From LNG Mega-trains to mid-sized modular units:

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1 OIL & GAS From LNG Mega-trains to mid-sized modular units: An exploration of the investment risks in today s LNG export terminals Graham Nott 18 October DNV GL 18 October 2018 SAFER, SMARTER, GREENER

2 Introduction 2

3 Some rules of thumb 1 SCF LNG ~ 600 SCG Natural gas 1 MMTPA ~ 140 MMSCFD 1 MMTPA ~ 35 MW 1 TCF ~ 0.8 MMTPA for 20 years Liquefaction losses are typically ~ 8% for base load LNG plants 3

4 Historical background 4

5 Significant events in the history of natural gas liquefaction 1959 First international LNG trade (Lake Charles, LA to Canvey Island, UK) 5000 m 3 LNGC 1964 Compagnie Algerienne du Methane Ltd (CAMEL) GL4Z LNG plant at Arzew commissioned and ships first gas. 3 trains of 17,000 BBL/day (3 x 415,000 Tonne/year ~ 2.2 MMTPA) Pritchard Cascade process (C3/C2=/C1), steam turbine compressor drivers Total investment cost $89 Million, delivered LNG cost $0.76/MMBTU 1969 Atlantic Richfield Oil Company (ARCO) Kenai LNG plant commissioned 1 train of 1.23 MMTPA Predecessor of Conoco Phillips Optimised Cascade Process, built by Bechtel. First use of gas turbine compressor drivers (6 x Frame 5) Total investment cost $ 200 Million, delivered LNG cost $0.52/MMBTU 1971 Exxon Marsa El Brega LNG plant commissioned: 4 trains each of 0.8 MMTPA First Air Products Single Mixed Refrigerant technology and use of Coil Wound Heat Exchanger 5

6 Significant events in the history of natural gas liquefaction 1972 Brunei LNG (LUMUT) plant commissioned Initially 4 x MMTPA (3.7 MMTPA) later expanded to 5 x 1.3 MMTPA First use of propane pre-cooled mixed refrigerant process (C3-MR) 1999 Atlantic LNG Train 1 commissioned Strategic move by BG to reintroduce competition 2005 SEGAS Damietta Commissioned First use of C3SplitMR to balance power between gas turbines and maximise LNG production at 5 MMTPA Compressor drivers using 2 x GE 7EA industrial gas turbines 2006 Darwin LNG First use of Aeroderivative gas turbine technology with 6 x GE LM2500 to achieve 3.7 MMTPA 2009 QatarGas II First AP-X project using 3 x GE Frame 9 gas turbines to achieve 7.8 MMTPA/train 2017 Wheatstone LNG First use of LM6000 Aeroderivative gas turbine technology to achieve 4.5 MMTPA 6

7 Train capacity (MMTPA) Growth in LNG single train capacity Mid scale isn t new; for a decade a 1-2 MMTPA train was standard Train capacity increased as developers sough economy of scale The Qatari AP-X plants marked the end of the quest for ever larger train capacity

8 Economy of scale Advantages Single train, single equipment Avoids complexity and potential flow mal-distribution Low equipment count offers less lost time to equipment failure and risk of loss of containment A single train can be optimised Disadvantages Larger equipment becomes increasingly difficult to transport Foundations and ground works become increasingly expensive Limited pool of suppliers Equipment becomes bespoke Time to market Case 1 Case 2 Case 3 Case 4 Configuration 1 x 5 MMTPA 2 x 2.5 MMTPA 1 x 3 MMTPA 2 x 1.5 MMTPA Drivers 2 x Frame MW 4 x Frame 5 2 x Frame 7 3 x Frame 5 Relative LNG Cost 100% 117% 122% 142% Source - Gastech 2008; LNG TECHNOLOGY FOR THE COMMERCIALLY MINDED THE NEXT CHAPTER by Charles Durr, Christopher Caswell & Heinz Kotzsot 8

9 Construction cost pressures 9

10 LNG Plant Cost Source: Oxford Institute for Energy Studies, LNG Plant Cost Escalation by Brian Songhurst 10

11 LNG Plant Costs (influence of infrastructure) Source: Oxford Institute for Energy Studies, LNG Plant Cost Escalation by Brian Songhurst 11

