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LNG as Future Bunkering Fuel in Europe

October 2013

Gazprom Group


FSU Countries




Republic of Korea

Bolivia Singapore Vietnam

Oil production Spot sales of LNG



Equatorial Guinea






Hydrocarbons s explorarton, production and geological survey Hydrocarbons processing Sales of gas, supplied by gas pipelines Electricity sales

Projects of methane production from coal beds Gas transportation and underground storage Gas sales to end-consumers Oil products distribution through gasoline stations network

Gas and gas condensate production Electric power and heat generation Oil and gas condensate sales

Refined products sales

Gazprom Marketing & Trading Limited

Gazproms strategic goal is to become the leading global energy company by entering new markets, diversifying business activities and ensuring reliable supply.

Gazprom Marketing & Trading Limited

Gazprom LNG operations and trading via GM&T

GM&T: Manage of the Gazprom Group LNG trading portfolio Operational support of maritime transport Trade and marketing activities development

Year 2005 2006 2007 2008 2009 2010 2011 2012

Volume traded (bcm) 0.16 0.44 0.45 0.64 1.84 2.54 3.04 1.82

Source country Market country

Cumulative Cargoes Traded

Source: Gazprom LNG

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Gazprom LNG business growth

Gazprom Marketing & Trading Limited

Gazprom is well positioned to develop a global G4T business in markets with proximity to its equity gas
Gazprom has the opportunity to build on its competitive advantages in a new emerging G4T market:
Equity gas in areas of interest: Secure supply Proximity to customers: Lower cost to customers compared with competitors A 10% market share in these ECA regions by 2030 could provide 1.8 mmtpa of LNG demand (2.4 bcm)

ECA 1: Baltic tied to NordStream feed gas Nord Stream pipeline project: existing infrastructure and substantial volume of equity gas

ECA 4: Singapore Pacific train 3 Sakhalin project: existing infrastructure, new volumes of LNG, possibility to build a small scale jetty


ECA 3: Med/Black Sea Black sea South Stream pipeline project: emerging infrastructure and substantial volumes of equity gas

ECA1 and 4:Other European and Asian Shtokman LNG project possibility to build a small scale jetty and then benefit from bunkering operations for the Arctic sea route towards Asia

Gazprom Marketing & Trading Limited

Emission Control Zones


Caribbean ECA

Singapore Green Initiative, Hong Kongs Fair Winds Charter

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Maritime regulation change is opening an opportunity for the LNG bunkering market to develop
IMO sulphur emissions limits

Ship operators comply options

Depending on stand alone ship economics as well as % of sailing in ECA1 zone, ship owners will have the following options to comply:

Marine Diesel Oil


No upfront investment Higher operating costs Refineries may not be able to meet increasing demand Lower fuel price Significant capex investment Operational constraints Competitive fuel price with MDO Security of supply is constrained by infrastructure Larger capex investment Lack of Infrastructure

HFO*/Scrub bers International Maritime Organisation (IMO) regulations will require significant reductions in ship emissions (under ANNEX VI) in designated Emission Control Areas (ECA1) over the coming years:
1 January 2015: Sulphur limit in ECAs will be reduced to 0.1% NOx for Tier I levels in ECAs will be reduced by 80%, and by 20% for Tier II (global) compliance By 2020 additional ECA zones are expected to be enforced: A global cap on sulphur content of 0.5% will be enforced

* Note: SCR: Selective Catalytic Reduction, HFO: Heavy Fuel Oil **Source: RS Platou


Currently there are 37 ships running on LNG worldwide (equal number has been
ordered so far**)

LNG consumption in North-West Europe shows that demand comes from Ro-Ro
ferries (36%), PSV (22%) and Car shuttle ferries (22%)

In Norway LNG bunkering exists since 2000 helped by the incentives posed by
the Government: NOx fund subsidizes the cost of LNG bunker fuel projects Clear policies for LNG bunkering
Gazprom Marketing & Trading Limited

LNG bunker demand potential in ECA 1

Demand for LNG bunkering will be driven by relative cost to traditional marine fuels

LNG bunker fuel demand, as part of total bunker fuel demand, will be determined regionally by:
Relative price levels with traditional marine fuels (HFO, MGO) ECA or other ship emission controls LNG fuel and infrastructure availability Composition of ship traffic NOx scrubbing and NOx adsorption traps

