Blue Corridor NGV Rally 2013: LNG as Future Bunkering Fuel in Europe

7/27/2019 Blue Corridor NGV Rally 2013: LNG as Future Bunkering Fuel in Europe

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LNG as Future Bunkering Fuel in Europe

October 2013


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Gazprom Marketing & Trading Limited 2

Gazprom Group

Europe FSU Countries Russia

Japan

Republic of Korea

Taiwan

ChinaVietnamIndiaIraqLibyaEquatorial

Guinea

Algeria

Bolivia

Venezuela

UAE

Singapore

Oil production

Oil and gas condensate

sales

Refined products sales

Electricity sales

Gas transportation and

underground storage

Electric power and heat

generation

Oil products distribution through

gasoline stations network

Hydrocarbons s explorarton

,

production and geological

survey

Projects of methane

production from coal beds

Hydrocarbons processingSpot sales of LNG

Gas sales to end-consumersSales of gas, supplied by

gas pipelines

Gas and gas condensate

production


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Gazproms strategic goal is to become

the leading global energy company by

entering new markets, diversifying

business activities and ensuring

reliable supply.


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Source country

Market countryCumulative Cargoes Traded

Year Volume traded (bcm)

2005 0.16

2006 0.44

2007 0.45

2008 0.64

2009 1.84

2010 2.54

2011 3.04

2012 1.82

Gazprom LNG operations and trading via GM&T

Source: Gazprom LNG

GM&T:

Manage of the Gazprom Group LNG trading portfolio

Operational support of maritime transport

Trade and marketing activities development


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Gazprom LNG business growth


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Gazprom has the opportunity to build on its competitive advantages in a new emerging G4T market:

Equity gas in areas of interest: Secure supply

Proximity to customers: Lower cost to customers compared with competitors

A 10% market share in these ECA regions by 2030 could provide 1.8 mmtpa of LNG demand (2.4 bcm)

Gazprom is well positioned to develop a global G4Tbusiness in markets with proximity to its equity gas

ECA 1: Baltic tied to NordStream feed gas

Nord Stream pipeline project: existing infrastructure and

substantial volume of equity gas

ECA1 and 4:Other European and Asian

Shtokman LNG project possibility to build a small scale

jetty and then benefit from bunkering operations for the

Arctic sea route towards Asia

A

D

ECA 3: Med/Black Sea

Black sea South Stream pipeline project: emerging

infrastructure and substantial volumes of equity gas

C

ECA 4: Singapore

Pacific train 3 Sakhalin project: existing infrastructure,

new volumes of LNG, possibility to build a small scale jetty

B A

B

C

D

DC


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Emission Control Zones

ECA 2

ECA 1

ECA 3ECA 4

Caribbean

ECA

Singapore Green

Initiative, Hong

Kongs Fair WindsCharter


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Maritime regulation change is opening an opportunity for theLNG bunkering market to develop

IMO sulphur emissions limits

International Maritime Organisation (IMO) regulations will

require significant reductions in ship emissions (under

ANNEX VI) in designated Emission Control Areas (ECA1)

over the coming years:

1 January 2015:

Sulphur limit in ECAs will be reduced to 0.1%

NOx for Tier I levels in ECAs will be reduced by 80%, and by

20% for Tier II (global) complianceBy 2020 additional ECA zones are expected to be enforced:

A global cap on sulphur content of 0.5% will be enforced

* Note: SCR: Selective Catalytic Reduction, HFO: Heavy Fuel Oil

**Source: RS Platou

Depending on stand alone ship economics as wellas % of sailing in ECA1 zone, ship owners will have

the following options to comply:

Ship operators comply options

HFO*/Scrub

bers

Marine

Diesel Oil

LNG

No upfront investment

Higher operating costs

Refineries may not be able to meet

increasing demand

1

2

3

Lower fuel price

Significant capex investment

Operational constraints

Competitive fuel price with MDO

Security of supply is constrained by

infrastructure

Larger capex investment

Lack of Infrastructure

Currently there are 37 ships running on LNG worldwide (equal number has beenordered so far**)

LNG consumption in North-West Europe shows that demand comes from Ro-Ro

ferries (36%), PSV (22%) and Car shuttle ferries (22%)

In Norway LNG bunkering exists since 2000 helped by the incentives posed by

the Government:

NOx fund subsidizes the cost of LNG bunker fuel projects

Clear policies for LNG bunkering


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LNG bunker demand potential in ECA 1

Demand for LNG bunkering will be driven by relative cost to traditional marine fuels

Source: Gazprom G4T

Market expectations on LNG bunkering demand:

