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www.tri-zen.com
Commercial viability of FLNG projects: What does the future hold for the LNG industry
10th Asia Pacific LNG Summit, Singapore
25-26 June 2013
Tony Regan
Tri-Zen International Pte Ltd
www.tri-zen.com 2 2
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
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
www.tri-zen.com Confidential
Engineering Associates
Uhde Energy & Power
Based in the UK and Hong Kong, Uhde Energy &Power, a member of the ThyssenKrupp Group, is a technical management consultancy providing multi-discipline technical support for major capital developments. The company has a significant track record of experience in the oil & gas, LNG and power sectors worldwide providing high quality project services to asset owners, operators and contractors in the oil, gas, LNG and renewables industries.
Core engineering design services focussed around process, facilities, utilities and structures with specialist services for due diligence and peer review, feasibility study, option appraisal, conceptual design and project management.
20 professional engineers, 20 LNG professionals
Experience gained from:
Over 30 LNG import terminals
Over 15 LNG liquefaction projects
13 Floating terminal projects (both FPSO’s and FSRU’s)
11 floating liquefaction projects (FLNG)
www.tri-zen.com Confidential 4
Drivers for FLNG
Drivers for FLNG
• Higher Gas / Energy Prices
• Cost effective way of monetising commercially challenged gas reserves
Fundamentals
• Design flexibility: re-deployable, can handle wide range of gases, can draw from multiple fields, location flexibility – offshore/inshore
• Problems with conventional LNG projects: land access, long delays getting permits, delays, cost overruns, shortage of key resources
Opportunity
• Can utilise proven technology (plenty of vendors)
Flexibility
• Potential for considerable cost savings: no offshore production & compression stations, no subsea pipeline to shore, no onshore plant/berths/utilities, and modular construction in shipyards
Financial
www.tri-zen.com Confidential
Rapidly increasing LNG project costs US$/tonne capacity
5
NWS T4
Darwin T1
NWS T5
Pluto T1 Gorgon
PNG LNG QCCLNG
GLNG
Icthys
Wheatstone
Pluto T2 Browse
0
500
1000
1500
2000
2500
3000
3500
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Start up date
Aus Pacific
Increased project costs
www.tri-zen.com Confidential 6
The Opportunity for FLNG
Opportunity for FLNG
Capital Intensive
Costs
Land Permits
Development Time
LNG projects suffer from long project development time, high cost and substantial budget overruns. Floating LNG is an attractive concept to an LNG developer as it should enable reduced costs and substantially reduce the time taken to first LNG production
www.tri-zen.com Confidential 7
The LNG/FLNG Value Chain
The LNG Value Chain
FLNG fits neatly in the LNG chain replacing onshore
liquefaction with offshore liquefaction
Gas Production
LNG Production
LNG Shipping
Storage & Regas
www.tri-zen.com Confidential 8
The Value Chain
LNG Value Chain
FLNG is part of a process/value chain. Chain comprises:
LNG profitability is primarily gas price driven.
Costs rising faster than the gas price. ROI’s falling
A need to reduce cost and seek low cost concepts to improve profitability.
Gas production (extraction) from reservoir
FLNG gas treatment, liquefaction, storage and export
LNG shipping to import terminal
Terminal storage, regasification and export to grid
www.tri-zen.com Confidential
Projects under construction
9
Leader Topsides LNG Hull Storage Project status Location
(Constructor) Liquefaction mtpa Containment m3 Project
Shell Technip 3.6 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) MR Membrane Sanctioned 2012 Sarawak
Start up Q4 2015
Exmar Black & Veatch 0.5 Barge 16,100 + Sanctioned 2012 Colombia
(Wison) SMR floating storage Start up Q1 2015 Pacific Rubiales
