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Mike Wood - GCA

East Africa - Major Gas Projects

Development Plans and Costs

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BLOCK 3BLOCK 3BLOCK 3BLOCK 3BLOCK 3BLOCK 3BLOCK 3BLOCK 3BLOCK 3

MANDAWAMANDAWAMANDAWAMANDAWAMANDAWAMANDAWAMANDAWAMANDAWAMANDAWA

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AREA 4AREA 4AREA 4AREA 4AREA 4AREA 4AREA 4AREA 4AREA 4

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BLOCK DBLOCK DBLOCK DBLOCK DBLOCK DBLOCK DBLOCK DBLOCK DBLOCK D

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EAST PANDEEAST PANDEEAST PANDEEAST PANDEEAST PANDEEAST PANDEEAST PANDEEAST PANDEEAST PANDE

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BLK-3CBLK-3CBLK-3CBLK-3CBLK-3CBLK-3CBLK-3CBLK-3CBLK-3C

BLK-1CBLK-1CBLK-1CBLK-1CBLK-1CBLK-1CBLK-1CBLK-1CBLK-1C

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kilometres

Gas Discoveries - Mozambique and Tanzania

Source: PetroView

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Mozambique

Source: Anadarko

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Mozambique LNG – Onshore Site Plan – Palma Bay

Source: Anadarko

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Tanzania

▪ Plans for developments to be integrated with major pipeline project

▪ Domestic demand for power and fertilisers

▪ Government demands onshore LNG plants

▪ Several onshore sites under consideration

▪ Fields are typically 100 km from shore

▪ Current plans for 4 x 5 MMtpa trains, fed by several operators/discoveries

Source: TPDC

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Tanzania - LNG Project Potential

▪ Several discoveries

▪ Similar development considerations as Mozambique

▪ Statoil has stated potential for FLNG – up to 3.5 MMtpa

Source: Statoil

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Mozambique LNG Project Summary

▪ Major integrated upstream/downstream project incorporating a multi-train onshore liquefaction facility to monetize significant gas discoveries from, initially, two offshore concessions in the Rovuma Basin, northeast Mozambique

▪ CAPEX: estimated by one sponsor a few years ago at up to US$16 Bn for initial two-train (10 MMtpa) development

▪ Natural gas production: initially 1,500 MMscfd for 2 trains from fields in Offshore Areas 1 & 4; 1,500 m water depth; gas is dry so liquids expected to be minimal

▪ Plant location determined: Afungi LNG Park, Palma Bay, Cabo Delgado Province, northern Mozambique; in vicinity of Offshore Areas 1 & 4

▪ LNG Plant Capacity: initially 10.0 MMtpa via 2 trains; with a notional 50 MMtpa in total

▪ Plans for 2 further Onshore trains

▪ Anadarko and ENI reported to be considering FLNG for future trains, and to develop other smaller discoveries in the Blocks - expected to be in the order of 2.5 MMtpa

▪ View is that FLNG has lower CAPEX !! Reported to be 30% lower costs for Australian Browse Basin projects

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Mozambique LNG - Project Development

▪ Deepwater, close to shore

▪ Dry gas – initially, limited flow assurance concerns

▪ Very prolific wells, - 100 MMscfd per well expected

▪ Remote region, no infrastructure

▪ All major hardware logistics likely to be by sea

▪ Site for onshore plant selected – appears to have reasonable ground conditions

▪ Camp – up to 10,000 workers for construction of 2 trains, airstrip, power plant required

▪ Construction efficiency uncertain

▪ Extended jetties, dredging required

▪ Late life water production may require future modification to subsea system & pipeline

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Onshore LNG Development Costs

▪ Much publicised benchmark rates – now reported to be

approaching $2,000 per tpa, (as high as $3,000 per tpa for

Gorgon)

▪ Apparent rapid growth in recent years

▪ But – no clarity in what is included in the cost:

– Offshore development costs, platforms, pipelines to shore??

– Gas pre-treatment - sweetening, LPG recovery??

▪ Actual liquefaction costs, including storage and export jetties

costs are probably nearer to $1,500 per tpa

▪ Still major uncertainties however, relating to location, site

conditions, access, infrastructure, labour efficiency and costs

▪ Wheatstone LNG site preparation costs (levelling and grading,

roads, dredging) reported to be $3 Bn !!

▪ Labour/construction costs in Australia are dominant factor

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Cost Estimate 5 MMtpa Onshore Plant – (750 MMscfd)

GCA estimate

Project Component Equipment & Materials

$ MM

Construction $ MM

Eng. / Mgt. & Owners

$ MM

Total Cost $ MM

Basis

Development Wells (15) 150 1,250 400 1,800 Standard, deepwater subsea wells.