PACE Global : LNG demand 6 MTPA expected in the Baltic/

North Sea (ECA 1) by 2030

Lloyds Register FOBAS:24 MTPA by 2025 globally. An

estimated 653 vessels, or 4.2% of global deliveries, could be

fuelled by LNG between 2012-2025

Danish Maritime Authority DMA:4 MTPA by 2020globally

(Det Norske Veritas DNV) 5-7 MTPA by 2020 globally

LNG bunker fuel demand, as part of total bunker fuel demand,

will be determined regionally by:

Relative price levels with traditional marine fuels (HFO, MGO)

ECA or other ship emission controls

LNG fuel and infrastructure availability

Composition of ship traffic

NOx scrubbing and NOx adsorption traps


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LNG bunkering value chainThe LNG bunkering value chain is composed of 4 distinct operations

1. Supply

2. Transport

3. Storage

4. Bunkering

- Initial LNG supply will be from liquefaction plant- Recommended option is for Gazprom to construct own plant close to existing

pipelines

- Transport of LNG from liquefaction plant to point of use or intermediate storage

- Typically performed by LNG feeder vessel (1,000 m3 40,000 m3)

- Can also be transported by truck (widely done in Norway)

- Storage capacity needed at liquefaction plant and end-user port

- Expected port tank capacity of 20,000-30,000m3

- LNG loaded from remote storage tanks to be delivered to end-user

- Can be performed by truck, fixed line or marine vessel (most likely barge)

- Barge capacity 1,000m3 up to 5,0000m3

- Demand per bunkering customer expected to be 300 m3 500 m3

- Barge is economically efficient but requires upfront investment since new

technology


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Kaliningrad

0.02 mtpa +

0.15 mtpa

Portovaya

0.5 mtpa

NE-E-Hub

Samsun

Target markets

CNG light & medium duty vehicles LNG heavy duty road transport LNG bunkering

NGV markets

Bunkering markets

Infrastructure options:

LNG liquefaction either in Russia or at exit of

Russian export pipelines

LNG storage hubs for geographic extension Distribution to target clients inland by truck /

on sea by feeder vessel

Utilization of cold generated from

decompression in existing network

South Stream

(Dzhugba)

0.5 mtpa

Options for SSLNG infrastructure to match Gazprom market share of 10%

based on conservative demand expectations, further geographic

expansion (US, China, etc.) possible.

NW-E-Cluster

CNG 1.0 bcm

LNG 2.2 bcm

SW-E-Cluster

CNG 5.4 bcm

LNG 3.4 bcm

SE-E-Cluster

CNG 3.0 bcm

LNG 2.4 bcm

LNG Bunkering Mediterranean Sea 3 bcm

NW-E-Hub

2

1

4

3Baumgarten

0.2 mtpa

xTarget market priority

Infrastructure option

NE-E-Cluster

CNG 5.4 bcm

LNG 3.6 bcm

SW-E-Hub

* Figures represent conservative demand projections per cluster

EU demand on SS LNG is expected to reach 43bcm

by 2030

Kingisepp

0.01 mtpa

Baltic LNG

10 mtpa


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Provide sustainable and

competitive supply of LNG

Develop dedicated

infrastructure based on

long-term partnerships

Provide sustainable and competitive supply of LNG to the

bunkering and transportation sector in the Baltic region

Attract economical and political support for development of

alternative fuel projects in Europe

Develop LNG infrastructure (liquefaction, hubs, fillingstations) in proximity to our European customers

We are dedicated to developing this market togetherwith our customers

Create value proposition

for customers

Guarantee lower Total Cost of Ownership than operations

on Diesel, HFO or MGO whilst at the same time fulfilling

environmental objectives

G G i k t t ith th k


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Gazprom Group is keen to partner with the keystakeholders so that to allow the development of LNG asa bunker fuel

Reliable supply of LNG in the Baltic/Northsea region

Development of infrastructure (storageand distribution)

Long-term partnership

Guaranteed demand of LNG

Development of infrastructure(storage and distribution)

Sign MOUs for offtake of LNG fromthe Baltic LNG plant

Our partners

Gazprom Group


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How do you envisage the development of LNG market in the port and the region?

What initiatives is the port authority involved to promote LNG as a fuel?

How port is intend to encourage/police use of LNG in SECA/ECA areas?

Is there any land available for Gazprom to build LNG storage/bunkering station?

What are the permits/application required? How long would it take to get them?

What are the regulations that currently in place for ship to ship bunkering and what is yet to be sorted out?

Documents

Blue Corridor NGV Rally 2013: LNG as Future Bunkering Fuel in Europe