Opportunities with Small-­Scale LNG Infrastructure in North America

Small-­ and Mid-­scale LNG SummitJune 2015

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Outline

4About ADI Analytics

4Opportunities with Small-­Scale LNG Infrastructure in North America

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ADI Analytics is a consulting firm serving oil and gas, energy, and chemical companies with passion, expertise, and rigor

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Outline

4About ADI Analytics

4Opportunities with Small-­Scale LNG Infrastructure in North America

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Key messages

1 Growing supply of cheap shale gas has driven interest in gas monetization options with LNG being the most popular.

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Natural gas supply is projected to grow immensely in the coming years thanks mainly to unconventional shale plays

Source: EIA Annual Energy Outlook 2015

53

7279

8490

2010 2015p 2020p 2025p 2030p

Shale Gas Other

U.S. Lower 48 Shale Gas Basins U.S. Natural Gas Supply(billion cubic feet per year)

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Natural gas monetization spans several active, dynamic, rapidly evolving, and increasingly interlinked markets

Gas flaring

Small scale

Exportprojects

Regulatoryapprovals

Methanol

LNG GTLMTG

Oil and gas prices

Heavy-­dutytrucking

Marine

Newplants

High horsepower

Natural Gas Monetization

Transpor-­tation

PowerIndustrial

Chemicals

Regulations

New plants

Technologychanges

Coal displacement

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Economics of shale gas monetization depend on oil and gas prices;; a boe ratio of at least ~2.75 yields a 10% rate of return

Gas Monetization IRRs Vs. Oil/Gas Price Ratio on BOE Basis(U.S. Gulf Coast, 35% Taxes, No Debt)

0%

5%

10%

15%

20%

25%

30%

35%

0 1 2 3 4 5 6 7 8

GTL

LNG

MTG

Oil / Gas Price Ratio, boe basis

IRR

Ratio in 2015 = 4.0Oil = $60 / bbl

Gas = $2.60 / MM Btu

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LNG can also be used as a alternative to diesel fuel in several transportation and high-­horsepower applications

Trucking

E&P(Rigs & Frac)

Rail

Marine

Industrial (Mining, off grid)

LNG Supply LNG Refueling

U.S. Diesel Use in Target Markets

Trucking, 72.0%

Industrial, 15.0%

Railroads, 6.0% Marine,

4.0%E&P, 3.0%

Source: EIA

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Key messages

1 Growing supply of cheap shale gas has driven interest in gas monetization options with LNG being the most popular.

2 Beyond LNG exports, small-­scale LNG is another attractive natural gas monetization option with multiple end uses.

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There are several different types of LNG infrastructure each serving different markets and end users

Type Key Features Plants

Large-­scale Export

4 Natural gas liquefaction terminal producing over 1 million tons per year4 Focused on shipping LNG to the large markets of Europe and Asia4 Most planned for the U.S. Gulf Coast and W. Canada often costing $1-­$20 billion4 Cost per ton of $500-­$800 with timeframes from 2-­6 years

Over30

Import / Regasification Terminal

4 Coverts LNG imports into gas to supply power plants and other end-­users4 Serve natural gas utilities in LNG importing countries4 Focused in Asia and Europe

8

Small-­scale Export

4 Natural gas liquefaction terminals producing under 1 million ton per year4 Serve smaller regional markets in Central America and the Caribbean4 Located along the U.S. Gulf Coast4 Cost per ton of $700-­$1,000 with timeframes less than 2 years

7

Merchant4 Natural gas liquefaction terminal to supply non-­utility domestic users4 Supply LNG for marine, heavy-­duty trucking, and high-­horsepower markets4 Often located near shale plays4 Cost per ton of $700-­$1,000 with timeframes less than 2 years

~10

Utility Peak Shaving

4 Facilities to liquefy and store gas for use in power plants during demand spikes4 Serve power plants in areas where electricity demand spikes are common…4…Focused in the Midwest and Northeast due to cold winters

