Small and medium scale LNG for power generation

1. Power Gen Asia 2-4 October 2013 Small and Medium Size LNG for Power Generation • KARI PUNNONEN • AREA BDM, OIL&GAS BUSINESS, MIDDLE-EAST, ASIA & AUSTRALIA • WÄRTSILÄ FINLAND OY 1 © Wärtsilä 13 January 2014 K. Punnonen

2. FOR INFORMATIONAL PURPOSES ONLY DISCLAIMER Disclaimer 2 This document is provided for informational purposes only and may not be incorporated into any agreement. The information and conclusions in this document are based upon calculations (including software built-in assumptions), observations, assumptions, publicly available competitor information, and other information obtained by Wärtsilä or provided to Wärtsilä by its customers, prospective customers or other third parties (the ”information”) and is not intended to substitute independent evaluation. No representation or warranty of any kind is made in respect of any such information. Wärtsilä expressly disclaims any responsibility for, and does not guarantee, the correctness or the completeness of the information. The calculations and assumptions included in the information do not necessarily take into account all the factors that could be relevant. Nothing in this document shall be construed as a guarantee or warranty of the performance of any Wärtsilä equipment or installation or the savings or other benefits that could be achieved by using Wärtsilä technology, equipment or installations instead of any or other technology. All the information contained herein is confidential and may contain Wärtsilä’s proprietary information and shall not be distributed to any third parties without Wärtsilä’s prior written consent. © Wärtsilä 13 January 2014 K. Punnonen

3. SMALL AND MEDIUM SIZE LNG AGENDA: 1. Company Profile 2. LNG Supply Chain 3. LNG Terminal with Power Plant 4. LNG Based Feasibility 3 © Wärtsilä 13 January 2014 K. Punnonen

4. It’s Time for LNG 4 © Wärtsilä 13 January 2014 K. Punnonen

5. Wärtsilä Corporation 19,000 professionals Power Solutions for Power Generation Marine/ offshore Ship Power • Listed in Helsinki • 4.9 billion € turnover (2012) 5 © Wärtsilä 13 January 2014 K. Punnonen Power Plants Services

6. Installed base – Wärtsilä Powering the world* Europe: Output: 12,1 GW Plants: 1793 Engines: 3361 Asia: Output: 18,7 GW Plants: 1645 Engines: 3627 Americas: Output: 11,3 GW Plants: 395 Engines: 1342 Total: 53,7 GW Plants: 4689 Engines: 10584 Countries: 169 Africa & Middle East: Output: 11,9 GW Plants: 856 Engines: 2254 Industrial self-generation Flexible baseload Grid stability & peaking Oil & gas * On-shore Power Plants December 2012 6 © Wärtsilä 30 April 2013 POWER PLANTS 2013

7. Wärtsilä Hamworthy Gas Excellence Your perfect match – WÄRTSILÄ is a global leader in complete lifecycle power solutions for the marine and energy markets. In addition to being a world class engine manufacturer and supplier, Wärtsilä is also a recognized EPC contractor in the power generation sector with extensive references for turn key delivery of onshore power plants and floating power barges. – HAMWORTHY OIL & GAS SYSTEMS was a leading designer, developer and manufacturer of advanced gas handling systems for onshore, marine and offshore applications. Hamworthy has patented LNG technology within LNG liquefaction and is a recognized provider of technology and systems for various LNG applications worldwide. – With Hamworthy now being an integrated part of Wärtsilä the two companies’ extensive project execution experience and technology portfolios are combined into a seamless and fully accountable one stop shop for complete small and mid scale LNG production facilities.

8. Wärtsilä Oil & Gas Systems Products and Organization from Wärtsilä Oil & Gas Systems LPG LPG cargo handling systems Cargo heaters & vaporizers Reliquefaction & cooling plants Ship- and cargo tank design LNG BOG reliquefaction plants Gas Recovery Separation Technology Aftermarket VOC recovery systems Separator design Complete site support services LNG regasification plants Zero Flare solutions VIEC /VIEC-LW internals Project life time support Small scale LNG plants HC blanket gas and recovery Interface level and profilers Training LNG fuel gas systems Flare gas recovery and ignition Compact separation

