LNG Bunkering Terminal Infrastructure: Opportunities …€¢Supplying LNG in a small quantity (27 to 40 cbm only) •Only suitable for small-scale LNG vessels and regional operating

LNG Bunkering Terminal Infrastructure: Opportunities and Challenges for LNG ships

Mr Faizul Ismail Vice President, LNG Business 21 March 2013

LNG MALAYSIA FORUM 2013, Kuala Lumpur, Malaysia © Copyright reserved MISC BERHAD

© Copyright reserved MISC BERHAD

Disclaimer

Certain statements made in this presentation and in other written or oral statements made by MISC Berhad are “forward-looking statements” that involve subjective judgement and analyses and are subject to significant uncertainties, risks and contingencies, many of which are outside of, or unknown to MISC Berhad. A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: “believe”, “anticipate”, “expect”, “estimate”, “project”, “will”, “shall” and other words or phrases with similar meaning. Actual future events may vary materially from the forward looking statement and the assumptions on which the forward looking statements are based. Given these risks and uncertainties, readers should not place undo reliance on forward-looking statements as a prediction of actual results.

These forward looking statements speak only as of the date of this presentation. MISC Berhad disclaims any obligation or undertaking to publicly update or revise any of the forward looking statements in this presentation, whether as a result of new information, or any change in events, conditions or circumstances on which any such statement is based.


Contents

LNG Bunkering Value Chain

Challenges • Operational challenges • Ship design challenges

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3

Conclusion 5

Opportunities

• Forecast of LNG Bunker demand by 2020.

• Global LNG bunkering infrastructure by 2020

• Forecast of LNG-fuelled newbuildings.

4

Introduction 1


Introduction


Regulations are in place to cap the sulphur content in marine fuels

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2000 2005 2010 2015 2020 2025

ECA GlobalSulphur content %

All shipping is subject to International Maritime Organisation regulations

Some voyages are subject to regulations agreed within regional “Emission Control Areas”

Global limit likely to be pushed out to 2025

Source: WoodMackenzie

Different alternatives that are viable for emissions regulations fulfillment:

• Burning lower sulphur fuels such as low sulphur marine diesel oil or marine gas oil (MGO).

• Fitting abatement technologies i.e. Heavy fuel oil (HFO) with an exhaust gas scrubbers.

• Converting to LNG or ordering new LNG-fuelled ships.

Emission Control Areas are in force in the Baltic, North Sea and around North America; future ECA are under consideration

Established Emissions Controlled Areas Emissions Controlled Areas under consideration Shipping critical points

New regulations apply to all vessels (existing and newbuilds)

Established ECA

ECA under consideration

Shipping Critical points



Value Chain


Supply of LNG as a bunker fuel – which options to choose?

LNG supply infrastructure LNG bunkering options LNG received as shipping fuel

Available options Potential future option

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Jetty-to-ship

Ship-to-ship

Ship-to-ship

Truck-to-ship

LNG Onshore terminal

Floating LNG terminal

Source: DNV


Opportunities


Source: Det Norske Veritas (DNV)

Global LNG bunker demand by 2020 forecasted to be in between 4 to 7 Mtpa

• ECA zones such as Europe and North America will dominate the LNG bunker demand until 2016 due to stricter emission control regulation.

• The price of LNG and other alternatives, particularly on dual fuel engines, will strongly influence growth of LNG bunkering demand.

• Strong government intervention and incentives are required for growth e.g. subsidies, tax reduction etc.

