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LIQUEFIED NATURAL GAS

:
GLOBAL EXPERIENCE AND
ECONOMIC BENEFITS

OCTOBER 2010
LNG

WHAT IS LNG • Natural Gas cooled down to approximately 161°C • The natural gas is condensed into a liquid • Mass is then reduced 600 times OCTOBER 2010 LNG .

4 USD/MMBtu ~0.4 USD/MMBtu 1 ton LNG = 52 MMBtu = 15.THE LNG VALUE CHAIN Liquefaction Shipping Regasification ~1 USD/MMBtu ~0.3 MWh ≈ 1.300 m3 of natural gas *) OCTOBER 2010 LNG *) Depending of heat value .

Oman & UAE Indonesia & Malaysia Australia Trinidad & Tobago Egypt ? D 12 C B 01 A 07 06 02 03 18 05 55 04 36 03 F E 04 Japan & Korea 05 Source: BP statistical Review 2010 .WORLD LNG SUPPLIERS AND MARKETS Major markets Major suppliers 01 02 03 04 05 06 07 A Japan & Korea B North America C Mediterranean D North West Europe E India F Taiwan Algeria Nigeria Qatar.

Oman & UAE Indonesia & Malaysia Australia Trinidad & Tobago Egypt ? D C B 01 02 E 12 D 9 C 36 A A Middle East 07 06 39 A Japan & Korea B North America C Mediterranean D North West Europe E India F Taiwan 03 F E 04 05 Source: BP statistical Review 2010 .WORLD LNG SUPPLIERS AND MARKETS Major markets Major suppliers 01 02 03 04 05 06 07 Algeria Nigeria Qatar.

e. BAFA.LNG PRICES IS USUALLY LINKED TO OIL USD/ 1000 m3 • LNG doesn’t have a common price denominator as known from oil (i. Brent or WTI) EU LNG import price span Average European LNG price German import price 800 700 600 500 400 • In European markets it is Brent or NBP 200 100 Gas price mar-10 jan-10 nov-09 sep-09 jul-09 maj-09 mar-09 jan-09 nov-08 sep-08 jul-08 maj-08 mar-08 jan-08 0 nov-07 • LNG for Japan usually links to JCC crude notation 300 sep-07 • Instead LNG is priced against the destined market Crude oil parity S-curve • Henry Hub is widely used in US market Illustrative Brent OCTOBER 2010 LNG Source: IEA. Japanese Ministry of Finance .

Japanese Ministry of Finance .CASE: JAPANESE LNG PRICES 750 1-6 month 20 600 15 450 10 300 5 150 0 0 2008-01-01 Parity 2008-07-01 Indonisia 2009-01-01 Qatar 2009-07-01 Nigeria 2010-01-01 Australia EUR/'000 m3 USD/MMBtu 25 2010-07-01 Henry Hub NBP OCTOBER 2010 LNG Source: Thompson Reuters.

WHY LNG IN THE BALTIC • Security of Supply • Diversity of Supply • Flexibility OCTOBER 2010 LNG .

THE PRESENT SITUATION FOR SECURITY OF SUPPLY IN EUROPE High low OCTOBER 2010 LNG Source: Ramboll Security of Supply index (RAMSOS) .

RECOMMENDATIONS FROM BEMIP / LNG terminals planned or under construction • Substantial investment in infrastructure • Amber PolLit • Balticconnector • At least one LNG terminal • Strengthening of existing infrastructure between Baltic states Balticconnector • Promote reverse flow in Yamal pipeline Amber PolLit OCTOBER 2010 LNG .

HOW IS IT DONE • Thorough planning • Patience • Brave decisions OCTOBER 2010 LNG .

BUILDING A LNG TERMINAL TAKES TIME Feasibility/FEED EIA Permetting 18-24 months Project award Construction 36-42 months First gas Commissioning 4-6 months Supplier negotiations Business processes IT systems Financial and legal structure 0 60 Months OCTOBER 2010 LNG Note: Assuming a larger scale base load terminal .

THERE ARE ECONOMIES OF SCALE CAPEX split on work 500 Equipment Million Euro per BCM capacity 20 Materials 33 1 400 Prefabrication Construction 14 Design & PM 300 14 Insurance & certif ication 16 2 Contingency 200 100 0 0 2 4 6 8 10 12 Total capacity of terminal (BCM) Existing terminals Planned terminals OCTOBER 2010 LNG .

EIB etc. CIF Underlying indexation Rely on spot cargoes • EPC or several tenders • Operational organisation • Gas quality Planning/permitting issues Financial/structuring issues • Third party access • Regulatory setup (ie what level of tariffs can you expect) • • • • • Capital structure Project financing Strategic partners Company structure Special purpose financing (EBRD.WHAT IS YOUR DESIRED RISK APPETITE Non-Exhaustive! Commercial issues Technical/operational issues • • • • Number of suppliers FOB vs.) OCTOBER 2010 LNG .

com Jack M Kristensen Director.comm Tel: (+45) 5161 5670 OCTOBER 2010 LNG .THANK YOU FOR THE ATTENTION Ramboll Oil & Gasas. Studies and planning E-mail: JCKK@ramboll.