Marine Transportation of Compressed Natural Gas

Marine Transportation of Compressed Natural Gas Omid Shakeri, Aghil Barati Iranian Fuel Conservation Organization (IFCO), September 26-27, 2009, The 3rd Iran Gas Forum

Introduction Natural gas is rapidly becoming an even more important resource of energy, with its share in the world consumption expected to increase dramatically over the next two decades. Currently, natural gas is transported to the markets by pipelines and as LNG. Transporting the natural gas by pipelines is convenient and economically attractive onshore. For the offshore transport of natural gas, pipelines become challenging as the water depth and transporting distance increase. LNG, an effective means of transporting gas for long distances across the seas, constitutes 25% of the world gas movement. But LNG projects require large investments, along with substantial natural-gas reserves, and are economically viable for distances of 2,500 miles and beyond. CNG provides an effective way for shorter-distance transport. The technology is aimed at monetizing offshore reserves that cannot be produced because of the unavailability of a pipeline or because the LNG option is very costly. Technically, CNG is easy to deploy, with lower requirements for facilities and infrastructure.

Forecast of World Energy Consumption 700 600 Hydro, Geothermal, Solar % Share 8.1 500 Nuclear 3.5 15 Quadrillion Btu 400 300 200 100 % Share 5.9 28.9 17.4 17.4 47.3 0.4 % Share 6.5 5.9 26.1 21.6 38.9 % Share 7.0 6.8 6.3 24.4 23.7 22.7 22.1 38.7 Coal Gas Oil 47.5 25.9 0 1970 1988-2001 2001 2010 2020

What is Marine CNG?

Why CNG? Stranded gas Associated gas Stranded market Incremental capacity May replace need for pipeline : Provide more market flexibility Can be moved to other fields at end of life Pipeline environmental issues avoided

Key Market for CNG Not connected to natural gas Often Islands Moderate demand Not connected to continental grid Limited space for infrastructure Complementary alternative to either pipeline or LNG (starting point or capacity increment) Environmental imperative (tourism and regulations) Anti-flaring regulations (Kyoto protocol) Power Plants

Modern CNG Carriers EnerSea (steel, vertical pipes, 130 bar, -29ºC) Sea NG Corporation (Coselle) (steel, coiled, 275 bar, ambient) Knutsen (steel, vertical pipes, 250 bar, ambient) CETech (steel, horizontal pipes, 200-250 bar, ambient) TransCanada (wrapped steel liner) Trans Ocean Gas (composite)

EnerSea Transport LLC (USA)

Sea NG Corporation (Coselle) (Canada)

Sea NG Corporation (Coselle)

Knutsen Group (Norway)

CETech (Norway)

TransCanada Pipeline Ltd. (Canada)

Trans Ocean Gas (Canada)

CNG Cargo Containment System

Cross-section of a CNG carrier ship

Storage Efficiency in CNG Technologies 0.5 Advanced Technology Weight of Gas Weight of Steel 0.3 Conventional Technology Advanced Technology Conventional Technology 0.1 Rich Gas Lean Gas

CNG Gas Delivery Project Chain Loading Facilities CNG Vessels Delivery Facilities Storage Facilities

Economics of Transporting Gas

Comparison of CNG and LNG Size of investment for a 500MMscf/d plant CNG LNG Reserves: Modest Large Processing cost: MM$30-40 MM$750-2000* Transportation costs: MM$230/ship MM$160/ship Unloading costs: MM$16-20 MM$500-550 Total investment: $1-2 billion** $2-3 billion** * Depending upon the location of the production site ** Depending upon the number of ships used for the transport of the gas.

Typical cost components for CNG & LNG CNG LNG 5% 6% Unloading Compression and Loading Shipping 50% 39% Shipping Unloading Liquefication 89% 11%

CNG Operation & Logistics

Comparison of LNG and CNG Price of the delivered gas LNG value chain per MMBTU Exploration and Production: $0.5-1.0/MMBTU Liquefaction: $0.8-1.2/ MMBTU. Shipping: $0.4-1.5/ MMBTU*. Regasification and Storage: $0.3-0.5/ MMBTU. $1.00 as netback for the investors Final price of LNG: $3.00-5.20/MMBTU. * For transport distances from 1000 miles to 5000 miles

Comparison of LNG and CNG Price of the delivered gas CNG value chain per MMBTU Exploration and Production: $0.5-1.0/MMBTU Processing and transportation: $1.08-3.82/MMBTU* $1.00 as netback to the investor Final unit price of CNG: $2.58-5.82/MMBTU * For transport distances from 1000 miles to 5000 miles

