John Morgan DLO 31 July AM Questions/Answers Mark Agerton Can you comment on the changing role of long-term oil-indexed

ed contracts vs. spot and short-term contracts? Response: This is not my area of expertise. But maybe should direct a response first to oil-indexed prices which seem likely to become less common or favorable. But long-term pricing indexed to other than solely to oil is probably developing and will be reflected in financing for LNG projects. Spot contracts would likely continue to be much less common. Short-term contracts with an advance set of trading terms in place could become more common. Oil Indexed contracts have been the norm in SEA for decades, but in the last year Japan and Korea are challenging this and moving towards a hub-based pricing system, essentially gas-on-gas. Spot or Short-term LNG trades now represent some 25% of the business and are largely based on the spare capacity that exists in many of the production facilities. Prices are established by negotiation. Are there other technologies for liquefaction other than Air Products? Is there any new technology development in this area? Response: ConocoPhillips enjoy a significant ongoing market share; Shell technology is used in some major facilities but perhaps only where Shell have an equity interest; the B&V Prico technology is used in many smaller LNG facilities. There are other technologies used to a much lesser extent. "Do you see Micro LNG could be stronger in N America?" Response: I have little information other than the observation that gas prices are very low in North America. However there is interest in LNG as a transportation fuel in the USA and this might drive the development of Micro-scale LNG facilities. There are some interesting recent developments in this area by Expansion Energy, who have recently tied-up with Dresser. BOC and Linde also active in this area. For floating LNG, a developing technology, what are the capex and opex for the range of sizes being built? What are threshold recoverable reserve sizes? Response: Two projects are underway and there is not a history on floating LNG to estimate sound conclusions on costs, Shell quote $10Bln for their 3.5Mtpa Prelude, but this includes the upstream costs. Typically one reckons that 1tcf is required to justify a 1Mtpa facility, but for FLNG the threshold could be lower if a relocation strategy is envisaged. Do LNG buyers of rich LNG extract ethane and LPG for other uses? Response: there have studies but the demise of LNG imports to the USA has diverted attention from this topic. The extraction of LPG has been practiced in India for LNG supplied by RasGas, but generally the costs are too high to do this at a regasification terminal. The LNG producers are now designing liquefaction trains with the capability to extract LPG themselves when economically justified

Michael Strathman

Ankur Jariwala

Gerald Radke

Michael Strathman

Gerald Radke

Looking at relative costs in the value chain, what are the costs of each element - for each $1.00 of costs, how much is production, PNG, transportation by tanker, and regasification? Response: It all depends! The relative costs are project-specific. These will vary widely reflecting factors such as nature of the gas reserves/supply, LNG plant location, local construction cost structure, capital equipment inflation pressures etc etc. Here is one basis as quoted in John M Campbells G29 LNG Short Course there will be many other and differing relative cost splits: Gas Production (Well to site) 25% Liquefaction 50% Shipping 15% Regasification 10% Does a Different LNG i.e. Rich & Lean require different technology for Regasification? Response: Not fundamentally. The main problem is whether the gas is of the right quality for regasification and delivery into the receiving countrys pipeline network. The Wobbe Index (WI) of LNG is significantly higher than Pipeline Natural Gas (PNG) because there is no CO2 in the gas. So a rich gas from LNG may require ballasting (diluting) with say N2 and a lean gas spiking with say propane, What is the fraction cost of the utilities and offsite in the total cost of the LNG plant? Do we increase the number of utilities facility with the number of trains? Response: Again using data from G29 LNG short course: Process train (AGRU-Liquefaction) 50% Offsites (Storage and marine) 25% Utilities 10% Infrastructure (site, buildings etc) 15% clearly each project is different and these numbers could vary widely.

TEJASH SHETH

Majid Abdi

TEJASH SHETH

"Does a Different LNG i.e. Rich & Lean require different technology for Regasification? (Australia - Perth) " Response: Same question as-above. which form of LNG transportation/transfer is safer? Shipping or the Pipelines? Response: Not sure on what basis to compare safety. But LNG is an expensive pipeline to move gas from A-to-B. The LNG industry enjoys a very good safety record especially in the shipping sector. Good philosophical question: Pipeline Natural Gas (PNG) is typically at high pressure 50 100 barg and there have been several accidents and deaths. On the other hand there was major LNG leak (Cleveland) in the 1940s where 120 people were killed; but in this case the wrong materials were used, the design was wrong and operating procedures were suspect. So one view is that LNG, correctly handled, is pretty safe at atmospheric pressure.