9. How to get LNG? – Conventional LNG supply chain Gas exploration 9 Liquifaction Large scale shipping © Wärtsilä 13 January 2014 K. Punnonen Hub Evaporat ion Pipeline End user (NG)

10. LARGE SCALE Large Scale LNG • Intercontinental transport • Millions of tons per year • LNG Terminal feeding into pipeline system • Providing a commodity Jetty capable of offloading ships from 35,000 m3 to 145,000 m3 • Single containment tank (160,000 m3) • 125 MMSCFD Regas and Sendout

11. How to get LNG? – Mid and Small Size LNG Gas exploration Liquifaction Large scale shipping Evaporat ion Pipeline End user (NG) Small scale shipping Mid scale storage Evaporation End user (NG) Truck transport Hub Small scale storage Ship bunkering 11 © Wärtsilä 13 January 2014 K. Punnonen Evaporation End user (NG)

12. From Large Size to Small Size 12 © Wärtsilä 13 January 2014 K. Punnonen

13. Small Size LNG Carrier • Typical small size LNG carrier. The vessel is often a combined gas and chemical carrier – 5 800 / 10 000 cbm. Small Size LNG •Regional supply •Directly to end-users •Providing an energy solution previously not available 10,000 m3 Multigas Carrier Source: Norgas Small Size LNG Harbour •LNG Carrier loading •Road tanker loading Source: Knutsen 13 © Wärtsilä 13 January 2014 K. Punnonen

14. LNG Recieving Terminal – Power Plant “Does it make sense to invest into a Single Purpose LNG Receiving Terminal - as a fuel system for a Power Plant?” 14 © Wärtsilä 13 January 2014 K. Punnonen

15. LNG Based Power Plant A Feasibility Analyze was done to evaluate this question. The results are presented here: Natural Gas has become the fuel of preference and is expected to pass coal within a decade or so… 15 © Wärtsilä 13 January 2014 K. Punnonen

16. Power Plant – Technical Solution  Power Output  Fuel Consumption  LNG Consumption 16 © Wärtsilä 30 April 2013 POWER PLANTS 2013

17. Wärtsilä Power Plant – Technical Solution Chosen Power Plant Characteristics for the study Power Output Fuel Consumption • Single Cycle, gas engine 9MW and 18 MW • Net Power at Step-Up Trafo: 50, 100, 300 MW • Outgoing Voltage: 110 kV • Fuel: LNG (Natural Gas) • Generator set efficiency: 46% • Own electrical consumption: 4 MW at 400V • Plan Net Electrical Efficiency: 43,1 - 44,5% Operational Profile Ambient Conditions • Average ambient temp: 29 C (min. 10 C, max. 40C) • Height above sea level: max. 100 m • Methane number 80 17 © Wärtsilä 13 January 2014 K. Punnonen • Annual Running Hours: 7000 • Plant average load: 80% • Utilization factor: 64%

18. Power Plant Configuration Plant Size 50 MWe 100 MWe 300 MWe Prime Mover 6X20V34SG 12X20V34SG 18X20V50SG Plant Net Output @site conditions 53 MWe 106 MWe 304 Mwe Net Electrical Eff. Net Heat Rate 43,1% 8271 kJ/kWhe 43,2% 8250 kJ/kWhe 44,5% 8013 kJ/kWhe Plant Size 100 MWe 300 MWe LNG cons/day 18 50 MWe 511 m3 1022 m3 2840 m3 © Wärtsilä 13 January 2014 K. Punnonen

19. LNG consumption by power plant (base load) 100MW plant 100% utilization 0.14 Million Ton/year (MTPA) 0.31Millon m3/year 19 300MW plant 100% utilization 0.41 Million Ton/year (MTPA) 0.94 Million m3/year © Wärtsilä 13 January 2014 K. Punnonen

20. Wärtsilä 300 MW power plant based on W50SG © Wärtsilä 2011

21. LNG Recieving Terminal – Technical Solution  LNG Carrier Capacity  Storage Tank Capacity  Re-Gasification Process 21 © Wärtsilä 13 January 2014 K. Punnonen

