Oivin inversen's presentation slides from the 2010 World National Oil Companies Congress

Øivin Iversen

Vice President

Höegh LNG

Floating LNG Production (FPSO) The opening up of an untapped LNG supply source

2 / 28. juni 2010

Floating LNG Production (FPSO) –The opening up of an untapped LNG supply source

• Key industry trends and their implications for NOCs

• The market opportunities for LNG FPSOs-will the NOCs participate?

• Risks and Rewards for LNG FPSO Projects

• Project schedule, cost and the competitive advantage of LNG FPSO

3 / 28. juni 2010

Höegh Group Family controlled since 1927…..

Other ActivitiesAsset ManagementReal estate RailwaysMediaOther assets

Höegh AutolinersHöegh LNG

World’s 4th largest autoliner company with 50+ vessels

37 years of LNG experience and innovation

Shipping ActivitiesHöegh LNGHöegh AutolinersCETech

4 / 28. juni 2010

Höegh LNG Existing fleet

Delivered in June 2010, from Samsung Heavy Industries. The vessel is chartered to GDF Suez LNG Trading SA on a 20 year Time Charter for the Neptune project offshore Boston, US.

Delivered in June 2010, from HanjinHeavy Industries. The vessel will be on TC to Repsol for 33 months plus options. Ship management and Operation Agreement

Delivered in 2009, from Samsung Heavy Industries. The vessel is chartered to GDF Suez LNG Trading SA on a 20 year Time Charter for the Neptune project offshore Boston, US.

Delivered in 2006, from Mitsubishi Heavy Industries. The vessel is dedicated to the Snøhvit project, and is chartered by Statoil ASA.

Delivered in 2006, from Mitsubishi Heavy Industries. The vessel is chartered on a 20 year TC for Total on the Snøhvit project.

Delivered in 1979, from Newport News. Tractable LNG Trading owns the liquefied natural gas carrier Matthew. The vessel is operated by Höegh LNG.

Delivered in 1973, from Rosenberg shipyard in Norway. Prototype of the Moss spherical cargo containment system.

STX

Frontier

Suez

Matthew

GDF Suez

Cape Ann

GDF Suez

Neptune

Arctic

Princess

Arctic

Lady

Norman

Lady

5 / 28. juni 2010

Höegh LNGStrategic Projects

• Floating Production Storage and Offloading (FPSO)•

• Front End Engineering and Design (FEED) completed 2009• Most advanced floating production project to date• Adaptable to wide variety of gas and associated gas fields• Operations agreement with Prosafe 2010• FEED fully funded by Höegh LNG

• Port Dolphin• Deepwater port offshore western Florida• Approved by US authorities• Offshore terminal for shuttle re-gasification vessels (SRVs)• Premium gas market• Fully funded by Höegh LNG

• Port Meridian• Deepwater port offshore western England• Approved by UK authorities• Offshore terminal for floating storage and re-gasification vessel (FSRU)• Fully funded by Höegh LNG

• Triton• Stationary FSRU offshore terminal in the Adriatic • Permitting process in progress• Joint development agreement with GDFSuez• GDF Suez and Höegh LNG to operate, tendering managed by HLNG

• CETech• Compressed Natural Gas for moderate distance / moderate volume natural

gas transportation.• competitive advantage is its unique composite tank technology• Wholly owned subsidiary.

6 / 28. juni 2010

Business strategy The complete Floating LNG value chain

Production & Liquefaction

Transportation Storage Re-gasificationExploration End user

FPSO Existing LNGC’s

Neptune SRV’sNeptune SRV’s / DWP Port Dolphin /

DWP Port Meridian / Triton

7 / 28. juni 2010

Höegh LNG The floating LNG chain – NOCs participation

Gas Asset

Gas Asset

Gas Asset Liquefaction Company

LNG Offtaker

Power plants

Industrial

Retail

FPSO Transport Regas

FPSO Lease Agreement

Time Charter Agreement

Regas Capacity

Gas Purchase LNG Sales & Purchase Agreement

UpstreamUpstream MidstreamMidstream DownstreamDownstream MarketMarket

Scope:• Complete & Produce wells• Tie in from oil field to LNG

FPSO• Maintain and ensure flow

Participants:• NOCs• E&P companies

Scope:• Aggregate gas resources• Own gas molecules in

liquefaction facility• Finalize LNG sales and

Purchase agreement• Lease FPSO

Participants:• E&P companies• NOCs• Utility companies• Investors

Scope:• Purchase LNG• Provide shipping for LNG• Provide regas capacity• Market and sell gas

