Standards Magazine Issue 3 - The Shipping Issue

The Investors Guide To Cyprus

THE SHIPPING ISSUE

,

-10:

, !N A M E S Y O U C A N T R U S T

You Decide On The InvestmentWe'll Provide The Rest

AccountantsLawyersDevelopersBanksAdvertisingMarketingConsultants

ShippingImportersExportersConstructionInsuranceEstate AgentsIT Solutions

The Cyprus Top 10:

Luxury Hotels Apts & Villas ActivitiesAirlines Travel Agents Car Rentals

Along with a complete Traveler's Guide and:

-

:

www.CyprusStandards.com

4 CyprusStandards.com

We understand shipping

Cyprus is at the forefront of global shipping with a fully functional and innovative department of merchant shipping, an EU approved tonnage tax regime and a committed resident shipping industry.

At KPMG Cyprus, our dedicated team of shipping professionals provide support to our clients by drawing on a depth of shipping knowledge and experience, offering tailored solutions to the challenges they face. Our highly qualified practitioners undergo continuous industry specific training so as to remain at the forefront of developments within the shipping industry and, together with our global network of shipping specialists, apply this expertise to the services we offer to the maritime sector, which include:

Audit and assurance related services

International and local tax planning, structuring and restructuring

Tonnage tax compliance services

Advisory services (corporate finance, valuations, mergers and acquisitions, restructurings)

ISAE 3402 service reports on ship managers for communicating information to ship owners on the formers internal controls

For more information please contact:

Sylvia A. LoizidesBoard Member, Head of Shipping T: 25 869 138, F: 25 363 842E: [email protected]

Alexandros S. SofocleousBoard Member T: 25 869 223, F: 25 363 842E: [email protected]

kpmg.com.cy

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ited liability company and m

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International), a Swiss entity. A

ll rights reserved.

For more information regarding our service please contact:[email protected] +44 (0) 8995 4364

Cypriot flagged vessels

All figures shown in $million for coverage of the tanker, bulker (>20k dwt), container and gas fleet.

Vessels with Cyprus flag* (708) - colours show country of ownership, size shows relative value ($M).

*as of 25/09/2014

= $132million*The Grand Aniva, a Large LNG, owned by Sovcomflot, 147 200 CBM, built in 2008 by Mitsubishi.

The Grand Aniva

$0 $500

$1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000

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n in

USD

mill

ion

Country of ownership of Cypriot flagged vessels by total value ($M)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

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Flags of Cypriot owned vessels by total value ($M)

Most valuable Cypriot flagged vessel*

Ownership Country

Ships cons ume fuel when they s tay at the port. This creates pollution, nois e and vibration in the port area. Thes olution to this problem is s hore-to-s hip power. It allows direct connenction of s hips to a harbors electric grid.

Sources:www.abb.comGlobal stat ist ics: Wor ld f leet stat ist ics www.shipbuildinghisto r y.com; por t s wor ldwide www.wor ldpor t source.com, Global emissions: CO2 www.mdgs.un.org, Shipping f leet emissions 4% (www.abb.com/por ts) . Emissions f rom ships at por t s are 7% of the total Fast turnaround ships and the ir impact on crew, E. Kahveci 1998 Coal-f ir ed plants emissions: Green Power Equivalency Calculator Methodologies www.epa.gov

large land areas which will remain committed for a long term resulting in the loss of residential or tourist development.