22. LNG Consumption at max. and average loads Plant Size 50 MWe 100 MWe 300 MWe Power Plant Consumption, max. load 511 m3/day 1022 m3/day 2840 m3/day Additional Gas Take-Off, max. Load 701 m3/day 1360 m3/day 1754 m3/day Total Gas Consumption, max. load 1212 m3/day 2382 m3/day 4593 m3/day Total Gas Consumption, average load 677 m3/day 1311 m3/day 2604 m3/day Plant Size 50 MWe 100 MWe 300 MWe Annual Consumption, Average load 247.000 m3 478.000 m3 950.000 m3

23. Terminal optimization • The most important parameter when optimizing the terminal is the LNG supply. The ship size will determine the cargo that will be received. Shipping time and needed weather margins will determine the time between cargos. But also available HUB slots and costs need to be considered. • The average consumption requirement will determine the slope of the volume curves and thus the needed re-gasification capacities. Volume • Heel Requirement is for safe-guarding the cry-temperature in the LNG tank at all times Ship cargo Total storage volume Shipping time Incl. loading and unloading Emergency Inventory Heel requirement Time 23 © Wärtsilä 13 January 2014 K. Punnonen

24. LNG Carrier Capacity Determination Main Parameters for carrier capacity determination:  Transportation Distance: 1500 NM  LNG Carrier average speed: 15 Knots  LNG Tank sizes as defined Carrier Capacity  Gas consumption as defined Plant No Gas With Gas  For average capacity Size Off-Take Off-Take 50 MWe 6000 m3 13.000 m3 100 MWe 12.000 m3 30.000 m3 300 MWe 35.000 m3 52.000 m3

25. LNG Storage Tank Capacity Determination Main Parameters for storage tank capacity determination:  Safety inventory: 7 days  Heel requirement: 10% LNG-Tank Capacity  Shipping information as defined  Gas consumption as defined Plant No Gas With Gas Size Off-Take Off-Take  For average gas consumption 50 MWe 10.000 m3 25.000 m3 100 MWe 20.000 m3 45.000 m3 300 MWe 57.000 m3 90.000 m3

26. Re-Gasification Low Pressure System LNG Re-Gasification Process to deliver Low Pressure Gas:  Low pressure consumer, i.e. Power Plant  Atmospheric full containment tank  Delivery Pressure @10 bar(g)  Boil Off Gas fed into low pressure gas supply system  Heating media for re-gas: ambient air, sea water of hot water/steam  Dimenioned for max. gas consumption 13.1.2014

27. Re-Gasification High Pressure System LNG Re-Gasification Process to deliver Low and High Pressure Gas:  Low pressure, 10 bar(g), High pressure to NG pipeline, 50 bar(g)  Atmospheric full containment tank  Boil Off Gas fed into low pressure gas supply system  Heating media for re-gas: ambient air, sea water of hot water/steam  Dimenioned for max. gas consumption BOG Heater To Engines Excessive BOG Compressor Regas Phase 1 Natural BOG Compressor HP-pump LNG Vaporizer LNG To Gas Grid Blowdown to Vent/Flare Regas Phase 2 Loading Arms 5000 m3/h each BOG LNG Supply Vapor Return Pump 13.1.2014 LNG Tank

28. Re-Gasification High Pressure System REGASIFICATION SYSTEMS Heating media: Seawater Intermediate: Propane, phase-change Petronas Melaka Re-Gas Capacity 3*221 t/h Pressure: 70 bar Sea Water Heating Dry Weight 945 tons Heating media: Steam Intermediate: Water/Glycol

29. LNG Recieving Terminal – Power Plant 29 © Wärtsilä 13 January 2014 K. Punnonen

30. LNG Feasibility Analyze – STEP 1 STEP-1 LNG FOB-Price At Main Hub US$/MMBtu STEP-2 Distribution Gas Price as fuel Cost US$/MMBtu 13 January 2014 LNG Transportation LNG Receiving Terminal LNG Re-Gasification ”Terminal Effect” on gas price -transportation cost -investment cost -operation and maintenance cost Distribution Gas Price: US$/MMBtu Power Plant energy conversion Conversion Cost -fuel cost -investment cost -O&M cost Sales Power Tariff US$/MWh