Participants:• Utility companies• NOCs• LNG Portfolio players

Scope:• Industrial and retail

consumption of gas

Participants:• Utility companies• Industry Consumers

8 / 28. juni 2010

Key industry trends and their implications for NOCs

• More smaller off takers looking for Natural Gas

• The smaller off takers also want to diversify the supply sources

• Flaring of associated gas no more allowed

• Need to handle the gas to sustain oil production

• Changing the view on associated gas from “a cost” to “a revenue”

• Extensive technical development on Floating LNG the last 10 years

• Smaller sized projects 1-3 MMTPA open up for Independent Service Providers

• NOCs can work with the Independent Services Providers in a similar manner as for Oil FPSOs

Production Transportation Regasification Market Access

9 / 28. juni 2010

The market opportunities for LNG FPSOsWill the NOCs participate?

Estimated Distribution of Offshore Gas Fields (Logarithmic scale)

Source: Pareto Securities

3922

1043

719

347

337

73

4

1 10 100 1000 10000

<0.1 tcf

0.1-0.25 tcf

0.25 -0.5 tcf

0.5-1 tcf

1-5 tcf

5-50 tcf

50-100 tcf

Future Technology

Large scale onshore Facilities, potentially with a LNG FPSO as early production

LNG FPSO or smaller onshore facilities

Future technology

Borderline economics

Future technology

Borderline economics

10 / 28. juni 2010

LNG Process Capacity:

LNG: 0.85 - 3.00 MTPA

Gas Reserves: 1-4 TCF

Lifespan: 15 – 20 years

LNG FPSO Design Envelope – Medium Size

Example 1

LNG 1.70 MTPA

LPG 0.46 MTPA

Condensate 0.22 MTPA

Example 2

LNG 1.00 MTPA

Condensate 0.10 MTPA

Example 3

LNG 2.60 MTPA

11 / 28. juni 2010

Risk and rewards for LNG FPSO Projects

• Risks• A novel concept based on experience from Oil FPSOs and LNG industry

• Rewards• LNG production of stranded reserves means revenue

• Economics in smaller gas reserves

• Larger fields can be developed with a 2 MTPA LNG FPSO to achieve early revenue and continue with baseload onshore development

• Project construction at specialized construction site (Shipyard) to reduce risk

12 / 28. juni 2010

WHAT ARE THE CRITICAL ISSUES?

Risks and Rewards for LNG FPSO Projects

13 / 28. juni 2010

Critical issues for Floating LNG projects

1. Liquefaction technology

2. Cryogenics

3. Marine LNG experience

4. Offloading

5. Interfaces

6. Offshore design & operations

7. Process plant integrity

8. EPC capabilities

9. Permitting

10. Cost & Finance

Your team need to have excellent competence in all these areas

14 / 28. juni 2010

Höegh LNG - Choosing the right team

HLNG FPSO

Topside Engineering

Shipyard

FinanceCiti/JPM

LNG shipping/regas

FPSO Operations

15 / 28. juni 2010

Höegh LNG FPSOFPSO Development history

• Complete feasibility study for converting 129 000 m3 LNG carrier to FPSO (Moss Maritime)

• Screening of suitable liquefaction technologies for FLNG applications (HLNG / Moss Maritime)

2006

2007• Initiated Pre-FEED study for new-build LNG FPSO (Topside – CB&I Lummus, Hull/Marine - Aker Yards,

Turret-Bluewater, Tandem Offloading – Framo)

2008• Completed Pre-FEED study

• 3rd party review of topside (Energy & Power Ltd.)

• 3rd party verification of the Niche LNG technology performance (Sintef Research Institute)

• Initiated extensive FEED (Topside - CB&I Lummus, Hull/CCS/Marine/Integration – DSME, Turret - APL)2009• Completed FEED - including 3rd party reviews and project risk assessments. Approval in Principle by DNV

• Established Contract structure, Operations and Maintenance philosophies, Commissioning and Start-up procedures

• Optimization Studies for further improvement of performance, efficiency and economics

• 10+ Client/Field specific studies for clients

• MOU with Prosafe Production for operation

• MOU with KBR for Topside Engineering

2010

16 / 28. juni 201016 / 28. juni 2010

• Technical:

• Comprehensive technical basis – developed to early Detail Engineering in some areas

