E xamining the N orth A merican M arket “ W hat is the P otential for F LNG”
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Transcript of E xamining the N orth A merican M arket “ W hat is the P otential for F LNG”
Examining the North American Market “What is the Potential for FLNG”
2014 Houston Marine Insurance SeminarSeptember 23rd, 2014Constantyn Gieskes
DisclaimerThis Presentation has been produced by Braemar Engineering. This presentation is strictly confidential and may not be reproduced or redistributed, in whole or in part, to any other person. To the best of the knowledge of the Company, the information contained in this presentation dated February 2014 (the "Presentation") is in all material respect in accordance with the facts as of the date hereof, and contains no material omissions likely to affect its importance. However, no representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein. This Presentation is not a prospectus and does not contain the same level of information as a prospectus. None of the Managers, the Company, or any of its parents or subsidiary undertakings or any such person’s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this Presentation. This Presentation contains information obtained from third parties. Such information has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information to be inaccurate or misleading. This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words “believes”, expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts and are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. 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AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY’S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND INTEREST RATES AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS PRESENTATION. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the Company or the Managers or any of their parent, shareholders, subsidiaries or any such person’s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. By attending or receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company’s business. This Presentation is confidential and is being communicated to persons who have professional experience, knowledge and expertise in matters relating to investments and are "investment professionals" for the purposes of article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and only in circumstances where, in accordance with section 86(1) of the Financial and Services Markets Act 2000 ("FSMA") the requirement to provide an approved prospectus in accordance with the requirement under section 85 FSMA does not apply. 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Presentation Overview• Braemar Engineering
• LNG 101
• North American Gas Market
• Proposed FLNG Projects Overview
• Why FLNG?
• Obstacles to FLNG Projects in North America
• Conclusions & Questions
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Braemar Engineering Overview
• Braemar Engineering is an engineering company specializing for 20+ years in the marine, offshore and land-based gas industries.
• Part of the Braemar Technical Services Group, supported by a worldwide network of offices with the ability to call on the support of over 400 technical staff of all disciplines.
• Braemar Technical Services Group is a wholly owned subsidiary of Braemar Shipping Services PLC, a London Stock Exchange (BMS).
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Braemar Technical Services (Engineering), Inc. February 2013
LNG 101
What is LNG?
Liquefied Natural Gas (LNG) is a clear, colorless, odorless, non-toxic liquid
LNG is natural gas that has been cooled and condensed to a liquid at -162 °Celsius at atmospheric pressure
LNG is less than ½ the weight of water
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LNG Makeup LNG almost has the same chemical make-up
as regular pipeline quality gas that is used residentially
Chemical Chemical Formula Low High
Methane CH4 87% 99%
Ethane C2H6 <1% 10%
Propane C3H10 <1% 5%
Butane C4H10 <0.1% >1%
Nitrogen N2 0.1% 1%
Other Hydrocarbons
Various Trace Trace
CO2 & H2S both removed prior to liquefaction
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Liquefaction Plant Process Overview
Braemar Technical Services (Engineering), Inc. February 2013
Pre-treatment
Gas Treating
Dehydration & Mercury Removal
NGL Removal
Liquefaction
Storage
Fractionation
Feed Gas
Acid Gas (CO2 & H2S)
H20 & Hg
Ethane
LPG
C5+ LNG
N2
Main principle of Liquefaction
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CondenserCompressor
Hot High Pressure VaporLow Pressure Vapor
LiquidCold Liquid + Vapor
Evaporator
Expansion Valve
Cold Air Warm Air
Work
Heat Rejected to Ambient
Why liquefied?
• Natural gas is liquefied to reduce volume for transportation & storage
LNG-162oC
610 1
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Components of the LNG Supply Chain
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From the Gas Field to the Consumer’s Pipeline System
EXPLORATION & PRODUCTION
LIQUEFACTION & STORAGE
SHIPPING REGASIFICATION & STORAGE
Typical LNG Export Facility
Braemar Technical Services (Engineering), Inc. February 2013
Source: Cheniere
So what is FLNG?
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Source: Hoegh LNG
Braemar Technical Services (Engineering), Inc. February 2013
Why Export LNG from North America?
North American LNG Export Boom
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Approved LNG Export Projects
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Proposed LNG Export Projects
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Proposed FLNG ProjectsSite/Project Name Location Capacity Type
EOS LNG Port of Brownsville, TX 4 MTPA Near-shore
Port Lavaca - Excelerate FLNG Calhoun County, TX 10 MTPA Near-shore
Delfin LNG Offshore West Cameron, LA 13 MTPA Offshore
CE FLNG – Cambridge Energy Plaquemine Parish, LA 8 MTPA Near-shore
Main Pass Energy Hub – United LNG Offshore, Venice, LA 24 MTPA Offshore
Douglas Channel LNG Kitimat, BC 1 MTPA Near-shore
South Texas LNG Export – Pangea LNG Corpus Christi, TX 8 MTPA Near-shore
Texas LNG Brownsville, TX 2 MTPA Near-shore
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Near-shore Example• Excelerate – Port Lavaca
– Eliminates motion from the equation– Opportunity to have land-based infrastructure to increase FLNG capacity
Source: Excelerate Energy
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Why Floating LNG?
• Permitting Advantages
• Construction Schedule, Cost & Labor Pool
• Conversion Opportunities
• Site Location Flexibility
• Plug & Play Opportunity
• Moveable Asset
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Why Floating LNG?
