VENICE LNG A PROJECT WHERE TECHNOLOGY AND ENVIRONMENTAL SUSTAINABILITY GO HAND IN HAND

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1 VENICE LNG A PROJECT WHERE TECHNOLOGY AND ENVIRONMENTAL SUSTAINABILITY GO HAND IN HAND The interest for liquefied natural gas comes from some international regulations that will become effective from 2020 thanks to which the ships will have to use low-sulphur-content fuels (like LNG) or, as an alternative, to install scrubbers. After this deadline, the DAFI European Directive, implemented in Italy by Legislative Decree 257/2016, establishes that by 2025 a suitable number of LNG stations have to be installed in ports in order to allow gas-powered ship to be operative. The recent approval of the national strategic framework (specific provisions for the supply of natural gas for transport) by the Ministry of Economic Development, gave a clear framework for those who wish to develop these new infrastructures, triggering a rush to new submittals. We estimate that in 2030, the Port of Venice expected demand for LNG will be equal to 873,000 tonn/year, of which 73% for road transport, 19.7% for maritime transport and a remaining share for port/local services. Additionally, the North Adriatic Sea Port Authority, in collaboration with Rimorchiatori Riuniti Panfido, is studying, also thanks to the European co-financing, the design and implementation of an innovative barge for LNG transport with a bi-fuel pusher for LNG distribution and bunkering to ships, starting from the new terminal of Venice LNG. These are innovative Made-in-Italy means that will set a trade standard and a reference benchmark for all new LNG terminals that are being designed in Europe following the new legislation. EU SUPPORTING THE PROJECT Thanks to the North Adriatic Sea Port Authority interest, the project has received an European co-financing for the design and for the authorizing processes expenses as part of the GAINN project. Additional financing for the terminal design and implementation will be available from the next CEF call for proposals and EIB contribution. The co-funded activities within the GAINN project (promoted and coordinated by MIT and Consorzio 906) support the use of alternative fuels in consideration of the restrictions on sulphur emissions for maritime transport and contribute to the definition of a national regulatory framework; this framework includes laws and regulations for the fuel supply to ships and some types of facilities that will be developed, also identifying ports and their locating area (in accordance with Directive 2014/94/EU on the deployment of alternative fuels infrastructure). I believe that sustainability and technology should go hand in hand, in this context a new LNG terminal is an excellent example of this philosophy. That is why we decided to support the initiative of two private companies with the objective of contributing to promote the use of LNG as alternative fuel, both at port and for road transport, forestalling EU legislation. Moreover, the initiative that was presented today is framed within a growing excitement given the expected arrival of the first LNG-fuelled cruise ships (Costa, Aida, MSC), the first dual-fuel ferryboats and the testing of LNG-fuelled trucks, for which the record is still set by a local player, the logistic and road transport company Codognotto. In Venice, the possibility to rely on an ad-hoc terminal for the supply of this new fuel allows us to become the Adriatic hub for the refuelling of LNG for the new ships and to be already ready today predicting future market requirements, the President of the North Adriatic Sea Port Authority, Mr. Pino Musolino, has declared. For press information: Community Strategic Communications Advisers Port of Venice Press Office

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3 PROJECT DETAILS COASTAL LNG STORAGE IN PORTO MARGHERA Storage capacity Supply and distribution Throughput Interventions Investments Opportunities for Porto Marghera Location Construction phase Design Criteria MAIN CHARACTERISTICS The LNG storage facility will have a capacity of about 32,000 m 3. It will be supplied by small-medium sized LNG carriers, through the Port of Venice s South Industrial Canal. The LNG land distribution will be provided via trucks, while LNG barges will ensure the bunkering of ships. In a first phase, the storage facility will handle 150,000 m 3 of LNG per year. With the expected demand increase, it will handle up to 900,000 m 3 per year. In addition to the LNG storage tank, the following interventions are planned: new facility on the existing berth DECAL1 in order to receive small-midsized LNG carriers LNG transfer system in order to allow the loading of bunkering barges at DECAL1 berth. five loading bays for LNG tanker trucks Boil Off Gas Equipment: o compressor station for the injection of BOG into the national gas network 1 o Wobbe Index adjustment system Auxiliary devices and buildings. The total investment amounts up to over 100 million Euros. The new storage facility represents a substantial opportunity for the development of Porto Marghera in terms of both the amount of the investment and the benefits for the local economic system. In fact, the LNG market is expanding sharply and recent studies 2 have estimated that LNG global trade will triple by The plant will be located in a brownfield industrial area (a former cement plant, demolished in 2010) next to the existing Decal storage site. The construction phase will last for 2 years and about 100 specialised workers will be employed. The storage facility is designed on the basis of the following criteria: minimisation of the interferences with the surrounding environment o no impact on safety conditions of the adjacent areas o no limitation of the existing activities 1 The plant is not designed for re-gasification: the possible connection to the gas network is only intended for safety and environmental reasons thus avoiding flaring or venting to the atmosphere. 2 International Energy Outlook 2017 (IEO2017) 1

