PNG LPG Supply to Pacific

Islands Region

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Twinza Oil Introduction
The Twinza Story
 Pasca A field
C-1 C-2
 Discovered in 1968 and has
lain fallow for almost 50 years
 Rich gas-condensate field in a
high relief reefal carbonate of
Miocene age A-2
1 A-3 Pasca C
 High resolution 3D seismic
has significantly improved the
definition of the resource
 Advances in offshore
engineering and gas
processing have significantly Pasca B
reduced development costs
 Pasca A field is capable of
very high flowrates enhancing
the economics
 PNG’s first offshore
development and
infrastructure
 Well located to supply to
Pasca A
regional markets

 New 3D seismic data processing offers superior imaging of the Pasca A reef.
 Both interior and external geometries are seen in higher resolution.
 Note the terraces visible on the outer surface of the reef.

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 Field Layout – Engineering View

LPG FSO

Central Processing Facility

Condensate FSO(Close-Moored)

Minimum Wellhead Platform

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 Pasca A LPG Production Profile

Pasca A - Production of LPG

300,000

250,000
Tonnes per annum

200,000

150,000

100,000

50,000

-
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Propane Butane

• Pasca A LPG production business case sufficient to cover current PNG LPG retail market
• LPG offtake with be via refrigerated and pressure vessels
 Approximate 1000 cbm combined daily production
• Two separate FSOs planned, each for storage of C3 and C4 6

 Ambient pressurized LPG will be supplied to the FSO from production platform
 Base plan for FSOs to be semi-refrigerated vessels

Pasca A will produce 1.8 million tonnes of LPG

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 Energy Landscape: Challenged by Geography & Market size

• Smaller populations, smaller markets • Exposed to global energy price

• Distant from supply • Support required for affordable & reliable energy
• Energy supply chain constraints

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 Energy use: Petroleum & Biomass dominate, LPG only 2%

LPG is a very versatile energy source

Source: LPG and Natural Gas as Alternative Energy Sources for the Pacific, Pacific Region Infrastructure Facility, 2015.

According to the World LPG Association LPG has more than 1,000 applications

Home applications Transport applications Recreational applications Agricultural applications Business and industrial applications

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 Regional LPG Movements & Markets

• Pacific Region mostly supplied via pressure ships out of Brisbane & Sydney
• Market is > 30,000 metric tons per annum Propane and ~ 50,000 metric tons per annum Butane
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 Pasca A Location – A Comparative Advantage (1)
LPG Supply from PNG (Pasca A field) Reduces Delivery time to Regional Markets

Voyage Duration
Saudi – Brisbane 24 days @ 13 knots
Saudi – Sydney 24 days @ 13 knots

4 days voyage
BNE – POM 5 days @ 11 knots

Regionally supplied LPG from PNG reduces delivery time to regional markets by at least 30 days
 Savings in related transport and port costs

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 Pasca A Location – A Comparative Advantage (2)
Pasca LPG supply is delivered in less time to PNG & Regional Markets.

• Controlling for ship size, LPG quantity and number of voyages per year,
 Pasca A LPG shipment takes 117 days round trip to deliver 16k MT LPG to PNG market
 Similar vessel delivering the same cargo from Brisbane takes 221 days (~180% more days than from Pasca A)

• Saudi Arabia (Ju Aymah LPG Terminal) voyage to Brisbane takes ~ 29 days

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 Pasca A LPG Production & Regional Demand Profile
LPG Storage Capacities indicate market size

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 Pasca A LPG Production & Regional Demand Profile
Pasca A LPG Production Sufficient to Supply Region

Pasca LPG Production and Total Regional LPG Demand

350

300
Thousand tonne per year

250

200

150

100

50

-
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Supply Excess Demand Demand PNG Demand Other South Pacific Demand Australia & Indonesia
Note: Australian demand refers to northern Queensland and Nothern Territory markets and Indonesian demand refers to West Papua province.

