FLNG Economics and Market Potential

Transcription

1 FLNG Economics and Market Potential Philip Fjeld CEO, FLEX LNG Management Ltd Singapore, 10 February 2011

2 Private and Confidential Brief Introduction to FLEX LNG FLNG Market and Size Considerations FLNG Economics vs Onshore Summary

3 FLEX LNG a brief introduction FLEX LNG Ltd was founded in 2006 to commercialize floating LNG liquefaction vessels Currently four LNG Producer hulls on order at Samsung Heavy Industries in Korea All units targeted with a liquefaction capacity of up to 2.0 mtpa Lumpsum, turnkey EPCIC contract for LNGP no.1 Offices in London, Oslo, Singapore, Australia and Korea with broad competence and experience Great support from SHI and numerous contractors and suppliers Strong support from our shareholders, with K -Line as the largest shareholder An advanced generic FLNG design has been developed with great adaptability for many different field-specific requirements 3

4 FLEX LNG Producer Key facts Classification DNV Overall (riser to offloading) Fuel Shrinkage: Approx. 10 % Maintenance 20 years on-station maintenance Turret Internal Submerged Turret Production system (STP) from APL Liquefaction Capacity: mtpa LNG Accomodation 120/150 POB (regular + temporary) LNG Storage Capacity : m 3 Condensate/LPG Storage: m 3 Feed Gas: Approx mmscf/day Image courtesy to Samsung Heavy Industries 4

5 FLEX LNG Producer - Generic concept taking adaptability and broad envelope of fields into account Generic topsides Liquefaction and fine removal of acid gas, water and mercury Field-specific topsides Field specific treatment to condition the gas for generic part Field Specific Pre-FEED/FEED Designs Concluded in Parallel with the Generic Development Project 1 Project 2 Project 3 Medium rich feed gas with high CGR LPG rich feed gas and requirement for MEG Very lean feed gas with long tail of HHCs and MEG Project 4 Project 5 Nitrogen rich feed gas (~10 mol%) CO2 rich feed gas (~20 mol%) MEG Reclamation and injection module 5 Condensate and LPG handling module

6 Nitrogen Expansion Proven in Applications and Size - Successfull application of large nitrogen expansion system paves the way for FLNG Proven technology for a range of applications Nitrogen liquefiers, air separation Peak shaving plants Re-liquefaction onboard LNG carriers Sub-cooling of mega trains (AP-X TM ) Proven technology in size The AP-X TM sub-cooling cycle uses N 2 expansion Largest N 2 expansion system in use Selected for trains QG 4,5,6,7 and RG 6,7 The N 2 cycle compressor is directly driven by a GE frame 9 gas turbine (100MW rated at 49 deg C) The system uses 4 cold expanders and 1 warm expander A BAHX is used as nitrogen cold box Courtesy: APCI The N 2 part of the AP-X TM system is equivalent to a mtpa stand-alone system twice the size of an LNG Producer liquefaction train! 6

7 LNG Containment Technology SPB tank technology the only safe and reliable option for FLNG SPB Containment Excellent track record for LNG since 1993 Applied successfully for gas FPSO/FSOs Maximized flat deck space for topside Self supporting tanks allows for in-situ inspection and maint. without dry-docking Only containment system with all features required for safe and reliable offshore LNG Sloshing Free Tank System Inspection and Maintenance Access SPB Tank Technology Superior for LNG Production Spherical No filling restrictions On-site inspection & Maintenance Limited deck-space Membrane Filling restrictions On-site inspection & Maintenance Flat deck-space 2-Row Membrane Filling restrictions On-site inspection & Maintenance Flat deck-space SPB No filling restrictions On-site inspection & Maintenance Flat deck-space 7

8 EPCIC Contract with Samsung Heavy Industries - Unique guarantees provided by SHI enabling strong commercial structure Single EPCIC contract, Lumpsum, turnkey delivery of the LNG Producer Includes all works from FEED through detailed engineering, procurement, construction and integration, to commissioning (at-shore and offshore) Minimised integration risk Includes full-scale liquefaction test prior to sail-away Clear legal responsibilities Extensive performance guarantees and LDs Production capacity Fuel efficiency Plant reliability Defect rectification liabilities Close collaboration together with financial and legal advisors in order to ensure commercial structures that together with the EPCIC framework will result in alignment and bankable projects Samsung guarantees performance up to the level required by the project finance debt providers 8

9 Private and Confidential FLEX LNG and the LNG Producer Concept FLNG Market and Size Considerations FLNG Economics vs Onshore Summary