~60

3

1

2

4

5

Source: FERC

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There are technological differences between small-­ and large-­scale liquefaction facilities

Scale and Technology DriversPlant

Category Plant Type Size (MTPA) Technology Vendors

Micro Peak Shaving <0.1 § Nitrogen § Salof§ Cosmodyne

Mini Merchant (Dedicated) 0.1-­0.5

§ Nitrogen§ Single mixed

refrigerant

§ GE § B&V§ Chart

Small Small Export 0.5-­1.0 § Single mixed refrigerant § B&V (PRICO)

Large Large Export >1.0

§ Dual mixed refrigerant

§ Propaneprecooled mixed refrigerant

§ AirProducts§ ConocoPhillips§ Shell

Simple, low efficiency

Complex, high efficiency

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LNG capacity is focused in the Midwest and Northeast where utility peak shaving facilities are most prevalent

Source: PHMSA

• Utility Peakshaving• Merchant• Import Terminal• Planned Merchant

Quadren Cryogenics

Noble LNG

Puget Sound Energy

Waller MarineMagnolia LNG

HEYCO LNG

Floridian Natural Gas Storage

Eagle LNG

Gulf Oil

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Most of the current LNG capacity is already dedicated and unable to be used for anything else

PADD VWest Coast

PADD IVRockies

PADD IIIGulf Coast

PADD IIMidwest

PADD IEast Coast

PADD IA

PADD IB

PADD IC

PADD VWest Coast

U.S. LNG Supply (Million Gallons Per Year)

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Key messages

1 Growing supply of cheap shale gas has driven interest in gas monetization options with LNG being the most popular.

3 Small-­scale LNG offers export opportunities to smaller, emerging regional markets.

2 Small-­scale LNG offers unique advantages as a part of natural gas monetization though the production of LNG.

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Export could be focused on a countries in the Caribbean and Central America …

Mexico

Costa Rica

USA

Colombia

Cuba

Jamaica

Dominican Republic

Bahamas

Guatemala

Belize

Honduras

Nicaragua

Panama

Puerto RicoHaiti

El Salvador

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… Many of which are FTA countries …

§ FTA countries§ Non-­FTA countries

Mexico

Costa Rica

USA

Colombia

Cuba

Jamaica

Dominican Republic

Bahamas

Guatemala

Belize

Honduras

Nicaragua

Panama

Puerto RicoHaiti

El Salvador

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… That have a need for natural gas imports to replace current heavy fuel oil and diesel-­fired capacity

2008 2012 2020

2008 2012 2020

2008 2012 2020

Dominican Republic

2008 2012 2020

Cuba

2008 2012 2020

Puerto Rico

Mexico

Costa Rica

USA

Colombia

Cuba

Jamaica

Dominican Republic

Bahamas

Guatemala

Belize

Honduras

Nicaragua

Panama

Puerto RicoHaiti

El Salvador

Natural Gas Demand in Targeted Countries (mtpa)

Guatemala

Costa Rica

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Demand for natural gas in the Caribbean is projected to see robust growth over the next five years

2008 2012 2020 Base 2020 High

Central American Natural Gas Demand(mtpa)

Puerto Rico

Haiti

BarbadosNicaragua

BelizeCayman Islands

El SalvadorPanamaGuatemala

Costa Rica

Cuba

Dominican Republic

Honduras

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In response, several countries in this region are considering regasification terminals

Mexico

USA

• Under construction• Proposed regasification

§ FTA countries§ Non-­FTA countries

Antillean Gas

AguirrePuerto Cortes

Cutuco

Colombia

Colon

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Collectively, a significant amount of regasification capacity is being proposed in Central America

Name Location Storage (cu/m) Stage Ownership

Andres LNG Dominican Republic 160,000 Operating AES

Penuelas LNG Puerto Rico 160,000 Operating Ecoelectrica

Antillean LNG Dominican Republic 127,000 Under Construction BWGas

Aguirre LNG Puerto Rico 150,000 Proposed Excelerate

El Salvador LNG (Cutuco) El Salvador 320,000 Proposed Cutuco Energy

Colon Panama -­ Proposed LNG Group Panama

Puerto Cortes Honduras -­ Proposed AES

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Planned regasification terminals are estimated to have enough capacity to handle LNG demand

