Floating LNG Development - Doha NG Conference Mar-09

8/6/2019 Floating LNG Development - Doha NG Conference Mar-09

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Floating LNG ProductionNothing worthwhile is easy

7th ANNUAL DOHA GAS CONFERENCE

MARCH 9-11, 2009


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COPYRIGHT 2009 POTEN & PARTNERS, INC.

Page 1 POTEN & PARTNERS

Poten & Partners:

Consultants to the Global Gas & LNG Industries

Over 60 years as anadvisor and broker to theenergy and oceantransportation industries

Providing strategicadvisory services alongthe entire natural gasand LNG value chain

More than 35 LNGprofessionals in NewYork, Houston, Londonand Perth


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FLNG view should balance concepts pros and cons

Unprecedented level of interest in floating liquefaction Diminishing gas supply, rising LNG prices spur development

Yet technical, commercial and legal obstacles remain

The first firm project commitment remains elusive

Should Floating LNGs backers be concerned?

FLNG on typical emerging technology development path

Obstacles can be overcome tolerance for uncertainty

advisable


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FLNG opening more gas to development

Accesses gas unsuitable for baseload development

Eliminates pipeline & loading infrastructure costs

Reduces security and political risks

Constructed in controlledshipyard environment

Can relocate facility

upon field depletion

Data: Infield

< 0.1 Tcf

50 - 100 Tcf

5 - 50 Tcf~70 fields

4

Mid-Scale and

Floating LNG

Large-Scale LNG

~350 fields

~350 fields

~4,000 fields

~1,000 fields

~700 fields

1 - 5 Tcf

0.5 - 1 Tcf

0.25 0.5 Tcf

0.1 0.25 Tcf

< 0.1 Tcf

50 - 100 Tcf

5 - 50 Tcf~70 fields

4

Mid-Scale and

Floating LNG

Large-Scale LNG

~350 fields

~350 fields

~4,000 fields

~1,000 fields

~700 fields

1 - 5 Tcf

0.5 - 1 Tcf

0.25 0.5 Tcf

0.1 0.25 Tcf


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Two distinct development paths emerging

Shell 5-6 mtpa conceptSBM Offshore 2.5 mtpa

haracter st c Small-scale loat n ar e-scale loat n

q efact on capac ty: less than 3.0 mtpa 3.5 to 6.0 mtpa

eq re reserves: 0.5 to 3.0 Tcf more than 3.0 Tcf

ll: Ship-like Barge-like

Stora e capac ty: up to 220,000 m3

more than 250,000 m3

q efact on processes: Simpler processes Baseload-type processes

(e.g., Single Mixed Refrigerant

processes, dual expander processes)

(e.g., Dual MR,

Mixed Fluid Cascade)


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Yet despite activity, a first FID remains elusive

Small-scale: Flex LNG Progress LNG FID delayed in Jan09

SBM Offshore expecting to start client FEED in 09

Hegh LNG completing generic FEED-level design

Other concepts in earlier stages of development

Excelerate/Exmar, BW Offshore, Teekay, Bluewater, Sevan

Large-scale:

Shell bids and possible award later in 09

Candidate locations: Prelude, Greater Sunrise

Inpex Abadi LNG startup planned for 2016


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Marine settings present technical challenges

Waves, wind and currents

Process equipment

performance

LNG storage sloshing

Open-water LNG transfers

Pretreatment requires up to

50% of available deck area

Favors feed gas with low

levels of inerts and impurities

Condensates and LPGs

increase processing, storage

and offloading demands

Flex LNG Producer - IHI SPB Containment S stem

Source: Flex LNG

Hegh FLNG Concept Side-b -side Loading

Source: Hegh LNG


8/16



Liquefaction choices far from mature

Need simple, robust andcompact liquefaction solutions

Single mixed refrigerant cycles

Gas expander-based cycles

Concerns

Process efficiencies

Scale-up performance

LPG refrigerant storage

Marine performance and reliability

Source: Black & Veatch

Source: MustangEngineering

Mustang NDX-1 Process (patent pending)

Black & Veatch PRICO SMR Process


9/16



Economics mired in uncertainty

Development costs look competitive, but require furthercritical analysis

Reserves depletion relevant to projects economic

performance

No long, slow depletion profiles

Additional drilling to sustain fields production plateau; maintain feed

gas pressures

FLNG relocation not necessarily easy

Balance costly, time-consuming retrofits vs. sub-optimal performance

Abandonment timing


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Commercial structure a challenge for FLNG developers

FLNG developer can gainbroader reward/risk

exposure through various

hybrid structures

Ability to take on thisbroader role depends on

Project partners

Developers industry

expertise

Developers ability to raise

financing

Resource

Owner

Production Liquefaction LNG Marketing

(1) INTEGRATED PROJECT

Gas

Facilities

(2) MERCHAN T PROJECT

Gas

Facilities

(3) TOLLING FACILITY

Gas

Facilities

Ow

Ow

Ow

Ow

FLNG

Project

Ow

Ow

Ow

FLNG

Project

FLNG

Project

Ow

Ow

GSA

Tolling Agreement

1 INTEGRATED PROJECT

2 MERCHANT PROJECT

3 TOLLING FACILITY


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Construction risk-sharing must be addressed

Risk allocation between theshipbuilder, process vendor,and EPC contractor needsdefinition

More construction risks willultimately rest with projectowners or LNG buyers

EPC contractors dont have thebalance sheet to bear completionor performance risks for emerging

technologies

Licensing agreements forjointly developed technologies

Source: Expro


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Offshore production and loading affect fiscals; SPAs

Upstream fiscal terms

must address LNG exports

FLNGs likely to have

tighter logistical

constraints

SPAs focus on scheduling

issues

Source: Bluewater


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Financing will require proof of concept

FLNG concept not fully proven greater project executionand operational risks

First project will be subject to rigorous review to establish

financing precedents

Loan tenor aligned with production life

Movable asset has some financing merits

High level of investment concentrated on a single hull raises

insurance issues


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Legal/regulatory landscape can affect design

Marine setting brings FPSO-type legal frameworks into play Which national legislation, flag state regulations, class rules and

international conventions apply?

FLNG approvals similar to those for LNG vessels

Some legal issues can affect design

Ship vs. static facility?

Is the vessel transporting gas?

Fulfilling Domestic Market Obligations

Local content requirements


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FLNGs next steps

Small-scale FLNGs needs1. Appropriate stranded gas resources

2. Project sponsors

Large-scale FLNG remains domain of international oil companies

Deep engineering, project development and financial resources

Downturn could induce a pause in development

Changing economics

Evaporating sources of financing

On the positive side..

Construction costs are falling

Shipyards looking to fill order books


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Floating LNG Development - Doha NG Conference Mar-09