4 Venice LNG S.p.a. minimisation of the interventions o re-use, where feasible, of the structures already in place o limited changes to the existing infrastructures use of consolidated technologies o Best Available Techniques (BAT) will be adopted. SAFETY FEATURES Fully compatible with the surrounding areas The feasibility study together with the preliminary analysis of the possible major-accident scenarios confirm that the facility is fully compatible with the surrounding areas and exclude the risk of the so-called domino effect. Precautionary principle The plant is designed in full compliance with the precautionary principle and it will adopt safety, containment and monitoring systems in compliance with the reference standards3. Full containment technology In particular, the 32,000 m3 storage tank will use one of the safest and most tested technologies worldwide, which ensures a full containment of the product. In fact, the primary tank is made of special steel and it is protected by a reinforced concrete structure, which guarantees full resistance to thermal stresses. Minimization of the risks The realisation of the LNG storage facility will be subject to a complex authorization process, in which the competent institutions will verify that the plant is designed in full compliance with all safety requirements of the national and international legislation. Once the storage facility is realized, it will be subject to a strict risk minimisation procedure, and Venice LNG will have to adopt: a major-accident prevention policy a security management system specific control activities punctual emergency planning activities. The Ministry of the Interior is responsible for the coordination and control the above-mentioned activities. 3 UNI-EN 1160/98, UNI EN 1532/99, UNI-EN 13645/2006, UNI-EN 1474/99, UNI-EN 1473/

5 Render of the LNG storage facility, next to the existing Decal site (on the right) ENVIRONMENTAL ASPECTS Recovery of a disused area No increase in road traffic A ship per week Average height Environmental Impact Assessment The environmental impact of the plant is minimal, as the terminal is built in a brownfield industrial area, which is not included in the Habitat 2000 directive area. The potential impact on air is mainly due to dust and heavy vehicles exhaust gases, from road tankers loading LNG at the terminal. There will be no increase in traffic, as the terminal is located in an industrial area, and the traffic is expected to replace equivalent traffic of road tankers loading conventional fuels. Moreover, each load of LNG will replace the energy equivalent amount of diesel fuel or heavy fuel oil, resulting in a consistent PM10 and PM2.5 reduction. With regard to the maritime traffic, a maximum of 50 ships per year is expected, approximately corresponding to one vessel per week. The LNG carriers themselves will be fuelled with LNG, and the barges will allow the ship bunkering with LNG in the Port of Venice. Today the barges carry marine diesel (which contains 500 times more sulphur than diesel for cars) or fuel oil (which has even 1,000 times more sulphur). Also the maritime traffic will contribute to replace the existing traffic of oil products. The landscape impact will be minimal, as the storage tanks will be located in an industrial site, and have an average height (32 metres), compared to other plants in the area, such as a coal-fired power station, an ethylene plant etc. The environmental impacts of both the construction phase and of the operational phase are currently under study. The environmental impact study will be evaluated by the Ministry of the Environment and subject to a public consultation within the Environmental Impact Assessment (EIA). 3

6 THE STORAGE FACILITY AS A STRATEGIC INFRASTRUCTURE The international strategy for the reduction of pollutants The Venice LNG storage facility will foster the use of LNG as a fuel for heavy and marine vehicles, as it takes advantage of a strategic position that is accessible to both sea and land routes. This is fully in line with what the European Commission established with the so-called DAFI Directive, which provides that by the end of 2025 an LNG supply network must be available for ships and heavy vehicles along the TEN-T central network. The Port of Venice is one of the Italian ports of the TEN-T network and therefore strategic for the construction of small-scale LNG storage facilities. A wider distribution of LNG as a fuel for ships and road vehicles is foreseen at Community level due to the significant environmental benefits deriving from its use, since, compared to traditional fuels, it is able to significantly reduce particulate matter and sulphur emissions in the atmosphere and, at the same time, to reduce the impact of transports on the climate. GAINN_IT initiative The Venice LNG storage facility is one of the projects envisaged under the GAINN_IT initiative, which is promoted by the Italian Ministry of Infrastructures and Transport, in compliance with the provisions of Legislative Decree 16 December 2016, No. 257, which implements the DAFI and approves the National Strategic Framework. GAINN_IT is the container of the projects co-financed by the European Commission within the CEF (Connecting Europe Facility) programme and it aims at conceiving, defining, testing, validating and implementing, in the period, the storage network, the distribution and the use of alternative fuels, LNG in particular. EU co-funding Specifically, the Venice LNG storage facility, together with the project for a coastal storage depot of 9,300m 3 in the port of Livorno, is part of the GAINN4SEA action (GAINN for South Europe maritime LNG rollout) presented under the funding programme 2017 CEF Transport Blending MAP General. At the end of 2017, both projects were declared eligible for co-financing. LNG Main characteristics LNG and water LNG is natural gas (methane), brought to liquid state through a cooling process at -160 C. It is odourless, colourless, non-toxic and noncorrosive. In the gaseous state it has a density lower than air, therefore in case of release into the atmosphere it evaporates without leaving a trace. LNG does not dissolve in water, but evaporates without mixing or leaving residues. Therefore, it cannot pollute the sea or the aquifers, or damage the fauna and the aquatic flora. LNG used as marine fuel solves the problem of the spillage of mineral oils in an aquatic environment. In fact, traditional fuels contain more complex and heavy products (such as asphaltenes and resins) that tend to change in terms of both volume and composition, when released in water. 4