www.tri-zen.com Confidential
FEED/Pre FEED stage
10
Country Project MTPA FID Start Up Sponsors
FEED complete
USA Lavaca Bay 3 2013 2018 Excelerate, RWE
FEED in progress
Canada BC LNG Export Co-Op 0.7 2015 Hais la Nation and Douglas Channel Gas Services
Indonesia Abadi 2.5 2013 2018 Inpex, Shel l
Malaysia Sabah LNG 1.5 2013 2016 Petronas
Pre FEED complete
Australia Cash Maple 2 2013 2016 PTT
Pre FEED in progress
Australia Bonaparte 2 2014 2018 GdF Suez Santos
Israel Tamar 3 2013 2015 Noble Energy, DorGas , Is ramco, Pangea & Delek
Eight projects at the Pre-FEED/FEED stage
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SBM & Golar LNG;
Considering conversions – expected to be 6-12 months shorter schedule than new build;
0.5- 2.0 mtpa LNG
Both smaller scale - probably focused towards smaller developers;
Golar – FEED being done by Keppel
3 Possible Vessel Conversions;
Contract Value of $600m Quoted;
SBM - Generic pre-FEED complete
11
Unconventional FLNG
www.tri-zen.com Confidential
Proposed FLNG projects
12
Proposed
Country Project MTPA FID Start up Partners
Australia Greater Sunrise 4 2020 Woods ide, Shel l , ConocoPhi l l ips , Osaka Gas
Australia Cash Maple 2 2013 2016 PTT
Australia Bonaparte 2 2015 2018 GDF Suez, Santos
Australia Scarborough/Pi lbara 6 2014 2020 ExxonMobi l , BHP
Canada BC FLNG - Douglas Channel 0.7 2015 Hais la Nation and Douglas Channel Services
Indonesia Abadi 2.5 2015 2018 Inpex, Shel l
Israel Tamar 3 2013 2018 Noble Energy, DorGas , Is ramco, Pangea, Delek, Avner
Malaysia FLNG2 - Sabah LNG 1.5 2013 2016 Petronas
USA Port Lavaca 4 2013 2018 Excelerate Energy, RWE
USA G of M FLNG 1 2014 2017 EDF Trading, Exmar
26.7
www.tri-zen.com Confidential
Potential FLNG projects
13
Potential
Australia Browse 12 2014 2018 Woods ide, Shel l , PetroChina, MIMI
Australia Evans Shoal ENI, Shel l
Australia Echuca Shoal 1.5 Nexus Energy
Cameroun Gulf of Guinea 3 GDF Suez, SNH
Gabon Shel l
Iraq Basrah 2 Shel l Mitsubishi
Mauritanea Banda NW & West Tul low
Mocambique Rovuma Basin Pangea LNG
Namibia Kudu Ph 2 1.5 Tul low
Papua New Guinea PNG FLNG 3 2015 Hoegh, DSME, Petromin
Tanzania Block 1 BG, Statoi l
USA South Texas LNG 8 2018 Pangea LNG
USA Main Pass 24 2017 United Energy, Freeport-McMoRan Energy
USA Waller Point 1.25 Waller Energy
USA Port Arthur 3 2020 Sempra Energy
USA CE FLNG 1.5 2016 Cambridge Energy Holdings
60.8
www.tri-zen.com
Liquefaction
Firm
Existing
Proposed
Tangguh, 7.6 mtpa
PNG LNG, 6.3 mtpa
PNG
AUSTRALIA NWS Train 1 - 5, 16.3 mtpa
Darwin, 3.7 mtpa
Greater Sunrise, 4 mtpa
Bonaparte, 2 mtpa
Ichthys, 8.4 mtpa
Prelude, 3.6 mtpa
Pluto, 4.3 mtpa
Gorgon, 15 mtpa
Scarborough, 6-7 mtpa
Wheatstone, 8.6 mtpa
Fisherman’s Landing, 1.5 mtpa
Australia Pacific, 7 mtpa
Arrow Energy 8 mtpa
Gladstone, 7.8 mtpa
Queensland Curtis, 8.5 mtpa
Echuca Shoals,
1.5 mtpa
Abadi, 2.5 mtpa
INDONESIA
TIMOR LESTE
Bontang, 23 mtpa
Cash Maple, 2 mtpa Evans Shoal,
Hoegh/Talisman, 2 mtpa
Donggi Senoro, 2 mtpa
Browse 12 mtpa
The way to go - FLNG
www.tri-zen.com Confidential
FLNG status report
Total of 30 Projects & Prospects
Under construction – 3 (1 offshore field, 2 onshore gas):
Shell Prelude;
Pacific Rubiales Columbia;
Petronas Kanowit.
Pre-FEED/FEED Stage – 9;
Possible – 16;
Early proposed projects were off West Africa;
Then focus switched to Australia;
And now going global – Malaysia, Indonesia, Iraq, Israel, Colombia and USA
15
www.tri-zen.com
R/P = 98
R/P = 265 R/P = 41
FLNG Projects
Firm
Proposed
Iraq
Canada
USA
Colombia
Gabon
Namibia Mocambique
Israel
Malaysia
Indonesia
Australia
PNG
FLNG Projects
www.tri-zen.com Confidential
Possible production profile
17
0
5
10
15
20
25
30
2014 2015 2016 2017 2018 2019 2020
FLNG projects Million tonnes
Pacific Rubiales Petronas FLNG 1 Shell, Prelude Petronas FLNG 2
BC FLNG, Excelerate, Lavaca Bay PTT Cash Maple Exmar G of Mexico
Tamar Abadi Bonaparte Scarborough
Potentially almost 30 mtpa by 2020
www.tri-zen.com Confidential 18
What will FLNG Cost?
