Prelude - where next is FLNG poised to "take off"?

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This is a presentation that Tony Regan, Principal Consultant, Tri-Zen International Singapore spoke about at SEAAOC 2012

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Prelude - where next is FLNG poised to "take off"?

  1. 1. www.tri-zen.com Tony Regan Principal Consultant SEAAOC 2012, Darwin 18June-20 September 2012 Prelude – where next Is FLNG poised to “take off”
  2. 2. www.tri-zen.com 22 Introduction to TRI-ZEN  TRI-ZEN is a consulting business focused on energy and utilities  We cover upstream & downstream, technical, commercial & financial  We offer a wide range of services:  Consulting  Strategy  Business Development  Project Management  Organizational Development  Alliances  Due diligence for M&A, project finance and IPO’s  Lead consultants located across Asia with a global extended network  Clients include the leading companies in energy and professional services based in Asia, Europe & North America  Tri-Zen, in association with engineering consultants , Energy & Power Ltd, provide comprehensive advice and services at every stage of an LNG/FLNG development
  3. 3. www.tri-zen.com FLNG - Prelude  15 years of research  1.6 million man hours working on the engineering challenges  Front End Engineering & Design awarded Samsung-Technip in July 2009  Final Investment Decision May 2011  Built at Samsung Heavy Industries’s Geoje shipyard in South Korea  Enters service 2016 3 Shell has entered into a Master Service Agreement with Technip and Samsung for the design, construction and installation of multiple floating liquefied natural gas facilities over a period of up to fifteen years Picture courtesy of Shell
  4. 4. www.tri-zen.com FLNG - Prelude  Designed to be on site for 25 years  To be located in the Browse Basin off Western Australia  Will tap into 3 Tcf gas reserves in Prelude & Concerto fields  5.3 mill tonnes of liquids producing:  3.6 mtpa of LNG  1.3 mtpa of condensate  0.4 mtpa of LPG 4
  5. 5. www.tri-zen.com 5 Floating liquefaction  Started with 14 different options on offer  Hull: 7 vessel, 7 barge  Storage from 0.5 mill tn to 5.8 mill tn  Flex LNG 1.7 MTPA LNG SPB Tanks SS Nitrogen Cycle Cost indic. $700/TPA  Shell LNG 3.5 MTPA Membrane Tanks DMR/ACD Cost indic. $1700/TPA Hoegh LNG Flex LNG Shell
  6. 6. www.tri-zen.com FLNG – Pacific Rubiales (Exmar)  Liquefaction  70 MMSCFD  0.5 MTPA  LNG Storage 14,000 m3  Offload to tankers up to 140,000 m3  Storage & Regas  Tolling basis for 15 years  Planned start 2014  Pacific Rubiales Energy Corp.  Offshore Columbia (Caribbean)  LNG Supply to Caribbean Islands 6 Picture courtesy of Exmar
  7. 7. www.tri-zen.com FLNG - Petronas Sarawak  1.2 MTPA  FEED Completed Feb 2012  Technip/Daewoo  Turret Moored  Membrane Storage  Sanctioned March 2012  Start Up Planned Q4 2015 Sabah  1.5 MTPA  4 Bidders for FEED – 2 to be awarded  Samsung, Daewoo and Hyundai + MMHE?  Sanction planned late 2013 ??  Start up planned Q4 2016 7 Picture courtesy of Technip
  8. 8. www.tri-zen.com Projects 8 LEADER TOPSIDES LNG HULL STORAGE PROJECT (CONSTRUCTOR) LIQUEFACTION MTPA CONTAINMENT m3 STATUS Shell Technip Barge 220,000+ Prelude Sanctioned, (Samsung) Shell DMR Membrane 90,000 LPG+ EPC in progress 126,000 Cond Sunrise next? Partner Inpex for Abadi (2.5) 4 projects planned Petronas Technip/Linde Barge FEED completed Feb 2012 (DSME) MR Membrane Sanctioned Mar 2012 Overtake Shell? Flex LNG Costain/Kanfa /WParsons Ship 170,000+ Interoil PNG FEED (Samsung) Dual Nitrogen SPB (SS) 50,000 LPG/Cond Generic - Det Eng Höegh LNG KBR Ship 190,000+ Petromin FEED (DSME) Niche (Methane/N2) Membrane 20,000 LPG+ Generic FEED 19,000 Cond Tamar, Israel pre-FEED Black & Veatch 14,000 SMR Part of value chain Linde Barge 180,000+ PTTEP Australia MR SPB?? 25,000 LPG+ Cogee FEED 25,000 Cond TBA Bonaparte Studies Conceptual Design Exmar 0.5 Barge Pacific Stratus Energy Colombia SBMLinde 2.5 GDF Suez/Santos Doris 2 Studies 3.5 1.2 ??? 2 2