10 Multiple Applications for LNG FPSOs Small stranded offshore non-associated gas fields Associated gas projects Onshore gas fields Provide a economical development concept for stranded offshore gas fields Provide a viable alternative for large scale associated gas flaring or reinjection projects (e.g. in West Africa, Gulf of Mexico) Offer a cheaper, quicker, and less complex solution for onshore gas fields (e.g. Papua New Guinea, CSG projects in Australia) Pipeline gas Locate LNG FPSO alongside a jetty. Liquefy gas taken from existing pipeline infrastructure (e.g. the domestic pipeline grid) Early production/cash flow Large gas field staged developments Deepwater gas fields/long tie-back distances Provide an early production system for large offshore gas fields Lead time to first cash flow can typically be cut by 50% Accelerate production and provide lower production cost per ton for large developed gas fields that have liquefaction capacity constraints Reduce CAPEX for deepwater offshore gas fields and long tieback distances 10

11 Floating LNG is a Smarter Way to Produce LNG - But can economy of scale lower the costs further? 1 x Large FLNG barge Multiple Medium Sized LNG Producers 11

12 Economy of Scale for LNG FPSO Bigger is not always better 600 Multiple Units Attractive for Reserve Owner and Regulator Enhanced Field Development LNGP2 Production (mmscf/d) LNGP1 LNGP potential redeployment or tie in more gas Gas Reserve Production Profile Large FLNG Production Capacity LNGP Production Capacity 12

13 Maximise Existing Ship Yard Facilities and Knowledge Bigger is not always better Vessel beam (m) Vessel Size Comparison Existing FPSOs LNG Producer Large FLNG barges Vessel length (m) Large FLNG barge concepts do not fit within existing construction practices, Stretching Yard Limits Overall topsides weight Module size and weight Lifting and handling Yard slot Time in dock Equipment sizes Complexity Larger risks: Construction Integration Completion Performance Cost & schedule A Mid-Sized LNG FPSO Represents ~2 Equivalent Yard Slots Compared to 8-10 for a Large FLNG Barge 13

14 Medium-scale FLNG Topsides Within Proven Range Comparison of Topside Weights Topside Weight ('0 000 tons) ? Unproven Range Proven Range 10 0 Bonga Kizomba A/B N'Kossa Dalia LNGP Girassol Belanak Pazflor Large FLNG Concept 14

15 Potential Economies of Scale for LNG FPSO Bigger is not always better Case Study 1 x LNGP 2 x LNGP Large FLNG Production (mtpa) CAPEX EPCIC (mill USD) Shrinkage (%) OPEX (USD p.d.) 110, , ,000 Start Two fields are evaluated of 2.0 and 5.0 TCF CAPEX service costs are calculated as a tolling structure where the NPV of the tolling fees equals the NPV of the CAPEX costs The time to pay down the CAPEX is taken equal as the field life (i.e. no residual value) Discount factor is 11% Analysis is based on lean feedgas, although both can produce LPG and condensate for rich feedgas. A basic OPEX figure is used, which will vary per project and it will most likely not be double for a dual vessel or a large barge solution. 15

16 Potential Economies of Scale for LNG FPSO Bigger is not always better Liquefaction Costs NPV Project Cash Flow Liquefa action costs ($/mmbtu) OPEX Efficiency sales loss (15 $/mmbtu) CAPEX service 1 x LNGP 2 x LNGP FLNG barge 2 x LNGP FLNG barge 2 TCF 5 TCF cashflow (billion USD) NPV(11%) of project LNG 7 $/mmbtu LNG 12 $/mmbtu 1 x LNGP 2 x LNGP FLNG barge 2 x LNGP FLNG barge 2 TCF 5 TCF 21 yrs 10.5 yrs 26 yrs 21 yrs 10.5 yrs 26 yrs At 12 $/mmbtu the CAPEX of the Large FLNG should reduce to ~3000 million USD to equal NPV at 26 yrs production Note: A lower efficiency implies the use of more feedgas, which cannot be sold as LNG. The efficiency difference is thus included as a cost charged with the LNG market price. Tolling fee is calculated to obtain equal NPV of the capital expenditures and the tolling revenues. Cashflow calculation includes a 2 $/mmbtu feedgas cost. 16

17 Private and Confidential Brief Introduction to FLEX LNG FLNG Market and Size Considerations FLNG Economics vs Onshore Summary

18 ...liquefaction development costs are unsustainably high. They will come down to 350 USD/ton in the future...

