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www.tri-zen.com
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
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
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
www.tri-zen.com
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
www.tri-zen.com
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
4
www.tri-zen.com Confidential
Global LNG Imports
5
0
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
www.tri-zen.com Confidential
Asian LNG Imports
0
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
6
www.tri-zen.com
Asia leaps back
US dwindles
Europe weak
New entrants in Asia:
Thailand
Indonesia
Malaysia
Singapore
Asian sales 173 million tonnes
7
Global Market Share 2013
N. America 3%
Cent & S. America
6%
Europe 17%
Asia 72%
Middle East 2%
2013
www.tri-zen.com
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
www.tri-zen.com
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
www.tri-zen.com
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
www.tri-zen.com
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
www.tri-zen.com
Demand Forecast (Base Case)
12
0
100
200
300
400
500
600
Million tonnes
North America Central Amer/Caribb South America Europe Asia Middle East
www.tri-zen.com
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
www.tri-zen.com
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
www.tri-zen.com
Global liquefaction capacity
Mill tonnes
Existing projects 27 277
Under construction 14 116
Planned/Proposed 41 359
Speculative 32 277
Total 114 1029
15
0
200
400
600
800
1000
1200
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
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
www.tri-zen.com
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
www.tri-zen.com
Main participants
17
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 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 0 0 4.80 4.80
133.41 211.86 274.62 322.10
Equity share in liquefaction capacity
0
10
20
30
40
50
60
Equity share in liquefaction capacity (Top 10) Mill tonnes
2005 2010 2015 2020
www.tri-zen.com
Fleet configuration
18
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))
www.tri-zen.com Confidential
Short 160 vessels
19
0
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 -160Fleet data: Mitsui OSK Lines
www.tri-zen.com
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
www.tri-zen.com
Next phase
21
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 Authority (PREPA)2016 1.5
PGN FSRU Lampung Golar Eskimo
www.tri-zen.com
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
www.tri-zen.com
Global FSRU Capacity
23
0
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
www.tri-zen.com
FSRU Order Book
24
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
www.tri-zen.com
FLNG projects under construction
25
Leader Topsides LNG Hull Storage Project status Location
(Constructor) Liquefaction mtpa Containment m3 Project
Shel l Technip 3.5 Barge 220,000 + FEED completed 2009 Austra l ia
(Samsung) Shel l DMR Membrane 90,000 LPG + Sanctioned May 2011 Prelude
126,000 Condensate Start Up 2017
Petronas Technip/Linde 1.2 Barge FEED completed 2012 Malays ia
(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 s torageStart up Q1 2015 Paci fic Rubia las
Petronas JGC 1.5 Barge FEED completed 2013 Malays ia
(Samsung) AP-NTM Membrane Sanctioned 2014 Sabah
Start up 2018
www.tri-zen.com
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
www.tri-zen.com
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
www.tri-zen.com
FLNG Projects
0
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
28
Four under construction, another five hope to take FID shortly. Potentially almost 20 mill tonnes production from FLNG units by 2018
www.tri-zen.com Confidential
Emerging Market
Base Load
LNG Trade Flow
29
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
www.tri-zen.com Confidential
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
30
www.tri-zen.com Confidential
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
31
0
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$/MMBtu
Gas Henry Hub Crude WTI
www.tri-zen.com
Gas : Oil differential not as wide in Europe and Asia as in North America
But:
LNG still the cheapest fuel
Gasoil can be more than double LNG
Even with higher delivery costs, LNG is still cheaper than diesel and LPG
This is driving the creation of a new market – LNG as a transportation fuel and creating the need for small/medium scale LNG solutions
32
Economic Reality
0
5
10
15
20
25
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Jun
-12
Sep
-12
Dec
-12
Mar
-13
Jun
-13
Sep
-13
Dec
-13
Mar
-14
LNG v fuel oil & gasoil - Korea US$/MMBtu
180 cst Fuel Oil Gasoil LNG
0
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$/MMBtu)
1% fuel oil Gasoil LNG
www.tri-zen.com Confidential
Economic Drivers
33
0
5
10
15
20
25
Jan
-08
Mar
-08
May
-08
Jul-
08
Sep
-08
No
v-0
8
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-0
9
Jan
-10
Mar
-10
May
-10
Jul-
10
Sep
-10
No
v-1
0
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
No
v-1
1
Jan
-12
Mar
-12
May
-12
Jul-
12
Sep
-12
No
v-1
2
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
Crude v Natural Gas Chart US$/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
www.tri-zen.com Confidential
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
34
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
35
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
36
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)
37
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 Confidential
LNG Bunker Status
LNG developing within ECA’s
Initial users ferries, offshore service vessels, coastguard – vessels operating 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 operation 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 over 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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