Economic Evaluation of Timor Sea Projects v22Sep2010[1]

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Economic Evaluation of Timor Sea ProjectsAn Economic Model for Greater Sunrise LNG Project

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The objective of the project is to develop an economic model for Greater Sunrise LNG using various development options and with capability to evaluate the project at an integrated and at each segment of the value chain

An Economic Model for Sunrise LNG Project>

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Project: Development of Economic Evaluation Model for Greater Sunrise LNG Project

Objectives:• To develop an economic model for Greater Sunrise LNG project, and

• To provide general training on the development the economic model.

Scenarios to be assessed:1) An Integrated LNG economics - for TLNG, Darwin LNG, and FLNG

development concepts

2) Separate upstream and downstream (pipeline + liquefaction) economics

3) Upstream gas price sensitivities for (2) given a fixed downstream IRR

4) Separate upstream, pipeline, and liquefaction economics - for TLNG development concept

5) Downstream gas price sensitivities for (4) given a fixed upstream IRR

6) Upstream gas price sensitivities for (4) given a fixed downstream IRR

7) Sensitivity analysis for field and liquefaction parameters (including the 7.7 Tcf case)

Evaluation Option

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Project progress - Economic Evaluation Model

Completed• Model template on an Excel 2003 platform

• General economic assumptions and prices

• Collating and populating data for each development option

To be done• Develop fiscal model calculation for Timor-Leste PSC

• Develop fiscal model calculation for Australia Concession

• Develop macros for sensitivity and breakeven (netback) analyses

• Develop cash flow consolidation and results

• Draft a general user-guide

Illustration of Economic Model

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Structure of Economic Model

General Assumptions

Technical Inputs –production, costs, prices

Upstream taxation

Upstream taxation

Upstream taxation

Upstream taxation calculations

Pipeline taxation calculations

Liquefaction taxation calculations

Timor LNG

FLNG

Darwin LNG

Development Option

Consolidation & Outputs

Fiscal Models

Assumptions & Inputs

ALL SEGMENTS

DOWNSTREAM

LIQUEFACTIONPIPELINEUPSTREAM

UPSTREAM

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General assumptions will contain all the common inputs that could be applied for all modules (upstream operation, pipeline, and liquefaction). Examples are conversion factors and economic indicators such as inflation rates.

Development scenario will include some flexibilities to evaluate the project economics based on stand-alone basis or integrated scenarios.

Each value chain module (upstream, pipeline, and liquefaction) will be structured consistently, starting from assumptions, calculation, and output.

Assumptions will be value chain-specific, including development schedule, estimated capital expenditures, production profiles, operating expenses.

Then, the calculation will process all the generic and specific assumptions based on the applied fiscal systems for both Timor-Leste PSC and Australia Concession.

Summary of output will be summing up all the result from each of the value chain

Sensitivity analysis and output charts will also be built to cater for various options of development scenario

Structure of Economic Model

General Assumptions

Technical Inputs –production, costs, prices

Timor LNG

Darwin LNG

FLNG

Development Option

Assumptions & Inputs

Upstream taxation

Upstream taxation

Upstream taxation

Upstream taxation calculations

Pipeline taxation calculations

Liquefaction taxation calculations

Fiscal Models

Consolidation & Outputs

ALL SEGMENTS

DOWNSTREAM

LIQUEFACTIONPIPELINEUPSTREAM

UPSTREAM

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Information Sources: Development Options

Information Required Data Sourced From

FLNG Production profile Wood Mackenzie's analysis*Upstream cost Wood Mackenzie's analysis*Pipeline cost Wood Mackenzie's analysis*LNG plant cost Wood Mackenzie's analysis*Cost phasing Wood Mackenzie's analysis*

Timor LNG Production profile Following FLNG assumptionUpstream cost Following FLNG assumption (FPSO development)Pipeline cost JP Kenny reportLNG plant cost KBC reportCost phasing Team

Darwin LNG Production profile Wood Mackenzie's data on Darwin (Bayu Undan)Upstream cost Following FLNG assumption (FPSO development)Pipeline cost Intec Sea reportLNG plant cost TeamCost phasing Team

Note: *Wood Mackenzie’s unpublished information

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Information Sources: Assumptions

Information Required Data Sourced From

Economic Assumptions Inflation rate Wood Mackenzie's dataCapex Escalation rate TeamOpex Escalation rate TeamInterest Rate (LTBR) Wood Mackenzie's data

Prices Brent Wood Mackenzie's dataJCC Wood Mackenzie's dataCondensate Wood Mackenzie's dataLPG Wood Mackenzie's dataLNG FOB to Japan/Korea/China Wood Mackenzie's data

Field/Plant parameters Heating value Wood Mackenzie's dataLNG project benchmark Wood Mackenzie's data

Project timing Wood Mackenzie's analysis

Note: *Wood Mackenzie’s unpublished information

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Information Sources: Tax & Legislation

Information Required

Upstream Taxation Timor-Leste PSC terms Wood Mackenzie's dataAustralia Concession terms Wood Mackenzie's data

Downstream Taxation Timor-Leste Taxation PWC Timor-Leste Tax BookAustralia Taxation Wood Mackenzie's data

Legislation CMAT SERNTimor Sea Treaty SERNGreater Sunrise Operating Agreement SERNGreater Sunrise Unitisation Agreement SERN