2008 2012 2020 Base 2020 High

(High)

(Base)

Central American Natural Gas Demand and Regasification Capacity(Million Tons Per Annum)

Puerto Rico

Haiti

BarbadosNicaragua

BelizeCayman Islands

El SalvadorPanamaGuatemala

Costa Rica

Cuba

Dominican Republic

Honduras

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Key messages

1 Growing supply of cheap shale gas has driven interest in gas monetization options with LNG being the most popular.

3 Small-­scale LNG offers export opportunities to smaller, emerging regional markets.

2 Small-­scale LNG offers unique advantages as a part of natural gas monetization though the production of LNG.

4 Emerging small-­scale LNG plants and new business models offer new opportunities and expanded end uses for LNG.

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If all of these plants move forward there will be a 40% increase in small-­scale liquefaction capacity by 2018

Planned Capacity

2015 2016 2017 2018 Total 2015 2016 2017 2018 Total

Million Gallons Per Day Million Tons Per Year

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Dedicated liquefaction plants cost $600 to $1,000 per ton with economies of scale seen above 100,000 gpd capacity …

$-­

$200

$400

$600

$800

$1,000

$1,200

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000

Capital Cost ($/Ton)

Capacity (Gallons Per Day)

Unit Plant Capital Costs (Total Installed Cost)

Size with optimal capex and acceptable levels of market risk

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… Leading to very competitive delivery costs in comparison to current LNG pricing in the region

Mexico

Costa Rica

USA

Colombia

Cuba

Jamaica

Dominican Republic

Bahamas

Guatemala

Belize

Honduras

Nicaragua

Panama

Puerto RicoHaiti

El Salvador

$16.35 $12.23

$7.38 $5.02

2013 2014 2015 Cost of Supply

Central America

($USD per MMBTU)

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Carib Energy is currently supplying two Coca Cola bottling plants in Puerto Rico with LNG and has plans to supply more

Investors / Promoters4Carib Energy was acquired by Crowley Maritime, a diversified shipping company, in May 2013

4Crowley has shipping and trading infrastructure set up in many non-­FTA Caribbean countries

Customers / Off-­take4Intended to serve markets such as Latin America, the Caribbean and Puerto Rico that lack pipeline infrastructure or have demand too small for large LNG tankers

4Two Coca Cola plants in Puerto Rico already contracted

Other Information

4Floridian Natural Gas Storage Company building storage facility in Martin County, Florida

4Pivotal for gas supply from liquefaction plants / peak shavers north of port

Timeline

4Shipments to Coca Cola plants started in August 2014

4Planning to start shipments to a pharmaceutical in Puerto Rico 2H2015

Permits / Approvals

42012 Aug: FERC approval of storage facility

42013 Oct: Final DOE FTA approval for 0.03 Bcf/d to FTA countries

42014 Sep: Final DOE non-­FTA approval for 0.04 Bcf/d

Suppliers / Vendors

4Shipped via truck w/ 10,000 gal 40ft containers to ports. Load containers onto ships for transportation

4Export from various Gulf ports depending on final destination of LNG

4U.S. territories don’t require permit

Project Location4Storage facility in Martin County, Florida

4No LNG is being manufactured

4LNG is stored then shipped

Capacity4Approved for export: 0.5 mtpa or ~0.07 Bcf/d

Cost

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Key messages

1 Growing supply of cheap shale gas has driven interest in gas monetization options with LNG being the most popular.

3 Small-­scale LNG offers export opportunities to smaller, emerging regional markets.

2 Small-­scale LNG offers unique advantages as a part of natural gas monetization though the production of LNG.

4 Emerging small-­scale LNG plants and new business models offer new opportunities and expanded end uses for LNG.

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