Chris Ampiah

Jon Even Vale

when making power from LNG is the LNG regasified first or burnt directly? Response: regasified first.

Farrah Tan

What are some of the bigger examples of safety concerns related to LNG production and delivery? Response: The same as any gas handling facilities plus those associated with the handling of cold liquids in large quantities. Containment is the main issue With higher summer temperatures in some areas does that change the take or pay contract? Response: Im sorry but I dont have specific information on this. But the demand pattern will be a component of the Gas Sales Agreement Why does LNG prices vary so much across the globe? (Abhijeet from Denmark)? Response: presumably due to the supply and market conditions, in particular the availability of lower-priced gas by pipeline. Basically the Pacific region has developed LNG trades related to Oil prices, but in the USA gas sales are market driven (Hub Pricing). Europe has long-term Pipeline Natural Gas (PNG) contracts where the prices were established against oil products, but there is more flexibility than in South-East Asia. What is a "typical" production cost range per MMBTU for LNG (excluding the upstream portion)? Response: Liquefaction costs range from $36/MMBtu depending on capacity, quality of feed and location "there is a joint venture of few companies in Angola for LNG production, from your knowledge what are the biggest challenges of LNG production in Africa (more specifically in Angola)? Response: in general among the factors are likely to be quality of the infrastructure, availability of skilled labor, political stability etc. I dont have specific knowledge of Angola. Can we have the slides? Response: Please check with SPE HQ on the small file-size version. What is a "typical" transportation cost range per MMBTU for LNG? Response: Depends on distance but typically $1-2/MMBtu for 3-8,000 nm (nautical mile) Isn't the sloshing of the LNG within the partially filled storage compartments make the ship unstable? Response: You might contact the American Bureau of Shipping for further information. To some extent perhaps yes; but the task is to minimize the sloshing because the main risk is damage to the membrane tanks (which are the more common configuration). Recently GTT have developed a tank utilizing a central bulkhead which minimizes the problem (and will be used on Prelude)

K Smith

Abhijeet Kulkarni

Vily Frenk

Clarindo Chassungo

Majid Abdi

Vily Frenk

Vily Frenk

Thomas Wahlheim

"What is the potential to reuse underutilized USA import terminals as export terminals? Region (USA) Response: the potential is there but it is suggested to read the trade and business press as this is an evolving situation. There is one project (Freeport) underway and several others under development. So there is great potential and costs will be lower as the off-sites are already in place. is LPG also expensive to produce? Why is LNG more important? Is it because it is a better fuel? Response: LPG is less expensive to produce than LNG because LPG doesnt require such low-level refrigeration and is easier to transport. Also LPG and LNG serve different markets. What are the challenges of FLNG regarding each field characteristics? Water, CO2, H2S content..etc. Luber. Norway. Response: the gas pretreatment requirements will be the same for land-based or floating LNG. There is not enough history of FLNG to fully compare the two. How sustainable is the near parity oil-linked pricing that Asian LNG buyers currently pay? Response: the oil-parity as a structure is under some strain; For example $17/MMBtu gas is similar to $100/BBL oil in equivalent energy content. What is a "typical" transportation cost range per MMBTU for LNG ?? I forgot to add per mile? Response: please see previous answer "how long can be a pipe between LNG plant and LNG terminal?" Response: you might check the Bintulu LNG plants they are among the longer lines I believe. At Ras Laffan the distance from storage to loading is up to 6km. At Isle of Grain (UK) the distance from ship to tanks is 4km. Perhaps these distances could be longer. Issue is cost, these transfer lines cost $10k/m, heat gain (leading to more BOG) and pumping costs. Hello John, are there any examples of "small scale" - onshore based LNG business cases e.g. with rail based LNG carriers? (Raimund from Calgary, Canada) Response: Hello Raimund its great to hear from you. Ive not been active in the small scale LNG business so Im sorry not to be able to comment. But it is an active market. Not sure about rail cars, but there are dozens of examples of LNG being trucked. In China, LNG is trucked by road over 4,000km. There are other long distance hauls in Australia. The LNG tanks (vacuum 3 insulated up to 50 m ) are containerized so could be transported on a flat bed rail car. "Do you see LNG as a competitor to or complementary to gas storage? Particularly in the context of UK requirements? UK Question!" Response: I dont see LNG as a significant competitor for large-scale gas storage. But LNG has an established place as a peak-shaving supply. LNG is primarily a means of TRANSPORTING gas. It is used for storage (peak shaving) and in Korea there is massive seasonal storage. But it depends on how easy it is to construct salt-cavern gas-storage or

