04. foreest 30 by Jeremy Alexander

Document number

Introduction of (L)NG to Curacao A value chain perspective Curacao Conference Durable Energy Author: Floris van Foreest Date: 30 March 2012

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

DNV KEMA Energy & Sustainability  More than 2,300 experts in over 30 countries around the world  Part of DNV, a global provider of services for managing risk with more than 10,000 employees in over 100 countries  Driving the global transition toward a safe, reliable, efficient, and clean energy future.

 Specialized in providing world-class, innovative solutions in the fields of business & technical consultancy, testing, inspections & certification, risk management, and verification.  Advising and supporting organizations along the energy value chain

DNV – Across the Gas Value Chain

Subsea

Offshore production facilities

Offshore pipelines

Onshore processing

SubPiping surface transportation

Onshore Pipelines

End-user (gas distribution/ power generation)

(multiphase and gas)

 DNV is involved across the whole gas value chain in several segments: -

Offshore production, including subsea, deep water. LNG liquefaction, LNG carriers, LNG regas plants, LNG scheduling, LNG as fuel Trunk gas pipelines, onshore & offshore Safety (occupational & process), EIAs, Technology Qualification, Operations Excellence, Maritime Advisory, Decision Support, Enterprise Risk, and Funding Due Diligence.

 DNV customers include IOCs, NOCs, rig owners, LNG carrier owners, Pipeline JVs, gas distributors, service companies, and equipment manufacturers.

DNV KEMA LNG Services: levering with DNV’s expertise in LNG upstream and transport  Demand forecasts: market studies and modelling  Scenario analysis  Sourcing analysis: contracting, pricing  Design and construction: review, monitoring and safety assessments  Techno-economic feasibility studies  System planning

 Operational planning  Grid design and operation  Downstream market integration

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

Global gas resources Estimates show a global recoverable resource base corresponding with 250 years of current production: 400 tcm conventional and 406 tcm unconventional gas World natural gas resources by region, January 2010

Source: IEA 2011 7

Global gas demand Share of energy sources in world primary demand by scenario, 2035

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

18,301

16,962

14,869

 Gas and oil continue to play an important role in different scenarios

Mtoe

RES Nuclear Gas

Oil Coal

Current policy

New policy

450

Source: IEA, WEO 2011

 Shift away from coal in case climate policies effectively implemented  Potential upside for gas after Fukushima and delay of CCS

Global picture: pricing Henry Hub

 Large spreads across regions due to different pricing mechanisms:

NBP

Brent

Japan

 Asia $15-16/MMBtu  Europe $10 /MMBtu  US $2-4 /MMBtu

 Henry Hub spot price at $2.18 MMBtu (23 March 2012)  Brent spot price $124/bbl ~ $21.3/MMBtu

01/2008

01/2009

Source: GDF Suez

01/2010

01/2011

01/2012

Global LNG picture: supply-demand Supply

Demand

 Global liquefaction capacity 271MMtpa in 2010, increasing to 336 Mmtpa in 2015

 Increase demand to 224 MMtpa in 2010 (22%+ compared to 2009)  Capacity receiving terminals: from 572MMtpa in 2010 to 680 MMtpa in 2015

 Australia on its way to become main exporter (70MMtpa 2020)

 Shale gas revolution US  US becoming LNG exporter (Sabine Pass, Freeport)?

 Asian demand:  60% of global demand  China: tripling of terminal capacity  Japan: upward effect due to Fukushima incident

Source: IGU Source: Wood Mackenzie, IGU LNG report 10

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

Regional developments Supply

South Atlantic liquefaction plants

 Trinidad supply 15,2 million tonnes in 2010 (9% of global export)  Venezuela (Delta Caribe) 14MT pre FID  Approximately 50 MT announced in West Africa  US exporting 7-11 MT as of 2015?