• Permitting Advantages• Construction Schedule, Cost & Labor Pool
• Conversion Opportunities
• Site Location Flexibility
• Plug & Play Opportunity
• Moveable Asset
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Permitting Advantages
• Federal Energy Regulatory Commission (FERC) vs United States Maritime Administration (MARAD)– Near-shore vs. offshore difference
• ~2 miles off the coast is under MARAD’s jurisdiction– MARAD defined timeline vs. indefinite FERC timeline
• Smaller footprint– Less public opposition– Potential for less environmental impacts
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Why Floating LNG?
• Permitting Advantages
• Schedule, Cost & Labor Pool• Conversion Opportunities
• Site Location Flexibility
• Plug & Play Opportunity
• Moveable Asset
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Schedule, Cost & Labor Pool
• Potential for shortened construction schedules– Fabrication yards vs site stick-
built
• Site location– Weather impacts – Canadian projects are relatively
remote Second-coming of Australian
cost escalation? Work camps required?
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Schedule, Cost & Labor Pool
• Labor pool uncertainty– Enough labor/talent in Western
Canada? How many projects feasible at one
time?– Competition in the Gulf Coast
Includes new chemical plant construction
Over $70 billion in CAPEX forecasted in US downstream sector through 2020
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Why Floating LNG?
• Permitting Advantages
• Construction Schedule, Cost & Labor Pool
• Conversion Opportunities• Site Location Flexibility
• Plug & Play Opportunity
• Moveable Asset
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Conversion Opportunities
• FPSO conversions provide some level of comfort
• Several concepts out for FLNG conversion opportunities utilizing retiring Moss LNGCs
• Potential for lower CAPEX and time-to-market advantage
• Limited liquefaction capacity
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Why Floating LNG?
• Permitting Advantages
• Construction Schedule, Cost & Labor Pool
• Conversion Opportunities
• Site Location Flexibility• Plug & Play Opportunity
• Moveable Asset
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Site Location Flexibility
• Footprint vs. available land space – Douglas Channel (steep terrain – lack of buildable land)
Source: Douglas Channel Energy
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Why Floating LNG?
• Permitting Advantages
• Construction Schedule, Cost & Labor Pool
• Conversion Opportunities
• Site Location Flexibility
• Plug & Play Opportunity• Moveable Asset
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Plug & Play Opportunity
• One-size does fit all?– No, but the project
design basis differences are much more minor than typical liquefaction projects
– Pipeline quality gas Less variability
than typical liquefaction projects
– More opportunity to design a solution that’s flexible enough for several locations
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Why Floating LNG?
• Permitting Advantages
• Construction Schedule, Cost & Labor Pool
• Conversion Opportunities
• Site Location Flexibility
• Plug & Play Opportunity
• Moveable Asset
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Moveable Asset
• Once upon a time…
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A Look Back…
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Moveable Asset
Source: Shell
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Obstacles to FLNG
• Financing - Cost Uncertainty, Completion Guarantee & Insurance
• Technical Challenges
• Cooling Requirements
• Efficiency vs. Safety
• General Issues Within North America
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Obstacles to FLNG
• Financing - Cost Uncertainty, Completion Guarantee & Insurance
• Technical Challenges
• Cooling Requirements
• Efficiency vs. Safety
• General Issues Within North America
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Financing• FLNGs are relatively unproven
– Only a few in construction and no existing FLNG’s in operation CAPEX/OPEX uncertainty
• Limited market capacity for risk– Unless a Major (ie. Shell, ExxonMobil, etc.)
that can self-insure• Completion guarantee complexity
– Hull, Topsides, Turret, Commissioning Consortium may be required
• Weather impact on insurance– Hurricanes
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Obstacles to FLNG
• Financing - Cost Uncertainty, Completion Guarantee & Insurance
• Technical Challenges
• Cooling Requirements
• Efficiency vs. Safety
• General Issues Within North America
39
Technical Challenges
• LNG storage capacity limits• Motions (offshore)
– Impact to process & unloading operations Pre-treatment is most sensitive to
motion Loading windows
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Obstacles to FLNG
• Financing - Cost Uncertainty, Completion Guarantee & Insurance
• Technical Challenges
• Cooling Requirements
• Efficiency vs. Safety
• General Issues Within North America
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Cooling Requirements• Environmental permitting
requirements in North America are unlikely to allow for open-loop water-cooling systems– Alternative options include air-
cooling, closed loop water-cooling, cooling towers
• Space requirements of air cooling are significant– Need to avoid re-circulation– Efficiency losses
42
Obstacles to FLNG
• Financing - Cost Uncertainty, Completion Guarantee & Insurance
• Technical Challenges
• Cooling Requirements
• Efficiency vs. Safety
• General Issues Within North America
43
Efficiency vs. Safety• Liquefaction process
selection – Efficiency at the cost of
safety? Flammable
refrigerants present greater risks
– Safety gap requirements Eats up valuable deck
space– Incoming gas has a known
present value
44
Obstacles to FLNG
• Financing - Cost Uncertainty, Completion Guarantee & Insurance
• Technical Challenges
• Cooling Requirements
• Efficiency vs. Safety
• General Issues
45
General Issues
• Pipeline Projects– Western Canada projects all face
pipeline challenges• Panama Canal Expansion
– Uncertainties in transit fees and completion dates
• Competition– Limited appetite for LNG export
projects?• Long-term Henry Hub pricing
– Impacts of domestic gas uses increasing
46
Looking Forward
• All of the following could lead to a succession of other FLNG off-shore projects proposed in North America– Long FERC delays– Labor costs escalate– FLNGs become more common with proven costs and schedules
Reduced risk will lead to more favorable financial environment
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Thank You & Questions?
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Braemar Engineering2800 North Loop West, Suite 900Houston, TX 77092USA
Constantyn GieskesPhone 713 820 9600E-mail [email protected] www.braemar.com