LNG Growth Relevance for Port Authorities

1. LNG GrowthRelevance for Port Authorities

2. Presentation Outline Natural Gas and LNG – Present and Future LNG – Role of the Middle East and South Asia LNG Terminals – Challenges LNG Industry – Safety Record Implications for Port Authorities

3. Clean • Abundant • Cost competitive mln boe/d Why Natural Gas? The Fuel of the 21st Century‘Natural Gas could overtake oil as the global number one fuel of choice by 2025’ 150 Oil 125 Gas 100 75 Natural Gas as the fuel of the twenty-first century with increasingly diverse supply, driven by emerging technologies and the development of broader gas markets. 50 25 0 1980 1990 2000 2010 2020 2030

4. 2000 4000 6000 8000 10000 0 LNG - Liquefied Natural Gas • What is LNG? • Natural gas cooled to –160°C • Volume reduced by factor 600 - Transport - Storage Cost of Conversion / Transportation Cost per MMBTU $4 Pipeline Pipeline/LNG LNG Offshore Gas Line Onshore Gas Line LNG $0 kilometres Source: SGSI 2005, GPM 2004

5. Evolution of LNG Markets….increasing global trade 1990 2003 2020 LNG Imports (% gas supply) 50% bcf/d 20 20 20 14% 17% 62% 10 10 10 65% 8% 6% 2% 0.3% 0 0 0 1990 2003 2020 1990 2003 2020 1990 2003 2020 North America Europe Asia Korea, Japan, Taiwan, India and China Sources: Cedigaz, bp statistical review 2004, Shell

6. Global LNG Fleet Number of Ships Fleet Projected per order book Projected fleet by 2008 = 275 vessels Sources: Poten and Partners

7. Presentation Outline Natural Gas and LNG – Present and Future LNG – Role of the Middle East and South Asia LNG Terminals – Challenges LNG Industry – Safety Record Implications for Port Authorities

8. The Middle East: major global supplier by 2015 Global and Middle East LNG capacity (mtpa) ~350 Rest of World Yemen Middle East UAE Libya Oman Egypt 140 Qatar 45% 155 Iran 25% 35 2004 2015

9. Emerging Markets in Asia Pacific will drive Regional LNG Demand Growth New terminals in Pakistan and India Source: Shell, 2005

10. Presentation Outline Natural Gas and LNG – Present and Future LNG – Role of the Middle East and South Asia LNG Terminals – Challenges LNG Industry – Safety Record Implications for Port Authorities

11. LNG import terminal – Zeebrugge (Belgium) As a fixed asset, an LNG receiving terminal represents a very significant capital investment

12. LNG IMPORT LNG EXPORT Success requires more than terminal realization

13. Hurdles to Realization • Viability and sustainability • Strategic • Economic • Social • Local Sentiment • Environmental • Permitting and regulatory approval • Technical

14. Hurdles to Realization

15. Beyond Construction The challenges of operation: • Scheduling • Multiple shippers • Single shipper terminals require careful scheduling as well • Fitting deliveries into slotted time • Weather, tide, supplier delays • Managing storage space and its limitations • HSSE • The Unexpected Terminals often challenged to achieve 100% utilization

16. When It Works Sakhalin Target Marketing Area Baja California • Sakhalin to Baja California • Fully integrated supply chain • First direct sale of Russian natural gas to N. America • Commitment to deliver 37 million tons of LNG over 20 years • 3 short-term and 2 long-term ships employed for 520 journeys of over 9000 nautical miles to deliver the LNG • Annually import volumes more than the totality of Portuguese demand

17. Presentation Outline Natural Gas and LNG – Present and Future LNG – Role of the Middle East and South Asia LNG Terminals – Challenges LNG Industry – Safety Record Implications for Port Authorities

18. LNG main features • LNG extremely cold, clear, non-toxic, non corrosive. Shipped and stored at normal atmospheric pressure. • LNG itself poses little danger as long as it is contained within storage tanks and handled with appropriate equipment. • LNG lighter than water then floats, LNG floats on top of water and quickly vaporizes • LNG is flammable only in the gaseous form when mixed with the right proportion of air.

19. Safety record • There are currently more than 150 LNG carriers around the world. Another 50+ under construction • Carriers make approx 1,800 shipments of LNG per year. • Commercial LNG shipments over the past 40 years have been without serious incidents. Between 1959 and 2002 30 safety incidents with LNG carriers (grounding, collisions, etc) In none of these incidents the cargo containment was breached. • 40 terminals around the world. Few other industrial operations can equal LNG’s safety performance. Many LNG facilities close to densely populated areas in Asia, Europe and the US.

20. LNG safety in Shell • Developed substantial research since the 70’s • Involved: Computer modeling and full scale safety testing, addressing phenomena like • Explosion pressures • Fire radiation • Gas dispersion • Rapid phase transition when LNG comes in contact with water. • Shell’s design facilities are based on surviving 100 year storm events and are design to support severe earthquakes. • Safety achieved also through sound engineering and construction, advanced technology, personnel training, strict compliance with procedures for safe operations, enforcement of regulations and industry and government oversight • There has not been a single fire or explosion in any of Shell’s LNG facilities or LNG ships during the 30 years Shell has been operating plants and LNG carriers.

21. Presentation Outline Natural Gas and LNG – Present and Future LNG – Role of the Middle East and South Asia LNG Terminals – Challenges LNG Industry – Safety Record Implications for Port Authorities

22. Implications for Port Authorities • Ability to meet requirements of this specialized industry. • Flexibility for expansion. • Flexibility for evolution. • Ability to adjust to long lead times. • Work with credible players with proven abilities.