Read Marine CNG Viability of Supply text version

Marine CNG Viability of Supply

Presentation to the National Energy Board April 25, 2006

Centre for Marine CNG Inc.

Centre for Marine CNG Inc.

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World's first marine CNG R&D facility Independent corporation Global Focus - efficient, safe and competitive transportation, storage, handling and usage of compressed natural gas Facilitating the development of standards for vessels, storage systems, training, and procedures

Our Team and Alliances

· Michael Hanrahan ­ Managing Director · Grant Dedora, P.Eng. ­ Facilities & Operations Manager · Stephen Duffett, B.Comm. ­ Business Manager · Tanya Dawe ­ Office Coordinator · Dr. Majid Abdi, P.Eng. ­ Senior Research Consultant (Process) · Dr. Brian Veitch, P.Eng. ­ Senior Research Advisor (Marine) · Dr. Arshad Hussain ­ Senior Research Fellow · Mr. Esam Jassim ­ Researcher (Mechanical Engineering) · Ms. Erica Bronovitch ­ Researcher (Chemical Engineering) · Gas Technology Institute ­ process engineering · Memorial University ­ marine engineering & naval architecture · Poseidon Marine Consultants ­ various maritime specialities

Our Members

Our Facility & Capability

Marine Compressed Natural Gas

What is Marine CNG?

Regional Solution

CNG Criteria

Fewer Assets - Transferable Assets

Delivery Chain Capital Cost Comparison ($US millions)

(Source - Wood Mackenzie)

LNG Low High Low $0 $15

CNG High $100 $50 $900 $100 $50 $1,200

Liquefaction / Storage / Jetty Loading Buoy Shipping Unloading Jetty / Storage / Regas Unloading Buoy Total Capital Cost

$1,500 $3,000 $0 $175 $325 0 $0 $440 $500 0

$200 0 $15 $230

$2,000 $3,920

Marine CNG Proponents

CNG Proponents

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CETech - Norway EnerSea Transport - USA Exmar/Institut français du pétrole Knutsen - Norway SEA NG - Canada TransCanada - Canada Trans Ocean Gas - Canada

Knutsen Group

TransCanada

Sea NG Management

Coiled pipe in a Carousel: Coselle

Regulatory Status

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CETech ­ Approval in Principal (DNV) EnerSea Transport ­ Class Approval in Principal for whole ship (ABS). Prototype testing completed. Exmar/IFP - unknown Knutsen ­ Formal Approval for Cargo Containment System (DNV), Formal Safety Assessment performed (IMO) TransCanada ­ ASME Approval, Lloyd's Register Approval in Principal Trans Ocean Gas ­ Approval in Principal for pressure vessels (ABS) SEA NG ­ Approval in Principal for coiled pressure pipelines (ABS)

Marine CNG Projects

SIGALPHA - 1965

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Columbia Gas commissioned first CNG ship "Bottle-type" Tested around New York Harbor Two major constraints:

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ASME standards drove cost of steel pressure vessels too high; Natural gas traded at $0.60 and trended downward

Columbia Gas

CNG Projects

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Myanmar to India

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Proponent ­ GAIL Status ­ Expression of Interest Q1, 2006

CNG Projects

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Tanzania to Kenya

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Proponent ­ Artumas Group Inc. Status ­ awarded FEED to TransCanada in April

CNG Projects

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Papua New Guinea to New Zealand

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Proponent ­ Oil Search Status ­ FEED in Q3, 2006

CNG Projects

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White Rose

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Proponent - Husky Energy (lead) Status ­ Pre-FEED in 2005

Project Economics

Operational Efficiency Assessment

Variables: Ship Capacity (250, 500, 750 mmscf) Unloading stations (1, 2) Number of vessels (3, 4, 5, 6) Constants: Ship Speed ­ 18kn Distance - 750nm Field Production Rate ­ 250mmscf/day Unloading Rate ­ 500mmscf/day

Production Efficiency vs. Vessel Size

Production efficiency

100 production eff. (%) 90 80 70 60 50 40

200 300 400 500 600 700 800

Prod eff. (3vessels, 2 unloading stations) Prod eff. (4vessels, 1unloading stations) Prod eff. (4vessels, 2 unloading stations) Prod eff. (5vessels, 1unloading stations) Prod eff. (5vessels, 2 unloading stations) Prod eff. (6vessels, 1unloading stations) Prod eff. (6vessels, 2 unloading stations) Prod eff. (3vessels, 1unloading stations)

vessel capacity (mmscf)

CNG Value Chain

Offshore capex: Transportation capex: Unloading capex: Total investment: O&M MM$40-60 MM$205/ship (X4) MM$20-60 $1-1.5 billion MM$25/yr (est.)

