asia days 2013 - market opportunities for small lng distribution

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Market Potential for Small Scale LNG Distribution and Use in Asia IN Information Day / Norshipping 6th June 2013 Oslo Egil Rensvik Science & Technology Counsellor Royal Norwegian Embassy Singapore Innovation Norway - South & SouthEast Asia

Source: Gasnor

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Asia

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India

Vietnam

Indonesia

Singapore

UAE

South Korea

China

Japan

Thailand

Malaysia

Innovation Norway in Asia

The Philippines

Taiwan

Sri Lanka

Saudi Arabia

Iraq

Iran

Russia

Mongolia

Yemen Nepal

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Innovation Norway - The Commercial section of the Royal Norwegian Embassy, presence in Asia

• Tokyo • Seoul • Beijing • Shanghai

• Hanoi • Bangkok • Kuala Lumpur • Singapore • Dhaka • Delhi • Abu Dhabi • Jakarta

http://tyneships.co.uk/phpfiles/bigphoto.php5?ref=1887

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Analysis of LNG Opportunities in Asian Countries • Singapore • Indonesia • China • India • Bangladesh • Philippines • Vietnam

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© Det Norske Veritas AS. All rights reserved.

Opportunity assessment of the South East Asian market for LNG shipping and distribution

SPONSORING PARTNERS

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The shipping segment that first might adopt LNG for propulsion is regional container feeders

Pasir gudang

Yangon

Kuching

Kota Kinbalu Labuan

Taiching Xiamen

Shekou

Nansha

Potianak

Pekanbaru

Kantang

Fuzhou LEGEND

LNG Marine Terminals Liquefaction facility status

■ Existing

■ Proposed

■ Under Construction

Regasification facility status ● Existing

● Proposed

● Under construction

5 container feeder lines




1 container feeder line

Routes

About 20% of the regional container feeder traffic are up for renewal towards 2020

Preparing for The Future – The New LNG Terminal in Singapore

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• The S$1 billion (NOK3,8 billion) LNG Terminal is located on a 30 hectare site on Jurong Island • Initial Capacity: 3 mill tons/yr Can be expanded to 6 million • Construction starts in 2009

• Operational in 2013

• Electricity Generating Co. Singapore Power’s subsidiary PowerGas is awarded the contract to build and run the Terminal Jurong Island

- Singapore’s Petrochemical Complex

Current Situation: 80% of electricity is generated using piped natural gas from Malaysia and Indonesia Balance 20% is from oil

Singapore’s First LNG Terminal


Indonesia LNG Opportunities - Small Scale LNG

1st & 2nd May 2013

DNV Singapore has performed extensive work with numerous partners on small scale LNG in Indonesia

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Cutting edge project investigating small scale LNG based distributed power Small scale LNG market study and opportunity identification Assessment of LNG logistics chain in Indonesia Joint industry project – Feasibility assessment of the Southeast Asian market for LNG shipping and distribution Opportunity assessment of the Southeast Asian market for LNG shipping and distribution

2010

2011

Results of JIP identifying that LNG could increasingly be used to serve power needs in Eastern Indonesia

Sources: DNV Figure 1: List of some of the JIP members



1st & 2nd May 2013

Small scale LNG is an option for supplying growing energy demand in Eastern Indonesia

LNG is a viable alternative to diesel power in Eastern Indonesia

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BONTANG LNG Plant

TANGGUH LNG Plant

DONGGI-SENORO LNG Plant

MASELA/ABADI LNG Plant

FSRU Nusantara Regas I

FSRU Planned

8

7

5 3

4

2 6

1

Small scale LNG import terminals

Phase 1 (2012)

1. Tg. Batu, Samarinda, East Kalimantan (25 mmscfd)

2. Batakan, Balikpapan, East Kalimantan (15 mmscdf)

3. Pasanggaran, Bali (25-30 mmscfd)

4. Pomala, Kendari, South Sulawesi (25 mmscfd)

Phase 2 (2013)

5. Mataram, West Nusa Tenggara (15 mmscfd)

6. Banajarmasin, South Kalimantan (6 mmscfd)

Phase 3 (2015)

