justifying small lng shipping for inter …...parties involved - let me sell the consultant's...

JUSTIFYING SMALL LNG SHIPPING FOR INTER-ISLAND

TRANSPORTATION AND DISTRIBUTION: FACTORS AND

PRACTICAL APPLICATIONS FOR A BUSINESS CASE

Eduardo Perezwww.Small-LNG.com

small-lng.com1

Intro

● Why me?○ Dow 14 years in Spain, The Netherlands, Argentina

and USA○ Norgas Carriers 2 years in the USA and Singapore○ Lauritzen Kosan 7 years in Denmark and Spain○ Own consultancy firm on small scale LNG shipping

● PLEASE ASK QUESTIONS

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The world today

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LNG Trade Flows

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Source: http://www.openstreetmap.org/

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LNG Trade Flows

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Source: http://www.openstreetmap.org/

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LNG Trade flows 2014

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The world tomorrow

How Shale gas will change the world in the near-future

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World Shale gas reserves

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US Natural Gas Pipelines: 3 million miles of pipelines, about the same amount of paved roads

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European Natural Gas Pipelines

Source: http://www1.inogate.org/inogate_programme/inogate_resource_center/maps/gas_map_big.gif14

Opportunities

● Shale gas will grow at different paces due to political restrictions

● Lack of pipelines will force Asia to use more ships

● Global price gaps now, regional price gaps in the near future

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A quick look at Asia

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Singapore LNG terminal

● Current capacity: 6 MM MTs per annum● 3 tanks with capacity for 540,000 cbms LNG● 4th tank in 2018 will increase it to 11 MM

MTpa● Singapore as a hub for the region● Terminal can handle 2 Q-Max and 1 "smaller

LNG tanker" at a time

Source: http://www.power-eng.com/news/2013/04/23/corporate-singapore-lng-terminal-on-track-for-2q-launch-gets-ready-for-global-suppliers.html18

LNG Infrastructure to support Small LNG Shipping and Distribution

● Hubs and receiving terminals as market facilitators

● Singapore terminal● South China Sea carriers 50% of the world

LNG● Asia LNG consumption about 170 MM MTs

(2012)● Major producers in the area

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How will the development of Small LNG Shipping change trade in Asia?

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SEA: 600 MM ppl / 20,000 islands

Source: http://www.openstreetmap.org/#map=4/6.84/123.75&layers=T 21

Indonesia LNG facilities & pipelines

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Bali - Small LNG terminal

● Bontang LNG (East Kalimantan) to Bali● Shuttle ship: Surya Satsuma (23,000 cbms)● Receiving terminal: FRU + FSU (Chinese NB

26,000 cbms)● FSU to be replaced by a new FSU from

Korea in 2017● Second small LNG plant in Bali ?

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Small LNG Challenges & Opportunities

● Local cabotage laws● Indonesia: importer and exporter of LNG● Competing terminals● End of fuel subsidies● Newcomers to the market: Australia

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A quick look at the Americas

So

Source: http://www.openstreetmap.org/#map=5/21.166/-77.080&layers=T25

Island States and US territories

Source: http://www.eia.gov/todayinenergy/detail.cfm?id=17611

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Residential electricity prices

Source: http://www.eia.gov/todayinenergy/detail.cfm?id=17611

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Gas Carriers

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Types of tanks in Gas Carriers: Membrane

● Best for bigger ships● Best for shallow draft

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Types of tanks in Gas Carriers: Moss

● Best for bigger ships

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Types of tanks in Gas Carriers: Type-C tanks

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● Best for smaller ships● Multiproduct

Small Gas Carriers

● Fully Pressurized: ambient● SemiRefs and FullyRefs: - 48 deg C● LEGs (ethylene/ethane carriers): -104 deg C● LNG carriers: -162 deg C

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Gas Carriers Pyramid (Type C)

- 48 º C (PPL) Semi-Ref Carriers (LPG, But, PPL)

- 104 º C (Ethylene) LEG Carriers (Semi-Ref+Ethylene)

- 88 º C (Ethane)

- 163 º C (LNG) Small LNG Carriers (LEG+LNG)

Ambient temp. Pressurized Carriers

+15-20%

+15-20%

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What is a Small LNG Carrier

● From 0 to 40,000 cbms● Not a standard. Some people will use other

ranges.● -162 degC

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Shipping is only part of the SC cost

PipelineLiquefaction Plant

LNG Tanker

LNG Storage

VaporizersPipeline

LNG Storage

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When and where to use Small LNG carriers

● Islands● Seasonal consumption● Isolated places / expensive pipelines● Pipeline expansions● Pre-marketing / new markets● Inland waterways● LNG as fuel● Pollution restrictions

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Small LNG Carriers - world's fleet

● Very small fleet, less than 40 ships worldwide

● Most of them already in a long term deal

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Strictly confidential38

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Subscribe to our newsletter

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small-LNG.com/subscribe

Small size LNG shipping market

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Recent Developments in Small Scale Shipping

● Type C tanks and petchem ShipOwners● Multi-product carriers● LNG as fuel● Advances in design bring new flexibility at

load and disports.

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Key Success Factors for Leading players

● Multiproduct carriers● Building against long term T/C contracts● Controlled risk● Global fleet

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Considerations

● Dual fuel engine● Position of manifolds● Multiproduct vs. LNG dedicated

○ Cost○ Time to change grades

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Yes, but, how much?

The theoretical hire of a small LNG carrier is:Ethylene market rate + 20% extra for LNG capabilities

So in today’s market:- 8,250 cbms ethylene carrier: USD 525,000

pcm (Nov-2015 12 months hire rate)

- 8,250 cbms LNG carrier should be USD 630,000 pcm

Disclaimer: this is a theoretical calculation based on ship building costs and in a liquid market. This is not a proposal and not an offer.

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Gas Carriers Pyramid (Type C)

- 48 º C (PPL) Semi-Ref Carriers (LPG, But, PPL)

- 104 º C (Ethylene) LEG Carriers (Semi-Ref+Ethylene)

- 88 º C (Ethane)

- 163 º C (LNG) Small LNG Carriers (LEG+LNG)

Ambient temp. Pressurized Carriers

+15-20%

+15-20%

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Yes, but, how much? (cabotage)

In a domestic market, you have to add:Ethylene market rate + 20% extra for LNG capabilities

Plus:- Extra cost of legal requirements- Extra costs of local crew - Extra cost of reduced competition

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Canary Islands’ random exercise

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New ideas in Small LNG Shipping

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68Source: http://www.tge-marine.com/files/lng_fuel_forum_north_america_march_2014_miami.pdf

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GTT Membrane shallow draft bunker barge

Source: http://www.lngworldnews.com/gtts-lng-bunker-barge-design-receives-abs-approval/ 71

Jensen (Crowley) bunker barge

Source: http://www.lngworldnews.com/jensen-maritime-to-design-lng-bunker-barges-usa/

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LNG Bunkering

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Where are the ships today?

Main uses for small LNG carriers

● Bunker ships for LNG bunkering:○ Only in Northern Europe○ Why? ECA restrictions

● Virtual pipeline: bringing product to remote or isolated locations:○ Main driver in Asia○ Mainly in RICH countries (Japan & Norway)

LNG as fuel

● In 2015, seaborne traffic in North America, the US Caribbean, and European waters will be mandated to reduce fuel sulfur content.

● New barge and ship designs● There are 100 LNG fuelled ships today (90%

in Norway) (http://blogs.dnvgl.com/lng/2014/03/reached-100-lng-fueled-ships/)

● DNV predicts 1000 ships by 2020

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Emission Control Areas

SOX limits:2014 - 1.0%2015 - 0.1%

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LNG as fuel

● EU subsidies● European ports leading with “standard”

bunkering procedures: Dunkirk, Rdam, Zeebrugge, Antwerp (and Singapore)

● Spanish re-loads● Environmental vs economical motivations● The mighty USA

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Contracts

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Parties involved in a shipping contract

● Shipper● Charterer● Broker / consultant (please, never skip them)

● Ship Owner / Ship Operator● Receiver

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Parties involved - let me sell the consultant's services● Shipping is normally a small part of the total

project● Shipping is a vital part of the project● Shipping has to be invisible and RELIABLE● The cost of consultants and brokers is

significant in absolute terms but minimal in relative terms

● A consultant will help to optimize, reduce costs and avoid unnecessary mistakes

● Can you afford NOT having a shipping consultant ?

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Shipping Contracts:Types of contracts

● Spot● CoA: Contract of Affreightment● T/C: Time Charter

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Shipping Contracts: Cabotage

Cabotage adds complexity:● Building locally or importing

○ Building locally:■ Is it possible? (technically,economically) ■ How much?

○ Importing: taxes○ Temporary import

● Local company● Local flag● Local crew (training)● Added costs

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Types of contracts: Spot

● Spot contract: ○ One cargo on one ship for specific dates from A to B○ Higher prices○ No long term commitment○ Extremely dangerous in Small LNG because of the

small size of today's world fleet

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Typical Spot indicationWe are pleased to indicate as per following,01. Charterers: Charterer A02. Owners: ShipOwner B as Owners or as disponent Owners.03. Vessel: LNG X (descriptions as per SIGTTO Form) 04. Cargo: MIN 4.800 MTs CHOPT UPTO FULL CAP LNG05. Load: OSP/B Tarragona06. Discharge: OSP/B Dunkirk 07. Laycan: Laycan Sep 1-15, 2013 to be narrowed by owners to 10 days by 4th Aug and to 5 days by 23rd Aug08. Freight: USD 200 per metric ton09. Laytime: 100 mtph load/100 mtph disch shinc reversible10. Demurrage: USD 23,000 per day prorata.11. Last cargo: LNG12. Presentation: Under LNG vapours ready to load13. LoadTemp: Please indicate. In case cooling is required, additional costs will have calculated.14. Distchtemp: Please indicate. In case cooling is required, additional costs will have calculated.15. CP: Asbatankvoy Charter Party with logical amendments.16. Comms: 2pct comm to Broker C17. Agents: Owners’ agents both ends.18. Approvals: Big Corp D approval19 Other Terms: ShipOwner B stardard LNG termsend

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Types of contracts: CoA

● CoA: Contract of Affreightment○ A contract for a certain number of cargoes in a

certain period among different ports.○ Better for complex trades with Ship Owners with big

fleets.○ Freight includes:

■ Port costs■ Bunkers■ Crew■ Ship maintenance

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Typical CoA indicationCOA Indication:Date: 6 Aug 2013Subject: Charterer A reconfirmation latest within 22 July 2013.Charterers: Charterer A, FinlandOwners: ShipOwner B, GreeceContract Type: Contract of AffreightmentPeriod: 1st February 2014 – 31st December 2014Shipments: Minimum 1 charterers option up to 4 shipments during the contract period. Additional shipments by mutual agreement.Tonnage: ShipOwner B newbuilding LNG carriers (descriptions as per Gas Form C), suitable for both the carriage of refrigerated LNG and the ports covered in this COA. Vessels are to be subject to charterers suppliers receivers ship vetting acceptance.Product to be Shipped: Refrigerated LNGCargo Quantity per Shipment: Charterers option up to full cargo.Loading: OSP/B Tarragona at a temperature of approximately minus 161 degrees centigrade.Discharge: In charterers option 1 or 2 safe ports, one safe berth each port, in charterer’s option, from within the following ranges: A) MediterraneanFreight: A) Mediterranean: USD 888,000 LSIf a second discharge port is declared, then an additional USD 65,000 lumpsum will be added to the highest applicable freight rate.Laytime per Shipment: Loading : 100 mts per hour shincDischarging : 150 mts per hour shincLaytime fully reversibleAdditional 12 hours if second discharge port declared.Demurrage: USD 55,000 pdprShipment Schedule: TBALast cargo: TBAVessel Presentation: Vessel is to present all cargo tanks and associated systems at LNG loadport under shore supplied nitrogen atmosphere with max 0.2 pct oxygen content by volume with a dew point of max minus 45 degrees C.Ship Vetting: Owners agree to co-operate fully with charterers suppliers receivers ship vetting personnell, including any requests to physically inspect/visit vessels while at building yard, load and discharge ports.Asbatankvoy with usual ShipOwner B/Charterer A terms.End

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Types of contracts: T/C

● T/C: Time Charter○ A ship gets hired for a certain period of time.○ Most likely scenario for Small LNG in the short term○ The hire includes:

■ Crew■ Ship maintenance

○ The hire doesn't include:■ Bunkers■ Port costs

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Building against a T/C

● A Charterer need a ship to move LNG● A ShipOwner agrees to build a ship against

a long-term T/C deal (15-25 years)● ShipOwner contracts a ShipYard and builds● Ships enters long term T/C● Charterer pays a monthly hire for the life of

the contract○ Purchasing option after a certain period○ Replacement option○ Early cancellation clauses and engines

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Typical T/C indicationTIME CHARTER for Charterer: Charterer A (please provide full style) Owner: ShipOwner B, Greece. Vessels: 1,700 cbm LNG carrier LNG Carrier C (Basic specifications attached ) Period: Two years. Lay/can: Jan 1st, 2014 to Feb 31st 2014, to be narrowed down to 15 days by Charterers upon signature of the C/P. Owners to narrow down from 15 days to 10 days one month before delivery. Delivery: SEA Redelivery: SEA Trading range: Worldwide always within IWL Products: LNG Hire: US$ 666,000 pcm. Hire to be annually adjusted by a mutually agreeable inflation factor C/P: Shelltime 4 suitably and logically amended Description: Capacity 2 tanks total 1,700 cubic metres Commission: 3pct paid to Broker COther clauses: Charterer to have the option to redeliver the ships to Owners at any time after the end of year number one. Three months notice is required.

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Considerations for small LNG shipping in South East Asia

● Lack of available tonnage● Have to look at the whole picture: Indonesia

+ Malaysia + Philippines + Singapore + Australia

● Using synergies and existing experience in other markets

● Innovation and right technology for each project

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South East Asia - near future

● Many new opportunities for FSUs and FSRUs

● Lack of ships● Use of existing tonnage (Pavillion from

Singapore)● The importance of planning● Opportunities for international players

(Australia, Philippines, Indonesia, etc)

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Floating LNG

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FSRU / FLNG / FSPO / FRU / FSU

● FSRU: Floating Storage and Regasification Unit

● FLNG: Floating Liquified Natural Gas● FPSO: Floating Production, Storage and

Offloading● FRU: Floating Regasification Unit● FSU: Floating Storage Unit

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Bali - Small LNG terminal

● Bontang LNG (East Kalimantan) to Bali● Shuttle ship: Surya Satsuma (23,000 cbms)● Receiving terminal: FRU + FSU (Chinese NB

26,000 cbms)● FSU to be replaced by a new FSU from

Korea in 2017● Second small LNG plant in Bali ?

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Small scale FSRUs

● Pros:○ Low(er) costs than on-shore terminals (¿?)○ Faster deployment○ Flexibility○ Adaptability

● Cons:○ No transfer of expertise○ Smaller impact in local employment○ Only a handful of companies in the market (for now)

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Small scale FSUs

● Pros:○ Great opportunities reconditioning existing tonnage○ Faster deployment○ Flexibility○ Adaptability

● Cons:○ No transfer of (limited) expertise○ Smaller impact in local employment

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Considerations for FSRUs/FSUs in South East Asia

● Lack of available tonnage● Availability of older and bigger tonnage● Small scale LNG carriers acting as FSUs will

reduce the available fleet

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Supply Chain Analysis

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Supply Chain Analysis

● Load port(s): berth, storage and restrictions● FSU/FSRU/FLNG● Disport(s): berth, storage and restrictions● Ports congestions● Milk-runs vs. one-to-one distribution● Optimal tonnage vs. available tonnage

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Supply Chain Analysis: items to consider

● Seasonality and scalability of the solution: will it survive the pass of time?

● One ship vs several ships solution:○ One ship:

■ More economical■ Less flexible■ More risky (vessel downtime)

○ Several ships:■ Redundancy■ Risk of delays■ Risk of failure■ Maintenance and drydocking

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Your case, can we help

What is your case ?Do you want to share ?

Not ready to openly share ?Please contact me after the workshop if you want to discuss your options.

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THANK YOUEduardo PerezSmall-LNG.com

eduardo@small-lng.com+34 946 545 481

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