12 Market forces 12

13 Increasing liquidity in LNG markets 13

14 Recent permitted and planned USA LNG projects 14

15 Recent approved or operational US LNG projects FERC STATUS Project Name Location Gas flow Phase 1 Phase 2 Licensor Technology Operation Sabine Pass Liquefaction Sabine Pass, LA 1.40 BCFD 4 x 4.5 MMTPA 1 x 4.5 MMTPA Conono Phillips Optimized Cascade Operation Dominion Cove Point LNG Calvert County, MD Air Products C3-MR Construction Southern LNG Elba Island, GA 0.35 BCFD 6 x 0.25 MMTPA 4 x 0.25 MMTPA Shell MMLS Construction Cameron LNG Hackberry, LA 2.1 BCFD 3 x 5 MMTPA Air Products C3-MR Construction Freeport LNG Freeport, TX 2.14 BCFD Air Products C3-MR Construction Cheniere Corpus Christi LNG Stage 1 Corpus Christi, TX 2.14 BCFD 2 x 4.5 MMTPA Conono Phillips Optimized Cascade Approved Southern Union Lake Charles LNG Lake Charles, LA 2.20 BCFD Air Products C3-MR Approved Magnolia LNG Lake Charles, LA 1.08 BCFD 4 x 2 MMTPA LNG Limited OSMR Approved Cameron LNG Hackberry, LA 1.41 BCFD Air Products C3-MR Approved Exxon Mobil Golden Pass LNG Sabine Pass, LA 2.10 BCFD 3 x 5.5 MMTPA Air Products C3-MR Source FERC project list with additional data collated by author from FERC filing and developers websites 15

16 Pending and pre-filing US LNG projects FERC STATUS Project Name Location Gas flow Phase 1 Phase 2 Licensor Technology Pending Gulf LNG Liquefaction Pascagoula, MS 1.5 BCFD 1 x 5 MMTPA 1 x 5 MMTPA Pending Venture Global Calcasieu Pass Cameron Parish, LA 1.41 BCFD 9 x MMTPA GE SMR Pending Texas LNG Brownsville, TX 0.55 BCFD 1 x 2 MMTPA 1 x 2 MMTPA Air Products Pending Rio Grande LNG - NextDecade Brownsville, TX 3.6 BCFD 6 x 4.5 MMTPA Air Products C3-MR Pending Annova LNG Brownsville, TX 0.9 BCFD 6 x 1 MMTPA Black & Veatch PRICO SMR Pending Port Arthur LNG Port Arthur, TX 1.86 BCFD 2 x 6.75 Air Products C3-MR Pending Eagle LNG Partners Jacksonville, FL BCFD 3 x 0.33 MMTPA Chart IPSMR Pending Venture Global Plaquemines Plaquemines, LA 3.4 BCFD 9 x x MMTPA MMTPA GE SMR Pending Driftwood LNG (Tellurian) Calcascieu Parish, LA 4.0 BCFD 11 x 1.38 MMTPA 4 x 1.38 MMTPA Chart IPSMR Pending Alaska Gasline Nikiski, AK 2.63 BCFD 3 x 6.5 MMTPA 3 x 6.5 MMTPA Air Products C3-MR Pending Freeport LNg Dev. Freeport, TX 0.72 BCFD Air Products C3-MR Pending Jordan Cove Coos Bay, OR 1.08 BCFD 5 x 1.56 MMTPA Black & Veatch PRICO SMR Pending Cheniere Corpus Christi LNG Stage 2 Corpus Christi, TX 1.86 BCFD 1 x 4.5 MMTPA Conono Phillips Optimized Cascade Pre-filing Commonwealth LNG Cameron Parish, LA 1.18 BCFD 8 x 1.1 MMTPA Pre-filing Port Fourchon LNG La Fourche Parish, LA 0.65 BCFD Development Cheniere Corpus Christi LNG Stage 3 Corpus Christi, TX 1.86 BCFD 7 x 1.4 MMTPA Development Galveston Bay LNG Texas City, TX 3 x 5.5 MMTPA Source FERC project list with additional data collated by author from FERC filing and developers websites 16

17 Mid-scale LNG technology suppliers 17

18 Black & Veatch PRICO Source Black & Veatch website 18

19 LNG Limited OSMR Source LNG Ltd website, 2015 OSMR Conference Paper 19

20 Chart Energy and Chemicals IPSMR process Source Gastech Benefits of Mid-Scale LNG by Scott Mossberg (Bechtel) and Douglas Ducote (Chart Energy & Chemicals) 20

21 GE (SALOF) Source GE publicity materials. 21

22 Technical observations Mid-scale LNG LNG processes tend to: Use Brazed Aluminium Heat Exchangers (BAHX) over Coil Wound Heat Exchangers Use Aeroderivative over Industrial gas turbines Incorporate a higher element of modularisation and pre-assembly Use simpler processes with less refrigerant pressure stages 22

