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LNG as Future Bunkering Fuel in Europe
October 2013
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Gazprom Marketing & Trading Limited 2
Gazprom Group
Europe FSU Countries Russia
Japan
Republic of Korea
Taiwan
ChinaVietnamIndiaIraqLibyaEquatorial
Guinea
Algeria
Bolivia
Venezuela
UAE
Singapore
Oil production
Oil and gas condensate
sales
Refined products sales
Electricity sales
Gas transportation and
underground storage
Electric power and heat
generation
Oil products distribution through
gasoline stations network
Hydrocarbons s explorarton
,
production and geological
survey
Projects of methane
production from coal beds
Hydrocarbons processingSpot sales of LNG
Gas sales to end-consumersSales of gas, supplied by
gas pipelines
Gas and gas condensate
production
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Gazprom Marketing & Trading Limited 3
Gazproms strategic goal is to become
the leading global energy company by
entering new markets, diversifying
business activities and ensuring
reliable supply.
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Gazprom Marketing & Trading Limited 4
Source country
Market countryCumulative Cargoes Traded
Year Volume traded (bcm)
2005 0.16
2006 0.44
2007 0.45
2008 0.64
2009 1.84
2010 2.54
2011 3.04
2012 1.82
Gazprom LNG operations and trading via GM&T
Source: Gazprom LNG
GM&T:
Manage of the Gazprom Group LNG trading portfolio
Operational support of maritime transport
Trade and marketing activities development
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Gazprom Marketing & Trading Limited 5
Gazprom LNG business growth
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Gazprom Marketing & Trading Limited 6
Gazprom has the opportunity to build on its competitive advantages in a new emerging G4T market:
Equity gas in areas of interest: Secure supply
Proximity to customers: Lower cost to customers compared with competitors
A 10% market share in these ECA regions by 2030 could provide 1.8 mmtpa of LNG demand (2.4 bcm)
Gazprom is well positioned to develop a global G4Tbusiness in markets with proximity to its equity gas
ECA 1: Baltic tied to NordStream feed gas
Nord Stream pipeline project: existing infrastructure and
substantial volume of equity gas
ECA1 and 4:Other European and Asian
Shtokman LNG project possibility to build a small scale
jetty and then benefit from bunkering operations for the
Arctic sea route towards Asia
A
D
ECA 3: Med/Black Sea
Black sea South Stream pipeline project: emerging
infrastructure and substantial volumes of equity gas
C
ECA 4: Singapore
Pacific train 3 Sakhalin project: existing infrastructure,
new volumes of LNG, possibility to build a small scale jetty
B A
B
C
D
DC
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Gazprom Marketing & Trading Limited 7
Emission Control Zones
ECA 2
ECA 1
ECA 3ECA 4
Caribbean
ECA
Singapore Green
Initiative, Hong
Kongs Fair WindsCharter
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Gazprom Marketing & Trading Limited 8
Maritime regulation change is opening an opportunity for theLNG bunkering market to develop
IMO sulphur emissions limits
International Maritime Organisation (IMO) regulations will
require significant reductions in ship emissions (under
ANNEX VI) in designated Emission Control Areas (ECA1)
over the coming years:
1 January 2015:
Sulphur limit in ECAs will be reduced to 0.1%
NOx for Tier I levels in ECAs will be reduced by 80%, and by
20% for Tier II (global) complianceBy 2020 additional ECA zones are expected to be enforced:
A global cap on sulphur content of 0.5% will be enforced
* Note: SCR: Selective Catalytic Reduction, HFO: Heavy Fuel Oil
**Source: RS Platou
Depending on stand alone ship economics as wellas % of sailing in ECA1 zone, ship owners will have
the following options to comply:
Ship operators comply options
HFO*/Scrub
bers
Marine
Diesel Oil
LNG
No upfront investment
Higher operating costs
Refineries may not be able to meet
increasing demand
1
2
3
Lower fuel price
Significant capex investment
Operational constraints
Competitive fuel price with MDO
Security of supply is constrained by
infrastructure
Larger capex investment
Lack of Infrastructure
Currently there are 37 ships running on LNG worldwide (equal number has beenordered so far**)
LNG consumption in North-West Europe shows that demand comes from Ro-Ro
ferries (36%), PSV (22%) and Car shuttle ferries (22%)
In Norway LNG bunkering exists since 2000 helped by the incentives posed by
the Government:
NOx fund subsidizes the cost of LNG bunker fuel projects
Clear policies for LNG bunkering
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Gazprom Marketing & Trading Limited 9
LNG bunker demand potential in ECA 1
Demand for LNG bunkering will be driven by relative cost to traditional marine fuels
