ProgressBrief LNG Facility Development

Progress Brief: Small to Mid-Scale LNG Facility Development
Industry Leaders Thoughts

Key insight into LNG Facility Development to Supply Fuel to the Transportation and High Horse Power Markets
Progress Brief: Small to Mid-Scale LNG Facility Development Industry Leaders Thoughts
INTRODUCTION
With ever-increasing demand from natural gas eet operators and high-horsepower applications such as the marine and railroad industries, the LNG industry needs fuelling to sustain its high growth. More specically, it needs fuelling infrastructure and lots of it. LNG is increasingly being thought of as capable of o ering a complete energy solution, and companies are beginning to plan for the long-term. Theres still a lack of small-mid scale infrastructure in place on the ground to unlock potential demand. This represents of course a huge opportunity for any company with the expertise to capitalise on the huge cost savings and environmental benets that LNG has to o er. Here, ve leading gures from three companies give their insights into the current state of play in developing small-mid scale LNG infrastructure. Coming to the industry from a variety of starting points and boasting a wealth of experience, our interviewees here help to place the US small-mid scale LNG infrastructure in context both domestically and internationally, and give us a better idea of the full value chain involved. Well also nd out how they plan to develop their businesses, what markets theyre targeting, the challenges theyve faced (and overcome), and how they see the industry progressing in the future. All of our interviewees will be speaking at the Small-Mid Scale LNG Infrastructure, USA conference in Houston on November 13-14, 2013. FC Business Intelligences Small-Mid Scale LNG Infrastructure, USA conference will take place in Houston, Texas, November 13-14, with many of the LNG industrys biggest names in attendance. The event will tackle vital issues facing the industry today, focusing on ve key areas: LNG BUSINESS STRATEGY: Hear from the nations leading Gas Producers, Utilities and Private Enterprises on their proven business model for successfully developing small-mid scale LNG facilities LEADING DEVELOPER CASE STUDIES: Evaluate how actual developers are building partnerships, tackling regulatory hurdles and overcoming operational challenges to guarantee project success DEMAND REQUIREMENTS: Real insight from Railroad, Drilling, Mining, Marine and Transportation Markets: Find out when, where and how their plans will roll out and what LNG supply they will need DISTRIBUTING & MARKETING: Find out how to secure capital for your project & make sure you remain protable by e ectively distributing and marketing your LNG DESIGN & OPERATE: Meet key infrastructure developers that can guarantee the timeframe, e ciency and cost e ectiveness of your LNG project
Small-Mid Scale LNG Infrastructure, USA

13-14 November, Houston, Texas
Develop Protable Small-Mid Scale LNG Facilities to Supply NGV and HHP Markets
www.lngsupplyevent.com
FC Business Intelligence 2011
INTRODUCTION TO OUR INTERVIEWEES
Linde LLC Bryan Luftglass is Head of Strategic Market and Development for LNG in the Energy Solutions group of Linde LLC. Linde is the worlds largest industrial gases and engineering company. His role involves setting the direction, and supporting the growth, of Lindes strategy to be a signicant participant in the merchant LNG business in the US. Bryan has been with Linde for around ten years, having previously worked for a number of start-up companies and as a consultant in the elds of energy, environment and chemicals. He holds a Bachelors degree in Geology from Colgate University (Hamilton, NY), and a Masters degree in Earth Sciences from the Scripps Institution of Oceanography, UC San Diego. Puget Sound Energy The largest electric and gas utility in the State of Washington, Puget Sound Energy (PSE) has around 750,000 natural gas customers, and also supplies over 1 million customers with electricity. Nathan Adams (Manager of Strategic Initiatives), Clay Riding (Director of Natural Gas Resources) and Charles Daitch (Energy Resource Analyst) are part of PSEs team for small-scale LNG for the transportation market, and are currently working on developing a new liquefaction facility in the region. Waller Marine David Waller is the founder of Waller Marine, a maritime engineering and architecture solutions company based in Houston, Texas, which has supported the o shore oil and gas and marine transportation industries for over 30 years. The company currently designs and builds the worlds largest oating powerplants. Originally from London, England, David Waller began his career over 50 years ago as an indentured apprentice at the Vickers-Armstrong shipyard in Barrow-in-Furness, in the north of England. He holds a BSc in naval architecture and shipbuilding.