  9. 9. www.tri-zen.com Projects 9 LEADER TOPSIDES MTPA HULL STORAGE STATUS (CONSTRUCTOR) LIQUEFACTION m3 Excelerate EBLV Black & Veatch 3.0 Barge 250,000 Concept (Exmar) SMR Membrane (incl. LPG) FEED in 2012? Inpex JGC 4.5 Barge Feasibility Mixed Refrigerant Now with Shell Aker/Statioil Aker 5.8 Barge FEED Mixed Refrigerant Shelved BW Offshore Mustang 1 Ship Concept Nitrogen SPB/Moss Hamworthy Hamworthy 0.5-2.2 Ship Field Specific Studies Nitrogen Field Specific TGE Marine TGE 0.4-1.5 Ship Concept (CMIC China) Mixed Refrigerant Type C ConocoPhillips ConocoPhillips 5 Barge 350,000 Concept Optimised Cascade Review in 2012 Sevan Marine Kanfa 1.5 Circular FPSO 200,000 Concept Nitrogen Tank
  10. 10. www.tri-zen.com The drivers for FLNG  Higher gas/energy prices  Growth in gas demand  36% increase between 2010 & 2020 (BP)  66% increase in Asia  Concern about declining domestic gas production (Europe & Asia)  Explosive growth of LNG demand and development of new sectors – transportation fuel, bunker fuel 10 0 50 100 150 200 250 300 350 400 450 500 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E North America Cent Amer/Caribb South America Europe Asia Middle East LNG Demand Forecast
  11. 11. www.tri-zen.com Drivers for FLNG  Cost effective way of monetising stranded/remote gas reserves  Design flexibility – re-deployable, can handle wide range of gases, can draw from multiple fields  Problems with conventional LNG projects – long delays getting permits, delays, cost over runs, shortage of key resources  Can utilise proven liquefaction technology – plenty of vendors  Potential for considerable cost savings:  No offshore production and compression stations  No subsea pipeline to shore  No onshore plant/berths/utilities  Modular construction in shipyards 11
  12. 12. www.tri-zen.com LNG Project Breakeven Costs 12 0 2 4 6 8 10 12 Sakhalin 2 Pluto 1 Browse Wheatstone GLNG APLNG QCLNG DSLNG Gorgon Ichthys Prelude US$/MMBtu FOB price needed to achieve a 12% IRR Source: Deutsche Bank Proposed projects
  13. 13. www.tri-zen.com Indicative FLNG CAPEX – Lowest Cost Scenario (1.7 MTPA, Lean Gas no LPG/Condensate Production) Building Block $ million Hull & Accommodation 580 Turret 40 Gas Reception 70 Feed Gas Compression later Gas Treatment 50 Gas Liquefaction 360 LPG Stabilisation option Power Generation 80 Utility Systems 80 Offloading 10 Interconnecting Pipework 30 Total 1300 765 $/TPA Contingency 30% 390 Owner's Costs 130 Total 1820 1071 $/TPA Production 1.7 MTPA CAPEX Depreciation (15 years) 71 $/T CAPEX Depreciation (15 years) 1.4 $/MMBTU Metric
  14. 14. www.tri-zen.com OPEX (Operating Cost) Estimate 1.7 MTPA LNG Production Component $ million/year Fuel Gas (15% Gas Feed) 17 $1.5/MMBTU Manning (120 people) 15 Maintenance (4% CAPEX) 38 Tugs 10 Base Support, Helicopters 10 Miscellaneous 10 Total 100 Production 1.7 MTPA Production Cost 59 $/ton Production Cost 1.2 $/MMBTU Note: Excludes any project financing costs
  15. 15. www.tri-zen.com 15 Proposed Floating LNG projects Liquefaction Firm Existing Proposed Flex/InterOil, 2 mtpa PNG AUSTRALIA Greater Sunrise, 3.5 mtpa Bonaparte, 2 mtpa Shell/Prelude, 3.5 mtpa Scarborough, 6 mtpa Echuca Shoals, 1.5 mtpa Abadi, 2.5 mtpa INDONESIA TIMOR LESTE PTT Cash Maple, 2 mtpa Evans Shoal, Hoegh/DSME, 3 mtpa Petronas FLNG, 1 mtpa Petronas FLNG 3 mtpa Others: Iraq; Shell, Mitsubishi 2 mtpa Israel; Nobel, Delek, DSME 3 mtpa Colombia; Exmar, Pacific Rubiales 0.5 mtpa USA, Excelerate 3 mtpa Current focus is South East Asia & Australia but likely to go global over next few years – Iraq, Israel, Colombia, USA
  16. 16. www.tri-zen.com 16 How will FLNG fit in? Still challenges but there is a place/need for FLNG and it could fit in:  By clearly demonstrating:  Substantial reduction in project development costs and time  Operating efficiency similar to onshore LNG  Lower CAPEX than conventional LNG  OPEX no higher than conventional LNG  Faster monetisation of reserves  Sponsors have kept it simple – not the time to be testing new technology  By having experienced, financially strong sponsors – preferably able to fund from balance sheet rather than project finance  By having a strong marketing team – to convince skeptical buyers (but we have moved back into a sellers market)  Probably more than just deepwater offshore – could be sound opportunities inshore or berthed  Could be a call for small scale barge mounted FLNG …………………..it won’t be easy but the time is right!
