Advisors and Investment Bankers to the Energy Industry

Capitalization on FSRU: the Fast Track Solution for LNG

Receiving and Regasification Terminals

LNG Carriers and FSRUs

June 18, 2014

Karthik Sathyamoorthy
Head of Asia Pacific – Galway Group

Galway Energy Advisors

A Member of the Galway GroupLP
www.galwaygroup.com
Galway’s Perspective

 Galway Group clients

Commercial  Upstream gas and LNG
producing companies
 Government and investor-owned
utilities interested/working on
Technical

LNG projects

Strategy
Galway
Energy  Large energy trading companies
Advisors  LNG terminal development
companies
 Private equity investors

Financial  Galway is advising several

clients in:
 The Caribbean, North America,
Central America, South America,
Galway Offices

the Middle East and Asia on LNG

Houston procurement and Floating LNG
Singapore
import terminal development

Galway Energy Advisors 2

Galway is Assisting Numerous Regas Terminal
Development Projects Around the World
Opportunity Concept Deal Asset
Financing
Definition Framing Development Operations

Bahrain
US Virgin
Hawaii Island
Puerto Rico
East Coast Philippines
India

Indonesia

Mauritius

Uruguay
South Africa

Industry Leaders in LNG Project Development/Commercial Advisory

Galway Energy Advisors 3
Agenda

 Credibility Through Viable Import Terminal Solution

 LNG Infrastructure Options

 Understanding FSRU Configurations

 Near Shore vs. Offshore FSRU

 Review Global FSRU Projects

 Is FSRU the Right Solution for China?

 Key Takeaways

* Floating Regasification and Storage Unit

Galway Energy Advisors 4
Viable LNG Import Terminal Solution is an Important
Component of Establishing Credibility with Suppliers

 Most LNG sourcing strategies aim to establish a competitive

environment amongst potential suppliers to obtain;
 Competitive price,
 Fair terms and conditions and
 Security of supply

 The buyer would want to involve multiple qualified potential suppliers

in a process (Request for Proposal or parallel negotiations) to create
that competitive environment

 To attract multiple qualified potential suppliers, buyer must establish

its credibility with potential suppliers
 Credibility and reliability as a buyer
 Creditworthiness, Offtake reliability, etc.
 Credibility and reliability of existing gas and LNG infrastructure
 Credibility and technical viability of gas and LNG infrastructure development plans

Galway Energy Advisors 5

Infrastructure Should be “Acceptable” to as Many
Suppliers as Possible to Support Sourcing Strategy

LNG infrastructure must be “acceptable” to as many potential

suppliers as possible to enable the buyer to create a competitive LNG
supply environment
Designed, built and operated to safely and reliably accommodate LNG ships
• Berthing/docking (berth configurations, acceptable metocean conditions)
• LNG unloading (connectivity & rate)
• LNG storage (capacity), etc.

Compatibility with the LNG shipping fleet

Focus on operational reliability to understand risks of disruptions and impact on

overall supply & shipping portfolio management (applies to both DES & FOB sales)

LNG infrastructure should be based on proven and reliable solutions

and technology to support buyer’s sourcing strategy

Galway Energy Advisors 6

Assessment of Floating LNG Infrastructure Options

Floating LNG Import Terminal

Location Near-shore vs. Offshore

Mooring FSRU at Berth vs. FSRU at Buoy vs. FSU at Berth

Size Standard Scale vs. Mid/Small Scale

Business Models Captive use, Tolling vs. Multiuser

Timing Project Development & Permitting

Galway Energy Advisors 7

LNG Terminals – Onshore vs. Floating

Standard LNG Terminals Small Scale LNG

Onshore Floating Onshore or Floating
Berth & Mooring
Vaporizers &
Vaporizers & System
Utilities
Utilities
Tanks

Tanks FSRU*
FSRU*
Marine facilities

• Industry “Standard” • Rapidly growing option • Emerging option

• Cost: $0.5 - $1.5+ Billion
• 3-4 years construction
• Most suitable for larger, base
load service (economics)
• Require deep water port
• Require sizeable land area
• Cost: $100-$250+ MM
(FSRU) plus $50 - $200+
MM (infrastructure)
• Construction: 12-30 months
• Unit costs can be higher
depending on throughput
• Require deep water port
• Cost: $70+ million
• Construction: 2+ years
• Onshore or floating (barges)
• Unit costs highly dependent
on throughput
• May not require deep water
port if serviced by small
scale ships/barges