• All key interfaces between Hull and Topsides closed-out during FEED

• 300 000 engineering man-hours spent to date

• 1 500 technical documents developed (from PFD’s to Mechanical Datasheets)

• Project Execution (EPC):

• Project Execution Plan

• Project Team

• Contracting Strategy / Basis for EPC Contracts

• Commissioning and Start-Up Strategy

• Operation and Maintenance Partner (Prosafe)

• Project Risk Analysis performed

• Capex based MTO’s and quotes from potential suppliers

Höegh LNG FPSOProject Development

17 / 28. juni 2010

Höegh LNG – LNG FPSO team

• Complete consortium

• World leaders in every segment

• Unmatched experience• Combines Marine LNG experience with FPSO experience

• Sufficient and adequate engineering capacity and competence within the same company

Our Uniqueness1. Liquefaction technology √2. Cryogenics √3. Marine LNG experience √4. Offloading √5. Interfaces √6. Offshore design & operations √7. Process plant integrity √8. EPC capabilities √9. Permitting √10. Cost & Finance √

18 / 28. juni 2010

Typical field development timeline

3-5 yrs 6 mths 0.5 – 2 yrs 1 yrs 1 – 1.5 yrs 4 yrs

Exploration AppraisalAssess

ConceptsSpecific

engineeringDevelopment

Discovery FID

Commitment wells

completedConcept Selection

E&P Company

development phases:

Conventional timeline

• Typical schedule from FID to first LNG: 4 years• Schedule driven by topside engineering, long lead items and topside installation

19 / 28. juni 2010

Why choose Höegh LNG ? Improved timeline

HLNG Technical Maturity

3-5 yrs 6 mths 0.5 – 2 yrs 1 yrs 1 – 1.5 yrs 4 yrs

Timeline improvements:

Exploration AppraisalAssess

ConceptsSpecific

engineeringDevelopment

Discovery FID

Commitment wells

completedConcept Selection

E&P Company

development phases:

3-5 yrs 6 mths 0.5 – 2 yrs 0.5 yrs 0.5 - 1 yrs 4 yrs

Conventional timeline

Total timeline improvements: 12-18 months

20 / 28. juni 2010

Project Execution – key to success

Select FEED Execution OperationAssess

Value

 (NPV

)

Time

Good ProjectDefinition

Poor ProjectDefinition

Good Execution

Poor Execution

Poor Execution

4 years of technical development already performed to support a Good Project Definition

21 / 28. juni 2010

Participation by NOCs in Höegh LNG FPSO development

• Höegh LNG offers NOCs joint owner-ship and operator-ship of the LNG FPSO

• Through partnership, the NOCs can get access to all work done and experience gained from 4 years of extensive development

• Höegh LNG has a proven track record of financing large and complex LNG projects

• Höegh LNG has long standing relationships with all major shipyards with LNG ships and large new-built FPSO’s competence and capacity

• Höegh LNG offers the shortest possible schedule to 1st LNG at a competitive price

22 / 28. juni 2010

Participation by NOCs in Höegh LNG FPSO development

LNG FPSO SPV

Höegh LNG

NOCs & Partner(s)

Gas Liquefaction Company SPV

Partner(s), NOCs and/or Asset owners

Gas Field(s)

Asset Owner(s)

NOCs

LNG Buyer

Partner(s)

LNG Shipping Co

Payment flowsContractual commitments

Lease agreement

Gas Purchase Agreement

FOB LNG sale Purchase Agreement

LNG

T/C

Entities owning the gas in the various phases

Gas processing service provider.

Shipping service provider.

23 / 28. juni 2010

Höegh LNGSummary

• LNG FPSO allows for monetizing of smaller fields

• LNG FPSO allows for earlier start up and earlier cash flow

• LNG FPSO offers to turn cost of flaring and re-injection to revenue

• Through a partnership with Höegh LNG the NOCs can benefit from 4 years of development work to shorten field development schedule

• Through a partnership with Höegh LNG the NOCs can get access to world-leading companies in development of the LNG FPSO: KBR, DSME and Prosafe Production

24 / 28. juni 2010

THE ONLY PARTNERSHIP OF THIS KIND IN THE MARKETCOMBINING LNG AND FPSO EXPERIENCE

LNG FPSOHöegh LNG & NOC

LNG Shipping/Regas Topside Engineering

ShipyardFPSO Operations

FinanceCiti/JPM

Thank you for your attention!

Øivin [email protected]