Delivered Cost for Marine CNG

$1.00 - $2.50mmBtu

Notes: Exclusive of E&P costs Sources ­ public data prepared by EnerSea, Knutsen, Zeus Developments, Worley International Inc., and Michael Economides Currency is US dollar in all instance

CNG Advantages

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Economics No political risk associated with supply Scalable to meet demand Re-deployable assets Complements Canadian offshore projects Uses existing or near-future infrastructure

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Northeast Gateway and Neptune

Offshore Newfoundland and Labrador

Offshore Newfoundland and Labrador

20 basins/sub-basins > 300,000 mi2 prospective 131 exploration wells Three fields on production 640 million bbls produced

Significant Discoveries ­ Grand Banks

18 discoveries to date · 2.1 billion bbls oil · 5.6 tcf gas · 324 million bbls NGL's

Discovered Gas Resources Grand Banks

White Rose Hibernia North Dana Ben Nevis Terra Nova Springdale South Mara North Ben Nevis Trave 0 472 315 269 238 144 116 30 500 1000 1500 2000 2500 3000 1320 2722

Hibernia Field ­ Gas Availability

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Gas handling capacity - 300 mmcf/d Gas cap blowdown after oil recovery Solution gas is being re-injected for enhanced oil recovery Recovery factors are high >40% Some early gas off take may be possible

White Rose Field ­ Gas Availability

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South White Rose (600bcf)

- gas being re-injected into North White Rose gas cap - could provide basis for early gas sales

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North and West White Rose (1.8bcf)

- delineation ongoing, timing of gas sales contingent on requirement for oil recovery

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Mara ­ available now (300bcf) F-04/04Z discovery ­ same as North and West (200bcf)

Grand Banks Gas Development

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Two cases to be considered:

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stand-alone project basin-wide gas development

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Pipeline or LNG may not be feasible for these projects on a stand-alone basis Marine CNG is the cheapest transportation alternative - simple add-on option (Sources Worley International Inc., 2000; Locke, Millan, Rodgers, and Worley Inc., 2001; and Davis, 2002)

Basin-wide Development Scenarios

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Total cumulative potential production 600 to 700 mmcf/d (associated/non-associated gas, blowdown rate) May justify subsea pipeline to Nova Scotia/US - gas primarily processed outside Newfoundland Alternative, to process in Newfoundland and export by pipeline to Nova Scotia/US

Grand Banks Gas Export Options

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Absence of significant local market or feasible value-added options Gas export to NE USA becomes the most probable economic alternative Gas export options considered:

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LNG CNG Pipeline

Significant Discoveries ­ Offshore Labrador

LABRADOR Five gas discoveries Discovered recoverable Resources: ­ 4.2 trillion cubic feet gas ­ 123 million barrels NGL's

SNORRI HOPEDALE NORTH BJARNI BJARNI GUDRID

Bjarni / North Bjarni Fields

LABRADOR This non-associated gas is available now 3.1 TCF and 113 million bbl NGL's 480 mmcf/d annual average with 13 year plateau 24,000 bbls\d of NGL's

SNORRI HOPEDALE NORTH BJARNI BJARNI GUDRID

Labrador Gas Development Issues

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Labrador environment - harsher than Grand Banks (pack ice 6-8 months) Substantial transportation cost for products to markets Degree of offshore versus onshore processing Some technologies may be stretched to limits in the Labrador environment

UNDISCOVERED GAS RESOURCES

(After Drummond,2003) 26 TCF

55 TCF

Water Depth 6 TCF 14 TCF

9 TCF

15 TCF

Scenarios

Regional Supply and Demand

US Northeast demand is 9 bcf/d

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10 LNG Receiving Terminals Operating or Proposed ­ 9 bcf/d send out capacity 8 LNG Receiving Terminals `announced' ­ 4.9 bcf/d send out capacity Sable currently provides 400mmscf/d Iroquois, Algonquin and Tennessee pipelines have combined delivery capacity of 3.5bcf/d

Is there room for marine CNG?

Marine CNG - c.2012

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Natural Gas Royalty regime in place Industry will have sanctioned CNG project elsewhere in the world ­ proving technology White Rose CNG project in construction (commissioning 2014) 350mmscf/d (scalable) to be delivered direct to US N.E. via Neptune or Northeast Gateway or to Nova Scotia Tie-back engineering in progress for basin-wide development ­ 500-600mscf/d by 2017

Marine CNG - c.2012

Other considerations: · Newfoundland LNG Limited will have commissioned LNG Transshipment Terminal by 2009 (takes pressure off need to land gas on Island) · Laurentian Basin development plan will have been filed (could bring pipeline into solution) · Sable will be exhausted

Low Price Case ($5HH) Strong Economy, Harmony

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CNG delivered to Boston est. $2.00/mmBtu + Producer costs ­ still works Competing with LNG at $3.50-$4.00/mmBtu Reality check - Projected supply in Northeast not realized (i.e. less LNG Re-gas infrastructure)

High Price Case ($15HH) Strong Economy, Harmony

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Brings many unconventional gas supplies into solution (e.g. GTL, floating liquefaction, `seasonal' fields development, long distance pipelines) Discourages `bleeding edge' technology Contribute to increased steel costs which hurt CNG economics

Mid-price Case ($8HH) Weakening Economy, Fortress

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No political risk associated with CNG supply LNG supply could be compromised CNG used as reliable supply, LNG re-gas terminals used an peak storage Increased offshore discharge moorings

Summary

Scenario Jeanne`D'Arc Labrador Shelf Laurentian Basin Basin (2020) (2014) (2016) Low Price Mid Price CNG Viable No development likely viable CNG Viable

CNG Viable

CNG Viable as Pipeline interim Viable development strategy CNG Viable Pipeline Viable

High Price

CNG Viable

Information

Marine CNG Viability of Supply

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