23 Process efficiency 23

24 Key factors influencing process efficiency Aeroderivative gas turbine drivers have a higher efficiency compared to industrial G-T s Compressor polytropic efficiency has increased significantly over the past decades but generally larger compressors have higher efficiency Mid scale processes are more simple and do not offer multiple stages of refrigerant evaporation pressure and therefore some irreversible work is lost (i.e. Chart IPSMR 3 stages c.f. COP OCP 3/2/3) BAHX gives an order of magnitude increase in MCHE area and therefore allows close temperature approaches Historically little of the heat in the G-T exhaust has been captured Aeroderivative G-T s are more adversely affected by ambient temperature than industrial G-T s End flash expander Air recirculation 33.3 Gas turbine efficiency in mechanical drive Source GE publicity materials. 24

25 Air recirculation and layout Source UNDERSTANDING OF HOT AIR RECIRCULATION PHENOMENA IN AIR-COOLED BASE LOAD LNG PLANT, Siti Farhana Bt M Shaari Malaysia LNG Sdn Bhd. 25

26 Compressor driver 26

27 Key factors influencing compressor driver selection Two shaft machines (i.e. Frame 5 and aero-derivatives) allow operating flexibility for compressor re-start after settle out and allow more shaft power to be used in the process (or more turndown). Electric drivers offer high availability but power must be produced somewhere and fuel gas might be in surplus Industry confident that MWe drivers are feasible (cf large generators) Freeport LNG in construction (3 x 5.1 MMTPA each with 3 x 75 MWe drivers) Aero-derivative G-T s might be changed out in 2 days compared to 5 days for industrial gas turbines. Aero-derivative G-T s are more sensitive to loss of power at higher ambient temperatures. 27

28 G-T inlet air cooling Source: Gastech 2018: Debottlenecking; Getting the Most Out of Your LNG Plant Christopher Ott, Lead Process Engineer, Air Products and Chemicals, Inc. 28

29 Availability 29

30 Key factors influencing plant availability Gas turbine scheduled inspection and maintenance Effective heavy ends removal and MCHE tolerance Dilemma of lean gas Full scrub column v s pre-cooling section with separator Common pre-treatment SIMOPS Gas nomination and supply Variable frequency drives and denox 30

31 Darwin LNG Source: AERODERIVATIVE GAS TURBINE DRIVERS FOR THE CONOCOPHILLIPS OPTIMIZED CASCADESM LNG PROCESS WORLD S FIRST APPLICATION AND FUTURE POTENTIAL Cyrus B. Meher-Homji, PE. Bechtel Corporation 31

32 Venture Global Calcasieu Pass LNG Source NextDecade website 32

33 Modularisation 33

34 Modular LNG plant construction Example modular LNG plants Sakhalin North West Shelf Train 5 Pluto Gorgon Snohvit Yamal Curtis Island (Australia) Source KBR website 34

35 Key factors affecting modularisation strategy Remoteness of site Competitiveness of local work force Costs of establishing camp Completeness of design Foundation loads / costs Seismic v s transport loads Structural steel content Source NextDecade website 35

36 Congestion Density (m/m 3 ) Module growth and congestion On-Shore LNG Plant Footprint growth of onshore LNG plant reported by JGC Project A 20% Project B 21% Project C 14% FLNG Feed Congestion 1.5 Initial Congestion 1.0 Final Congestion Module ID Source DNV GL collected data 36

37 SIMOPS and Safety 37

38 Key safety considerations Smaller inventories but greater spill frequencies Smaller propane surge drum size Maintenance lifting over live plant Construction of adjacent units Maintain safety gaps and separation (DDT), avoid growth and congestion Flare sizing requirements (common failure) Possibility to reduce setback distance 38

39 Layout and plot size 39

40 Mid scale modular LNG claims to be competitive on plot size Source Conoco Phillips publicity materials Conoco Phillips Two in one concept Sabine Pass 78,000 m 2 / 4.5 = 17,500 m 2 /MMTPA = 6.4 m 2 /TPD Air Products C3SplitMR Damietta 44,000 m 2 / 5.0 = 8,800 m 2 /MMTPA = 3.3 m 2 /TPD 40

41 Driftwood LNG Four in one concept Source Tellurian website 41

42 Economics 42

43 Key project cost implications First phase must bear infrastructure costs Jetty (>$50,000/m) Breakwater / dredging ($100 MM) LNG tanks (>$ 90 MM for 200K m 3 ) Standard equipment and machinery But potentially faster to market 43

44 Summary 44

45 Summary Modular mid sized LNG plant is not new But there are few reference plants for the new technology licensors at this scale There are dangers in an over-reliance on modularisation and off-site construction The process cycles are not as optimised as classical C3MR / Optimised Cascade processes, however the use of aero-derivative gas turbines and inlet air cooling level the field Other factors can drive plant availability in the real world SIMOPS should be central to the layout and development plan 45

46 Thank you for your interest SAFER, SMARTER, GREENER The trademarks DNV GL, DNV, the Horizon Graphic and Det Norske Veritas are the properties of companies in the Det Norske Veritas group. All rights reserved. 46