Comparison of gas prices Distance LNG CNG (Case I) CNG (Case II) miles $/MMBTU $/MMBTU $/MMBTU 500 3.55 2.72 2.72 1000 3.65 2.74-2.84 2.82-2.90 1500 3.75 3.06-3.10 3.15-3.26 2000 3.85 3.30-3.37 3.11-3.62 2500 3.95 3.44-3.90 3.50-3.98 3500 4.25 4.08-4.43 3.98-4.34 5000 4.65 4.84-5.49 4.70-5.43 Case I: Transported Volume = 3.5 10 6 ft 3 Case II: Transported Volume = 5.0 10 6 ft 3

Energy Losses 50% Energy losses from transport system 40% 30% 20% 10% 0% CNG Pipeline LNG GTL More Moreprofitability, less lessenvironmental impact

Global Applications The World Needs CNG

Scalable Supplies for Emerging Gas Markets

Gas Transport Solutions Pipelines (local) CNG (regional) LNG (global) Project Gas Rate Pipelines LNG CNG Hydrates Distance to Market Plataforma Deltana

Associated Gas Solutions Gas-to-Flare (burning) Gas-to-Well (injection) Gas-to-Liquid (LNG, GTL, MOH etc) Gas-to-Wire (electricity) Gas-to-Tank (CNG) Gas-to-Solid (NGH)

Flared Gas CNG Case Study Commercial viability of CNG is defined by: Cost to deliver gas from supply to market Market price or value for delivered gas Cost avoidance for re-injection Benefits from credits for flaring reduction Environmental benefits and possible increased production

Flared Gas CNG Case Study Delivered Gas Rate: 80 MMscfd Gas Composition: 1265 btu/scf Water depth: 1,500 m Supply pressure: 120 bar Storage temperature:-15ºc Transport distance: 200 600 km Buoy Loading Continuous production Continuous offloading Feedstock for LNG Plant

Receiving Terminal Requirements Simple finger jetty required minimal infrastructure Port draft of <6m 24 Hour/day access Proven loading arms for gas transfer Terminal Facilities could be sited on a small-barge or onshore Gas Storage can be provided, if needed

Project Components CNG Loading Equipment: Gas compression (provided by field operator) CNG transfer equipment Gas Transport Fleet of CNG Ships Gas Delivery Terminal: Offloading lines and equipment at existing port facility CNG transfer facilities Operations & Maintenance: Marine Fleet, Dry-docking, annual service and inspections Utilities (fuel gas and electrical power) Distance to Ship Size Gas delivery terminal and offloading facilities Market (km) (MMscf) CNG Fleet Service does not include: Port development costs 200 110 3 Port facilities & entry fees, Land, Governmental Fees or Licenses 400 170 3 Fuel gas (cargo gas used) Permits 600 110 4 Tariff ($/MMBtu) 2.00 2.45 2.60

Producer Economics: CNG vs. Re-injection Producer Costs: (Per MMBtu) Gas Gathering: $1.00 CNG Transport: $2.60 (600 Km Case) Liquefaction: $1.00 LNG Shipping $0.50 (Europe/US) Regasification: $0.50 Producer Netback: Gas sales price: $7.00 (Europe/US) Producer costs: ($5.60) Cost avoidance $0.50 (Re-injection) Emissions Credit $0.50 Producer Net Back $2.40 per MMBtu Total Volume Gas Saved: BCF (20 years) 580 Net Commercial Value: Billion $1.8 Commercial Viability NPV 10 : Billion $0.8

CNG Comparison to Pipeline and LNG Final Observations Pipeline is a fixed asset - large initial expense LNG - large expense for liquefaction and re-gasification facilities CNG requires smaller initial volumes than pipeline or LNG and can grow in small increments 80% of CNG investment in ships, re-deployable asset, lower investment risk Several CNG technologies are technically well defined and ready for commercialization CNG transport of gas is simple and easy to implement Pipelines are convenient and economical for onshore transport of natural gas Offshore, as the water depth and distance increase pipeline transport of gas becomes difficult. CNG can deliver gas cheaper than LNG for distances up to 2500 miles At distances above 2500 miles the cost of CNG becomes similar or more than LNG thus making LNG attractive because of its ability to transport more gas per shipment

Conclusions CNG transport is an important new gas solution Technology advancements have greatly improved CNG economics & applicability Worldwide CNG applications are being pursued CNG has superior efficiency and performance for regional applications Increasing demand for energy, will boost the development of smaller reserves General promise from CNG: economically exploit modest reserves in moderate volumes over shorter distances CNG is commercially viable for flaring and many other applications

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