Pre FID Existing

Source: Total

Regional developments LNG Imports Americas (MT)

Demand  LNG demand in the Americas increased by 30% to 19.7 MT in 2010  South America (incl. Mexico) has a share of 4,6% of global regasification capacity. The US has a share of 19%  New terminals planned in Brazil (3), Uruguay and Bahamas

Country

2009

2010

9.3

8.5

Mexico

2.6

4.4

Argentina

0.7

1.3

Puerto Rico

0.6

Dominican Republic

0.4

0.6

Brazil

0.5

2.0

Chile

0.4

2.3

Total

14.5

19.7

LNG Import mix 2010 Other 18% 37%

Indonesia 7%

Qatar

Trinidad

12% 16% Nigeria

10% Egypt

Sources: IGU LNG 2010 13

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

Rationale shift to (L)NG $/MMBtu

 Reduction of energy costs  Capitalizing on the increasing spread between oil and natural gas price  Using gas as more efficient fuel

Source: EIA 2010

RES

 Improving security of supply

Illustrative Oil

 Fuel mix diversification (disruptions, price exposure)

Electricity

 Balancing intermittency of renewable energy Natural gas

Rationale shift to (L)NG  Reduction of carbon footprint of energy supply  Power generation: reduction CO2 (-50%), Nox (-50%), SOx emissions (close to zero)  Reduction emission of particular matter in transport  Reduction of emissions at Cruise ship harbor through shift to onshore LNG generator

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

Assessment market potential Power 1 Residential generation

Shift from oil to LNG (natural gas)  LNG-fired cogeneration, gas turbines  Balancing intermittent renewable sources (wind, solar)  Gas demand driven by o.a. load factor, efficiency and electricity demand

Industry 2 Commercial

Shift from oil to LNG (natural gas)  Refinery main potential user of LNG  Power and heat (steam) generation  Feedstock hydrogen production  Fuel for hydrogen production

Assessment market potential Commercial1 Residential

Shift to natural gas through distribution or dedicated grid  Hotels, restaurants, laundries, small companies  Potential gas use for cooking, water heating, distributed generation (small scale LNG)

Transport 1 Residential

Shift to CNG and LNG  Distribution to fuel stations via trucks  LNG as fuel for trucks and busses  CNG as fuel for private cars

Residential 2 Resiial

Shift to natural gas through distribution grid  Limited gas demand potential (cooking, hot water)

 High investment to connect households via gas grid

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

Value chain perspective: sourcing of LNG  Price components: - Pricing formula: Oil link vs spot markets Henry Hub is key pricing point in Americas - Liquefaction charge (incl. fuel cost) - Flexibility premium - Shipping: FOB, DES

LNG cost breakdown

 Example US Export economics ($/MMBtu): -

Henry Hub gas Fuel surcharge Liquefactions costs Shipping

- Delivered costs

$4.00 $0.6 $2.00 $1.00 (Eur)- $3.00 (Asia) $7.60 (Eur) – $9.60 (Asia)

Low

High

Gas Production

15%

20%

Liquefaction

30%

Shipping

10% 15% 70

Regas

45% 30% 25% 120

Sources: PTT LNG, CBI 21

Value chain perspective: integration in energy system

Power generation

Offshore regas

Commercials

Onshore regas

Residential

CHP and local storage

Transport

Refinery and other industry

LNG Import

Main users: industry and power generation

Gas Distribution

Small scale LNG

LNG import LNG Regasification Vessel (LNGRV)

 Discharge of natural gas at sea (buoy) without the need to visit a port or terminal  130,000-150,000 m3 Floating storage and regas unit  Lower Capex compared to onshore regas  Lead time 1-3 years (less regulatory hurdles)

 Flexible and scalable (up to 300,000 m3) Onshore Regas Terminal

 Large Capex range ($20-$100mln/bcm), depending site specifics and new build v.s. expansion  Longer lead times Sources: Hoegh, Asian LNG summit 2011, IGU World LNG report , EIA

Value chain perspective: Distribution and end use Power generation  Pipeline (location of power plants)  Rebuild of diesel generators  Investment new gas turbines Industry (refinery)  Rebuild of energy generating equipment  Adjustment of other equipment (burners, furnaces)  Refurbishment energy infrastructure

Downstream market  Distribution grid: public or dedicated grid  Investment in small scale generation capacity  Adjustment of end user equipment

Value chain perspective: Small scale LNG Small scale LNG  Dedicated gas grid  Investment in small scale LNG storage  Investment tank trucks  Investment in filling stations  Investment in generation capacity (CHP)  Investment in heat pumps to convert waste heat in cooling

Agenda Introduction DNV KEMA Gas Consulting Services Global LNG picture

Regional LNG developments Rationale switching to (L) NG Assessment domestic gas market potential Value chain perspective

Renewable gas options

Renewable gases Biomethane  Production of biogas via digestion of waste or energy crops  Upgrade of biogas to biomethane and to bio CNG/LNG for transport

Hydrogen  Absorb surplus renewable energy via hydrogen production (electrolysis, hydrolysis)  Use of hydrogen as transport fuel (buses, cars)