Iroro Eradajaye

Luber Perez

Karthik Murali

Vily Frenk

Yann Le Gallo

Raimund Wege

James Lobban

to re-purpose depleted gas- or oil fields for gas storage, generally these will be the cheaper option. Chassty Manuhutu What are the key success factors behind the excellent HSE track-record of LNG shipping? Australia. Response: It certainly has been a fine record but I dont have specific information. LNG carrier movements within harbors are closely monitored; no doubt the training of the ships crews and officers is a factor too. What is the safety record like in LNG? United Kingdom. Response: the LNG industry has enjoyed a very good record. Statistics to quantify this might be available through the industrys insurers. Maybe check the Marsh website as a starting point. What is the dominating technology for ship to ship LNG transfer, Cryogenic hoses or loading arms? Response: The only proven technology is cryogenic hoses which now have been extensively used by Excelerate. But hard arms are in use on the Adriatic GBS and several of the other FSRU which are moored on a jetty. Prelude plans to use Hard Arms Is it possible to recover some of the energy used for refrigeration at the Regas terminals? (Bangalore, India) Response: This has rarely been done. One problem could be matching the LNG supply business model with that of another industry. A few examples of LNG used to chill inlet gas to power station GTs. Several concepts tried in Japan, but probably NOT economically viable. "Is it possible to get value from the very low temperature of the LNG at the delivery point. Or is it a cost, a problem? United Kingdom." Response: As with the previous question this has rarely been done. One problem could be matching the LNG supply business model with that of another industry. In terms of development cost at what scale does it make sense to have Floating Regas vs Land Based Regas? Response: for Regas it might not be driven primarily by size factors. Environmental factors, permitting and the attitude of the surrounding populace/ authorities could assume greater importance in the decision. (For FLNG the project scale depends on the business model. Projects under way and consideration will have different business models. Right now Petronas are developing at 1.5Mtpa and Shell at 3.5Mtpa. Probably 4Mtpa is the largest size one could contemplate and <1Mtpa is probably not economically justifiable for FLNG.) "will the intnl. market evolve to be just like the crude oil and products markets? How long will it take? Response: Probably not because of the much more complex and costly infrastructure required for LNG and the consequent large financial commitments.

David Ruddock

Oddgeir Johansen

Vinay Pydah

Neil Dunlop

Ben Thuriaux

Simon Antunez

Michael Strathman

Are LNG and GTL competing technologies? USA. Response: No, they are completely different. Gas-to-Liquids (GTL) facilities for diesel are more costly than the cost of LNG facilities. Both require low cost gas supply. But they are targeting quite different markets: LNG is largely a stationary fuel supply to power stations; GTL is aimed at transportation fuels.

John Morgan DLO 31 July PM Questions/Answers Kai Eberspaecher [Australia] - What is your opinion in taking coal seam gas to feed an LNG plant? Do you see any challenges in comparison to conventional developments? Response: one factor is that coal seam gas is very dry and has no condensate production revenue stream. Another factor is the large number of low productivity wells which do not like to be shut in potentially leading to a high level of make-over requirements. Disposal of water is another problem which has raised serious concerns with the environmental lobby. But that said, several different companies are pursuing this business. With the increase of investment to build up LNG plant in Canada and or USA, will that help to increase natural gas price in Canada and USA? When and estimate by how much? Noordin, Malaysia. Response: LNG exports from North America could be expected to firm-up the market for gas production; but I have not seen any published numbers. LNG exports for the USA will undoubtedly affect prices to some degree which are set by a supply-demand scenario. It is not easy to estimate the impact on price levels but the timing is linked to the assets coming on stream. Current forecast for Sabine Pass is 2013, no other facility has placed an EPC contract. The cold temperatures must be hard on the turbines. What changes are made to compensate for cold temperatures? Response: lower temperatures improve the power output from GTs but the temperature must be limited to minimize the effect of inlet air icing. Recognize that aircraft engines work at very low temperatures, albeit at reduced pressure. In artic regions the power output may be controlled to a maximum power that results from the high air density due to the combination of very cold temperatures at atmospheric pressure. Sakhalin (in particular) and Melkoya experience very cold temperatures. How much of the LNG is used in re-gasification? (USA) Response: If the heat for regasification is provided by burning some of the gas, then typically in a submerged combustion vaporizer the fuel consumption is 1.5% of the throughput. How can I get a copy of the presentation materials? Noordin Malaysia. Response: please check with SPE HQ for the small file size version. Hi Guys does winter or summer effect the plant efficiency? Response: winter operation (cold weather) operation will make refrigeration cycles more energy efficient.