What will FLNG cost?
High liquids content considerably increases commercial attraction.
Shell’s 3.5 mtpa concept thought to attract bids at around $1,000/tpa. Flex LNG indicating an estimate of $700/tpa for 1.7 to 2.0 mtpa liquefaction capacity
CAPEX figures exclude field development costs. Cost figures still indicative until full design completed for specific location/resource.
Early capital
cost estimates $ 600/tpa $ 1,200/tpa
Recent indicative cost
$ 1,000/tpa ± 30% Significant variations
depending on gas
composition (high/low
C3, C4, condensate)
and CO2, N2 content
* Figures in US$
www.tri-zen.com Confidential 19
Indicative FLNG Capital Expenditure
Indicative CAPEX cost
1.7 MTPA as a lowest cost scenario:
(Figures in US$)
Building Block $ million
Hull & Accommodation 580
Turret 40
Gas Reception 70
Feed Gas Compression later
Gas Treatment 50
Gas Liquefaction 360
LPG Stabilisation option
Power Generation 80
Utility Systems 80
Offloading 10
Interconnecting Pipework 30
Total 130 0 765 $/ TPA
Contingency 10% 130
Owner's Costs 130
Total 1560 918 $/ TPA
Production 1.7 MTPA
CAPEX Depreciation (15 years) 61 $/ T
CAPEX Depreciation (15 years) 1.2 $/ M M BTU
M etric
www.tri-zen.com Confidential
Recent CAPEX estimates
Recently completed front-end engineering and design (FEED) study estimates a cost of $540 per tonne per annum for Lavaca Bay project
“An FLNG inclusive of mooring is achievable in a range of $550-700 per tonne” Excelerate Energy
“CAPEX = 1000 USD per ton per annum (tpa) installed capacity” Kanfa Aragon for 2 mtpa LNG
4 mtpa LNG - Benign Metocean Environment ~$750/tpa, Severe Metocean Environment ~$900/tpa. ATP Oil & Gas Cylindrical hull
20
www.tri-zen.com Confidential
Economic Driver
Gas/LNG cheaper than oil
Widening of differential between oil and gas
Oil prices have doubled since 2009
Gas prices have fallen
Widest in USA – Henry Hub at circa 75% discount to WTI
Huge growth of US gas market
Europe – narrower differential but gas at circa 45% discount to Brent
21
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Widening oil v gas differential US$/MMBtu
Gas Henry Hub $/MMBtu Crude WTI $/MMBtu
www.tri-zen.com
Gas : Oil differential not as wide in Europe and Asia as in North America
But:
LNG still the cheapest fuel
Gasoil can be more than double LNG
Even with higher delivery costs, LNG is still cheaper than diesel and LPG
This is driving the creation of a new market – LNG as a transportation fuel and creating the need for small/medium scale LNG solutions
22
Economic Driver
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LNG v fuel oil & gasoil - Korea US$/MMBtu
180 cst Fuel Oil Gasoil LNG
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LNG v fuel oil & gasoil NW Europe US$/MMBtu
1% fuel oil Gasoil LNG
www.tri-zen.com Confidential
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 or fuel oil (max 1% sulpur)
Stimulated the use of LNG as a bunker fuel
23
www.tri-zen.com Confidential
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
24
Source: DNV
www.tri-zen.com
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)
25
0
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
www.tri-zen.com
LNG cheaper than LSFO but barge delivery costs are higher than for LSFO or diesel
However, even with barge delivery costs of $3/MMBtu, LNG still cheaper than fuel oil (2011-2012 prices)
N. America and Europe considerably cheaper than Asia
Singapore currently the largest bunkering port but unlikely to achieve this role with LNG. Could be 40-50% more expensive than Houston or Rotterdam
26
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150
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East China RMB/MMBtu
Fuel Oil LNG LPG
Economic Driver
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1% fuel oil Gasoil LNG
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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
Shell is also developing LNG stations at Flying J truck stops in Alberta, Canada
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 three small scale liquefaction plants to support fuelling network
27
North America
www.tri-zen.com
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
28
North America
www.tri-zen.com Confidential
China
PetroChina 35%
Other LNG producers
18%
ENN 17%
CNOOC 4%
Others 26%
Number of LNG refuelling stations doubled in 2012 to 400
Majority located in northwest (Xinjiang), north (Shandong) and south China (Guangdong)
Shandong - 44 operational service stations with combined sales of about 216 tonnes/day. Makes up 43% of daily LNG consumption making it the largest sales channel for LNG in the province
Roll out being extended to other provinces
The number of LNG filling stations is expected to reach 3,000 by 2015
By 2015, 220,000 heavy trucks and 40,000 coaches are expected to be LNG fuelled
29
Sinopec has accelerated its penetration of the downstream LNG market and now has
about 100 LNG re-fueling stations
Operational LNG refueling stations 2012
www.tri-zen.com
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
30
Australia
www.tri-zen.com
LNG transportation fuel market being supported by local small scale LNG liquefaction plants
These liquefaction plant doesn’t have to be onshore
Why not small scale floating liquefaction?