What are the steps Linde have taken to become more active as an LNG infrastructure development company?
Bryan Luftglass: Linde has been involved in the LNG industry since the early 1900s. For instance, our company built a number of the liqueers installed in the 1960s-80s that are still in operation here in the US. About 10 years ago, we decided to take a more active step in focusing on merchant LNG, at about the same time the import LNG area was very hot. So we started down a couple of di erent tracks, leveraging several of our capabilities.
Firstly, were a cryogenics company, so we have some inherent strengths there. Were very technology driven - we saw ten years ago that there were a lot of gaps in technology both in terms of producing and using LNG which we looked to ll. Linde Engineering builds LNG plants, so we can also take advantage of that expertise. One additional early step we took was to license the Gas Technology Institutes small-scale LNG technology. Were very happy with that, and have improved it and used it to build, own and operate LNG plants o pipelines at a very small scale in Australia and o landll gas here in the US. With application technology, we and our subsidiaries have stepped up our activities in this area. For example we own Cryostar, which supplies a lot of equipment for the LNG industry including LNG and LCNG fuelling stations, and CRYO AB, which is a leader in the supply of equipment for the marine LNG fuel bunkering industry.
What experience do you have in project development for small-mid scale LNG production facilities, and what are you working on now in the United States?
Bryan Luftglass: Linde spends between two and three billion dollars a year on new plants, and we see LNG as a very promising area to put our money. We havent announced any recent plans here in North America, but we will. Linde has built LNG plants from as large as 7 million gallons per day to as small as 10,000 gallons per day. To give an example of our capabilities, we currently operate dozens of plants that produce cryogenic products in the US. Were going to build on that base, alongside our logistics capability - we already haul and deliver about 1,000 truckloads a day of cryogenic products in the U.S. Weve got a national operating centre that takes care of scheduling, we have a remote operating centre that operates many of our existing plants, and we will slot in LNG as an additional product beyond the rst plant we built in the US. Incidentally, that project was the only one of its kind to take landll gas, clean it up and liquefy it that has been technically and commercially successful. As a global company, we can leverage our overseas experience. For instance, weve announced plans in Australia, and built an import terminal in Sweden that went operational about 2 years ago.

Is this market set for growth? And how many production facilities do you expect to be working on in the next few years?
Bryan Luftglass: Ive been tracking this for 10 years and waiting to see us reach this point. Im familiar with many people in the industry, and the consensus is that LNGs time has come. There have been false starts in the past, but this time it appears that theres sustainability in the LNG marketplace. The shale gas revolution has been the main driver behind that. We do see a good spread between natural gas and crude - or LNG and diesel that will create sustainable growth for quite some time.
What markets for LNG are you targeting and why?

Bryan Luftglass: Were keeping our options open right now. Were focusing on drilling and completion because of the demand pull in the industry, but heavy-duty trucking is an area we have focused on and that were re-focusing more on now. Weve just developed a new LNG fuelling station design. The rst example of this is in Indiana, and will be operational in late Q3 or early Q4 of this year. We expect that it will be a game-changer in the heavy-duty trucking market. With respect to marine, weve been a leader in the marine LNG environment in Europe for the last 10 or 15 years, and well be transferring that knowledge over here to America. We see some promise in the locomotive area - were trying to understand how the timing of that will work, and what the prospects are for it to really come to the fore.
What strategic partnerships do you think are necessary for advancing small-mid scale LNG projects?
Bryan Luftglass: I think that customers, especially at this early stage, are looking for a complete solution. We can supply the LNG, including managing the logistics to bring it to the customer. And we can supply the fuelling station or any kind of infrastructure, but what we dont provide is the third leg of the stool - the engine or vehicle that consumes the LNG. We have one partnership in that area right now with an engine converter, APG. Its not exclusive, so we see additional partnerships with companies providing engines and conversion systems for vehicles, and o -road and stationary applications. Strategic can be dened in many ways we look at strategic as enabling. What we need is partnerships with other companies to provide those complete solutions to customers who value it.