31. LNG ”Terminal Effect” FOB LNG Purchase LNG Transportation LNG Storage LNG ReGasification Power Plant Power Sales STEP 1 LNG transportation •Own LNG carrier operation •Out-sourced Carrier operation to third party •Transportation through LNG provider •All In Cost by LNG provider is considered. Depends according to LNG volume 31 © Wärtsilä 13 January 2014 K. Punnonen Terminal Investment •Tank and main process •Re-gasification process •Other: land, on-shore and offshore infrastructure •Working Capital, LNG tied in vessel and storage tank •Considered as total investment Terminal O&M •Operational Man Power •Maintenance Man Power •Spare parts and Material for maintenance •Typical estimation 1-2% of the investment in annual bases

32. LNG ”Terminal Effect” Back-Ground Investment Fundaments for Terminal •Existing harbour facilities available next to the Terminal and Power Plant sites – no maritime or off-shore works •Project Life time for evaluation and gas price calculations: 25 years •Weighted average cost of capital: 10% •On top of the power plant gas consumption, additional gas Off-Take was considered as in a similar magnitude as the power plant itself. Gas delivered to Off-Takers via 50 bar pipeline system •LNG average inventory Working Capital between 3 to 22 M€ depending on the project capacity Terminal Effect Constituents LNG transportation Terminal Investment Terminal O&M •All in cost by LNG provider is considered. Gas price increase due to transportation. •Total Investment effect on gas price: •Operational cost relatively insensitive for Terminal size •Maintenance cost follows the size Effect on Gas Price (US$/MMBtu) All in Transportation Cost (US$/MMBTU) : •50 MW – 2,14 US$/MMBtu •100 MW – 1,85 US$/MMBtu •300 MW – 1,43 US$/MMBtu 32 © Wärtsilä 13 January 2014 K. Punnonen Plant Size No-Off-Take •50 MW 4,09 •100 MW 2,28 •300 MW 1,60 With Off-Take 2,04 1,47 1,34 Effect on Gas Price (US$/MMBtu) Plant Size No-Off-Take •50 MW 1,57 •100 MW 1,05 •300 MW 0,47 With Off-Take 0,76 0,52 0,33

33. LNG ”Terminal Effect” Terminal Effect - $/MMBtu Plant Size No Gas Off-Take With Gas Off-Take 50 MWe 7,80 4,94 100 MWe 5,18 3,85 300 MWe 3,50 3,1 9 8 $/MMBtu Terminal Effect 7 6 5 4 3 Terminal Related Transportation 2 1 0 50 MW No 50 MW Off-Take with OffTake 33 © Wärtsilä 13 January 2014 K. Punnonen 100 MW No OffTake 100 MW with OffTake 300 MW No OffTake 300 MW with OffTake

34. ”Distribution Gas Price” Plant Size 50 MWe 100 MWe 300 MWe LNG Consumption 247.000 m3 478.000 m3 950.000 m3 LNG FOB Price- $/MMBtu Plant Size 50 MWe 17,82 16,39 15,68 300 MWe 14,97 LNG FOB-Prices negotiated based on estimated annual LNG consumption 17,11 100 MWe 30 No Gas Off-Take 14,25 US$/MMBtu 25 With Gas Off-Take Distribution Gas Price 20 15 10 Terminal related Capex&Opex Transportaiton 5 0 50 MW No OffTake 50 MW 100 MW 100 MW 300 MW 300 MW with Off- No Off- with Off- No Off- with OffTake Take Take Take Take FOB Price 34 © Wärtsilä 13 January 2014 K. Punnonen

35. LNG Feasibility Analyze – STEP 2 STEP-1 LNG FOB-Price At Main Hub US$/MMBtu STEP-2 Distribution Gas Price as fuel Cost US$/MMBtu 13 January 2014 LNG Transportation LNG Receiving Terminal LNG Re-Gasification ”Terminal Effect” on gas price -transportation cost -investment cost -operation and maintenance cost Distribution Gas Price: US$/MMBtu Power Plant energy conversion Conversion Cost -fuel cost -investment cost -O&M cost Sales Power Tariff US$/MWh