7 LNG and fire Benefits for air and health Even if it comes into contact with fire, LNG does not explode, but burns and evaporates without creating any shock waves. LNG can explode only under 3 specific simultaneous conditions: if it is in a closed and saturated environment if it is mixed with a percentage of air between 5% and 15% if, at the same time, it is in contact with a source of ignition. However, these conditions cannot occur inside a storage tank. LNG is considered the "cleanest" fuel for medium and long-distance transports because it ensures a significant reduction in NOx (45-85%), CO2 (15-30%), SOx (approximately 100%) and PM10 (90%), PM 2.5 (40.5%). As for unregulated emissions, technical records show that the use of LNG proved to reduce the non-methane VOCs in comparison with conventional marine fuels 4. Pollutant reduction Sox (sulphur oxides) - 95% Nox (nitrogen oxides) - 45% / 85% PM10 (coarse dust particles) - 90% PM2.5 (fine particles) - 40% CO2 (carbon dioxide from combustion) - 15 / 30% LNG AND PM10 REDUCTION When compared to the consumption of LNG trucks, the storage capacity of the Venice LNG storage facility could fuel about 15,000 trucks in a year, reducing PM10 emissions by about 330 tonnes. LNG and ships Several studies have been carried out on the connection between LNG and NOx, SOx and PM emission. These researches are linked to the Marpol Annex VI that regulates ships emissions and especially imposes a strong reduction of sulphur content in fuel oils by 2020 (from 3.50% to 0.50%) with even more restrictive limits for the ships trading in designated emission control areas. Even the most "ecological" marine fuel still contains 500 times more sulphur than the common diesel fuel for cars, while LNG is almost completely sulphur-free. As of March 2017, in the maritime sector more than 100 LNG fuelled ships 5 (excluding LNG carriers) are already operating worldwide. 100 new buildings were confirmed in LNG is expected to grow even more rapidly over the next 5-10 years in the shipping sector. 4 Zamiatina 2016 Klaipeda University; Papadimitriou 2015, National technical University of Athens; Saksa 2015, Technical Research Centre of Finland; Seddiek 2014, Alexandria University. 5 LNG World Shipping List, April Ghadikoalei, Gheung, Yung 2016, Hong Kong Polytechnic 5

8 COMPANY PROFILE Venice LNG is a new company founded at the end of 2017 by the union of two major Italian companies, Decal Spa (65%) and San Marco Gas (35%) - which belongs to San Marco Petroli group. Both companies are active from over 50 years in the sector of the storage and distribution of petroleum and petrochemical products. Strengthened by their experience and technological knowhow, today the members of Venice LNG focus on LNG, the most important alternative fuel to oil and its derivatives, which will be the cleanest and most reliable form of energy in the coming decades. DECAL S.p.A. operates in the storage sector of oil products, chemical and petrochemicals, biofuels, bunker products, vegetable oils and gases (LPG). DECAL S.p.A. (Italia) was founded in 1961 by Pietro Triboldi. In 1966, the Company's first marine Terminal for the storage of oil and petrochemical products was established in Porto Marghera (Venice). Later the company became a sector s leader in Italy and in the 90s started a rapid expansion of its business in Europe and in the world. Today Decal owns and operates six Terminals in five different countries Italy, Spain, Panama, Brasil and Russia with an overall storage capacity close to 2 million m 3. In addition, in Italy DECAL took over Società Internazionale Lubrificanti specialized in lubricants blending, filling and shipping services, thus widening the range of services provided. Decal makes constant investments aimed at ensuring compliance with the highest safety standards while reaching best performance through the continuous training of its personnel, the use of automated safety measures as well as the best available techniques (BAT) to operate while respecting the environment. San Marco Gas is a sister company of San Marco Petroli, a company founded in 1962 in Porto Marghera. It operates a 5,200 m 3 terminal for the storage, bottling and marketing of LPG in Portogruaro (Venice). Located in a strategic position between Veneto and Friuli Venezia Giulia, San Marco Gas reaches, with a broad coverage of the territory, also Emilia Romagna, Lombardy, Austria, Slovenia and Croatia. For years, San Marco Gas has been the point of reference for many operators in the market of the road distribution network, commercial warehouses and partner companies to which it guarantees the supply. San Marco Gas is an innovative company, in step with the times, attentive to environmental issues and equipped with a technologically advanced structure to guarantee quality, plant safety, risk management and health protection for workers and citizens. 6