Investment Opportunities

in LNG infrastructure

Source: Gate terminal

IVP presentation By: D. A. van Slooten 10 december 2015

 What is LNG?
Liquified Natural Gas (LNG)  Methane, CH₄
 Cleanest fossil fuel
 Colorless
 No Smell
 - 162 °C
 Liquid (boiling)
 600 x volume reduction
 Efficient energy transport

LNG is Efficient way of Gas/Energy transport

To the entry of a grid!

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 LNG in Two Worlds
 Mainstream
The Supply of LNG form the Source to the National Grid,
 Liquifaction
 Sea transport
 Receiving and regasification

 Downstream
The Supply of LNG for local / regional use,
LNG Satellite terminals
 Local power generation
 Local gasnetwork for cooking
LNG as Fuel
 LNG as Truck fuel
 LNG as Bunker (shipping) fuel

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 Mainstream: LNG from Distant Sources

LNG / Natural Gas Supply Chain Overview

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 LNG Expensive Gas at Entry
Liquefaction plant LNG receiving terminal

Cryogenic
Chill & compress Regasification
Heat-exchanger
Load Discharge

NG for
Supply NG by
distribution
pipelines LNG storage LNG storage

Gas production/cleaning/liquefaction

Typical component capital investment cost (in US$ for 8 MTPA):

1x€4b–€8b + 4 x € 0.3 b + 2 x € 0.6 b

The LNG / natural gas chain requires large investments and is largely
built on long-term supply, transport, and terminal contracts
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 Europe – Main Natural Gas Import infrastructure
Europe
• Over 25 Terminals
• All linked to a Grid
• Capacity 162,7 MTPA
• Average < 50%
Throughput

Legend:
In Operation
Under Construction
Planned
Pipelines Operating
Planned Pipelines

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 Massive gasgrid Available

Europe

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 Mainstream LNG on (supra-)National Level
Two Distinctive (unbundled) Businesses
 Commodity Trade
 Security of Energy Supply
 Government sensitive (i.e. Gasterra, 50% NL, 25% Shell, 25% Exxon)
 Multi supply sources, LNG is part of the Energy mix
 Multi Traders & Buyers (Essent, Nuon, Eneco, etc)
 Open market with hourly price setting (TTF)
Price & profit volatile Market
 Main National Infrastructure
 Government owned (i.e. Gasunie, 100% NL)
 Only one operator per region
Stable Market, NOT open for private Investors, but
heavily financed by Capital suppliers (Banks, etc)
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 Mainstream LNG Infrastructure
• Based on large integrated projects
• Longterm contracts (> 20 years)
• Aiming at National Energy (gas)supply
• High Investment due to Value chain
• Owned by IOC’s, NOC’s or Governments
• Political sensitive
• Governed in closed Limited partnerships
• Financed from Cashflow or non-recourse Project financing
• Stable but relative low returns

Mainstream LNG projects require High Investments,

Longterm Commitments & Political influence
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 Risks
 Upstream
 Big investment projects € 1-10 billion
 Consortium of large Enterprises (2-4) with local government
 Longterm contracts 10-20 years
 Commodity trade and pricing dependant
 Lead operator is a IOC, NOC or very large energy companies
 Sometimes project financed (50-75%) with a consortium of banks
 Potential high returns, but also commodity risks
 Very complex contract structures
 “High” project risks

Co- investment in Bank consortium possible

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 LNG in Two Worlds
 Mainstream
The Supply of LNG form the Source to the National Grid,
 Liquifaction
 Sea transport
 Receiving and regasification

 Downstream
The Supply of LNG for local / regional use,
LNG Satellite terminals
 Local power generation
 Local gasnetwork for cooking
LNG as Fuel
 LNG as Truck fuel
 LNG as Bunker (shipping) fuel

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 Downstream LNG on (supra-)National Level
Two Distinctive Businesses
 Commodity Trade
 Multi supply sources, LNG is part of the Fuel mix
 Multi Traders & Buyers (Eneco, Vitol, etc)
 Open market with daily price setting

Price & profit volatile Market

 Satellite & Fuel Infrastructure

 Privately Owned
 Supported by IOC (i.e. Shell, etc) and private Companies (i.e. Vopak, etc)
 Under development in Europe

Stable Market, Open for private Investors!!

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 Downstream LNG on (supra-)National Level
Two Distinctive Businesses
 Commodity Trade
 Multi supply sources, LNG is part of the Fuel mix
 Multi Traders & Buyers (Eneco, Vitol, etc)
 Open market with daily price setting

Price & profit volatile Market

 Satellite & Fuel Infrastructure

 Privately Owned
 Supported by IOC (i.e. Shell, etc) and private Companies (i.e. Vopak, etc)
 Under development in Europe

Stable Market, Open for private Investors!!

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 Downstream LNG Infrastructure
• Based on single or group based projects
• Short to medium Term contracts (3 – 10 years)
• Aiming at Alternative Energy or Fuel
• Moderate Investment due to Value chain
• Owned by Logistics (Storage, Transport, Distribution, etc) Companies
• Governed by Owner or in Open Partnerships
• Financed from Cashflow or non-recourse Project financing
• Stable but relative low returns

Downstream LNG projects require Moderate Investments

& Medium term Commitments with a Stable Return

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 Downstream: LNG in the Region
Power Plant

SMALL SCALE LNG Distribution and End Users

Regas Terminal Rail
<1 mtpa LNG Carrier
LNG Rail LNG
Tanker, Tender Locomotive
LNG

