Accelerating Energy. THE WORLD LNG SUMMIT JULY 2015

Transcription

1 Accelerating Energy With Excelerate Energy busy commissioning two new projects this year so far, and making waves with its project in Puerto Rico, LNG Hub Content Manager Larissa Hirst caught up with CEO Rob Bryngelson to discuss how despite LNG prices, it is still a busy global business environment for LNG, with great opportunities in FLNG still very much centre stage. Larissa Hirst (LH): Is FLNG the game changer everyone thought it would be? Rob Bryngelson (RB): The current LNG market price has made a lot of FLNG projects more difficult to pursue. Looking at the numbers now, a project needs to deliver at around $6-7 per MMBtu FOB to be competitive. Considering that liquefaction would run in the low $3 to $4 range per MMBtu, that leaves only about $2 3 per MMBtu for upstream production. For many of the reserve positions under consideration (stranded or otherwise), $2-3 is difficult to achieve. We have simplified our approach and what we are trying to do is walk before we can run. We are still focused on FLNG, but have refined our strategy to pursue a simpler design; something that looks more similar to a ship than an offshore facility. This approach brings the benefits of lower cost, quicker time to market, and a substantially simpler product. Creative deal structuring is key in this business. While there are good opportunities with interesting reserve positions, often these are held by producers who might have a market capitalisation that is substantially less than the cost of an FLNG vessel. In these circumstances, the FLNG

2 provider can t really be shielded by the producer from the upstream and downstream risks, so if there s a problem even if unrelated to the FLNG vessel the FLNG provider is exposed. In these instances, a more partnership type agreement with a balanced sharing of risks and upsides is appropriate and necessary to develop a viable project and secure necessary financing. There has been a good bit of excitement in the past over floating liquefaction, with significant investments made and lost without firm projects to back them up. Unfortunately, what we ve seen in this space is that once a company starts investing heavily in a project, it s hard to break that momentum and stop even if the company recognizes the project is no longer viable. As construction moves closer to completion, there is also a natural desperation to employ the asset quickly and the sponsor becomes willing to take a lower return or higher risk to do so. This has the potential to go one of two ways it can become a company killer, or it becomes a project that never delivers on its return promises. Either way, those are the kinds of situations Excelerate plans to avoid no project is better than a bad one. That said, today we are more focused; we had a dozen or so FLNG opportunities we were looking at before LNG prices really came off, and we have culled that list down to three to four those projects we believe have a good opportunity of succeeding. While falling LNG prices may have slowed the growth of the FLNG business for a while, the flip side of this is that it s had an incredible impact on the regasification business. With lower prices and more LNG available, regasification customers have started to really step up and want to do projects quickly. LH: Tell us about some of Excelerate s exciting projects and developments taking place at the moment? RB: At present, we have over three dozen projects in various phases of development around the world, working in just about every region you can imagine. Some of these are in the final stages of negotiation, and some are early in their life cycles. What s important to us is to keep the pipeline full and have a continuous stream of maturing projects to allow us to grow and expand our business. These projects don t happen overnight, and both patience and broad market coverage are the keys to being successful. Over the years, we ve seen the markets develop and substantially change from the simple chartering model where they started. We work

3 with our customers to define specifically what they need, and regardless of our role, we treat each project as though we were a partner. We want to ensure that we successfully deliver these projects as in our view, they are not simply the provision of an FSRU but rather an energy solution for our customers. We have secured multiple newbuilding slots, in addition to an extensive conversion program. There is no one-size-fits-all solution for FSRUs, so it s important to be able to react dynamically to market needs and provide tailored solutions. Our combined newbuild/conversion approach to the market allows us to do this. We are also constantly looking at expanding our product offerings including LNG bunkering, bulkbreaking, and regional distribution models. These allow us to enhance the value that our projects bring to our customers finding new ways to meet their needs. Energy Fast Forward is the phrase that we use internally to describe how we look at the markets. As far as specific projects go, we have had a very busy year. In March and April, we commissioned two new projects in Pakistan and Dubai respectively. Both of these projects provide critical energy infrastructure to rapidly growing markets, and were delivered concurrently in under 12 months. There is amazing potential throughout the region, and we continue to grow and expand our operations to keep pace with market demands. We are also making excellent progress in our implementation of our project in Puerto Rico, and despite the challenging economic conditions there we firmly believe that LNG is the best solution to reducing energy costs on the island. Another US island market is Hawaii, and we re actively involved there. Our unique experience in the complex US regulatory process provides us an added benefit in combination with our overall experience. We are active throughout Africa, with announced projects in Ghana, Cote d Ivore, and Namibia - and several others under exclusive development on both the east and west coasts. LNG provides a cost competitive and environmentally sensitive solution to these growing markets. These are near-term projects that we hope to see go online within the next two years. We have been involved in Bangladesh for some time, and are working closely with the IFC (World Bank) to bring that project to fruition. Bangladesh has significant energy needs, and we ll be providing a true terminalling service there, developing the FSRU, offshore mooring system, and interconnecting pipeline to shore as an integrated service to Petrobangla. Our plan is to be operational in South America continues to be a hot market for us, and we re seeing an increasing number of opportunities throughout the region and northward into Central America. Petrobras in Brazil and YPF/Enarsa in Argentina continue to be our biggest customers, and we are working to grow those relationships. India is quite active as well, with significant demand necessitating rapid development there. Complex markets, but great opportunities. Southeast Asia is also taking a lot of our attention for full sized FSRU projects, but also because of its potential for a regional distribution (hub and spoke) solution (much like the Caribbean).