Exmar LNG for Pacific Rubialas, Colombia – 0.5 mtpa
Should be cheaper, faster to build than onshore plants with fewer permitting issues
Indonesia – could be the perfect market for this
32
Small scale FLNG
www.tri-zen.com Confidential
How big is this market?
If all ships converted to LNG they would consume the (current) entire production of LNG
Difficult to forecast demand from bunker sector at this stage. An attempt: Base case – 653 LNG new builds by 2025 and LNG bunker demand of 24 million tonnes
High line – 1,963 LNG new builds by 2025 and LNG bunker demand of 66 million tonnes
Lloyds Register Aug 2012
Very early days – LNG as a transportation fuel taking off in China, USA and Australia. Others slower to catch on
Potentially it could be a huge market – why would any industrial plant/truck run on diesel (or LPG) if it could get LNG
Some recent estimates – Morgan Stanley estimate that LNG could displace between 1.5 and 4.5 mb/d of diesel and gasoline over next ten years.
Blue Sky scenario – 5.5 mb/d – about 225 million tonnes of LNG (global sales 2012 were 240 mill tonnes)
“The transportation fuel sector will be our largest LNG market” - PetroChina
33
www.tri-zen.com Confidential
Financing small scale FLNG projects
Can small scale LNG projects be financed?
Yes, banks generally like LNG and small scale will not be an exception
Just as with large scale LNG projects, the banks will want to see alignment:
Gas/LNG supply > production/distribution hardware > offtake agreement
The first and the last could be the biggest challenges in making small scale LNG projects “bankable”
Banks will want to be assured that there is adequate and reliable gas supply
Banks will want to be assured that there will be long term offtake agreements
Thus not going to be satisfied with spot deals. Will want to see long term supply agreements and long term offtake agreements – probably minimum ten years
34
www.tri-zen.com Confidential
Potential FLNG projects
35
Potential
Australia Browse 12 2014 2018 Woods ide, Shel l , PetroChina, MIMI
Australia Evans Shoal ENI, Shel l
Australia Echuca Shoal 1.5 Nexus Energy
Cameroun Gulf of Guinea 3 GDF Suez, SNH
Gabon Shel l
Iraq Basrah 2 Shel l Mitsubishi
Mauritanea Banda NW & West Tul low
Mocambique Rovuma Basin Pangea LNG
Namibia Kudu Ph 2 1.5 Tul low
Papua New Guinea PNG FLNG 3 2015 Hoegh, DSME, Petromin
Tanzania Block 1 BG, Statoi l
USA South Texas LNG 8 2018 Pangea LNG
USA Main Pass 24 2017 United Energy, Freeport-McMoRan Energy
USA Waller Point 1.25 Waller Energy
USA Port Arthur 3 2020 Sempra Energy
USA CE FLNG 1.5 2016 Cambridge Energy Holdings
60.8
Some already thinking along these lines
US bunker market
Caribbean bunker market
www.tri-zen.com Confidential
Financing small scale LNG projects
Can small scale LNG projects be financed?
Yes, banks generally like LNG and small scale will not be an exception
Just as with large scale LNG projects, the banks will want to see alignment:
Gas/LNG supply > production/distribution hardware > offtake agreement
The first and the last could be the biggest challenges in making small scale LNG projects “bankable”
Banks will want to be assured that there is adequate and reliable gas/LNG supply
Banks will want to be assured that there will be long term offtake agreements
Thus not going to be satisfied with spot deals. Will want to see long term supply agreements and long term offtake agreements – probably minimum ten years
36
www.tri-zen.com 38
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