Grid Logistics - Asia - 4

Grid Logistics

Asian Opportunity For LNG Deliveries By CATBs

The following material represents confidential trade secrets, technical specifications, business processes and strategies of Grid Logistics LLC.

• Cryogenic articulated tug barge (CATB)

• LNG delivery by barge rather than pipeline or ship

• Reduces risk of stranded investment in fixed LNG assets

• Deployable quickly

• Near-term prospects in Japan, Indonesia and China

Concepts Underlying Business Opportunity

Indonesia

JAVA124 million

SUMATRA45 million

BORNEO16 million

SULAWESI16 MILLION

BALI3 million

LOMBOK3 MILLION

PAPUA6 MILLION

MADURA3 million

Indonesia An Archipelago of 17,508 Islands - 6,000 inhabited

Indonesia exported 780,000 bpd in 1996. Eight years later, Indonesia was a net oil importer.

The World Bank last year estimated that Indonesia's total direct subsidies for fuel and the oil-burning electricity

industry cost more than $16 Billion a year – 23% more than government spending on law and order,

health and education combined.

The removal of the subsidies is highly unlikely, given that previous cuts have led to social unrest.

Drivers Creating Indonesian Opportunity

PGN operates 3,100 miles of natural gas distribution and transmission lines, comprising nine regional networks. The

networks have limited inter-connectivity, which has restrained growth of gas consumption. PGN is having new gas pipelines to

improve its Integrated Gas Transportation System (IGTS).

The IGTS is designed to eventually link the islands of Sumatra, Java, and Kalimantan via a 2,600-mile pipeline. The World Bank,

Asian Development Bank, and PGN are jointly financing the project.



Pipeline expansion will still leave many regions of Indonesia un-served by natural gas


The undersea topography of Indonesia

is not well suited to pipeline construction between Islands. For

many regions, pipelines are either technically

infeasible or too costly.

Indonesia’s state electricity firm PT PLN plans to build 11,000 megawatts of natural gas-fired power plants by

2019 at a cost of $15 Billion US to reduce its dependence on oil.


Indonesia’s state electricity firm PT PLN plans to build 11,000 megawatts of natural gas-fired power plants by 2019 at a cost of $15 Billion US to reduce its

dependence on oil.

PLN currently operates 5,233 power plants across the country with a combined capacity of 24,960 megawatts. Only 22 percent of them, or 1,151 units with a combined

capacity of 9,800 megawatts, use natural gas.


Indonesia’s state electricity firm PT PLN plans to build 11,000 megawatts of natural gas-fired power plants by 2019 at a cost of $15 Billion US to reduce its

dependence on oil.

PLN currently operates 5,233 power plants across the country with a combined capacity of 24,960 megawatts. Only 22 percent of them, or 1,151 units with a

combined capacity of 9,800 megawatts, use natural gas.

PLN is unsure whether the planned power plants would receive enough gas supply due to LNG export

commitments. Current gas supply is only 45% of its actual needs.


Power Generation Costs in Indonesia

Oil 25¢ / kwh

Geothermal 9¢ / kwh

Natural Gas 5¢ / kwh

Coal 4¢ / kwh

Source: Indonesia’s state electricity firm PT PLN -2011

Indonesia is the 3rd largest LNG exporter in the world

BONTANG A-HLNG EXPORT PLANT

(in decline)

TANGGUHLNG EXPORT PLANT

(new)

ARUNLNG EXPORT PLANT

(in decline)

Indonesian LNG Plants

Indonesia is the 3rd largest LNG exporter in the world

DONGGI-SENORO LNG EXPORT PLANT

(planned)

MALUKA LNG EXPORT PLANT

(planned))


BONTANG A-HLNG EXPORT PLANT

(in decline)

TANGGUHLNG EXPORT PLANT

(new)

ARUNLNG EXPORT PLANT

(in decline)

WEST JAVALNG REGAS PLANT

(Proposed)

EAST JAVALNG REGAS PLANT

(Proposed)

NORTH SUMATRALNG REGAS PLANT

(Future)


DONGGI-SENORO LNG EXPORT PLANT

(planned)

MALUKA LNG EXPORT PLANT

(planned))

The PT Perusahaan Gas Negara (PGN) LNG terminal plan has budgeted $1.7 billion for three small LNG regasification terminals, to come on line between

2011 and 2014. The projects may entail either Floating Storage and Regasification Units (FRSUs) or

permanent terminals and would also require LNG ships to supply the terminals.

