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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


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


Forecast LNG Supply & Demand 2015


Asia Pacific 111 mill tn

Africa


Liquefaction capacity (million tonnes)


(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


Forecast LNG Supply & Demand 2025



Africa


Liquefaction capacity (million tonnes) (Existing, under construction & planned but note slide 16)


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))


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


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


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


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


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


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


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


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


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

38


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


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


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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Documents

Recent LNG Developments & Ten Year Outlook. Update on …lng-world.com/lng_bali2014/slides/LNG Bali - Day 1 PDF/Tony Regan.… · Recent LNG Developments & Ten Year Outlook. Update