7. Gorontalo, North Sulawesi (6 mmscfd)

8. Halmahera, North Maluku (60 mmscfd)

Figure 3: LNG plants and import terminals/FSRUs

Sources: DNV analysis, Petrominer, Directorate General of Oil and Gas, Pendawa (2011)

8 small scale LNG terminals are set to be constructed by 2015

Currently there is 808 MW of diesel power generation capacity in 33 locations in Eastern Indonesia

A small scale LNG milk run carrier could carry LNG cargoes from one of the existing/planned LNG plants/FSRUs

Hoegh FSRU

ARUN LNG Plant



1st & 2nd May 2013

Cost-benefit analyses on two LNG supply chains in Eastern Indonesia

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Liquefaction plant

Power Plant

FLNG

Small-scale LNG ship (10,000 – 12,000 m3)

LNG storage & regasification (Satellite

plant)

LNG truck Small-scale LNG terminal (Onshore or Offshore)

Case Study 1

NG pipeline

Small-scale LNG terminal (Onshore or Offshore)

Case Study 2

Small-scale LNG ship (10,000 – 12,000 m3)

Supply chain options have no one size fits all – risks in each scenario varies and solutions have to be customized to each locality


Risks and Opportunities of Small Scale LNG Development in Indonesia

5/10/2011

Case study 1: LNG supplied along a milk-run by a combination of small scale LNG carriers and trucks

Milk run scenario: Originates from the Donggi Senoro LNG

plant Delivered to 8 locations with small scale

LNG carriers, and/or trucks

These power plants are currently diesel based and have capacities of between 7 to 56 MW

We assume in the future that: 70% coal (as base load), and 30% diesel or LNG (as peak load)

Minimise LNG ship terminals, and use LNG trucks within ~100km radius

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Bitung Lopana

Wuawua Kendari

Kayu Merah

Poasia Kendari

Kolaka

Luwuk

Gorontalo

Donggi Senoro LNG plant

LNG truck transfer route Small scale LNG shipping route Small scale LNG milk run distribution route from Donggi Senoro LNG plant

Sources: DNV analysis, Pendawa (2011), Google Earth Pro


Risks and Opportunities of Small Scale LNG Development in Indonesia

5/10/2011

Case study 1: Unit costs of supplying LNG are driven by the volumes being handled by the receiving terminals

The LNG supply costs are largely driven by the volume going through the jetty & receiving terminal

Current fuel costs (excl transport) are: Diesel: US$27.40/mmbtu LNG: ~US$15/mmbtu

The trend is for the price difference to continue to increase IEA price projections

At current prices this is an annualised savings of US$3.2 million per year for the 6 profitable locations

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Cost of supplying small scale LNG to locations in Eastern Indonesia

0

5

10

15

20

25

0 50 100 150 200Tr

ansp

ort c

ost (

$/m

mbt

u)

Volume through jetty (m3/day) Luwuk (no ship needed)

Kayu Merah

Gorontalo

Kolaka, Poasia Kendari, Wuawua Kendari

Lopana, Bitung

Difference between diesel and LNG (2011)


Commercial and Strategic Opportunities for LNG in China

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LNG Sector in China: Current Situation and Future Developments



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85 bcm of gas per year is produced from conventional resources, 7% of which is turned into LNG

Sources: IEA, CNPC (2009), EIA, Platts, Black and Veatch (2011)

China has more than 5950 bcm of technically recoverable reserves producing approximately 85 bcm of gas a year

About 7% of total gas produced in China, mostly those obtained from marginal gas fields, is turned into LNG and transported to major cities

These small to mid scale LNG projects have grown in the last 5 years, with at least 13 small to mid scale LNG plant projects initiated

Figure 1: Conventional gas resources in China

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/8354868



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China’s LNG imports rose 40% in 2011 from 2010 and is expected to increase 3.5 fold from 2011 to 2020

China is expected to import 18.1 bcm of LNG in 2011, up 40% from 12.8 bcm in 2010

Additionally, LNG demand is expected to increase 3.5 fold from 2011 levels, reaching 64 bcm in 2020

LNG procured through long term supply contracts is expected to make up 90% of total LNG imports by 2015 with the rest met through spot purchases

