LNG Experience. Owner & Investor Project Management

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Edmund Andrews
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1 LNG Experience Owner & Investor Project Management

2 Project Management (Operator / Investor) Most mega projects fail to meet FID Cost & Schedule Contracting Strategies are not meeting the challenges Regulatory Permitting Activities are often under-estimated Tighter labor market coming Even for Co-Investor, governance entails similar liabilities and responsibilities and therefore requires a spectrum of capabilities similar to an operated business.

3 LNG : Plan the Work and Work the Plan First LNG Cargo Delivered in Importing Counties and 19 Exporting Countries supplying 250 mtpa 2020 Forecast 40 Importing Countries and 24 Exporting Countries supplying 350 mtpa 2025 LNG Demand Forecast 400 mtpa Typical LNG Project Pre Final Investment Decision 3 to 7 years Planning Feasibility Studies and Approval Process Pre FID Evaluations FERC Approval & Permit required in the US Plan the Work Project Execution 4 to 5 Years

4 FERC Status

5 Owner Management Where we can Help Feasibility and Approval Process Pre FID Evaluations Contractor Selection Evaluations Scope Validation Execution Strategy Modularization vs. Stick Build Cost Validation Schedule Validation Team size, structure and content (staffing both competency assessment and sourcing) Risk Identification Execution Progress Monitoring and Control Risk Mitigation

6 DRL CAPABILITIES v v v v v v v v v v v v v v v PROJECT MANAGEMENT PROJECT DUE DILIGENCE COST REDUCTION METHODS EXECUTION PLANNING REGULATORY PLANNING CONTRACTING STRATEGY TENDER PACKAGE DEVELOPMENT FID ESTIMATE & BENCHMARKING SCHEDULE & BENCHAMARKING COST CONTROL & FORECASTING DEVELOPMENT OF WBS WORKPACKS SAFETY & RISK MANAGEMENT PLANS FACILITIES COMPLETION METHODS MOC PLAN COMMISSIONING & S/U PLANNING OWNER PROJECT MANAGEMENT SUPPORT WE HAVE MANAGED 110 JOBS IN USA

7 FEASIBILITY and APPROVAL PROCESS

8 Feasibility & Approval Progress Feasibility and Approval Process Establishing a Value Chain Commerciality Supply Demand Permits Risk and Opportunity Assessments

9 Project Management Key Risk mitigation & Predictable Outcomes are established in the early stages.. You have to KNOW what is coming down the track thru EXPERIENCED PMT.

Project Assurance Types of Assurance Activities Audits Reviews Participation at Stage Gates (Value Assurance, Estimate and Schedule Reviews) Activity Health Checks Project Execution Plan Review

10 Project Assurance Types of Assurance Activities Audits Reviews Participation at Stage Gates (Value Assurance, Estimate and Schedule Reviews) Activity Health Checks Project Execution Plan Review Assists (Peer Assists, Senior Discipline Counsel) Value Improving Practices Technology System Selection Process Simplification Constructability Review Lessons Learned Benchmarking Quality Assurance

11 Examples of Review Activities

12 LNG PLANT : Pre Final Investment Decision CONTRACTING and CONTACTOR SELECTION & EVALUATIONS What scope breaks/splits minimize execution risks? What Contractors fit the different scopes of work? What contracting approaches minimize the Owner s commercial exposure? Tender Evaluations

13 LNG PLANT Cost and Main Contractor

14 LNG PLANT : Pre Final Investment Decision SCOPE VALIDATION Contractor Scope Validation Identification of Risks and Opportunities

15 LNG PLANT Equipment Weight vs Capacity

16 LNG PLANT Total Weight vs Capacity

17 LNG PLANT : Pre Final Investment Decision MODULARIZATION vs. STICK BUILD EVALUATIONS Stick Build? Modularization Percentage?

18 Onshore Plant Construction Onshore Plant Construction decision on Modularization vs. Stick Build has many variables and for each individual project the answer is not always the same. Modularization introduces multiple construction locations and consequently required early decision making and good management. Challenges associated with Large scale Modularization Engineering & Design Needs to be Completed Earlier and with higher manhours relative to Stick Build Increased Steelwork Increased Temporary Facilities Earlier Procurement Significant Shipping Requirements (More Complex Logistics) Increased Interfaces Planning and Control Challenging

19 Onshore Plant Construction - Modularization Positive Features of Modularization for Unique site specific conditions include: Higher Labor Productivity Mitigation of Weather Related Delays. Seasonal concerns limiting suitable periods for stick build construction (related factors such as excessive mud or ice) Lower Labor Costs when compared to remote or expensive locations or with limited labor supply Mitigation of Schedule Risk by shifting construction work to a controlled manufacturing environment Potential Safety Risk Reduction from building in a controlled manufacturing environment

