www.galwaygroup.com

LNG Import Facility Infrastructure Options

Mangesh Patankar (Head of Business Development – Galway Group)

28th April 2016

Agenda

2

Introduction to Galway Group

Types of Regas terminals

Floating Regas Solutions

Case Studies on Floating Regas Solutions

Key Takeaways

Galway Group has more than 20 years’ experience in advising clients in the energy sector

3

Galway’s Value Proposition

Viable LNG Import Terminal Solution is an Important Component of Establishing Credibility with Suppliers

4

Most LNG sourcing strategies aim to establish a competitive environment amongst potential suppliers to obtain;

Competitive price,

Fair terms and conditions and

Security of supply

The buyer would want to involve multiple qualified potential suppliers in a process (Request for Proposal or parallel negotiations) to create that competitive environment

To attract multiple qualified potential suppliers, buyer must establish its credibility with potential suppliers

Credibility and reliability as a buyer

Creditworthiness, Offtake reliability, etc.

Credibility and reliability of existing gas and LNG infrastructure

Credibility and technical viability of gas and LNG infrastructure development plans

Infrastructure Should be “Acceptable” to as Many Suppliers as Possible to Support Sourcing Strategy

5

LNG infrastructure must be “acceptable” to as many potential suppliers as possible to enable the buyer to create a competitive LNG supply environment

Designed, built and operated safely and reliably to accommodate LNG ships

Berthing/docking (berth configurations, acceptable metocean conditions)

LNG unloading (connectivity & rate)

LNG storage (capacity), etc.

Compatibility with the LNG shipping fleet

Focus on operational reliability to understand risks of disruptions and impact on overall supply & shipping portfolio management (applies to both DES and FOB sales)

LNG infrastructure should be based on proven and reliable solutions and technology to support buyer’s sourcing strategy

LNG Terminals – Onshore vs. Floating

6

Onshore Floating

• Industry “Standard”

• Cost: $0.5 - $1.5+ Billion

• 3-4 years construction

• Most suitable for larger, base

load service (economics)

• Require deep water port

• Require sizeable land area

• Rapidly growing option

• Cost: $100-$250+ MM

(FSRU) plus $50 - $200+

MM (infrastructure)

• Construction: 12-30 months

• Unit costs can be higher

depending on throughput

• Require deep water port

Marine facilitiesTanks

Vaporizers &

Utilities

Berth & Mooring

System

FSRU*

Tanks

Vaporizers &

Utilities

Onshore or Floating

• Emerging option

• Cost: $70+ million

• Construction: 2+ years

• Onshore or floating (barges)

• Unit costs highly dependent

on throughput

• May not require deep water

port if serviced by small

scale ships/barges

Standard LNG Terminals Small Scale LNG

Understanding the commercial drivers for an FSRU Project is key for a successful terminal development

7

Key Drivers FSRU Characteristics

Project Lead TimeSignificantly shorter in countries where Government permitting

process is simple

Capital CostMedium unit capex cost compared to onshore terminal. But with no

economies of scale

Opex Higher than onshore regas terminals

Returns Suboptimal utilisation will affect returns

Regas OperationsInterrupted cargo delivery profile and lack of onshore storage can

deter some customers

Shipping Cost Shipping costs will increase with limited storage capacity

Storage Limited and not constant unless ships dovetailed

Globally, 17 FSRU projects are successfully operating, and 3 under construction

8

• FSRU has been deployed as an option in the countries with

– Downstream gas demand uncertainty (seasonal or erratic)

• Brazil, Argentina

– Countries where solutions have to be achieved in a short time, a bridging solution or a low demand

• Kuwait, Jordan, Lithuania, Israel etc.

– Countries with fragmented geography and gas transportation infrastructure constraints

• Indonesia, Malaysia

– Countries where lower capital investment is the key constraint

Existing and Under-Construction Floating LNG Import Terminals

With wider acceptance, FSRU’s are the forefront infrastructure option among new regasification development projects…

9

• With FSRUs proved as an acceptable solution operating successfully for a decade across the world, new FSRU projects are proposed across all regions:

– South America

• Chile, Brazil and Uruguay

– Middle East

• UAE, Bahrain etc.

– Europe

• Malta, Croatia, and etc.