Galway Energy Advisors 8

LNG Shipping Alternatives

Standard LNG Ship Small Scale LNG Ship Transshipment

Berth & Mooring
Vaporizers &
Vaporizers & System
Utilities
Utilities
Tanks

Tanks FSRU*
FSRU*
Marine facilities

• 90,000 – 260,000 m3 • New class of small scale • Combine benefits of

• Typical Size: 145,000 m3
(~3.1 BCF)
• Require deep water access
= 40-45 feet
• Require relatively large LNG
tanks at receiving terminal
• Require large tug support
• Cost: $200+ million
ships: 7,500 – 12,000 m3
(0.16 – 0.26 BCF)
• Can service shallower ports
(~20 feet)
• More maneuverable and can
be supported by smaller tugs
• Cost: $45+ million
• More costly on a unit basis
standard shipping (low cost
for long distances), and
small scale (marine access,
small loads)
• Transshipment from either
onshore terminal or floating
storage/ship

Galway Energy Advisors 9

FSRU’s are Becoming More Acceptable but
Configuration is Very Important to Suppliers
• For demand centers
• Post FID, and
with a high level of
subject to
seasonality in
availability of FSRU,
demand, options
a quicker
such as re-
commercial start to
deployment as
operations can be
LNGC can be
achieved (lead time
considered
on constructing
LNG storage tanks
• FSRU can be used
is nil)
as a stop gap
arrangement until
construction of land
based terminal is
constructed. Upon
construction of the
land terminal, FSRU
can be deployed at a
different import
location/country

• Risk tolerance with respect to FSRU/berth and FSRU/LNGC (STS transfer) is

increasing
• Not as capital intensive as a land based solution (storage tanks are high CAPEX
components)
Source : Galway Internal Analysis
Galway Energy Advisors 10
There are Several Viable FSRU Based LNG Import
Configuration Options

Options “Standard” Scale Solutions Small/Mid Scale Solutions

 Mid Scale FSRU with Single Berth &

 FSRU with Single Berth & “Ship-to- “Ship-to-Ship” LNG transfer
Ship” LNG transfer
Near Shore
 Mid Scale FSRU with Double Berth
Options
 FSRU with Double Berth & “Across & “Across the berth) LNG Transfer
the berth” LNG Transfer
 Regas ATB Barge with Single Berth

 FSRU with Single Submerged  Mid Scale FSRU with Single

Mooring Buoy with STS Submerged Mooring Buoy with STS
 FSRU with Above Water Single
Point Mooring (fixed or floating)  Mid Scale FSRU with Above Water
Offshore
with STS Single Point Mooring (fixed or
Options
 2 FSRU’s with Single Submerged floating)with STS
Mooring Buoy
 2 FSRU’s with Double Submerged  Regas Barges with Single
Mooring Buoys Submerged Mooring Buoy

Galway Energy Advisors 11

Near Shore FSRU Solution: Single or Double Berth-
Side Terminal Configurations
Double Berth
2nd Berth for
Delivery Ship
FSRU
Port Pecem – Brazil (Golar)
• Floating Storage & Regasification Unit
(FSRU) is moored to a berth & connected
to gas pipeline with high pressure arm
• Delivery ship moors to another berth
• LNG is transferred “across the berth” using
hard arms
• Requires benign conditions to maintain
high regasification and berthing &
unloading availability
• Require deep water access (42 ft)
• Generally accepted by Suppliers
Galway Energy Advisors
Single Berth
Berth
FSRU
Delivery Ship
Bahia Blanca – Argentina (Excelerate)
• FSRU is moored to a berth & connected to
gas pipeline with high pressure arm
• Delivery ship moors to the FSRU
• LNG is unloaded using Ship-to-Ship transfer
− Flexible hoses – Excelerate
− Hard arms - Golar
• Requires benign conditions to maintain high
regasification and unloading availability
• Require deep water access (42 ft)
• Less well received by Suppliers and
stated preference for hard arms
12
Offshore FSRU Solutions: Submerged vs. Fixed Point
Mooring Options
Submerged Mooring Buoys
Northeast Gateway – Boston, MA
(Excelerate)
• Loaded FSRU moors to buoy & connects to gas
pipeline via a buoy connection in the hull
• Can tolerate much higher metocean conditions
threshold to regasify than berth configurations
• Requires deeper water to accommodate buoy ~
200 feet, but not too deep (deepest installation in
500-600 ft)
• In theory, a delivery ship would moor against the
FSRU, & unload LNG into the FSRU using STS
• Suppliers have not yet accepted STS while
FSRU on buoy (never been done).
Galway Energy Advisors
Fixed Point Mooring
Rendition of Offshore LNG Toscana –
Tuscany, Italy (Golar)
• FSRU moors to above water single mooring
point and connects to the pipeline via mooring
connection in the bow
• FSRU to be supplied via side-by-side STS
transfer using hard arms
• FSRU hull undergoes modifications that would
hinder shipping efficiency, primarily meant for
more permanent installation
• The wave height threshold for delivering LNG
has been set at 1.5 meters.
• Suppliers’ comfort level with loading an
FSRU at an above water single point mooring
via STS is unknown, but is expected to face the
same issues as a submerged buoy.
13
Ship-to-Ship Transfer (STS) is a Relatively New Method
to Transfer LNG from a Ship to an FSRU