Sources: FACTS Global Energy, JP Morgan, BP Statistical Review of World Energy (2011), LNG Journal, Wood Mackenzie (2010)

Figure 4: China’s LNG imports in 2010 by country (bcm)

0

1

2

3

4

5

6

bcm

China's LNG Imports in 2010 by Country



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14 LNG terminals and 65 LNG carriers will be needed in China by 2015 to support planned import growth

14 LNG receiving terminals are expected to be operational by 2015 with a combined capacity sufficient to import >120 bcm of gas per annum

There are more than 20 LNG receiving terminals in various phases of development, with >90% owned by the major NOCs (CNOOC, CNPC, Sinopec) or their subsidiaries

It is estimated that >65 LNG carriers* will be needed by 2015 to support planned import growth

Sources: The California Energy Commission (2010), InterFax China (2008), China Shipbuilding Economic Research Centre (2011)

Figure 5: Existing and planned** LNG import terminals

* Refers to all LNG carriers importing LNG to China from overseas sources. These carriers may not be made domestically in China. ** Note that due to the rapid development of LNG terminals in China, not all planned import terminals may be represented



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Gas-fired power generation capacity has increased rapidly especially at key economic regions

The share of natural gas used in power generation over total gas consumption more than tripled from 5% in 2005 to 18% in 2010 and is expected to grow to 21% by 2015

Gas-fired peak load power generation is most prevalent in the Yangtze river delta economic zone and Southeast region (led by Shanghai and Guangzhou respectively)

This coincides with areas that have the highest number of LNG import terminals

Source: CNPC (2010)

Figure 6: Gas-fired power generation capacity by region in 2008



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More than 750 000 road vehicles are already running on CNG or LNG and the shipping sector is looking to convert

>750,000 NGVs including CNG- and LNG-fuelled cars, transit buses and taxis

Shipping sector now looking to emulate with the successful use of LNG-fuelled road vehicles

In 2010, a LNG-fuelled tugboat running on 70% LNG and 30% diesel was test navigated along the Yangtze River in Hubei province

8 LNG-fuelled demonstration ships are being built and will be launched simultaneously in the Yangtze River, Beijing-Hangzhou Grand Canal and the Pearl River

By 2015, 55 LNG bunkering facilities are expected to be set up along these three major river waterways

Source: Fortune Oil, China Natural Gas (2010), NGV Journal, Kunlun Energy, Jovo (2011)

Figure 7: Number of LNG bunkering facilities along major rivers



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Faster than expected development of unconventional gas resources may reduce demand for LNG imports beyond 2020

Source: Bloomberg, EIA (2010)

China’s unconventional and hard-to-extract gas deposits may account for 75% of China’s total reserves

Demand for LNG imports may go down if

commercial unconventional gas production expands faster than expected beyond 2020 The rapid expansion of shale gas production in

the USA and the impact it had on LNG markets could repeat itself in China. Figure 8: Shale gas production in the U.S.



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Chinese LNG-related companies have complementary needs to products and services offered by Norwegian companies

Source: DNV



Opportunities for Norwegian LNG-related companies in China are centred along two key areas

1a) Regasification solutions

1b) Small scale LNG distribution

1c) LNG as marine fuel

1d) LNG bunkering and ship to ship transfer

2a) Maritime technologies

2b) Rules, standards and regulations

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2

LNG Transportation and Distribution

Engineering Activities and Management

1

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Opportunities in Vietnam PetroVietnam has set the target to import

the first LNG cargo by:

2015 for Thi Vai

2018 for Son My

The importation of LNG will diversify primary

energy sources used for power production,

reduce the dependance on coal and ensure

national energy security.

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Source: DNV, 2012

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Case Study Vietnam -Small scale LNG milk-route

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Once LNG developments mature in the South, a large scale LNG receiving terminal facility could be considered for the North post 2020, opening up a second opportunity for an LNG FSRU

Two LNG receiving terminals at both ends of the country

would make supplying LNG to growing demand centres along the coast using small scale LNG vessels logistically possible

In one example scenario, a small scale LNG vessel (20,000

m3 – 50,000 m3) originating from the Southern facility would drop off LNG cargoes in a milk run fashion at small scale LNG receiving facilities along the coast before calling at the Northern facility

After all cargoes have been dropped off, the vessel would

then call at the Northern facility, pick up fresh LNG cargoes and double back along the same route

Source: DNV, 2012

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Indian Gas Scenario

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32%

10%52%

1% 5%INDIA

Oil

Gas

Coal

Nuclear

Hydro

World vs. Indian energy scenario

34%

24%

29%

5%7%

WORLDOil

Gas

Coal

Nuclear

Hydro

Source : BP Statistical Review, June 2010

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LNG Prospects in India • India is the 4th largest Energy consumer after US, China & Russia.