What has been the most signicant challenge you have faced so far when developing these projects?
Bryan Luftglass: The biggest challenge was the fact that the market has taken quite some time to develop. After the launch of the shale gas
revolution in 2008, it probably took two or three years for it just to sink in with many people that we really are in a di erent economic paradigm. So having the condence to invest ourselves, and seeing that customers are condent, has moved us to another point. I think a technological challenge that the industry has to grapple with is boil-o gas. Weve developed technology to minimise or eliminate venting from stations, and thats important from both an economic and environmental point of view.
How have you overcome these barriers so far what have you learnt about advancing in the industry?
Bryan Luftglass: Weve had a lot of outreach with trade organisations, and even held a workshop here at our facility to understand the issues that were concerning the industry. At this point, customers are not condent about LNG supply - but I think that perception will rapidly change as we and other companies add to the supply base.
Looking forward, what is your outlook for the industry and how do you see Lindes role developing over the next few years?
Bryan Luftglass: I see us being a leader in the industry, the way we are already the worldwide leader in the industrial gasses industry. We have three main engines for growth, and clean energy, of which LNG is an important part, is one of those three engines. We take a di erent approach to a lot of the other companies in the industry. We tend to be very conservative in what we say until were ready to make announcements. But were working, and were making a lot of progress. We might not be a ashy company, but we are leveraging what we do in all geographies of the world, exporting what weve learnt in the US to other countries, and likewise, bringing what weve learnt overseas to the US. Its an exciting time to be in this eld.

What are the steps Puget Sound Energy have taken to become more active as an LNG supply company?
Nathan Adams: It all started with looking at macro-trends at the executive level, looking at the long-range price of gas. Our job is to provide gas to our customers - mostly for residential and commercial/industrial use. The question was, is there a burgeoning market here that we should be addressing, that our customers are going to be looking at? It was over a year ago now that we carved out a team here to start looking at where our opportunities might be. Our service territory sits along the edge of Puget Sound, which has two pretty large ports in Tacoma and Seattle. A lot of the ships there are active in the North American emissions control area, so with that in mind we began to see that potentially we could be a supplier of LNG for future maritime use. Also, on the west coast we knew that there could be a pretty strong interest along the I-5 corridor for long-haul trucking using LNG. So the things weve started doing in terms of becoming more active as LNG suppliers are, rstly, contemplating the development of a new liquefaction facility here in this region, and secondly looking for ways to utilise existing liquefaction capacity in the region to help supply transportation customers in the near-term. Clay Riding: We serve around 1.2 million customers on the electric side, and 750,000 gas customers, but loads have been pretty at. So one thing were looking at is where we can use some of our core competencies to provide growth for the company, and looking at what other markets we should be chasing. This is one of the markets that has obviously become a hot topic. Charles Daitch: This does t in to our larger corporate initiative to see how PSE can expand into the transportation market in general, and part of that initiative includes CNG and electric vehicles too. So were looking at options in all of these arenas.

Nathan Adams: We actually developed and built a small LNG peaking facility which was completed in 2002 - that was our rst foray into the market. Beyond that were really leveraging a body of expertise and experience here that has done a lot of development on the power generation and gas pipeline side. Were taking those bodies of experience and applying them to another new LNG production facility. What were working on now is the development of a small-scale liquefaction storage facility in the Puget Sound region. Clay Riding: This is a really small peaking facility, but we have developed $2.6bn worth of energy resources in the region in the last ten years, including underground gas storage and the electric generation that Nathan mentioned, which included a whole bunch of wind generation weve got nearly 800MW of wind. Some of that we developed from the
ground up, so to speak, and some we bought in. So weve got a tremendous amount of development experience in complex energy projects.
What markets for LNG are you targeting, and why?

