looking Forward

• All of the following could lead to a succession of other FLNG off-shore projects proposed in North America– Long FERC delays– Labor costs escalate– FLNGs become more common with proven costs and schedules

Reduced risk will lead to more favorable financial environment

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Thank You & Questions?

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Braemar Engineering2800 North Loop West, Suite 900Houston, TX 77092USA

Constantyn GieskesPhone 713 820 9600E-mail [email protected] www.braemar.com

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E xamining the N orth A merican M arket “ W hat is the P otential for F LNG”