Data Sourced From

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Timor LNG• Development of 5.1 tcf of gas and 226

mmbbls of condensate from Sunrise and Troubadour fields

• Upstream operations using FPSO and subsea development

• 4 mmtpa LNG plant located on the South Coast of Timor-Leste, Beaco

• Feed-gas will be evacuated using 228 km gas pipeline crossing the Timor Trough with a maximum depth of up to 3,030 m

• Total Capex = US$16.1b consists of Upstream Capex of US$8.8b; Pipeline Capex of US$0.9b; Liquefaction Plant Capex of US$6.4b

• Estimated first production in 2022 with peak gas production of 610 mmcfd in 2023

Development Option A - Timor LNG

Development Option A - TLNG*

Beaco

Greater Sunrise

TIMOR SEA

Water depth = 160 m

Potential issue: • Cost optimization using fixed platform development• Logistics and marine support from Timor

Note: *Development Option to be analyzed - SERN



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FLNG• Development of 5.1 tcf of gas and 226

mmbbls of condensate from Sunrise and Troubadour fields

• Integrated upstream and liquefaction operations using FLNG vessel and subsea development

• 4 mmtpa LNG liquefaction plant on-board of FLNG vessel

• Total Capex = US$15.2b consists of Upstream Capex of US$8.8b; Liquefaction Plant Capex of US$6.4b


Development Option B - Floating LNG

Development Option B - FLNG*

Greater Sunrise

TIMOR SEA

Water depth = 160 m

Potential issues: • FLNG expansion capability for upside volume• FLNG ownership (under PSC?)

Note: *Development Option to be analyzed - SERN



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Darwin LNG• Development of 5.1 tcf of gas and 225 mmbbls

of condensate from Sunrise and Troubadour fields

• Upstream operations using FPSO and subsea development

• Using the existing Darwin LNG facilities of 3.6 mmtpa with the decline of Bayu-Undan supply

• Feed-gas will be evacuated using 500 km gas pipeline to an onshore landfall point in Darwin, Australia

• Total Capex = US$11.0b consists of Upstream Capex of US$8.8b; Pipeline Capex of US$1.8b; Liquefaction Plant Capex of US$0.4b (upgrading)


Development Option C - Darwin LNG

Development Option C - Darwin LNG*

Darwin

Greater Sunrise

TIMOR SEA

Potential issue: • Competing with upside volume from Bayu-Undan or

ChuditchNote: *Development Option to be analyzed - SERN



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Cost comparison for Greater Sunrise (FLNG Option)

$0

$2

$4

$6

$8

$10

$12

0 2 4 6 8 10 12 14

Gas Recovered (Tcf)

Ups

tream

Cap

ex (U

S$/

boe)

SunrisePrelude

Darwin (Bayu-Undan)

PlutoIchthys

Wheatstone

Q-Curtis

APLNG

GLNG

Liquefaction Cost Comparison*Upstream Cost Comparison*

Note: *Wood Mackenzie; Capex in Real Term 2010

$0.0

$0.5

$1.0

$1.5

$2.0

0 2 4 6 8 10 12

Liquefaction Plant Size (mmtpa)LN

G C

apex

('00

0 US

$/m

mtp

a)

Sunrise

Prelude

Darwin (Bayu-Undan)

Pluto

Ichthys

WheatstoneQ-Curtis

APLNGGLNG



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Upstream Revenue Sharing Structure

Greater Sunrise LNG Upstream Revenue

Joint Petroleum Development Area

(20.1%)

Australia Administration’s Area

(79.9%)

Timor-Leste (90%)

Australia (10%)

Timor-Leste (18.1%)

Australia (81.9%)

Greater Sunrise LNG Upstream Revenue

Timor-Leste PSC (50%)

Australia Concession (50%)

*Quarterly adjustment payment when Timor-Leste gets less than 50%

CMATS*Unitisation Agreement & Timor-Sea Treaty*

Note: *SERN



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Timor-Leste PSC - Revenue Flow*

Note: *A generic revenue flow

(100% with CF uplift)

(60%)

(30%)

(22.5% after 16.5 post-tax ROI)

-FTP +FTP(5%)



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Australia Concession - Revenue Flow*

Note: *A generic revenue flow

(29%)

(40%)



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Salient Points from Discussion

Comments:• Base case gas volume is 7.67 Tcf + 300 mmbbls condensate; 5.1 Tcf + 227 mmbbls condensate should

be the sensitivity case

• 5 mmtpa LNG plant capacity for Timor LNG and Darwin LNG; 4 mmtpa LNG plant capacity for FLNG (due to FLNG design constraint)

• Darwin LNG case should be an expansion case

• Project start should be 2017 for all cases

• Other than using FPSO, the fixed-platform and FSO development (refer to Woodside’s development option and costs) should be considered for Timor LNG and Darwin LNG

• Revenue sharing structure should follow the IUA 20.1% to Timor-Leste, 79.9% to Australia; adjustment payment should be done to match 50% Govt. revenue to Timor-Leste

• Greater Sunrise PSC terms should be used instead of the general Timor-Leste PSC terms

• Woodside and PETRONAS assumptions on cost escalation rate should be considered



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Aizal BaharuddinHead of Petroleum EconomicsT: +65 6518 0812E: [email protected]

Contacts



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Wood Mackenzie Disclaimer

Strictly Private & Confidential

This report has been prepared for by Wood Mackenzie Limited. The report is intended solely for the benefit of the Secretary of State for Natural Resources, Timor-Leste and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.

The information upon which this report is based has either been supplied to us by the Secretary of State for Natural Resources, Timor-Leste, or comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.



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Economic Evaluation of Timor Sea Projects v22Sep2010[1]

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