LNG Refuelling
Station
Wholesale LNG Road
Tanker
Small Scale LNG
Liquefaction Fuelled Truck
Industrial
End User Maritime
Small Terminal
/Regasification
LNG
Bunker Vessel
LNG
Small Fuelled Vessel
LNG Carrier Non-Road

Remote Small Remote

Power Plant Mining, Drilling

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 Gate the NW European LNG Hub

LNG’s future:
Similar infrastructure as downstream Oil products:
• Fuel supplies Gate 2015 –
• Fuel stations Dedicated Break
• Bunker stations Bulk jetty
AND
• Local gasdistribution in local grid
Hub terminal:
• Break Bulk & Re-export (Ship, Truck)
• Bunker & Fuel supply

Satellite terminal:
• Redistribution in local gasgrid
• Bunker & Fuel supply

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 LNG Satellite Terminals

Storage capacity: max 50.000 cbm

Throughput: approx. 1 MTPA
Capex: € 40 - €100 mln

Typical small satellite

(Onada – Yamaguchi Godo Gas)
Capacity 7,400 ton pa

Site area 3,200 m2

Storage capacity 3 x 100 m3

Send-out capacity 4 x 1 ton/hr

Courtesy: Tokyo Gas Engineering

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 LNG Satellite Terminals
Feed Local gas grid
 Power generation
 Local Industry
 Heating
 Cooking

Regional distribution centres (new build)

 Bunker stations for shipping
 Truck loading for Fuel & Bunker stations
 Railcar loading
 Tankcontainer loading

Issue: Few satellite Terminals existing

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 LNG Short Sea shipping

7500 m3
2500 m3

Remarks:
• facilitators for downstream market penetration of LNG to satellite terminalsPicture: courtesy Tokyo Gas Engineering
• carrier capacity: 1,250 m3 - 16,000 m3 – initial small carriers since 2005
• tank type: semi pressurized / bullet-type (example by Kawasaki Shipbuilding.Co.)
• propulsion: diesel engine or dual fuel gas/diesel

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 LNG Short Sea shipping

Coral Energy berthing at Gate Coral Methane berthing at Gate

New ships are build for short sea transport
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 LNG Short Sea shipping
Supply to LNG Satellites
 Shuttle tankers between Hub terminal and the satellites

LNG as Engine fuel

 Environmental: ECA zone – low emission areas
 Cheaper then Marine Diesel Oil (tax holiday)
 North Sea & Baltic front runners

Issues: Limited number Short Sea ships for Transport of LNG

Limited number Short Sea ships running on LNG

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 Downstream: LNG in the Region
Power Plant
Distribution and End Users
LNG as FUEL Regas Terminal Rail
LNG Rail LNG
LNG Carrier
Tanker, Tender Locomotive
LNG

LNG Refuelling
Station
Wholesale LNG Road
Tanker
Small Scale LNG
Liquefaction Fuelled Truck
Industrial
End User Maritime
Small Terminal
/Regasification LNG
Bunker Vessel
LNG
Fuelled Vessel
Small
LNG Carrier Non-Road

Remote Small Remote

Power Plant Mining, Drilling

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 LNG as Fuel

Ferry in port of Stockholm 2014

LNG bunkering in Sweden

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 LNG as Fuel

Dedicated Bunkerships is the future

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 LNG as Fuel
Short Sea Shipping
 Bunker stations in Ports
 Bunker supply barges

Port service Vessels

 Tugs
 Service vessels, i.e. pilots, survey vessels, etc

Inland Shipping
 LNG transport barges
 Barges using LNG as a Fuel
 Bunker stations along the Rhine

Issues: Few Bunker places & Bunker Barges

Few Short Sea/ Port/ Inland Ships on LNG
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 LNG as Fuel

LNG Truck at Gate Truck at loading station

Truckloading at Gate terminal

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 LNG as Fuel

LNG truckloads for NW Europe

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 LNG as Fuel
Supply from Hub & LNG Satellites:
 Supply to LNG Fuel Stations
 LNG pump at Highway Fuel station
 Shuttle tank trucks between satellite and Fuel station

 Supply to Fleet owners at Homebase

 LNG pump at Homebase

Issue: few LNG fuel stations along the European highways

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 “Green River” initiative 2012

Green Deal:
LNG Rijn en Wadden
Signed on the 5th of July 2012

Issue: No LNG Bunker stations along the Rhine

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 Risks
 Downstream
 Infrastructure investment projects € 1-100 million
- Seagoing ships, ferries, port-vessels, tugs
- Small lng terminals
- Fuel stations, trucks
- Barges, bunker stations
 Single owner / operator
 Short to Medium term contracts 2-5 years
 Commodity trade and pricing for suppliers account
 Regularly project financed (50-75%) with a bank loan
 Potential stable but reasonable returns, no commodity risks
 “Normal” project risks

Direct investment in projects possible

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 Downstream: LNG in Europe
 LNG Downstream Infrastructure
 Under development in Europe
 Satellite terminals
 Short Sea Ships & Bunker stations in Ports
 Barges & Bunker stations along the Rhine
 Trucks & Fuel stations along the high ways

 LNG Satellite & Fuel Infrastructure

 Privately Owned
 Supported by IOC (i.e. Shell, etc) and private Companies (i.e. Vopak, etc)
 Stable but relative low returns (5%), when contracted

LNG Downstream is Looking for (co-)Investors

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 Questions?

Source: Gate terminal

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Thank you

Dirk van Slooten Source: Gate terminal

Managing Director

VSC Hattem Telephone: +31 (0)38 444 0215

Koningin Emmalaan 2 Mobile: +31 (0)6 306 316 77
8051 PD Hattem Email: vsc.hattem@xs4all.nl
The Netherlands