North America 0.9 – 1.4 Mtpa

South America 0.3 – 0.4 Mtpa

Northern Europe 1.4 – 2.2 Mtpa

Southern Europe 0.3 – 0.7 Mtpa

Middle East & India 0.3 – 0.7 Mtpa

Japan & Korea 0.3 – 0.5 Mtpa

South East Asia 0.4 – 0.7 Mtpa

Australia & New Zealand 0.1 – 0.2 Mtpa

China 0.3 – 0.8 Mtpa

0.07 – 0.09 Mtpa

LNG Bunkering Demand 2012

LNG Bunkering Demand 2020 Equivalent to 4 – 7 Mtpa of LNG


Current and forecast of global LNG bunkering infrastructure by 2020

(2) (16) (19) Source: DNV, 2013

Major global bunkering ports: 1. Singapore 2. Rotterdam 3. Fujairah 4. Antwerp 5. Hong Kong

DNV is cooperating with KOGAS on feasibility study of LNG bunkering in Korea

DNV announced LNG Bunkering in Australia is feasible

Shell is anticipated to provide LNG barging and bunkering operation

SLNG has awarded ECP for berth project at Jurong Island terminal to facilitate LNG bunkering


Newbuilding and number of LNG fuelled ships segment

• The technology is proven with 48 ships in operation with LNG fuel capabilities and 43 new ships contracted as at 27 Feb 2013.

• The Offshore vessels and ferries dominate the LNG fuelled fleet and order book today.

• Discussions are on-going among yards, designers, equipment manufacturers and classification societies to develop concepts and designs for most ship types.

Source: Llyods and RS Platou, 2013

Basecase: 4.2% of newbuilds i.e. 653 LNG-fuelled NBs

Highcase 67 Mt: 12.6% of newbuilds i.e. 1,963 LNG-fuelled NBs

YTD 48 LNG fuelled ships in operation and 43 confirmed LNG fuelled newbuilds

Challenges


Whilst LNG bunkering infrastructure is developing, shipowners are facing several operational issues

Truck-to-ship transfer

•Supplying LNG in a small quantity (27 to 40 cbm only)

•Only suitable for small-scale LNG vessels and regional operating vessels

•LNG fuelled vessels for deepsea requires at least 500 cbm for operation

Jetty-to-ship transfer

•Lack of unified local and international regulations and standard bunkering procedures

•Permission from port state flag and port states have to be obtained for operation, causing complications if vessels calling at different ports

Ship-to-ship transfer via LNG bunkerbarge

•BOG handling and LNG bunkering interface (manifold) from LNG bunkerbarge to receiving vessels have to depend on receiving vessels specifications.

•Sensitive to adverse swell or weather conditions

•Missing link: LNG bunkerbarge (still at conceptual stage)


Shipowners are facing ship design issues in adopting LNG as bunker fuel

Fuel tank types Type C: safe, reliable, allow

high loading rates and pressure, but consume 3 to 4 times larger volume

Type B: taking up space, require pressure maintenance and secondary barriers

Storage volume LNG need 1.6 times more

storage volume compared to HFO

taking up considerable amount of underdeck space, compromising cargo carrying capacity

Source: ABS

TGE Type C Tank

Prismatic Type B Tank LNG tank underneath accommodation unit

Tank location Can be located in enclosed

spaces or on deck Several risks involve: Risk of fire Risk of leaked flammable

product causing fire Risk of leaked cryogenic fluid

- loss of structural integrity

Source: TGE Source: DNV



Conclusion


Conclusion

• Technical and regulatory challenges need to be overcomed before LNG bunkering in ports become standard.

• Concerted effort of regional governments for complete regulatory framework and incentives (e.g. sulphur tax exemption, NOx fund support) are needed to promote investments in LNG infrastructure

• Availability of LNG with the growing global network of LNG liquefaction plants and regas terminals could significantly spur interest.

• Coordinated efforts by all actors in the LNG supply chain are needed for establishing a “critical minimum” level of LNG infrastructure to meet the demand in 2015 to 2020.


LNG bunker suppliers are expecting off-takers to be ready and vice versa.

Shipowners are expecting shipyard to spur the development in terms of design, slot availability and vice versa.

Dilemma: which one comes first?

Thank You


Economic Evaluation of Using LNG as bunker fuel on 14,000 Teu Container Ship Study done by: DSME


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LNG Bunkering Terminal Infrastructure: Opportunities …€¢Supplying LNG in a small quantity (27 to 40 cbm only) •Only suitable for small-scale LNG vessels and regional operating