There is strong political pressure for the projects to lower subsidy costs


Use Cryogenic Articulated Barges (CATBs) in lieu of regasification terminals

and LNG ships

A ‘Cryogenic Articulated Tug and Barge’ (CATB) unit, with the tug engaged in the notch of the barge, is secured on each side of the barge notch. This positive connection allows the tug to pitch but not roll, enabling the tug and barge to behave and

handle in much the same manner as a ship, with added advantages of increased speed, improved fuel economy and

good handling characteristics.

A More Cost Effective and Flexible Plan

Cryogenic Articulated Tug Barge (CATB)

Confidential Material of Grid Logistics

• Insulation optimized for boil-off rate, cost, produce-ability and load bearing capability

• Maximum use of panel line construction techniques

• Geometry supports automated welding processes


LNG CATB – ContainmentIndependent Self-Supporting Cargo Tanks

• Incorporated in a double-hulled barge, the 5,000 cubic meter welded insulated tanks provide enhanced levels of safety relative to LNG ships. The much smaller quantity of transported LNG also reduces collateral damage from any potential (but highly unlikely) maritime incident (whether accidental or deliberate).


LNG CATB – ContainmentIndependent Self-Supporting Cargo Tanks

• On-board regasification equipment or land based regasification using:

• Waste heat from power plant or• Closed loop seawater “Bishop” process or• Cascading water process

Lowering fuel usage for regasification from 3% to 1%


LNG CATBRegasification Options

A CATB is estimated to cost $50 million$35 million for the barge & $15 million for the tug.

Fewer tugs are required than barges.

Using 3 CATBs for each project would cost $375 million.If additional infrastructure costs were as high as $325

(very unlikely) the total investment would be $700 million.

$1 billion less than the existing budget for PGN’s plan



Scenarios:

1) As markets grow, the economics of pipeline delivery or larger vessels may improve. CATBs are then redeployed to other islands

2) Market declines, and CATBs are redeployed

3) Market evolves slowly, CATBs remain cost effective



Japan

Japan LNG Imports

Drivers Creating Japanese Opportunity

2008 2009 2010 202069.3 64.5 70.0 >100

Expected decline in nuclear power will lead to substantial increases in LNG use for power

generation, well beyond the expectations in growth a year ago.

Characteristics of Attractive Markets for Cryogenic Articulated Tug-Barges

(CATBs)

Re-gas facilities are expensive ($750-$1,000 million), fixed assets that cannot be moved and have value only if

their markets offer attractive net-backs

CATBs can contribute the same economic value to LNG suppliers at lower capex (~$100-$400 million) and

provide geographic and scalable flexibility

Characteristics of Attractive Markets for CATBs

Barges offer the flexibility to quickly move LNG to markets that experience basis blow-outs

(e.g. South Korea during cold winter)

Net-backs enhanced in markets in which gas pipeline capacity is constrained and/or

prohibitively expensive to expand


Markets must provide for favorable regulatory and political treatment:

• By-pass of pipeline tariffs

• Light-handed regulation of direct connections


Articulated Barges Provide an Enhanced Netback Compared to Pipeline Tariffs

PA NJ

NY

ME

MA

CT

VT

NH

RI

NB

NSNova Scotia to GloucesterBarge Cost: $0.31Netback Benefit: $0.76

FSU to Long IslandBarge Cost: $0.09Netback Benefit: $0.56

Canaport to GloucesterBarge Cost: $0.24Netback Benefit: $0.79

These comparisons understate the full benefit of moving spot LNG cargoes to LDCs when seasonal basis blow-outs occur.


# OF DAYS TO OFFLOAD BARGE

ONE WAY TRAVEL DISTANCES

GENERAL ECONOMICS

$0

$5

$10

$15

$20

$25

$30

54 108 216 323 431

$ pe

r m3

80 161 322 805 1,609

COSTS FOR SELECTED DISTANCES AND DAYS TO OFFLOAD BARGES

One way kilometers per trip

MMSCFD Off-loading Barge

ANNUAL AVERAGE CATB TRANSPORTATION COSTS


$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

54 108 216 323 431

$ pe

r Mcf

50 100 200 500 1,000

COSTS FOR SELECTED DISTANCES AND DAYS TO OFFLOAD BARGES

One way mileage per trip

MMSCFD Off-loading Barge

ANNUAL AVERAGE CATB TRANSPORTATION COSTS


Charles NeillManaging Director

Grid Logistics LLCPO Box 647Weston, MA 02493

(617) 515-9083

[email protected]

Contact Information

Documents

Grid Logistics - Asia - 4