LNG bunkering for Northern Tyrrhenian Sea: Opportunities and Perspectives

Bruxelles, 15th May 2014

Francesco Campanale

francesco.campanale@oltoffshore.it

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Offshore LNG Toscana (OLT) shareholders

E.ON Global Commodities (46.79%) – Company belonging to the E.ON Group, one of the world’s largest private energy group, listed on the Frankfurt Stock Exchange

IREN Group (46.79% - Iren Mercato 41,71% and ASA Livorno 5,08%) – IREN listed on the Italian Stock Exchange, and founded in July 2010 from the merger between IRIDE and ENIA

Golar LNG (2.69%) – Shipowner specialized in the management of LPG carrier and LNG tanker fleets, belonging to the Fredriksen Group (owner of the largest oil tanker fleet in the world)

OLT Energy Toscana (3.73%) – the company that originally developed the project

OLT Energy

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Conversion of the LNG carrier 'Golar Frost' into a Floating Storage Regasification Terminal ‘FSRU Toscana’ moored 22 Kilometers from the Italian coast between Livorno and Pisa, in sea depth of 120 meters

EPCIC Contract awarded March 2008, Golar Frost purchased June 2008, conversion started June 2009 in Dubai

The FSRU Toscana left Dry-docks World Dubai on 2nd of June 2013. The terminal arrived offshore Livorno on 30th of July 2013 ready to be moored and commissioned

After installation works and connection with the national gas grid through a pipeline of 36.5 km, built and operated by Snam Rete Gas S.p.A., the Terminal received the first cargo commencing the commissioning tests and on 4th of October 2013 the first regasified LNG has been injected into the national gas grid

Since 20th December 2013 the terminal is fully operational and ready to receive LNG carriers

The Project in few words…

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and in few pictures…

Single point mooring

Regasification plant

Thruster Wobbe Index

Corrector

Turbo generators

Unloading arms

Blister

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Key technical and commercial data

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Operations based on ship-to-ship transfer of LNG in open sea. Ship-to-Ship manoeuvres approved for wave Hs up to 1.5 m while LNG transfer designed for wave Hs up to 2.5 m.

Regasification unit on board for send-out with nominal capacity of 3.75 bm3/a and a storage capacity of 137,500 m3 in 4 spherical Moss-type tanks more suitable for partially-filled terminal in offshore environment (anti-sloshing).

The terminal is completely self-sufficient and has the same operational features as typical onshore regasification terminals.

LNG loading occurs by direct transfer from LNG carriers moored side-by-side to the terminal via traditional (Jetty) loading arms.

Wobbe Index Corrector installed to produce Nitrogen can allow to receive most of the LNGs types.

Terminal is allowed to receive LNG carriers size in the range between 65,000 and 155,000 m3 (about 80% of the current worldwide LNGc fleet).

High flexibility in send out flow rate (maximum capacity of 15 MSm3/d with a very low minimum send out) allows high trading value to the users.

Since 4th October 2013 all commercial (Access Code, Capacity Contracts, etc) and operational (Cargo Handling Manual, Lng Carrier Approval Vetting Procedures, etc) documents have been published on OLT web site.

Operations & Maintenance Contract

Management and responsibility for all operations has been subcontracted to ECOS Srl – a joint venture company founded in 2010 by EXMAR (60%) and Fratelli Cosulich SpA (40%)

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ECOS has sole responsibility as “Armatore’ for the terminal

Fratelli Neri SpA provides all the marine support service:

Custom-built Guardian Vessel with fast rescue boat and emergency evacuation for 40 persons

2 x Custom built tugs of 110 tones bollard pull

Custom Built Crew Boat – max. speed 24 knots

Livorno

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European LNG outlook

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Declining European LNG Imports Total consumption of Natural Gas into Europe fell by 10% between 2010 and 2011 and by 2%

between 2011 and 2012 due to continuing economic crisis and the situation in the power sector.

Also the European LNG import fell due to the drop in gas demand and the strong competition for LNG in the global market, especially from Japan and South America.

The percentage of European LNG imports compared to pipelines has been reduced from 24% in 2011 to 18% in 2012.

Low level of utilization rates All European countries are affected: since 2011

European average (based on net import volumes) has been reduced by more than half from 40% to about 20%.

LNG is shipped/diverted to where the prices are the highest, currently Asia and South America.

Future: unknown (nuclear policy in Japan, Asian LNG demand, new exports project from North America, East Africa, Australia…).

Source: gle GAS LNG EUROPE

… all European LNG Terminals are proposing/developing new services to meet market needs, new requirements such as reloading, transhipment…

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European LNG outlook

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Development of “new” LNG services

Reloading: transfer of LNG from the terminal’s tanks into an LNG carrier (offered in France and Spanish terminals, Zeebrugge and Gate). For example in 2012 25 ship reloading have been performed in Zeebrugge LNG terminal and 37 in the Spanish market.

Trans-shipment: direct transfer of LNG from one LNG carrier to another (offered in France and Spain and from 2015 also in Belgium).

Small Scale LNG Services:

• Loading of bunkering ships: LNG is loaded on bunkering ships which transport LNG in smaller quantities or used for propulsion in substitution of diesel/MGO.

• Truck loading: LNG is loaded on tank trucks or used as fuel. In 2012 316 truck loading have been performed in Zeebrugge LNG terminal and 44.857 in Spanish market.

• Rail loading: LNG is loaded on rail trucks.

Transshipment at Montoir LNG terminal

Loading of Small LNG carrier at Zeebrugge LNG terminal

Truck loading at Zeebrugge LMG terminal

… or be available for Peak Shaving service for the security of the national Gas System

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Small Scale LNG Services

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Why?

Switching to LNG will result in significantly lower emissions, immediately contributing to Europe’s efforts to hit its climate targets imposing stricter requirements and increasing taxation.

Ships powered by LNG instead of the usual heavy fuel oil reducing emissions by up to:

Main barriers to be overcome Infrastructure is not developed enough to supply ships, trucks and trains with appropriate quantity and at the right geographical locations in order to have secure and efficient supply.

Lacking of flag state regulation for bunkering operations, even because most authorities do not have knowledge on the matter.

Who is going to invest first?

• Ship-owners will not start ordering LNG fuelled ships before the relevant LNG supply / infrastructure / regulations / pricing are well defined and planned. • Required infrastructure will not be planned/built if there is no certainty in demand for LNG bunkering from shipping companies.

FSRU Toscana as potential infrastructure for

LNG bunkering market in Tyrrhenian sea

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LNG Supply Infrastructure LNG Bunkering options LNG received as fuel

F S R U

LNG truck loading station

LNG fuelled vessels

Onshore LNG tanks

LNG fuelled trucks

SLC-to-truck

Industry

Truck-to-ship

LNG Bunkerbarge Onshore LNG terminals

LNG Bunker Vessel

FSRU Toscana: potential LNG bunkering operation

FSRU Toscana could use the existing port side facilities to unload the small quantities of LNG required for LNG bunkering. Feasibility studies, technical studies, authorizations and certifications (regarding, inter alia, mooring operations, cargo transfer, terminal port manifold), have to be obtained according to the standard requirements that are going to be finalized by EU by the end of 2014.

FSRU Toscana: strategic location

Olbia Civitavecchia

125 km

135 km

320 km

25 km

50 km

250 km

Strategies and initiatives for the supply and logistics of LNG for transport

Thank you for your attention

for more information www.oltoffshore.it