UNCTAD 11th Oil & Gas, Trade & Finance Conference

Nairobi, 23rd May 2007

Options for stranded gas in Africa – the CNG alternative

Angus Campbell

Head of OSG Gas

DAY 1, Session 3, Room B, 14: 00 – 15:30

NOT AN OFFICIAL UNCTAD RECORDNOT AN OFFICIAL UNCTAD RECORD

Overseas Shipholding Group - OSG

• Market leader in providing marine energy transportation services and solutions.

• Controlled, dual flagged fleet, of 105 vessels; in excess of 12m DWT.

• 39 new builds / rebuilds under construction in Korea, China, Japan and the United

States.

• Focused on four market sectors: Crude, Products, U.S. Flag and Gas.

• Our goal is to achieve market leading positions in all sectors.

• Global Operations, listed on NYSE since 1973, second largest publicly traded tanker

company in the world.

• 3,980 employees (3,579 seagoing personnel and 401 shore side staff).

OSG – operational performance

TransCanada introduction

• Competitively positioned in natural gas transmission & power services

• $25.9 billion of premium pipe and power assets ($US at Dec. 31, 2006)

• Skilled, expert people with strong technical knowledge

• Strong financial position

Leading North American energy company

TransCanada – extensive energy network

•approx. 59,000 km (36,500 miles) of wholly owned pipeline.

•transports 15 billion cubic feet/day (Bcf/d) from virtually all major supply basins on the continent.

•2,969 km of proposed oil pipeline, capable of transporting 435,000 barrels per day.

•16 power facilities with 7,700 megawatts of power generation.

•two proposed liquefied natural gas facilities total capacity 1.5 Bcf/d.

•significant gas storage capacity in Canada and the United States, 360 Bcf.

Safe and reliable delivery of energy

• TransCanada and OSG joined forces to provide a complete CNG marine transport service to customers worldwide.

• TransCanada and OSG have well respected and established management organizations

with extensive technical support, leadership and expertise. are committed to high standards for environmental and safety

performance and have records and operating standards that confirm this commitment.

are financially capable and able to achieve competitive financing structures for any CNG transport solution.

are committed to long term energy transportation.

The TransCanada/OSG partnership

Energy demand - the role of natural gas.

“World energy consumption is projected to increase by 71% from 2003 – 2030”

Source: EIA International Energy Outlook 2006.

• Environmentally attractive primary energy source, providing 26% of world energy needs by 2030.

• Many fields are too small and remote from markets to be economically developed for pipelines or LNG.

• This is the niche that marine CNG occupies.

Energy demand – stranded gas?

• Definition: reserves discovered but not developed for physical or economic reasons.

• On a global scale, this represents a huge energy resource.

• Increased demand and rising costs drive the search for new solutions.

• Marine CNG is the key to unlock this resource.

Stranded gas in sub-Saharan Africa

Rovuma Basin

Orange Basin

Economic Volume and Distance for CNG Transport

0

500

1000

1500

2000

2500

0 100 200 300 400 500 600 700 800

Volume (mmscfd)

Dis

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CNG Ships

LNG

CNG Barges

Pipelines

Economic volume and distance for CNG transportation

• More flexible than LNG

• Market location

• Gas field location

• Gas field characteristics

• Project portability

• Handles both lean and rich gas

• Smaller gas processing overhead compared with LNG

• More energy efficient process than LNG - energy loss (5-8% vs. 15%) Source : DNV

Key drivers for marine CNG

• High energy costs driven by oil price.• Increase in global gas demand/price.• Increase and more interest in gas discoveries.• Power and industrial plant fuel replacement.• Anti-flaring regulations/Kyoto accord.• Government directives/incentives for cleaner fuels.• The ability to provide secure and reliable delivery.

Key drivers for marine CNG

Bulk CNG transportation – robust and proven process

NPT was a subsidiary of NOVA Corporation, a part of the present day TransCanada.

Bulk CNG transportation – robust and proven process

CompressionLoading/Unloading

Delivery Station

Marine CNG transportation

Marine CNG training facility

Inlet Gas

Dehydration

Compression Gas Cooling

Gas Chilling(Optional)

Pipeline toLoading

Mooring Buoy or DocksideLoading System

Mooring Buoy or DocksideUnloading System

Pipeline to De-Compression Station

Heat Letdown Valve

Gas to Fuel System orCompression for

Pipeline

Low Pressure Fill Bypass

Marine CNG system – typical process schematic

Gas Transport Module (GTM) – fully tested and approved

Prototype under test

Demonstration Unit

ASME Code Case #2390 approval - October 2002

All containment system testing completed in 2001

GTM general layout

• Larger size and lower cost than conventional seamless tube steel and all composite gas cylinders; minimizes valving and manifolding.

• GTMs are up to 40% lighter than an all-steel pressure vessel of the same rating.

• Ships operate at ambient temperature so require no complicated loading schemes or refrigerated hold.

• Loading facilities require only compression, cooling, dehydration, and loading connections - similar to offshore crude loading.

• Unloading facilities require letdown station, compression and unloading connections.

GTM system advantages

• Simplicity of system provides low initial capital commitment to initiate gas flow.

• Easily developed by adding ships and additional loading facilities to increase gas deliveries.

• Flexibility of system allows ships to be re-deployed to other production areas or markets when no longer needed.

• Simplicity of loading and unloading facilities means little stranded capital.

GTM system advantages

Pressure vessel manufacture.

Deep Water Loading, Unloading and Ship Outfitting CapabilityWorld Class Facility: ASME Section VIII, Div 3 and Section X

Manufacturing License awarded to FPC Inc. – Plant Developed in Saint John, New Brunswick, Canada.

Flexible delivery - the GTM truck trailer

Volume: up to 250,000scfVolume: up to 250,000scf (7,100 m3) (7,100 m3)

Weight: ~ 42 tonnesWeight: ~ 42 tonnes

Length: 20 ft - 45 ftLength: 20 ft - 45 ft

Number of GTMs: 2 or 3Number of GTMs: 2 or 3

ISO Container FrameISO Container Frame

Standard ISO Container Standard ISO Container Chassis TrailerChassis Trailer

Flexible delivery – the GTM ISO container

Volume: up to 250,000scfVolume: up to 250,000scf (7,100 m3) (7,100 m3)

Weight: ~ 29 tonnesWeight: ~ 29 tonnes

Length: 20 - 45ftLength: 20 - 45ft

Number of GTMs: 2 or 3Number of GTMs: 2 or 3

Conclusion – the CNG alternative works for Africa

• Natural gas is the fastest growing primary energy source.

• Many fields too small to be developed for LNG or too far for pipelines.

• Marine CNG can supply to stranded markets without the need for expensive infrastructure.

• Fuel replacement projects are ideal for marine CNG and can provide local solutions for local markets.

• Stimulation of economic and industrial growth.

The driving force to deliver Africa’s stranded gas?

Length Over All Appr. : 149,90 m

Length Between P.P. : 142,00 m

Breadth mld. : 23,50 m

Depth to double bottom : 2,00 m

Depth mld. to Main Deck : 15,00 m

Draught Design : 7,50 m

Draught Summer / Scantling : 8,00 m

Hull Displacement : 18700 tons

www.osg.com