• LNG Ship moors to the FSRU “Side-by-

Side” using fenders and mooring lines

• FSRU can either be at a berth, or at

anchor, or underway in calm waters

• Flexible cryogenic hoses (or hard arms)

are connected to transfer LNG from the
ship to the FSRU

• Can only be accomplished in calm

waters where cross-ship movement
remains within the stress tolerance of the
mooring lines and hoses/hard arms

• Vast majority of STS’s have been done

with FSRU docked at a berth

Galway Energy Advisors 14

World Over 11 FSRU’s Have Been Successfully Built, 5 Are
Under Construction, and Numerous Proposed.

Excelerate Hoegh1
Lithuania
Excelerate
UK
1
Italy Golar Kuwait Tianjin
US Excelerate
Excelerate3 GDFSuez - Hoegh
Excelerate2
Puerto Rico Dubai
Israel
Excelerate2 Golar

Golar
Indonesia Hoegh1
Brazil Excelerate2
Golar
Golar
Hoegh1 Uruguay GDFSuez – MOL 2
Chile Excelerate

Golar2 Argentina
Excelerate
Berth-Based Configuration
Project Status:
1 Under construction Buoy-Based Configuration
2 Under Development
3 Decommissioned Turret-Based Configuration

Galway Energy Advisors 15

Is FSRU A Real Cost-effective and Fast Track
LNG Import Solution for China?
Parameters FSRU Characteristics Implication for China
Significantly low in countries where
Project Lead High (Due to lengthy permitting
Government permitting process is
Time simple
process)

Lower unit capex cost with no High (Economics of scale is key for
Capital Cost economics of scale country with increasing demand)
High (FSRU would compete with
Opex Higher than onshore regas terminals
onshore regas terminals)
Suboptimal utilisation will affect
Returns returns
Medium (Utilization is key)

Interrupted cargo delivery profile Medium (Interruptible gas supply

Regas Tariff and lack of onshore storage can could be managed with portfolio of
deter some customers supply options)
Shipping costs will increase and
Shipping Cost FSRU must be empty upon LNG Medium (Linked to utilization)
carrier arrival
Limited and not constant unless
Storage ships dovetailed or permanently Medium (affects few customers)
moored

May Be……May Be Not!

Galway Energy Advisors 16
Key Take-Aways

 To support competitive procurement strategies, regas configuration

should be “acceptable” to as many potential suppliers as possible
 Suppliers are increasingly comfortable with delivering to FSRU based
LNG terminals, but the choice of configuration is important
 Small/Mid Scale berthed terminal solutions may offer better
economics than “standard” size solutions. Need to study this in detail.
 So far, no small/mid scale floating terminal concept has been
implemented
 Berth-based or near shore LNG import terminal solution is preferred in
China, but obtaining siting approval may be difficult and lengthy
process because of proximity to the public & required harbor
modifications
 Buoy-based offshore solution may be challenging in specific locations
and will require detailed technical studies to assess metocean
conditions/ water depth limitation
 Hence even a fast track FSRU based regas terminal might take
around 2 to 3 ½ years to successfully develop in China
Galway Energy Advisors 17
 Thank you!

Advisors and Investment Bankers to the Energy Industry

Galway Energy Advisors 18