4 In the past customers used to say they wanted a ship, then an FRSU, and then a delivered solution. Now they are asking for something that will provide them with electrons, so we are seeing more and more partnerships with power plants, and we are working closely with power producers. The market has really matured over the past several years, moving from simply a price-based determination to one where operating history, availability and vessel performance matter. Customers are better informed as they have access to more information and data on actual project performance over time. LH: What does the global business environment look like for LNG right now and in the near future? RB: In a word, busy. We see many new markets capitalizing on the abundance of LNG supplies and pushing their projects forward. This means that we have to grow and adapt to meet their needs, and we re well positioned to do this with the newbuild and conversion strategy, as well as the regional distribution model. What we see, however, is that most of these markets are looking for a solution not a ship, and a solution provider who ensures that they have the energy they need. In general, the solutions are becoming more complex and integrated as the market evolves. Demand for LNG is worldwide, and we maintain a global focus and don t overly constrain ourselves to one type of size of project. In addition to the full-scale FSRU project opportunities I mentioned before, we re working on small-scale / regional distribution opportunities with a renewed focus in South East Asia and the Caribbean. Even in the United States, our project in Puerto Rico makes a tremendous amount of sense to help reduce energy prices on the island and improve environmental conditions, and there s a similar motivation for Hawaii. Our customers look to LNG and more specifically to our FSRUs to provide a combination of reducing energy cost, improving environmental conditions, enhancing security of supply, and transitioning to renewable energy. LH: How will new LNG supply change the market, and how will this impact Excelerate? RB: New LNG supply availability is really stepping up the pace for development. As more supply becomes available and as the market becomes more commoditized, it is easier for new projects to get comfortable with moving forward. The growth in spot trading and flexible LNG cargoes is helping with this as well, allowing new LNG consumers to have a more measured and controlled entrance into the market rather than making an all or nothing commitment from day one. LH: How can players succeed in shipping s cyclical market? RB: I see two answers to this. The first is obvious and that is do your business well. Sounds simple, but this means putting yourself in the customer s shoes. For example, there are situations on projects where the FSRU may be performing well, but a problem manifests itself on the customer s side. It would be easy to sit back and say that s their problem but in our view, a project isn t successful unless it s successful for everyone involved. For that reason, Excelerate s technical, operations, commercial, and logistics teams are available 24 hours per day to our customers to help solve their problems and come up with solutions. We want to be an indispensable part of the project for our customers. In this business, relationships matter as much as

5 experience does that s how you build and maintain a reputation. The second is to differentiate find new ways of doing things and offer things that your competitors don t. That means always looking ahead and never getting comfortable with where you are, and it also means learning from your mistakes along the way. In this business, experience really does matter but not just from day-to-day activities. The experience in how to put a project together, manage risk, and deliver an effective solution is not as fungible as some might think. LH: What are you most looking forward to at the World LNG Summit? RB: World LNG Summit is always a great place to exchange ideas and meet with clients, partners, vendors, and service providers around the world. When you get that many knowledgeable and motivated people in one place, you can come up with some amazing results. A big part of this business is learning from each other and coming up with new and innovative ways to succeed. Being a part of such a key industry event helps make that a reality. Excelerate Energy are Bronze Sponsors at the at the 16 th World LNG Summit and Awards Gala Dinner, taking place 1-4 December 2015, at the Rome Cavalieri Hotel, Italy. The CWC World LNG Summit and Awards Gala Dinner (WLNG 2015) is fully recognised as the premier gathering of senior, commercially-minded LNG executives in the world. The Summit offers a unique platform to access the key international LNG buyers and sellers and hear the latest industry developments in a relaxed and informal setting. For more information please contact Tyler Forbes or Elliot McGinn on LNG@thecwcgroup.com or call Interview by Larissa Hirst, Online Content Manager, The LNG Hub. Pictures from Excelerate Energy.