• Primary energy consumption of India has more than doubled between 1990 and 2011.

• The Indian gas market is projected to be one of the fastest growing in the world over the next two decades: the IEA forecasts gas demand to increase at 5.4% per annum over 2007-30 reaching 132 billion cubic meters by 2030.

• The power sector is the fastest growing area for energy demand, increasing from 23 percent to 38 percent of total energy consumption between 1999 to 2009.

• India and China represented a combined 12% LNG market share in 2012.

• The growing appetite for LNG in India and China resulted in 7.7% & 12.2% growth in LNG import in 2012

• Natural gas currently contributes 8% of total energy consumption and is projected to grow up to 20% by 2030 in India.

Source:- International Energy Agency

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LNG in India beginning and growth

• India began importing liquefied natural gas from Qatar in 2004 and increasingly relies on imports to meet domestic natural gas demand gaps.

• In 2011, India was the 6th largest LNG importer with over 5.3% of the global imports.

• Gas consumption has grown at an annual rate of 10 percent from 2001-2011

• The power sector and fertilizer sector drives the Natural Gas Demand in the country. The government has identified these as priority sectors, which ensures that they receive larger shares of any new gas supply.

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LNG in India reserves and network

• According to the Oil & Gas Journal, India had 43.8 Trillion cubic feet of proved natural gas reserves at the end of 2012. About 30 percent of these are onshore reserves, while 70 percent are offshore reserves.

• The two most important companies operating India's large gas pipeline system are GAIL and RGTIL. GAIL is a state owned gas transmission & marketing company having 8000 km (Source:- CRISIL) gas transportation infrastructure. Reliance Gas Transportation Infrastructure (RGTIL) is the largest private sector gas transmission structure.

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Evolving Energy Mix- Increase Share of GAS

Source:- GAIL

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Demand Supply Outlook of LNG • Domestic natural gas supply to grow at a CAGR of 5.6 per cent over FY13-

15 while gas demand to grow at a CAGR of 17-18 per cent thus aggravating

the deficit situation.

• LNG imports are expected to increase at a CAGR of 19 per cent over FY13-

15 but will only partially meet the shortfall, despite huge LNG re-gasification

capacity additions planned in the next 5 years.

• India’s Gas demand supply gap projection necessitating import of LNG.

Year

2015

2020

2030

Gap in demand

and supply MMTPA

14.175 22.05 40.95

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India’s gas infrastructure

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Existing & Projected LNG Regas Capacity

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Existing LNG Terminals in India Terminal Partners Capacity Supply source Start up

date Dahej Petronet LNG (GAIL,

ONGC, Indian Oil and BPLC (each 12.5%), GDF Suez (10%), ADB (5.2%) and private shareholders (34.8%))

10 mtpa Qatar – long term (7.5 mtpa)

March 2004

Hazira Shell (operator, 74%), Total (26%)

3.5 mtpa Merchant model

April 2005

Dabhol NTPC, GAIL, Indian banks15 (28.3% each) and the Maharashtra state Electricity Board (15%).

5 mtpa (1 mtpa initially)

Possible: Algeria, Qatar, Australia, Oman and Abu Dhabi

2010

Total 18.5 mtpa

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Under Construction LNG Terminal in India Terminal Partners Capacity Supply source Start up

date

Kochi Petronet LNG

2.5 mtpa 1.5 mtpa for 20 years from Gorgon, Australia (2014-15). Possibly Qatar, Papua New Guinea

2012

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Planned LNG Terminals Terminal

Partners

Capacity Start up date

Dahej exp Petronet LNG 2.5 mtpa March 2014

Hazira exp

Shell, Total 6.5 mtpa TBN

Kochi exp Petronet LNG

2.5 mtpa 2014

Mundra Port GSPC (75%), Adani Group (25%)