• Pasca A LPG production is sufficient to cover project PNG domestic demand & PICTs
LPG demand
• Assume constant demand growth based on economic growth and LPG market 14

penetration

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 LPG Offtake: Demand Profile & Parcel Size
• Understanding specific parcel size crucial for LPG offtake to
regional markets
 Few LPG traders currently dominates regional LPG circulation
 Understanding anchor off-taker’s and their onshore storage
2016 requirements is crucial for effective distribution
• Off-take requirements / parcel sizes, and distribution model
will determine sizing of storage facilities
Phase 1 Drilling
 ISO containers
 Small pressure vessels for milk runs through the Pacific Islands
• Regional LPG distribution is generally straightforward
 Existing LPG terminals in most islands
 Only minor site works necessary for ISO containers
• Bulk LPG movement for power generation will require new
terminals and storage hubs

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 LPG A Proven Fuel Source For Electricity Generation
LPG a Potential substitute for diesel fired electricity generation

• Experience in Latin America and Caribbean proved conversion of base load power production from diesel
and fuel oil to LPG lowers energy costs while promoting lower carbon emissions
• ~120 metric ton LPG required to generate 1 MWe per month @ shaft
• LPG is a good precursor for future gas use in CNG & LNG

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 Diesel Substitution With LPG in Electricity Generation
LPG a Potential substitute for diesel fired electricity generation
Alternative Hydrocarbon Fuel Costs
(March 2017)
7

LPG Market Opportunity

(US$/gallon)

4
Fuel Cost

0
Gasoline Diesel Marine Fuel LPG(PNG) LPG(Saudi) Natural Gas
Alternative Hydrocarbon Fuels

1. Fuel prices shown are based on Port Moresby & Lae (PNG) prices
2. Natural Gas price is based on US West Coast price ($/GGE)

• LPG landed cost is a determining factor to enhance cost competitiveness against diesel
• ~120 metric ton LPG required to generate 1 MWe per month @ shaft

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 LPG Cost Build Up in the PICTs
Retailer
Where the opportunities lie for Twinza to make an impact pricing/cost / Customer
Location
Retail
Local Margin
220 Wholesaler
Operating
Costs
200
Land
Transport
180 Wholesale
Margin
160
Local
Storage
140 Retail
Wharfage 4 Price
120 Australia Port
Saudi Freight- Services
100 Arabia Small
Ships
80 Terminal
Charges
60 Freight-
VLGC 3
Saudi CP
40
/ FOB
2
20
1
0
Saudi CP/FOBSaudi CP orTerminal Charges used to determine
other benchmark Port Services
FOB price from Local storage This may be
the producer. Land
a transport Retailcharge
benchmark plus or minus margindepending on
1 commercial negotiations.

Avoided cost due to the proximity to the market. Ras Tanura to Sydney or Brisbane is around 24 to 30 ship voyage days, which is avoided if gas
2 sourced from PNG.

3 Initially, this may be avoided if demand is sufficient for direct transport from upstream FSO to market. Long-term will be via terminals in Port Moresby
and Lae.

4 Reducing landed costs of LPG and encouraging increased usage of LPG via diesel substitution will spur increased storage allowing for the retail
segment to benefit from improved economies.

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 Way Forward

PNG LPG supply to region requires cooperation between producer & off-takers
• Explore economies of scale in bulk LPG movements to increase domestic
household use
• Engage regional governments on use of LPG in the energy mix of PICTs
• Develop strategic partnerships
 Potential anchor customers for LPG in retail, manufacturing & power sectors
 Regional fuel transporters & infrastructure related constraints
 Govt. regulator and development partners to increase LPG in regional energy mix
• Work closely with agencies such as SPC & PRIF to address regional energy
aspirations:
 Liaise on ways to achieve SPC goal of reduced HFO reliance in fuel use
 Determine enablers for more LPG in energy mix and less reliance on diesel
• Encourage gas to electricity projects in PICTs countries, starting with LPG
 A pilot trial in the region is needed to appreciate the opportunities and constraints for
the South Pacific region

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 Conclusion
Sourcing LPG from PNG advantageous for South Pacific LPG markets
• Current LPG supplies to Pacific regional markets have significant transport costs &
little competition
 PNG LPG supply potentially reduce transport-related costs for PICTs,
• LPG distribution to Pacific region requires support from multiple stakeholders
 Producer, transporter, regional governments, bulk off-takers
• Success of bulk LPG movements will avail cost effective LPG to consumers in the
retail space (economies of scale)
• Gas to electricity for the PICTs, starting with LPG is a proven concept in
archipelagic and distributed markets such as the Caribbean and Indonesia
• PNG LPG supply addresses PNG and regional energy aspirations:
 SPC pushing for reduction of heavy fuel oils use within Pacific Island countries
 Contributing to reduced emissions targets

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