  17. 17. www.tri-zen.com What will it cost?  Early capital cost estimates for US$600- 1200/tpa  Recent indicative costs – US$1,500/tpa plus/minus 30%  Flex LNG indicating US$ ~700/tpa for 1.7 to 2.0 mill tonne liquefaction capacity  Estimate that the capital cost of Shell’s Prelude FLNG facility will be just over USD6bn or about USD1, 700 per tonne of capacity  Significant variations depending on gas composition (high/low C3, C4, condensate) and CO2, N2 content,  High liquids content considerably increases commercial attraction  CAPEX figures exclude field development costs  Cost figures indicative until full design completed for specific location/resource 17
  18. 18. www.tri-zen.com Insufficient LNG supply  LNG demand expected to double between 2010 and 2018/2019  Insufficient new liquefaction capacity coming on to meet demand – about 75 million tonnes  But, 338 million tonnes of new liquefaction capacity is being offered by project sponsors who say they expect to take FID between 2012 and 2014.  Have recently seen a significant increase in the number of new projects being offered into the project pipeline including 166 million tonnes from the USA  From famine to feast – unprecedented number of proposed projects  However, not all will go ahead 18 2011 2012 2013E 2014E 2015E 2016E 2017E 2018 2019 2020 Existing 270 275 280 279 280 280 280 278 276 276 Under construction 0 0 5 18 40 62 75 75 75 75 Proposed 0 0 4 12 47 95 169 272 330 352 Speculative 0 0 1 3 4 5 21 84 122 130 Total 270 275 290 312 371 443 545 710 803 833 Existing planned and proposed liquefaction capacity
  19. 19. www.tri-zen.com A path forward  Unprecedented number of potential projects being offered into the project pipeline  Too many, much more difficult for customers to choose  Could see the emergence of business clusters/ areas of prime focus  Will make it more difficult for projects not in these focus areas to gain traction with customers (e.g. Russia, Nigeria)  Likely to see FLNG emerge as the 5th cluster. Although not geographic, another 40 million tonne cluster is emerging 19 USA 40 mill tn 2016-2018 Canada 40 mill tn 2016-2020 East Africa 40 mill tn 2018-2022 Australia 60 mill tn 2014-2017
  20. 20. www.tri-zen.com Oil versus gas pricing 20 0 5 10 15 20 25 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Widening oil v gas differential US$/MMBtu Gas Henry Hub $/MMBtu Crude WTI $/MMBtu
  21. 21. www.tri-zen.com LNG as a transportation fuel 21 Increasing environmental and economic drivers to use LNG as a transportation fuel LNG cheaper then fuel oil and much cheaper than diesel Growing interest in using LNG as a truck fuel in USA and China. Australia emerging 0 5 10 15 20 25 30 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 LNG versus fuel oil & gasoil NW Europe US$/MMBtu 1% fuel oil NW.Eu German Gasoil LNG UK 0 5 10 15 20 25 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 LNG v Fuel Oil & Gasoil - Korea US$/MMBtu 180 cst Fuel Oil Gasoil LNG
  22. 22. www.tri-zen.com LNG as a transportation fuel  LNG service stations supported by small scale liquefaction plants  Floating storage an attractive option as LNG bunker storage in ports without an LNG terminal  Bunkers may also be supported by small/medium scale liquefaction plant  This could be FLNG in the port or against a berth. 22 LNG Bunker barge
  23. 23. www.tri-zen.com 23 We add value  Strategy  Asset optimisation  Sector studies  Market studies  Forecasting  Commercial and technical studies  Commercial representation  New market entry  Detailed business cases  Project finance and management  Mergers & Acquisitions  Organisational Development Based in Singapore with consultants in: Bangkok Beijing Hong Kong Jakarta Kuala Lumpur Melbourne Perth TRI-ZEN International Pte Ltd 30 Cecil Street, Prudential Tower 15-00, Singapore 049712 Tel: 65 6254 4791 tony.regan@tri-zen.com

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