Noordin Abdul Rahman

Stephen Holtz

Gavin Longmuir

Noordin Abdul Rahman

Graeme Brown

Nishant Chadha

"What is more expensive to build: LNG or FLNG? Australia" Response: there is not enough project cost history to make a comparison at present. But the current increased interest and developments suggest that the costs are comparable. Its unlikely that the Prelude project would have been approved by Shell if it was wildly out of line with other LNG sources. The first FLNG facilities look to be more costly than a land-based project built using modular technology, but undoubtedly costs will come down with experience and also depending on the application. The Shell Prelude application is complex with a high level of NGLs in the feed which need to be processed. Directionally FLNG could be marginally cheaper, but as yet this is not proven. what processes are involved in the re-gasification? (USA) Response: either submerged combustion or sea-water vaporization. An air exchanger arrangement has been proposed and is in use on the Hazia terminal in India and installed on the Cameron (?) terminal in the US? how do you see the large coal seam methane to LNG projects fitting into the future and do you see it happening elsewhere?....Australia Response: the fact that there are a number of coal-seam-gas (CSG) projects (by different companies) underway in Australia suggest that it is an economic gas source. Unaware of possibilities elsewhere but they may exist. Like shale gas, there are large reserves of accessible CSG around the world. The most likely place for further development in the near future is in China. is there an option to use LNG to export future Arctic gas production? San Diego, Ca B Bernard. Response: see the paper at the recent GasTech 2012 conference in London regarding exports from Russia, icebreakers etc. But such a project would be vulnerable to one or more severe winters where ice-reinforced LNG ships couldnt move. The envisaged LNG projects in Arctic regions are where the sea temperature does not fall too low. This is not necessarily coincident with the availability of gas. So as often is the case in this Industry It Depends on the precise circumstances. LNG will not be a generic answer. ARE THERE LNG IN THE OFFSHORE RESERVOIRS, WHERE? Response: The reservoirs will only contain the gas. LNG is only produced in surface facilities using large refrigeration systems. "How frequent is the economics of a project done? Is it being monitored constantly during the LNG operations as well? Thank you" Response: the economics of both the construction and operational phases would be under constant cost-control observation.

Benjamin JOHNSON

Mike Mollison

Bruce Bernard

FERNANDO PLAZAS

Azlan Kassim

Graeme Brown

"Does a FLNG facility have a lower capital cost than and fixed land based plant? And does it as a result produce less LNG? Australia" Response: No long-tem history exists on FLNG costs. The production rate is limited by the size of the floating platform itself. The Prelude FLNG project is the first and the only emerging data-point. A lot more will be know when it is completed and in operation. Please also see earlier responses above. Could you please explain what a 'pay or take contract' is again? Australia. Response: at its most basic it means that the purchaser pays whether or not it takes LNG product. This is to guarantee a revenue stream to the LNG plant investors. In modern contracts the Buyer is seeking relief by being able to sell on any surplus LNG What is a typical cost of LNG generation (on a per-unit basis), so what would be a limiting maximum price an LNG producer can pay to a producer of natural gas? (USA) Response: I am not aware of these costs in the public domain. Perhaps try the Petroleum Economist or similar publications; private economic consultancies will likely have this information. Please also see earlier AM session answer, $3-6/MMBtu USA: What are some of the typical pricing bases for LNG contracts? For example, LNG may be priced as a function of crude oil prices... Response: See earlier discussion. Varies from region to region, country to country. In Asia typically LNG is related to oil prices, but the Japanese and Koreans are trying to break the link. Generally LNG has to compete with alternative fuels unless it is a niche product which is unlikely. In the USA gas is traded at Henry Hub on a demand-versus-supply basis, making the price very volatile and difficult to predict. Please recognize that LNG is simply a means of transporting LNG, it is a floating pipeline not truly a product in its own right.

Nishant Chadha

Benjamin JOHNSON

Randall Reed

Daiye Zheng

What are the key elements to be considered when evaluating the economics of a LNG project? Malaysia Response: Among the key elements will be the adequacy of the gas reserve; also the commercial terms all the way to the ultimate gas purchasers ability to pay for the gas consumed in the receiving country with a reliable stream of payments. CAPEX and OPEX clearly play a part as will the rate at which demand will build up. Note that the requirements of the funders (project financers) need to be accounted for. Large loans are required which will need to be serviced. Thanks for the webinar...our first time. It was really useful.

Mike Mollison

Id like to recognize input to many answers by my Campbell instructor colleague Mr. John A. Sheffield and Kindra Snow-McGregor as Kindra introduced me and moderated the two sessions. John