6.5 mtpa 2012

Mangalore ONGC & IOC 5 mtpa 2012

Total 23 mtpa

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Planned LNG Terminals Terminal Partners Capacity Start up

date

Pipapav Port

Essar Group, Swan Energy, possibly GSPC Gujarat Pipavav Port Ltd. Intends to become a partner

5 mtpa 2013

Ennore TIDCO, IOC 5 mtpa 2017

Haldia Spice Energy 2.5 mtpa 2011

Total 12.5 mtpa 37

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Scope for Small LNG Tankers & FSRUs

• Demand for natural gas across the country in sectors such as town gas and transportation in addition to Industrial use and imported LNG can be an important source.

• Existing gas grid does not cover the entire country, particularly the coastal regions.

• Delays in expansion of gas grid owing to right of way problems & difficult terrain.

• Large coastline of about 7500 kms offers opportunity for small LNG carriers and FSRUs.

• Construction of small LNG Terminals at Andaman and Sri Lanka under consideration.

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Opportunities in India India plans to double its use of natural gas (LNG and

CNG) over the next 10 years.

Currently, India has two LNG terminals and another two under construction.

Small scale distribution will reduce the need of big receiving terminals.

Beneficial in regions without any pipeline grids.

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Norwegian LNG-related companies are distributed across the LNG value chain

Source: DNV


Liquefied Natural Gas (LNG) as fuel for ships Norwegian experience

The first LNG ferry Glutra 2000 Two Supply Vessels 2003 (Dual Fuel) Two supply vessels 2009 (Dual Fuel) Two supply vessels on order Five LNG car ferries 2007 Three LNG car ferries 2009 Three LNG car ferries 2010 Seven new LNG ferries on order Three military vessels in operation 2009

MARINTEK 42

The LNG ferry at berth

Höegh LNG – a fully integrated floating LNG service provider

Production Shipping Regasification Distribution Exploration

LNG carriers LNG regasification vessels FLNG

LNG: Liquefied Natural Gas SRV: Shuttle and Regasification Vessel FSRU: Floating Storage and Regasification Unit

Proprietary FLNG design

Principle approval for a FLNG project in Papua New Guinea

Pre-feed agreement for an FLNG at Tamar field in Israel

5 standard carriers in operation

1 carrier acquired with delivery 2Q 2012 (“LNG Libra”)

Purchase option for 1 carrier with delivery 2H2013 (“STX Frontier”)

2 regasification vessels in operation

3 regasification vessels on order, of which 2 with long-term employment secured

Options for additional regasification vessels

1 conversion candidate (“LNG Libra”)

Advantages of FSRU’s

Can be located near to key offtake loads (power stations, heavy industry)

Scalable – add more vessel based storage without regas capacity

Does not require large land tracts to be set aside

Shallow or deep water options available, all proven mooring solutions

Significant savings in time and money

Simpler permitting

Moveable – can be used to build up market and then move to new location

Base for small scale LNG distribution, no modifications necessary

Advantages of using FSRU for small scale LNG

New FSRU projects are being specified to include small scale capability

Simple in operational terms

Requires minor modification / upgrade to the FSRU

FSRU ideal as LNG distribution centre:

Offshore (typically)

Easy access for small scale vessels

Either for point to point or milk run distribution

GasPartners

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* Combined cycle electric power generation plant located on side units (Illust: Typically 220MW on each side unit) * For delivery of both gas and electric power to shore * Range of capacities: e.g. from 5 MW single units – to 2,000 MW gas power stations w/ several modules

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Regas & Power Generation Terminal

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Bergen Group Fosen Shipyard LNG Fuelled Ferry for Fjordline

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Concluding remarks

• Norway has demonstrated that small scale LNG production and distribution is competitive as fuel for ships

• LNG is available world vide and can be further distributed to a small scale market (industry, maritime)

• LNG is considered to be the main alternative fuel to fuel oils. • Asia will be the new large market for Small Scale distribution

and Use of LNG.


Thank you for your attention

Egil [email protected] Singapore

asia days 2013 - market opportunities for small lng distribution

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