– Africa

• South Africa, Ghana, Senegal, Benin and Egypt

– Asia

• Pakistan, Philippines, India, Bangladesh etc

Planned/Proposed Floating LNG Import Terminals

…and are becoming more acceptable to suppliers but configuration is very important…

10

• Availability to regasify LNG and send-out natural gas

• Availability to berth and unload delivery ship

• Suppliers will conduct significant technical and operational due diligence ,and evaluate on a case-by-case basis (same as for onshore terminal)

• Focus on LNG ship to FSRU/berth interface (safety and reliability)

• Suppliers have individual preferences and risk tolerances on both theconfiguration of the mooring/berthing infrastructure and interface with deliveryship

Suppliers are increasingly comfortable with FSRU based importterminal solutions

Choice of mooring configuration impacts floating terminal’s reliabilityand availability because of impact of meteorological (wind) and ocean (waves and currents) conditions

…hence, the need for a detailed Feasibility Study before selecting a configuration

11

A Feasibility Study provides an evaluation of the technical and commercial success of a potential project

provides a foresight on the expected project development challenges

helps in understanding and finalising various project concept options available for development

presents a view on the cost effectiveness and potential returns from the project EPC

FID

FEED

Feasibility Study/ Studies

There are a number of technical considerations required during the feasibility Study…

12

TechnicalConsiderations

Site Survey

Jetty Design

Pipeline Route and

Specification

New-build or

Conversion

FSRU/LNG Carrier

InterfaceFSRU Size

Gas Flow Measurement

Gas Quality

BOG Management

Various jetty designs can be

evaluated

Sub-sea and on shore

gas pipeline routes,

right of way issues,

pipe size and pressure

specifications to be

evaluated

Preliminary decision

between new-build v/s

conversion depends on

factors including

availability and size

requirements

Ship-to-ship or across the jetty

LNG transfer

Depending on the gas demand

Profile and type of customer

(e.g. assured anchor customer

availability)

Location of on shore

metering station

Boil-off gas re-capture and

condensation/flare-off etc.

Draft requirements, metocean conditions,shipping channel, sub-sea gas pipeline route feasibility

Factors such as Wobbe Index and compatibility of the R-LNG with existing grid gas and end user burner specification

…followed by several commercial considerations

13

Redeployment possibility and

salvage

Commercial Considerations

LNG Demand

Competitive Landscape

LNG Procurement

Business Model/

Commercial Structure

Project Financing

CAPEX and OPEX

Estimates

FSRU Ownership

Options

Identification of Project

Agreements

Upside Options

What does the demand profile look like,

major consumers?

Are there other gas suppliers

(domestic or LNG) in the region?

LNG Sourcing

Options

Merchant/Tolling,

Equity participation etc.

Possible sources/

strategic partner

Own or lease

TUA, SPA, GSA, TCP etc

Preliminary estimates of

CAPEX and OPEX

Case Study 1: FSRU’s have demonstrated shorter lead time for project construction

14

Construction Time: Onshore vs Offshore

New Built FSRU

0 10 20 30 40 50

Typical Onshore Regas

Typical Offshore Regas

Klaipeda LNG (FSRU)

Port Qasim (FSRU)

Egypt (FSRU)

Months

Speculative FSRU Contracted

An FSRU, usually, results in a short project development

time as compared to an Onshore regasification terminal

primarily because:

Speculative Investment by FSRU Owners

• Some of the LNG Ship owners invest in

speculative FSRUs making it available on a

short notice

• Shipyards have multiple decades of experience

in ship/LNGC building and knowledge of

construction critical path, making FSRU

construction efficient

Regulatory permits timeline

• In most of the cases, because of lesser

regulatory involvement in offshore, FSRU

permitting process is shorter as compared to an

onshore facility

Fabrication in a controlled environment

• The FSRUs are built in a controlled

environment (shipyard) with resources at the

disposal, which makes the process very efficient

and faster as compared to an onshore

regasification plant where construction site can

prove to be a challenge for resource mobilization

Case Study 2: Limited storage capacity may deter some consumers from selecting the FSRU option

15

Storage Comparison: Onshore vs Offshore

135,000

165,000

400,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

FSRUs before 2012 FSRUs after 2012 Typical OnshoreTerminal

Cubic

Mete

r of

LN

G

• Limited storage is one of the biggest drawbacks

of an FSRU that results in:

– Size limitation on the LNGC which can be

unloaded on to an FSRU, and may result in

demurrage charges because of unloading

delays

– Alternatively, FSRU has to discharge gas

faster than market requirement making gas

uneconomical for base load power generation,

or Partially loaded LNGC

– Resulting in lack of expansion possibility, and

presents no economics of scale

• As the industry matures, FSRU converted from old

LNGC is not widely appreciated due to lack of

storage capacity

• Most of the new build FSRU’s are currently above

170,000 cm LNG storage

Key Takeaways

16

To support competitive procurement strategies, regas configuration should be “acceptable” to as many potential suppliers as possible

Suppliers are increasingly comfortable with delivering to FSRU based LNG terminals, but the choice of configuration is important

Hence, detailed technical and commercial feasibility study is key in deciding the suitable configuration

Project development risks should be studied as part of the feasibility study so as to know the risk mitigation measures, and be able to fast track FID

Thank You.

Mangesh Patankar

Head of Business Development – Asia Pacific

Galway Group Asia

8 Temasek Boulevard#22-04, Suntec Tower 3,Singapore 038988

+65 91084421 (mobile)+65 6222 7917 (off)

mpatankar@galwaygroup.com