Market expectations on LNG bunkering demand:

PACE Global : LNG demand 6 MTPA expected in the Baltic/ North Sea (ECA 1) by 2030
Lloyds Register FOBAS: 24 MTPA by 2025 globally. An estimated 653 vessels, or 4.2% of global deliveries, could be fuelled by LNG between 2012-2025 Danish Maritime Authority DMA: 4 MTPA by 2020 globally (Det Norske Veritas DNV) 5-7 MTPA by 2020 globally

Source: Gazprom G4T

Gazprom Marketing & Trading Limited

LNG bunkering value chain

The LNG bunkering value chain is composed of 4 distinct operations

1. Supply

- Initial LNG supply will be from liquefaction plant - Recommended option is for Gazprom to construct own plant close to existing pipelines - Transport of LNG from liquefaction plant to point of use or intermediate storage - Typically performed by LNG feeder vessel (1,000 m3 40,000 m3) - Can also be transported by truck (widely done in Norway)

2. Transport

3. Storage

- Storage capacity needed at liquefaction plant and end-user port - Expected port tank capacity of 20,000-30,000m3

4. Bunkering

- LNG loaded from remote storage tanks to be delivered to end-user - Can be performed by truck, fixed line or marine vessel (most likely barge) - Barge capacity 1,000m3 up to 5,0000m3 - Demand per bunkering customer expected to be 300 m3 500 m3 - Barge is economically efficient but requires upfront investment since new technology

Gazprom Marketing & Trading Limited


EU demand on SS LNG is expected to reach 43bcm by 2030

Options for SSLNG infrastructure to match Gazprom market share of 10% based on conservative demand expectations, further geographic expansion (US, China, etc.) possible.
Target markets CNG light & medium duty vehicles LNG heavy duty road transport LNG bunkering

Portovaya 0.5 mtpa Baltic LNG 10 mtpa Kingisepp 0.01 mtpa Kaliningrad 0.02 mtpa + 0.15 mtpa

Infrastructure options: LNG liquefaction either in Russia or at exit of Russian export pipelines LNG storage hubs for geographic extension Distribution to target clients inland by truck / on sea by feeder vessel Utilization of cold generated from decompression in existing network



NW-E-Cluster CNG 1.0 bcm LNG 2.2 bcm

NE-E-Cluster CNG 5.4 bcm LNG 3.6 bcm 2

(Dzhugba) 0.5 mtpa

Baumgarten 0.2 mtpa Infrastructure option SW-E-Hub NGV markets Bunkering markets

SW-E-Cluster CNG 5.4 bcm LNG 3.4 bcm

SE-E-Cluster CNG 3.0 bcm LNG 2.4 bcm

South Stream Samsun

Target market priority

LNG Bunkering Mediterranean Sea 3 bcm

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* Figures represent conservative demand projections per cluster

We are dedicated to developing this market together with our customers

Create value proposition

for customers

Guarantee lower Total Cost of Ownership than operations on Diesel, HFO or MGO whilst at the same time fulfilling environmental objectives

Provide sustainable and

competitive supply of LNG

Provide sustainable and competitive supply of LNG to the bunkering and transportation sector in the Baltic region

Develop dedicated
infrastructure based on long-term partnerships

Attract economical and political support for development of alternative fuel projects in Europe Develop LNG infrastructure (liquefaction, hubs, filling stations) in proximity to our European customers

Gazprom Marketing & Trading Limited


Gazprom Group is keen to partner with the key stakeholders so that to allow the development of LNG as a bunker fuel
Gazprom Group Our partners

Reliable supply of LNG in the Baltic/North sea region

Development of infrastructure (storage and distribution)

Long-term partnership Guaranteed demand of LNG Development of infrastructure

(storage and distribution)

Sign MOUs for offtake of LNG from

the Baltic LNG plant

Gazprom Marketing & Trading Limited


How do you envisage the development of LNG market in the port and the region?

What initiatives is the port authority involved to promote LNG as a fuel?

How port is intend to encourage/police use of LNG in SECA/ECA areas?

Is there any land available for Gazprom to build LNG storage/bunkering station?

What are the permits/application required? How long would it take to get them?

What are the regulations that currently in place for ship to ship bunkering and what is yet to be sorted out?

Gazprom Marketing & Trading Limited