19 Onshore LNG Development Costs Remain Stubbornly High The recent global economic turmoil has resulted in some cost reductions in the oil and gas industry New Paradigm For The LNG Industry The IHS CERA Upstream Capital Costs Index (UCCI) tracks costs associated with the construction of new oil and gas facilities UCCI Index Values are indexed to the year 2000, meaning that capital costs of $1 billion in 2000 would in May 2010 equal $2.02 billion However, although the UCCI has dropped from the peak in November 2008, Q1 figures for 2010 have indicated a clear increase in the index and it seems unlikely that development costs will near term come back down to figures seen 6-10 years ago USD/ton liquefaction capacity 100 Source: IHS Cambridge Energy Research Associates (IHS CERA) Nov May 2006 Nov 2006 May 2007 Nov 2007 PNG LNG (2014) Angola (late 2012) Pluto LNG (2011) FLEX LNG (2014) ALNG (Trinidad 2003) May 2008 Nov 2008 GLNG (2014) QCLNG (2014) May 2009 Nov 2009 May Annual LNG liquefaction capacity (mtpa) Nov 2010 Gorgon LNG (late 2014) 19 Source: FLEX LNG, Industry Reports

20 The Future of Australian LNG is Maybe Not so Bright - Australian LNG projects are high cost and future projects could be threatened Australian LNG projects sanctioned recently are the world s most costly projects (by a wide margin) and are enjoying a perfect storm Moratorium for future LNG projects in Qatar Depressed gas prices in Atlantic Basin Record economic growth in Asia Robust oil prices Continued wide global gas market price spread Lower Cost LNG Alternatives i.e. FLNG Threats to Future Australian LNG Projects Unconventional Gas in the US and future LNG export capacity from the US Narrowing of Global LNG Price Spread Lack of competing LNG projects and continued strong oil price link is providing the foundation needed to execute on LNG projects in Australia that would be uneconomic elsewhere Unconventional Gas in Asia Future Australian LNG Projects Development of Labour and EPC Market in Australia What will the future look like if oil prices drop, the link to oil weakens substantially or more competitive LNG development options are embraced by the industry? 20 Competition from Clean Coal and Increase in Nuclear

21 FLNG Bundles Facilities and Infrastructure Into 1 Unit - A significant cost saving opportunity Product Storage 5% Offshore facilities 12% Delivery trunkline 12% LNG plant 37% Marine facilities 6% Subsea infrastructure 5% Wells 12% Onshore site preparations 5% Site civil works 6% An Onshore LNG Development Involves Logistical Complexities not Present With FLNG An FLNG Yard Utilises Existing Infrastructure, Eliminating Dedicated Investments Data source: Worley Parsons 21

22 Economies of Scale Are Not Working - New land-based LNG plants are considerably more expensive than FLNG Onshore LNG Projects are Significantly More Costly Than Medium-scale FLNG Project Capacity (mtpa) CAPEX (BUSD) Comparable Costs (71%) CAPEX USD/ton liquefaction capacity Gorgon PNG LNG QCLNG GLNG FLEX LNG Wheatstone Sunrise Browse APLNG Scarborough Building in a Controlled Environment Greatly Reduces CAPEX and Complexity (1) 29% capex reduction for wells, subsea, offshore facilities Source: Company Reports, UBS and J.P.Morgan estimates 22

23 Liquefaction CAPEX Service Costs ($/mmbtu) - Significant reduced liquefaction cost from FLNG Future Costs of Land-based Liquefaction Requires 4 6 $/MMBtu Tolling fee is calculated to obtain equal NPV of the capital expenditures and the tolling revenues. Assumptions: 25 years of operations, 11% discount factor 23

24 The Asian Utility Example A typical Asian utility would like to lower its cost of LNG supply If we assume that being fortunate with timing and only securing long term supply in a buyers market is not a sustainable long term strategy, then what options are open to the Asian utility? One of the best options would be to offset cost of LNG by taking equity in liquefaction projects (upstream and/or midstream). This leaves two options Asian Utility Wishing to Take Equity in Liquefaction Project Traditional LNG Project Developed by Major/IOC/NOC Asian utility likely to be allowed to enter project at FID (or close to FID) Small stake offered (~1-5%) Significant equity premium paid to enter project LNG sold at market price Mid-Sized LNG Project Developed by Untraditional LNG Player(s) Asian utility likely to be allowed to enter project at an early stage 20-50% stake is achievable Significant discount offered for equity investment compared to investing at FID LNG sold at discount to market price

25 Private and Confidential Brief Introduction to FLEX LNG FLNG Market and Size Considerations FLNG Economics vs Onshore Summary

26 Summary LNG FPSOs offer compelling arguments... Monetisation of commercially challenged gas reserves Lead time less than 50% of a traditional liquefaction project Unit CAPEX of USD/tons liquefaction capacity Redeployability Strategic and commercial independence Increased revenue/taxation for host governments compared to an onshore development Considerably reduced environmental impact compared to an onshore development...and as the first FLNG units are deployed the industry will see the following changes: New LNG supply can be developed in less than two years LNG supply projects will appear in locations unimaginable today (i.e. liquefying pipeline gas supplied from existing grid) Onshore liquefaction projects will have to innovate and become more cost effective to remain competitive Companies with no previous affiliation to the LNG industry can be become substantial LNG suppliers Traditional end-users of LNG will integrate upstream and take control over their own LNG supply destiny 26

27 Thank You Questions?