IMPLEMENTING AN FSRU

LNG IMPORT PROJECT

EUROPEAN GAS CONFERENCE
LNG FOCUS DAY 19 JANUARY 2016

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 • Navigant, Who We Are

• Project Background /
Challenge

• Project Elements

• Project Lessons &

Success Factors

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 Navigant Overview

Business Overview Talent Profile

2014 RBR = $767M Dispute & • 3382 employees as of Dec. 31, 2014
Energy, Investigative - 2774 billable FTEs
$98m Services
$291 M (37%) - 207 Managing Directors
Disputes,
Investigations &
Economics,
• Credentials include CPAs, physicians, PhDs,
Healthcare,
$224m
$310m attorneys, economists and engineers
• Niche areas of expertise combined in unique ways
• Broad networks of experts and affiliates
Financial, Risk &
Compliance • Collaborative and nimble resource management
Advisory $135m

Geographic Profile
Dubai
• Headquartered in Chicago
• Offices in nearly 50 cities
Chicago
New York
- North America
San Francisco
- Europe
Washington ,D.C. Hong Kong
Los Angeles - Middle East
Atlanta - Asia
London • Serving clients in more than 70 countries

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 With Navigant’s assistance the Government of Jordan has
implemented an LNG import terminal at Aqaba

Jordan – Quick Facts (2015)

• GDP USD 40 billion (#105)
• GDP per capital USD 6,100 (#151)
• GDP growth rate 3.3%
• Consumer price inflation rate 5.9%
• Population 7.9 million
• Standard & Poor’s rating BB
• Power Generation Capacity 3,600 MW
• Planned Additional Capacity 813 MW

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 In 2003 Egypt began supplying gas to Jordan via the Arab Gas
Pipeline

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 However in 2011 gas flows were interpreted and eventually ceased –
an alternative source of gas was needed

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 The LNG project’s economics were greatly assisted by the existence
of the pipeline infrastructure and CCGTs

Gas / LNG Pricing LNG Terminal Cost Assessment

Competing Fuel Pricing

LNG Project
Economics

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 Agreeing a commercial structure with a credit worthy off-taker is key
to generating ‘genuine’ interest in the project

• The importance of identifying Residential

Industrial Power
& Commercial

Demand
financially credible gas off-takers

Gas
cannot be underestimated
• To ensure competitive project offers,
buyers need to demonstrate
sustainable credit worthiness

Terminal
LNG
- Government guarantees or other
equivalent credit support
- Sizable institutions with a solid
financial status

structure
Infra-
- A large and liquid gas market with
multiple gas off-takers or traders
• Project developers will price in credit
risk, making offers more expensive

Supply
- In the worst case potential suppliers

LNG
may decide not to participate

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 We evaluated options for the different parts of the procurement
strategy against various defined criteria

Options Evaluation Criteria Optimal Solution

LNG Buyer
Establish Special Purpose
NEPCO
SPV Vehicle (SPV) to act as a gas
NEPCO
NEPCO
wholesale buyer and the main
Fajr
interface between NEPCO, LNG
Fajr
2 3 1 X 4
suppliers, Fajr and the FSRU

Purchase Model
Supply Enter into regas service
And Supply
Regas Supply agreement with terminal
Regas
operator which provides
Regas regasification services
Buyer but does not take ownership
Buyer 3 X 2 1 of gas
Buyer

Infrastructure Procurement
ADC Adopt specialist procurement
ADC approach; FSRU procured from
ADC ADC FSRU provider and separate EPC
ADC ADC contracted for onshore/offshore
3 X 2 1 infrastructure development

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 The Jordan LNG project was structured as four discrete elements
Gas Transportation LNG Supply
(Jordan Gas Transmission Pipeline)

Aqaba Terminal Infrastructure Floating Storage & Regasification Unit

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 The commercial structure: NEPCO, a Government owned company,
will mange and operate the LNG project

NEPCO

Delivered Ex-Ship Charter Fee Terminal Lease O&M Fee to SPT Provides Gas to
LNG to Golar to ADC Terminal Operator Power Plants

LNG Supplier FSRU Jetty, Topsides & Other Infrastructure NEPCO

Pays Gas Pipeline

Transit Fee to Fajr

JGTP

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 The contract structure and credit support mechanisms

Guarantee

FSRU Provider FSRU

(Golar) Lease IPP1
Guarantee
or LoC etc
IPP2
LNG Seller(s) LNG Purchase
Supplier 1 Agreement(s)
(long term NEPCO IPP3/4
Supplier 2 and spot)

Supplier 3

Gas Transport
GoJ Licence Agreement Tie in Agreement
(Regasified LNG)

EIA
Approval Land Lease O&M
Agreement
ADC
Fajr
Asset Transfer

EPC
Contract Terminal
Operator

EPC Contractor

GoJ Entity Contractor Contract EIA Guarantee

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 Critical Lessons: Planning and Communication

Clear Objectives
• Set clear objectives that are
consistent across
the various elements of the
project being procured
• Define the project’s “battery
limits” for the suppliers
in a clear and concise manner
Single
co-ordinating entity
• Authority to make rapid
decisions
• Ensure all relevant
government stakeholders are
kept informed and, insofar as
is possible, support
the project
Environmental studies
• Baseline studies will need
to be undertaken early
• The full environmental impact
assessment that will follow
can be time-consuming
• New requirements can
emerge that can create delays
– e.g. relocation of corals

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 Critical Lessons: Timeline
Fast track projects rarely
achieve the best prices and Complete key Ordering of
often require compromises studies early long lead items
• Our strong advice would be to • Front End Engineering Design • LNG / Gas hard arms
take the time to procure the (FEED) • Metering skid
project appropriately to what • Environmental Impact • Safety critical valves
the market can deliver Assessment (EIA) • Dredging
• Bidders for all project
elements will seek
to charge a premium if the
timeline is unreasonably
accelerated

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 Critical Lessons: Contracting Strategy
Flexibility on contracting
to address uncertainties
• Consider contracting strategy,
early contractor engagement
and partnering type
approaches may offer
greater flexibility
• Delays to infrastructure can
be hugely expensive LNG
supply cargos supply may
already have been negotiated
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Financing of the project
• The terminal is a significant
investment and so project
financing may be appropriate
• Structuring the project to
provide an appropriate
revenue stream to allow
project financing will be key
• Multilateral agencies are
generally supportive of LNG
projects which are relatively
low carbon
Project Documentation
• The procurement
documentation needs to be of
the highest possible quality
• Find a reasonable balance of
risk and reward in the
contractual documentation
from the perspective of
all stakeholders
 A critical success factor is understanding that each project requires
its own bespoke strategy

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 Supporting additional project objectives

More LNG…. LNG to Egypt….? Regional Pipelines…?

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 Golar Eskimo at berth in Aqaba

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CONTACTS
RICHARD BASS
Director
London, United Kingdom
richard.bass@navigant.com
+44 207 015 2394
+44 7968 979870

NICK ALLEN
Director
London, United Kingdom
nick.allen@navigant.com
+44 7980 319641

GORDON PICKERING
Director
Folsom, California, USA
gpickering@navigant.com
+1 916.201.7475

navigant.com
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