Marine CNG

Viability of Supply

Presentation to the
National Energy Board
April 25, 2006
Centre for Marine CNG Inc.
Centre for Marine CNG Inc.

• 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 LNG CNG
Comparison ($US millions)
(Source - Wood Mackenzie) Low High Low High

Liquefaction / Storage / $1,500 $3,000 $0 $100

Jetty
Loading Buoy $0 $0 $15 $50
Shipping $175 $440 $200 $900
Unloading Jetty / Storage / $325 $500 0 $100
Regas
Unloading Buoy 0 0 $15 $50
Total Capital Cost $2,000 $3,920 $230 $1,200
Marine CNG Proponents
CNG Proponents

• 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
• 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

• Columbia Gas commissioned first CNG ship

• “Bottle-type”
• Tested around New York Harbor
• Two major constraints:
– ASME standards drove
cost of steel pressure Columbia Gas
vessels too high;
– Natural gas traded at
$0.60 and trended
downward
CNG Projects

• Myanmar to India
• Proponent – GAIL
• Status – Expression of Interest Q1, 2006
CNG Projects

• Tanzania to Kenya
– Proponent – Artumas Group Inc.
– Status – awarded FEED to TransCanada in April
CNG Projects

• Papua New Guinea to New Zealand

– Proponent – Oil Search
– Status – FEED in Q3, 2006
CNG Projects

• White Rose
– 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 Prod eff. (3vessels, 2 unloading stations)

Prod eff. (4vessels, 1unloading stations)
80 Prod eff. (4vessels, 2 unloading stations)
Prod eff. (5vessels, 1unloading stations)
70 Prod eff. (5vessels, 2 unloading stations)
Prod eff. (6vessels, 1unloading stations)
Prod eff. (6vessels, 2 unloading stations)
60
Prod eff. (3vessels, 1unloading stations)

50
40
200 300 400 500 600 700 800

vessel capacity (mmscf)

CNG Value Chain
Offshore capex: MM$40-60
Transportation capex: MM$205/ship (X4)
Unloading capex: MM$20-60

Total investment: $1-1.5 billion

O&M 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

• Economics
• No political risk associated with supply
• Scalable to meet demand
• Re-deployable assets
• Complements Canadian offshore projects
• Uses existing or near-future infrastructure
– 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 2722
Hibernia 1320
North Dana 472
Ben Nevis 315
Terra Nova 269
Springdale 238
South Mara 144
North Ben Nevis 116
Trave 30

0 500 1000 1500 2000 2500 3000

Hibernia Field –
Gas Availability

• 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

• South White Rose (600bcf)

- gas being re-injected into North White Rose gas cap
- could provide basis for early gas sales
• North and West White Rose (1.8bcf)
- delineation ongoing, timing of gas sales contingent
on requirement for oil recovery
• Mara – available now (300bcf)
• F-04/04Z discovery – same as North and West
(200bcf)
Grand Banks
Gas Development

• Two cases to be considered:

• stand-alone project
• basin-wide gas development
• 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

• 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

• 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:
– LNG
– CNG
– Pipeline
Significant Discoveries –
Offshore Labrador

LABRADOR
Five gas discoveries

Discovered recoverable
Resources:
SNORRI
– 4.2 trillion cubic feet gas

HOPEDALE – 123 million barrels NGL’s

NORTH BJARNI
BJARNI

GUDRID
Bjarni / North Bjarni Fields

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

GUDRID
Labrador Gas
Development Issues

• 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
¾ 55 TCF
Water Depth
14 TCF
6 TCF

9 TCF 15 TCF
Scenarios
Regional Supply and Demand
US Northeast demand is 9 bcf/d

• 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
• 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

• 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

• 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

• 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 (2020) Basin
(2014) (2016)
Low CNG Viable No CNG Viable
Price development
likely viable
Mid CNG Viable CNG Viable as Pipeline
Price interim Viable
development
strategy
High CNG Viable CNG Viable Pipeline
Price Viable