Nathan Adams: For us, its the maritime industry, given our location in Puget Sound, and then, separately, the long-haul trucking industry. Clay Riding: Weve got a fair amount of regional trucking - these are the large trucks. Initially its going to be trucks that return to base, we think, but we want to help build out the long-haul trucking fuel infrastructure. Theres a hole between northern California and Vancouver, BC, where long-haul truckers couldnt get LNG, and if we could help augment that then it would help with that market as well. Charles Daitch: I would say those are the markets that we believe the plan were developing today will serve. I think we have an eye towards other markets we can move large amounts of LNG via barge to.
Nathan Adams: We really look at the full value chain of LNG. Our wheelhouse is the development, ownership and operation of complex energy infrastructure. There are the people that own and operate the liquefaction facilities, and there are the upstream gas suppliers and marketers that can help us hedge and bring the right gas product to the liqueer. Downstream of the liqueer youve got a number of di erent distribution channels. In the maritime sector theres going to be the barging and bunkering folks, while in the trucking sector youve got the LNG trucking companies who can distribute from centralised facilities out to customer sites, or distributed gas stations. And you have folks working on the retail front end - thats a key thing too. And this is all just the supply side of the equation. Clay Riding: Were trying to stay in the middle of the infrastructure piece - were not trying to do it all because thats not necessarily in our wheelhouse. We are trying to work with some gas suppliers, barging service providers and trucking service providers, and were trying to surround ourselves with those di erent teams that will help the project be successful. There are also political and environmental agencies. You also have the technology providers, because we also dont see ourselves as an expert in providing the actual liquefaction equipment. Some of the key elements of this are going to be permitting the plant and getting into partnerships with local stakeholders and political gures, so that you can get folks on your side, helping with the public perception of an LNG facility in their backyard. Charles Daitch: Were working with environmental groups to realise the benets of LNG over diesel, and working with some of the port stakeholders to get them comfortable with LNG moving around on the water.

What has been the most signicant challenge you have faced so far when developing this project?
Nathan Adams: There is no one thing. Its the fact that its everything. Its the chicken-and-egg, supply/demand issue. It is dealing at the small scale with regulations that were built for very large-scale facilities. On the maritime side its dealing with regulations that dont actually exist yet. Youre trying to balance the resources youre putting forth, and the money you spend, relative to how fast the market is moving and how certain you can be about it. Its a constant juggling act. Every day brings something new.
Nathan Adams: I dont know if Id say weve overcome the barriers yet! Its about patience, and you just have to keep moving the ball forward. Clay Riding: Weve spent a lot of time talking to the critical stakeholders the coastguard, the environmental agencies, the policy makers from State and local government. In terms of barriers, were dealing with customers that are not used to making long-term commitments for fuel. As a utility, thats something thats commonplace for us. We have one model, the market has another model most of these markets are used to lling up their tank of gas and paying for it when it gets lled up, and that model has to change. So its a combination of all those things. What were trying to do, as Nathan said, is move the ball forward by establishing these relationships and making sure were having good open dialogue with all the agencies.
Looking forward, what is your outlook for the industry and how do you see Puget Sound Energys role developing over the next few years?
Nathan Adams: I think our outlook is pretty bullish. Even in the past six months, I feel like weve seen a lot of movement on the demand side people are really starting to get it, and really actively transform their fuel consumption to LNG. So I think thats accelerating in the near-term. We hope that Puget Sound Energys role over the next few years is to be actively developing and constructing a new liquefaction facility and being a supplier to this market.