20 Onshore Plant Construction STICK BUILD FAVOURED WHEN Availability of labor at low all-in cost Suitable Site without large site preparation works Suitable Climate conditions for outdoor works all year Stick Building Enables Low Construction Cost Schedule Flexibility Use of large unskilled work force Local Content MODULAR FAVOURED WHEN Local labor costs high Indirect resources are high cost & have to be imported Remote location Site Preparation is significant Climate conditions are challenging Restrictions on use and availability of land Modular Construction Enables Reduced Plant Footprint Reduced Construction Area Onsite manhour reduction Superior Fabrication Conditions Delay to Early Works BUT INDIVIDUAL PROJECT ASSESSMENT REQUIRED AT PRE FEED STAGE TO DETERMINE THE APPROPRIATE EXECUTION STRATEGY. THIS MUST REALISTIC COST and SCHEDULE ESITATION. HISTORICAL PERCIEVED BENEFIT OF MODULAR CONSTRUCTION SCHEDULE (and COST) MAY HAVE BEEN OVERSTATED

21 Onshore Plant Construction There are circumstances where Modularization offers significant benefits, but realization of these benefits requires early management and planning to ensure that the required Execution Strategy is embedded through out all project phases Selective Modularization may provide a more cost and schedule effective result Each Onshore Project should develop it s OWN UNIQUE Execution Strategy and associated level of planning and management.

22 Early Planning for Modularization 22

23 LNG PLANT : Pre Final Investment Decision COST VALIDATION Contractor Cost Evaluation Identification of Risks and Opportunities

24 LNG PLANT Cost per tpa

25 LNG PLANT Cost per tpa

26 LNG PLANT Cost per tpa

27 LNG PLANT Cost per tpa

28 LNG PLANT Cost Drivers Major Cost Drivers include: Scope is the Biggest Driver Capacity / Functionality / Process Selection / Layout Location Labor Availability / Weather Execution Strategy Legislation / Regulatory Market Conditions Performance

$treating section a liquefaction section a refrigerant section a fractionation section an LNG$

29 LNG Plants : All Plants are Not Alike Minimum Process LNG Plant Some Differences :- Plant Location Cost of Labour Feed Gas Composition Product Specification a feed gas handling and treating section a liquefaction section a refrigerant section a fractionation section an LNG storage section a marine and LNG loading section a utility and offsite section Maximum Process LNG Plant

30 LNG PLANT Cost Differences

31 Sabine Pass LNG Project Comparison to Gorgon LNG Sabine Pass LNG Gorgon LNG

32 Comparison Sabine Pass vs. Gorgon GORGON LNG PLANT Gorgon LNG 3 x 5.2 mtpa. Train (15.6 mtpa) Remote Location Australia (Nature Reserve) Acid Gas Removal and Inlet Facilities Jetty 2.1 km in length Estimated Equip & Bulk Weight 270k tonnes Execution Duration to First LNG 80 months FID 13 September 2009 First LNG Export March 2016 Cost US$33.5 billion SABINE PASS LNG PLANT Sabine Pass LNG 4 x 4.5 mtpa. Train (18 mtpa) USA Gulf Coast Industrial Heartland No Acid Gas Removal Facility Two Unloading Docks Estimated Equip & Bulk Weight 180 k tonnes Execution Duration to First LNG 46 months FID June 2012 First LNG Export May 2016 Cost US$12.2 billion (incl. LNG Terminal) Cost Difference US$21.3 billion Indicative Reasons for Cost Difference Difference in Process / Layout / Infrastructure US$4.00 Billion Site Labour Unit Costs US$6.00 Billion Duration Related Costs US$2.20 Billion Company Owner Cost Unit Rates US$2.00 Billion Site Labour Productivity US$1.75 Billion Equipment / Bulk Procurement Unit Rates US$1.50 Billion Remote Location US$2.85 Billion Addition Weight due to Module Build US$1.00 Billion

33 Comparison Sabine Pass vs. Gorgon

34 Comparison Sabine Pass vs. Gorgon

35 Comparison Sabine Pass vs. Gorgon

36 LNG PLANT : Pre Final Investment Decision SCHEDULE VALIDATION

37 LNG Plant Execution Duration vs. Capacity

38 LNG PLANT DATA LNG PLANT DATA

39 LNG PLANT DATA

Alaska South Central LNG (SCLNG) Project

Alaska South Central LNG (SCLNG) Project Overview for Alaska Legislators February, 2013 - Overview BP, ConocoPhillips, ExxonMobil and TransCanada are working together to progress an Alaska LNG project: