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LPG for Power Generation

Paul Kelly, Vitol AsiaSingapore June 10th, 2014

Private and Confidential

Agenda

• Vitol

• The WAPA project

• LPG for Power Generation andPotential in the East

• Closing thoughts

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This Presentation has been prepared by Vitol Asia solely for information purposes and is subject to amendment, revision and updating in any way without notice or liability to any party. This presentation does not qualify as investment research or advice and is not intended to be relied upon in any way. This presentation contains some forward-looking numbers and statements which involve uncertainties and assumptions and actual results and developments may differ materially from those expressed or implied by the numbers and statements. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information or opinions contained herein, which has not been independently verified. Vitol Asia is not responsible for the accuracy of data collected from external sources and will not be held liable for any errors or omissions whatsoever. This presentation does not constitute an offer or solicitation to buy or sell any investment and nothing in the presentation should be regarded as investment advice or as a recommendation to enter into any transaction. Any persons acting on or relying on information contained in this report do so solely at their own risk. To the fullest extent permitted by law, no Vitol group company accepts any liability whatsoever (including in negligence) for any direct or consequential loss arising from any use of or reliance on material contained in the presentation.

Disclaimer

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VITOL

Executive Summary

• Founded in 1966 in Rotterdam• Private partnership with no external

shareholders• 48 consecutive years of profitable operations• Revenues of $307 billion in 2013• 276 million tonnes of crude & oil product sales

in 2013• Over 5 million barrels of crude oil & products

traded every day• 6,065 ship voyages per annum • The largest spot charterer in the world• Rated investment grade by all agencies• VTTI – terminals, storage business with

capacity of 8.6 million cubic meters

The Vitol Group exists to help meet the energy needs of a rapidly changing world. The world’s largest independent energy trading company, we find, refine, trade, store and transport energy from where supply is abundant to where demand is great.

GROUP TURNOVERbillion US dollars

Vitol Office Network – global physical distribution

Key Offices• Geneva, Rotterdam, Houston, Singapore, London, Bahrain, Moscow• 30+ additional offices globally

El Segundo

Calgary

HOUSTON

Hamilton

Lima

Buenos Aires

Rio de Janeiro

LONDON

ROTTERDAM

GENEVA

Mazeikiai

AlmatyKiev

MOSCOW

Accra

LagosAbuja

BAHRAINDubai

Mumbai

SINGAPOREMalaysia

Beijing

Hanoi

Luanda

Cape Town

Bogota

Hamburg

Istanbul

Mexico City

Johannesburg

Vancouver

Baku

Vitol LPG

• Vitol is one of the world’s largest international LPG traders

• Started our LPG business in 1977• Traded approx. 18mn tonnes of LPG in 2013-

physical and paper• Cover all of the major global LPG markets – Asia,

the US, Latam, Middle East and Europe• Worldwide networks to suppliers and consumers• Control rights to export up to 3.5mn tonnes pa

through 2024 from US• Global Shipping Portfolio

• Fleet of 27 pressurized LPG vessels (3000 to 6000mt)

• 7-10 VLGCs on time charter• 30+ annual voyage COA with a major

shipowner (VLGC size)

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The WAPA project

USVI Water and Port Authority (WAPA) - Background

• WAPA is a Government owned utility in the US Virgin Islands

• Main industry in the Virgin Islands is tourism – health and safety are key

• Two independent power generation facilities – 2 islands - St. Thomas 198 MW and St. Croix 118 MW - 50 miles apart

• Had been using Fuel No 2 diesel for power

• They were paying the highest cost for electricity compared with any other US state, territory or possession.. Needed to change..

• WAPA were looking for a quick, environmentally friendly, cost effective solution with the potential to evolve with a rapidly changing energy landscape – potential move to LNG

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WAPA: The Solution

• On July 25, 2013 Vitol and VI WAPA signed an agreement for the turnkey supply ofLPG for a period of 5 + 2 years.

• Vitol will Build, Own, Operate and Transfer (BOOT) the storage and terminal facilitiesrequired to deliver the propane to each plant gate in St Thomas and St Croix.

• Total project approx. $90mn..

• Vitol is also supervising the works led by General Electric for the dual fuel conversion ofthe turbines

• First in its class project as regional utilities explore options to replace fuel/diesel formore environmentally friendly and cheaper fuels

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1111

General Overview – Offshore

VLGC (44,000mt)

LPG Terminal (St. Croix)

SOURCING

FLOATING STORAGE

DISTRIBUTION

VLGC (44,000mt)

SUPPLY

Shuttle Tankers (1,500mt – 2,500mt)

LPG Terminal (St. Thomas)

(USGC and other sources as required)

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General Overview – Onshore

Pressurised LPG

offloaded at rates of

150mt/hr

Pressurised LPG

storage in mounded

bullets

Pump sets (100%

redundancy)

rated at 30m3/hrLiquid phase Liquid phase

Liquid phase

Gas phase

Gas deliver to Power Station

Turbine headers at required

interface conditions

Liquid to Gas

Transition in

Vapourizing units

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$-

$5

$10

$15

$20

$25

Fuel Oil Propane

Actual Cost of Fuel oil vs. Projected Cost of Propa ne$

pe

r M

illi

on

BT

U

Note: The propane cost considered includes a 7-year amortiza tion of the facilities’ capital expenditures. After 7 years ,propane costs will further be reduced.

~ 30% Fuel

Cost

Reduction

Project Benefits

Benefits

• Price

• Cost – infrastructure and maintenance

• Speed – project execution

• Flexibility – interim or long term

• Environmental- 20% reduction in emissions vs. No 2 fuel. 80% reduction in Sulfur Dioxide and Carbon Monoxide emissions

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LPG for Power Generation and Potential in the East

LPG for Power Generation

LPG (Propane and Butane) has a long history as a fuel for power generation in integrated refinery andpower generation systems worldwide. In countries like Japan and Korea, LPG is used as a backup fuelin thermal power stations.

Several OEMs are manufacturing units for dual fuel or are implementing conversion of units to add dualfuel capabilities

LPG Infrastructure is standard and typically includes mounded or above ground tankage, pumps,vaporizers, compressors, loading arms and instrumentation and safety controls systems. Vaporizationprocess and gas supply systems are needed to maintain LPG above superheat values

Difference vs. e,g. LNG

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Source: GE

LPG for Power Generation in the East

Not as easy a decision as WAPA - distance from cheap gas in the USGC, cheap LNG, noreal environmental concerns

BUT…………..

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10

15

20

25

30

Jan

/12

Ap

r/1

2

Jul/

12

Oct

/12

Jan

/13

Ap

r/1

3

Jul/

13

Oct

/13

Jan

/14

Ap

r/1

4

Jul/

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mmBTU Liquid Fuel

LNG FEI Propane Sing 10 ppm gasoil Sing 500 ppm Gasoil

LSFO MB + freight 1 MB + Freight 2

Propane

LNG

GO

Fuel oil

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Closing thoughts..

Closing thoughts

Ignoring the infrastructure advantage - LPG for power

generation is not clear cut from a pure pricing point of view -

now.. You need to look at each opportunity on a case by

case basis BUT

LPG for power generation has many advantages

• Price

• Cost – infrastructure and maintenance

• Speed – project execution

• Flexibility – interim or long term

• Environmental

To consider:

Market rapidly changing- heavy US exports, will this reduce prices?

Panama Canal expansion- significant reduction in journey time/ transport cost

We need to be more creative on the demand side.. Ethane? 18

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Thank you

Paul KellyVitol Asiapfk@vitol.com

http://www.viwapa.vi/OurEnergyFuture/VITOL_POWERINGVI.aspx