Clay Riding: We see our role primarily as a regional one. Were not looking to serve the world. It may extend beyond the region in certain instances, but certainly not outside of the western United States. But we are trying to make our mark on this corner of the world. Were basically taking the position that LNG is energy, and as the largest energy company in the Pacic Northwest we ought to be serving the market.
What are the steps Waller Marine has taken to become more active as a small-mid scale LNG infrastructure company?
David Waller: A lot of the work that we have done in the power business has been in the Caribbean. Utility rates there are extremely high, so theyre crying out for lower cost fuels. With the availability of low-cost gas in the US, we determined that that should be a competitive fuel for this market. That started us out looking at small-scale LNG, to simultaneously drive our oating power barge markets. So our rst step was developing a small-scale LNG export facility at a site in Cameron, Louisiana. We already have a Department of Energy license to export up to 1.25 million tons of LNG per year out of that facility.
David Waller: I go back a long way. My rst experience in the LNG industry goes back over 50 years. I was fortunate enough to have participated in the construction of the rst ever purpose-built LNG ship, which was the Methane Princess. We built that in Barrow in the mid-1960s. Obviously, that ship has bens scrapped, but theres another ship today that took its place, by the same name. At Waller Marine, Were now developing the Cameron Project, which is an LNG export project, and weve already leased 180 acres of land in southern Louisiana, and were now going through the permitting phase. We also have a second site, where we have purchased about 80 acres in Baton Rouge on the Mississippi, where we are going to install a small-scale liquefaction facility designated purely for the marine fuels market.
What markets for LNG are you targeting, and why?

David Waller: There are two reasons for the marine industry here to use LNG. The rst reason is compliance with the new UCA regulations. Theyre going to come into e ect in the US in 2015.

We are looking at our rst market - we had to create this market, its not a market thats there today. There are no vessels in the US today that burn LNG fuels, and neither are there any vessels that can transport it in the US or at least not US agged vessels. Were looking at the full LNG value chain. Were looking at liquefaction. Weve designed a series of barges to transport LNG, going from 2,000 cubic metre bunker barges up to 50,000 cubic metre ATB LNG vessels. In order to create our market, were looking at the conversion, initially, of vessels in the brown water eet of the US the vessels that ply the Mississippi and Ohio rivers, and the interstate waterway systems. So being a marine engineering company, we have some designs for the conversion of these vessels. And
some of these vessels have engine ratings of up to 10,000 horsepower they will be large consumers of LNG. So the second part is savings. These vessels already burn ultra-low sulphur diesel. The price of ultra-low sulphur diesel today is around 28 dollars per million BTUs. We think we can sell LNG to them for about 18 to 20 dollars per million BTUs. So there are signicant savings to be had by burning LNG.
David Waller: Weve got to convince the big towboat companies of the US that this is what they should do. As part of our marketing we go to them and say, lets partner in this eld. Well help you convert your vessels and supply you with LNG. And these are the savings youre going to make. On the other hand, in the Caribbean, were likewise looking at our potential clients, and more or less holding their hands, saying this is what you need to do in order to lower your utility costs in this particular country. And theyre signicant as well. We can provide them with highly e cient power, and feed it with low-cost LNG. In some cases, we can cut their utility bills by half.
What has been the most signicant challenge you have faced so far when developing this project?
David Waller: Other than money? Well, in the US I think the major challenge is the permitting process. We have an export license through the DoE. We now have to get a permit though the Federal Energy Regulatory Commission (FERC), and thats a long and expensive process. The DoE grants the license, while the FERC process is the one that actually allows you to do it!
David Waller: The permitting process is highly structured, and you just have to do what youre told to do. The process is very bureaucratic; you must know absolutely everything youre going to do in that facility, everything youre going to build, right from day one, before you make the nal application. If you change it during the process you go back to square one. I think that the engineering for small scale LNG and the liquefaction process are fairly mature - there are a lot of companies that now produce modular units. So we dont see any real challenges in terms of engineering, quite honestly. On the re-transport side, since there are no US-agged LNG vessels today, we have designed our own units and have applied for patents for some of them, from small bunker barges to larger ATB LNG vessels. There are some challenges in terms of conversions of various engine