Part TwoFloating Liquefaction Of Natural Gas Unit

The discovery of new gas fields offshore, at very large distances from the mainland and isolated, led to the inspiration of floating liquefaction of natural gas since it would be economically prohibitive to develop and unprofitable to exploit in distant onshore terminals. Such Liquefaction method is ideal for remote, isolated and individual deposits under three trillion cubic feet. What is a floating natural gas liquefaction unit A floating natural gas liquefaction unit is ideal for liquefaction of natural gas in deep seas near the deposits which are under exploitation at a floating platform where the gas goes. The extracted natural gas from the near by wells is gathered through pipelines on the platform were it is processed for purification, liquefaction and storage and from there it is taken for export to other countries by special tankers. The worlds first floating liquefaction unit Prelude is now under construction, owned by Royal Dutch Shell. The decision for the attempt was taken in 2009 and construction began in 2011. Prelude FLNG is expected to be completed and operational in 2017 at the Australian Browse Basin located 185 km from the shore and at water depth of 250 meters.Features: Length 488 meters Width of 74 meters Annual Processing Capacity: 3 mtpa LNG NG 1,3 mtpa natural gas condensate 0,4 mtpa LPG. Analysts estimate that it will cost close to $ 13 billion U.S. dollars. Under construction are now three more floating LNG units intended to operate in Malaysia, Indonesia and in Mozambique.

Country Gas Field Main Owner Production Capacity

Estimated Year of Operation

Cost Forecast

Australia Browse Basin Royal Dutch Shell

3 MTPA 2017 $13 Billion

Malaysia Rotan field Petronas 1.5 MTPA 2018 $19.6 BillionIndonesia Abadi field Inpex - Shell 2.5 MTPA 2018 will be

assigned?

Mozambique Mamba discovery

Eni 2.4 MTPA 2019 ?

Advantages of Floating Natural Gas Liquefaction Units Exemption of capital investment for construction of gas pipelines to transfer natural gas to onshore liquefaction terminal and construction of infrastructure to export natural gas (jetty) by tankers. Provides the ability to exploit remote and isolated deposits which would not be possible to develop otherwise. Less noise and nuisance from land units.

Disadvantages of Floating Natural Gas Liquefaction UnitsReduced annual production due to low capacity Reduced staffing and work positions

Benchmark of onshore and floating natural gas liquefaction units

Onshore Liquefaction terminal

Floating Liquefaction Unit

Ability to create synergies and partnerships or joined operations with neighbor countries

Security of facilities Ensure investment

Project delivery time

Upgrading ability

Reliability Ability to convert Cyprus into a regional energy hub

Jobs creation for Cypriots

Required land for facilities

Attractiveness to comparable investments

ConclusionThe floating liquefaction unit is a technology that offers the opportunity to exploit natural gas in isolated and remote areas with small but many deposits which would not be feasible to exploit due to cost and technical difficulties. The addition of this sector in the natural gas industry will contribute significantly to the increase of recoverable reserves worldwide. In the case of Cyprus, however, a floating liquefaction unit as the main means of liquefaction of natural gas reserves or as an additional means to the onshore liquefaction terminal would be costly, dangerous and experimental as it fails to secure the objectives, parameters and collaborations needed and offer Cyprus the means to the successful and profitable exploitation of its natural wealth.

ReferencesCandei Luca et al (2013) FLNG- Floating Liquefied Natural Gas: An evolutionary way to unlock stranded and marginal gas fields NTNU Norwegian University of Science and Technology.Nexant (March 2009) Floating LNG Production Chemsystems PERP 07/08S10Legislative Assembly Parliament of Western Australia (May 2014) Economic Impact of Floating LNG on Western Australia Economic and Industry Standing Committee.Pressprojectsogp (February 2014) The trend towards developing floating LNG to fuel the future of the oil and gas industry.Enoch, N., (December 2013) Whats 1,601ft long and weighs 600,000 tonnes but floats? Worlds largest ship, which is bigger than the Empire State Building, takes to the water for first time Mail Online.Thalassetis F., (2013) Pipeline or Liquefaction the Next Steps accessible at: www.cyprus-hydrocarbons-frixos.comThalassetis F., (2013) Cyprus Liquefaction Terminal, Infrastructure Safety and Additional Choices accessible at: www.cyprus-hydrocarbons-frixos.com

Frixos has a BA in Business Administration, an MA in Management and an MBA in Oil & Gas Management. Since completing his studies, Frixos has been elaborating in research and writing of studies on issues relating to the management of Cyprus hydrocarbons.

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Standards Magazine Issue 3 - The Shipping Issue