Source: Gazprom G4T
Market expectations on LNG bunkering demand:
PACE Global : LNG demand 6 MTPA expected in the Baltic/
North Sea (ECA 1) by 2030
Lloyds Register FOBAS:24 MTPA by 2025 globally. An
estimated 653 vessels, or 4.2% of global deliveries, could be
fuelled by LNG between 2012-2025
Danish Maritime Authority DMA:4 MTPA by 2020globally
(Det Norske Veritas DNV) 5-7 MTPA by 2020 globally
LNG bunker fuel demand, as part of total bunker fuel demand,
will be determined regionally by:
Relative price levels with traditional marine fuels (HFO, MGO)
ECA or other ship emission controls
LNG fuel and infrastructure availability
Composition of ship traffic
NOx scrubbing and NOx adsorption traps
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Gazprom Marketing & Trading Limited 10
LNG bunkering value chainThe LNG bunkering value chain is composed of 4 distinct operations
1. Supply
2. Transport
3. Storage
4. Bunkering
- Initial LNG supply will be from liquefaction plant- Recommended option is for Gazprom to construct own plant close to existing
pipelines
- Transport of LNG from liquefaction plant to point of use or intermediate storage
- Typically performed by LNG feeder vessel (1,000 m3 40,000 m3)
- Can also be transported by truck (widely done in Norway)
- Storage capacity needed at liquefaction plant and end-user port
- Expected port tank capacity of 20,000-30,000m3
- LNG loaded from remote storage tanks to be delivered to end-user
- Can be performed by truck, fixed line or marine vessel (most likely barge)
- Barge capacity 1,000m3 up to 5,0000m3
- Demand per bunkering customer expected to be 300 m3 500 m3
- Barge is economically efficient but requires upfront investment since new
technology
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Gazprom Marketing & Trading Limited 11
Kaliningrad
0.02 mtpa +
0.15 mtpa
Portovaya
0.5 mtpa
NE-E-Hub
Samsun
Target markets
CNG light & medium duty vehicles LNG heavy duty road transport LNG bunkering
NGV markets
Bunkering markets
Infrastructure options:
LNG liquefaction either in Russia or at exit of
Russian export pipelines
LNG storage hubs for geographic extension Distribution to target clients inland by truck /
on sea by feeder vessel
Utilization of cold generated from
decompression in existing network
South Stream
(Dzhugba)
0.5 mtpa
Options for SSLNG infrastructure to match Gazprom market share of 10%
based on conservative demand expectations, further geographic
expansion (US, China, etc.) possible.
NW-E-Cluster
CNG 1.0 bcm
LNG 2.2 bcm
SW-E-Cluster
CNG 5.4 bcm
LNG 3.4 bcm
SE-E-Cluster
CNG 3.0 bcm
LNG 2.4 bcm
LNG Bunkering Mediterranean Sea 3 bcm
NW-E-Hub
2
1
4
3Baumgarten
0.2 mtpa
xTarget market priority
Infrastructure option
NE-E-Cluster
CNG 5.4 bcm
LNG 3.6 bcm
SW-E-Hub
* Figures represent conservative demand projections per cluster
EU demand on SS LNG is expected to reach 43bcm
by 2030
Kingisepp
0.01 mtpa
Baltic LNG
10 mtpa
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Gazprom Marketing & Trading Limited 12
Provide sustainable and
competitive supply of LNG
Develop dedicated
infrastructure based on
long-term partnerships
Provide sustainable and competitive supply of LNG to the
bunkering and transportation sector in the Baltic region
Attract economical and political support for development of
alternative fuel projects in Europe
Develop LNG infrastructure (liquefaction, hubs, fillingstations) in proximity to our European customers
We are dedicated to developing this market togetherwith our customers
Create value proposition
for customers
Guarantee lower Total Cost of Ownership than operations
on Diesel, HFO or MGO whilst at the same time fulfilling
environmental objectives
G G i k t t ith th k
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Gazprom Marketing & Trading Limited 13
Gazprom Group is keen to partner with the keystakeholders so that to allow the development of LNG asa bunker fuel
Reliable supply of LNG in the Baltic/Northsea region
Development of infrastructure (storageand distribution)
Long-term partnership
Guaranteed demand of LNG
Development of infrastructure(storage and distribution)
Sign MOUs for offtake of LNG fromthe Baltic LNG plant
Our partners
Gazprom Group
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Gazprom Marketing & Trading Limited 14
How do you envisage the development of LNG market in the port and the region?
What initiatives is the port authority involved to promote LNG as a fuel?
How port is intend to encourage/police use of LNG in SECA/ECA areas?
Is there any land available for Gazprom to build LNG storage/bunkering station?
What are the permits/application required? How long would it take to get them?
What are the regulations that currently in place for ship to ship bunkering and what is yet to be sorted out?