types, and the work involved to convert some vessels to burn LNG fuels. Every engine is di erent, and some you just cant do it with. So owners have to go on burning low-sulphur diesel or change their engines out.
Looking forward, what is your outlook for the industry and how do you see Waller Marines role developing over the next few years?
David Waller: I think its a fabulous industry. Its an industry that will go a long way. To start o with, however, its going to be relatively slow because of the challenges we nd in vessel conversions and availability. Vessel owners say you want us to buy LNG from you, but we cant burn it right now. We overcome this by saying we know how to convert their vessel, and telling them how much it will cost. Its going to be relatively slow to take o , but I think it will build momentum once owners understand how much money they can save by burning LNG. And in terms of availability, vessels run from A to B, and youve got to be able to ll up at B once youve left A. You have to have capability in more than one port.
END NOTE
Although they approached the industry from a variety of angles, its clear that our interviewees all agreed on some important strategies. All put great value on the need to understand the full value chain for LNG - whatever their specic business model - and to work in partnership with all kinds of stakeholders and interest groups in an industry where future supply and demand levels are still di cult to predict with any accuracy. Regulatory matters were also agged up as important factors by both Nathan Adams of Puget Sound Energy and David Waller of Waller Marine, who highlighted some di culties common to many developing industries. Some companies involved in LNG are having to deal with regulations that do not even exist yet, or were designed for facilities on a very di erent scale to their own projects. In terms of engineering, its clear that a lot of work is left to be done, but that, equally, theres high condence that specic challenges such as reducing boil-o gas at stations and converting high-capacity engines for marine use can be overcome. Despite all these issues, whether technical, regulatory or commercial, one thing that was abundantly clear from our interviewees is the excitement and enthusiasm they share at being involved in an industry that is clearly going places - and fast. To get the most out of such an energetic industry, the Small-Mid Scale LNG Infrastructure, USA conference in Houston on November 13-14, 2013 will be invaluable for anyone needing a better understanding of both specic industry issues and the LNG value chain as a whole.

All of the companies that took part in this Progress Brief are speaking at the Small-Mid Scale LNG Infrastructure, USA conference in Houston on November 13-14, 2013. The expert speaker line-up includes: Mitchell Pratt, Chief Operating O cer, Clean Energy Fuels Corp. John Hofmeister, Former President of Shell Oil Company, USA & current CEO of Citizens for Aordable Energy David Waller, President, Waller Marine Peter Tumminello, Executive Vice President, WholesaleServices, AGL Resources Doug Clark, President, Metropolitan Utilities District, Chair of NGV America Kathryn Clay, Executive Director, Drive Natural Gas Initiative, American Gas Association Casey Crenshaw, President, Stabilis Energy They will be joined with over 30 expert speakers, who will be presenting on all aspects of small-mid scale LNG facility development. We will also be joined by leading end user customers across, transportation, marine, drilling, rail road and mining sectors who will discuss their specic LNG fuel supply needs.
Do you t the below criteria?

Are you a utility looking to utilize your existing LNG assets? Do you, as gas supplier, want to develop key partnerships with business partners to drive LNG as a commodity? Are you a private enterprise that wants to ensure your stake in the LNG liquefaction business? Are you an industry or eet manager looking to incorporate LNG fuel into your eet or equipment? If thats a yes, then you need to be in Houston so make sure download the brochure now. Youll be able to meet with key decision makers from across the value chain.

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Progress Brief: Small to Mid-Scale LNG Facility Development

Industry Leaders Thoughts

Small-Mid Scale LNG Infrastructure, USA

FC Business Intelligence 2011

INTRODUCTION TO OUR INTERVIEWEES

Small-Mid Scale LNG Infrastructure, USA

Small-Mid Scale LNG Infrastructure, USA

What markets for LNG are you targeting and why?

Small-Mid Scale LNG Infrastructure, USA

Small-Mid Scale LNG Infrastructure, USA

Small-Mid Scale LNG Infrastructure, USA

What markets for LNG are you targeting, and why?

Small-Mid Scale LNG Infrastructure, USA

Small-Mid Scale LNG Infrastructure, USA

What markets for LNG are you targeting, and why?

Small-Mid Scale LNG Infrastructure, USA

Small-Mid Scale LNG Infrastructure, USA

Small-Mid Scale LNG Infrastructure, USA

Do you t the below criteria?

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