36. LNG Based ”Power Tariff” FOB LNG Purchase LNG Transportation LNG Storage LNG ReGasification Power Plant Power Sales STEP 2 Power Plant Investment Power Plant O&M •EPC cost •Other up-front costs: land, on-shore infrastructure, licenses, etc. •O&M mobilisation costs •Considered as total investment 36 •Operational Manpower •Maintenance Manpower •Spare parts and Material for maintenance •Fixed O&M cost •Variable O&M cost © Wärtsilä 13 January 2014 K. Punnonen

37. LNG Based ”Power Tariff” Back-Ground Investment Fundaments for Power Plant •Power Plant Site location next to the LNG Terminal •Gas delivered to plant at 10 bar(g) •For simplicity; 100% equity financing considered •Return on Equity (ROE) Target: 15% •Project Life time for evaluation and power tariff calculations: 25 years •Running profile: annual running hours 7000h, average load 80%, capacity factor 63,9% Power Tariff Constituents Fuel Cost •Fuel cost for power plant as per the “Distribution Gas Price” •Lube oil consumption: 0,3 g/kWh •Lube oil price: 1 US$/Litre View of 6 engines modular engine hall Power Plant Investment •EPC part of total Investment (M€) •50 MW – 880 US$/kW •100 MW – 850 US$/kW •300 MW – 845 US$/kW Sasol New Energy Holdings, South Africa Power Plant O&M •Variable O&M cost: 7-9 US$/MWh •Fixed O&M cost typically between 5 – 10 US$/kW annually •Fixed insurance cost •Fixed Administrative costs O&M Agreement with thousands of MW s

38. Absolute Power Tariffs US$/MWh 50 MW Power Plant Solution 300 250 200 150 100 50 0 US$/MWh 100 MW Power Plant Solution 250 200 ROE Fixed O&M Cost Variable Cost Fuel Cost ROE Fixed O&M Cost 100 Variable Cost Fuel Cost 50 0 FOB Terminal FOB Terminal Tariff Tariff Tariff Tariff No Re-gas 150 FOB Terminal FOB Terminal Tariff Tariff Tariff Tariff With Re-gas No Re-gas US$/MWh With Re-gas 300 MW Power Plant Solution 200 150 ROE 100 Fixed O&M Cost Variable Cost 50 Fuel Cost 0 FOB Terminal FOB Terminal Tariff Tariff Tariff Tariff 38 © Wärtsilä 13 January 2014 K. Punnonen No Re-gas With Re-gas

39. Power Tariffs, Terminal Effect No Re-Gas Terminal Effect Power Tariffs, No Gas Off-Take 300 US$/MWh 250 200 ROE Fixed O&M Cost Variable Cost Fuel Cost 150 100 50 0 50 MW Plant 100 MW Plant 300 MW Plant ROE-chart for 300 MW plant, No Gas Off-Take -fuel price: 18,5 US$/MMBtu 39 © Wärtsilä 13 January 2014 K. Punnonen Simple Pay-Back Time less than 6 years

40. Power Tariffs, Terminal Effect With Re-Gas Terminal Effect Power Tariffs, With Gas Off-Take 250 US$/MWh 200 ROE Fixed O&M Cost Variable Cost Fuel Cost 150 100 50 0 50 MW Plant 100 MW Plant 300 MW Plant ROE-chart for 300 MW plant with Gas Off-Take -fuel price: 17,4 US$/MMBtu 40 © Wärtsilä 13 January 2014 K. Punnonen Simple Pay-Back Time less than 6 years

41. Final Conclusions Single Purpose Terminal can make sense • For remote location LNG can be the only acceptable fuel. Alternative would be HFO • LNG Terminal can serve the regional industry with clean and affordable fuel • LNG can be a domestic fuel Terminal economics is case specific • Each case must be studied indivudually • LNG FOB-price dominates the Distribution Gas Price structure • Additional Gas Off-Take will benefit the project feasibility • Difference between the best FOB-price and Distribution price is around 20% Gas fired power plant – a natural choice • For ”Green-Field” power development LNG is preferable vs. HFO • Power tariff difference is 37% between the two extremities • At its highist the ”Terminal Effect” will increase the power tariff with around 25% • At its lowest the ”Terminal Effect” will increase the power tariff with less than 10% With right LNG FOB price and power tariff a Single Purpose LNG Terminal can make sense... 41 © Wärtsilä 13 January 2014 K. Punnonen

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Small and medium scale LNG for power generation

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