Subsea Facilities 300 200 150 650 Standard configuration, current technology.

Pipeline to Shore 100 150 50 300 Close to beach, limited flow assurance risk.

Gas pre-treatment, condensate stabilisation, water handling

250 250 150 650 Sweet, lean gas, low condensate rates.

LNG Facilities 2,500 2,300 1200 6,000

Standard configuration, remote, poor infrastructure, but good ground conditions.

Storage, Marine Facilities, Dredging 500 700 400 1,600

Dredging required for LNG tanker access / turning

Total $ MM per 5 MMtpa 3,800 4,850 2,350 11,000

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Angola LNG – Development Challenges

▪ The 5.5 MMtpa, $10 billion Angola LNG plant shipped its first cargo in Mid 2013 after an 18-month delay

▪ Required major land reclamation/dredging effort

▪ Remote location

▪ Dedicated tankers included in costs??

Source: Bechtel

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Cost Uncertainties

Project Component Equipment & Materials

$ MM

Construction $ MM

Eng. / Mgt. & Owners

$ MM

Total Cost $ MM

Cost Drivers

Development Wells 150 1,250 400 1,800

Well productivity, Water depth. Rig Rates

Subsea Facilities 300 200 150 650 Gas Composition.

Pipeline to Shore 100 150 50 300

Distance to shore, flow assurance

Gas separation, pre-treatment, condensate stabilisation, water handling

250 250 150 650 Gas Composition

LNG Facilities, gas conditioning liquefaction, utilities, power

2,500 2,300 1200 6,000

Site and soil conditions, labour rates, access, logistics, regulatory compliance, local content

LNG Storage, Marine Facilities, Dredging 500 700 400 1,600

Water depth, soil conditions, storage capacity

Total $ MM per 5 MMtpa 3,800 4,850 2,350 11,000

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FLNG Costs

▪ Reported to be in the order of $2,000 per tpa for the FLNG vessel; including gas pre-treatment, but excluding subsea and well costs

▪ Reduced uncertainty – fabricated in shipyard – therefore independent of site conditions

▪ However as yet – unproven

▪ FLNG promoters claiming costs below $1,000 per tpa – what is included in this?

▪ Prelude FLNG costs are reported to be in the order of $3,000 per tpa of LNG (3.6 MMtpa) – but this also included costs for production of Condensate and LPG (1.7 MMtpa), - nearer $2,000 per tpa of liquids

▪ Potential cost savings in offshore infrastructure if fields are located distant from shore – eliminates pipeline costs

▪ Peak production capacity?

▪ Constraints on storage capacity?

▪ Availability uncertain?

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Prelude FLNG

Source: Shell

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Prelude

▪ 5.3 MMtpa of total liquids: including 3.6 MMtpa LNG, 1.3 MMtpa of condensate and 0.4 MMtpa of LPG

▪ Storage in the hull of the vessel

▪ Reported CAPEX of $10 Bn to 12 Bn

▪ Similar CAPEX indicated for 6 MMtpa dry gas case

▪ Remains higher than equivalent onshore LNG plant

▪ Bur valid for remote offshore fields

▪ Perceived reduced cost risk??

Source: Shell

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Other Contenders - FLEX LNG

Source: FLEX LNG

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Managing Uncertainty – a Hybrid Approach ??

Source: Iberdrola / Statoil

Transport of Snohvit LNG Liquefaction / Utilities Barge from Spain to Norway

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Snohvit LNG – Uncertainty Management

▪ Capacity 4.4 MMtpa LNG

▪ CAPEX reported to be $7.5 Bn (in 2006)

▪ Extensive subsea investment ~150 km multphase tie back

▪ Use of prefabricated LNG process module/barge, floated into position on the island

▪ Similar concept used for Sakhalin 1 Central Production Facility, and proposed for southern US liquefaction plants

Source: Statoil

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FLNG

▪ Appears to offer a cost benefit in some locations, where it

can offset costs for major offshore facilities or pipelines

▪ Similar cost levels to traditional onshore LNG

▪ Can offset construction cost uncertainty in difficult/remote

locations

▪ Potentially reusable

▪ As yet unproven – both in terms of development costs and

operability

▪ The “Snohvit” hybrid development, with process equipment

pre-fabricated on a barge, could be attractive for near-to-

shore fields, with a challenging onshore construction

environment