E xamining the N orth A merican M arket “ W hat is the P otential for F LNG”

Examining the North American Market “What is the Potential for FLNG” 2014 Houston Marine Insurance Seminar September 23rd, 2014 Constantyn Gieskes

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Presentation Overview • Braemar Engineering • LNG 101 • North American Gas Market • Proposed FLNG Projects Overview • Why FLNG? • Obstacles to FLNG Projects in North America • Conclusions & Questions

Braemar Engineering Overview • Braemar Engineering is an engineering company specializing for 20+ years in the marine, offshore and land-based gas industries. • Part of the Braemar Technical Services Group, supported by a worldwide network of offices with the ability to call on the support of over 400 technical staff of all disciplines. • Braemar Technical Services Group is a wholly owned subsidiary of Braemar Shipping Services PLC, a London Stock Exchange (BMS).

LNG 101

What is LNG? • Liquefied Natural Gas (LNG) is a clear, colorless, odorless, non-toxic liquid • LNG is natural gas that has been cooled and condensed to a liquid at -162 °Celsius at atmospheric pressure • LNG is less than ½ the weight of water

LNG Makeup • LNG almost has the same chemical make-up as regular pipeline quality gas that is used residentially • CO2 & H2Sboth removed prior to liquefaction

Liquefaction Plant Process Overview Pre-treatment Acid Gas (CO2 & H2S) Feed Gas Gas Treating Dehydration & Mercury Removal H20 & Hg NGL Removal Fractionation Ethane N2 Liquefaction LPG C5+ LNG Storage

Main principle of Liquefaction Work Low Pressure Vapor Hot High Pressure Vapor Compressor Evaporator Condenser Warm Air Cold Air Heat Rejected to Ambient Expansion Valve Cold Liquid + Vapor Liquid

Why liquefied? • Natural gas is liquefied to reduce volume for transportation & storage LNG -162oC 610 1

Components of the LNG Supply Chain From the Gas Field to the Consumer’s Pipeline System REGASIFICATION & STORAGE LIQUEFACTION & STORAGE EXPLORATION & PRODUCTION SHIPPING

Typical LNG Export Facility Source: Cheniere

So what is FLNG? Source: Hoegh LNG

Why Export LNG from North America?

North American LNGExport Boom

Approved LNGExport Projects

Proposed LNGExport Projects

Proposed FLNG Projects

Near-shore Example • Excelerate – Port Lavaca • Eliminates motion from the equation • Opportunity to have land-based infrastructure to increase FLNG capacity Source: Excelerate Energy

Why Floating LNG? • Permitting Advantages • Construction Schedule, Cost & Labor Pool • Conversion Opportunities • Site Location Flexibility • Plug & Play Opportunity • Moveable Asset

Permitting Advantages • Federal Energy Regulatory Commission (FERC) vs United States Maritime Administration (MARAD) • Near-shore vs. offshore difference • ~2 miles off the coast is under MARAD’s jurisdiction • MARAD defined timeline vs. indefinite FERC timeline • Smaller footprint • Less public opposition • Potential for less environmental impacts

Why Floating LNG? • Permitting Advantages • Schedule, Cost & Labor Pool • Conversion Opportunities • Site Location Flexibility • Plug & Play Opportunity • Moveable Asset

Schedule, Cost &Labor Pool • Potential for shortened construction schedules • Fabrication yards vs site stick-built • Site location • Weather impacts • Canadian projects are relatively remote • Second-coming of Australian cost escalation? • Work camps required?

Schedule, Cost &Labor Pool • Labor pool uncertainty • Enough labor/talent in Western Canada? • How many projects feasible at one time? • Competition in the Gulf Coast • Includes new chemical plant construction • Over $70 billion in CAPEX forecasted in US downstream sector through 2020

Conversion Opportunities • FPSO conversions provide some level of comfort • Several concepts out for FLNG conversion opportunities utilizing retiring Moss LNGCs • Potential for lower CAPEX and time-to-market advantage • Limited liquefaction capacity

Site Location Flexibility • Footprint vs. available land space • Douglas Channel (steep terrain – lack of buildable land) Source: Douglas Channel Energy

Plug &Play Opportunity • One-size does fit all? • No, but the project design basis differences are much more minor than typical liquefaction projects • Pipeline quality gas • Less variability than typical liquefaction projects • More opportunity to design a solution that’s flexible enough for several locations

Moveable Asset • Once upon a time…

ALook Back…

Moveable Asset Source: Shell

Obstacles to FLNG • Financing - Cost Uncertainty, Completion Guarantee & Insurance • Technical Challenges • Cooling Requirements • Efficiency vs. Safety • General Issues Within North America

Financing • FLNGs are relatively unproven • Only a few in construction and no existing FLNG’s in operation • CAPEX/OPEX uncertainty • Limited market capacity for risk • Unless a Major (ie. Shell, ExxonMobil, etc.) that can self-insure • Completion guarantee complexity • Hull, Topsides, Turret, Commissioning • Consortium may be required • Weather impact on insurance • Hurricanes

Technical Challenges • LNG storage capacity limits • Motions (offshore) • Impact to process & unloading operations • Pre-treatment is most sensitive to motion • Loading windows

Cooling Requirements • Environmental permitting requirements in North America are unlikely to allow for open-loop water-cooling systems • Alternative options include air-cooling, closed loop water-cooling, cooling towers • Space requirements of air cooling are significant • Need to avoid re-circulation • Efficiency losses

Efficiency vs. Safety • Liquefaction process selection • Efficiency at the cost of safety? • Flammable refrigerants present greater risks • Safety gap requirements • Eats up valuable deck space • Incoming gas has a known present value

Obstacles to FLNG • Financing - Cost Uncertainty, Completion Guarantee & Insurance • Technical Challenges • Cooling Requirements • Efficiency vs. Safety • General Issues

General Issues • Pipeline Projects • Western Canada projects all face pipeline challenges • Panama Canal Expansion • Uncertainties in transit fees and completion dates • Competition • Limited appetite for LNG export projects? • Long-term Henry Hub pricing • Impacts of domestic gas uses increasing

Looking Forward • All of the following could lead to a succession of other FLNG off-shore projects proposed in North America • Long FERC delays • Labor costs escalate • FLNGs become more common with proven costs and schedules • Reduced risk will lead to more favorable financial environment

Thank You & Questions? Constantyn Gieskes Phone 713 820 9600 E-mail constantyn.gieskes@braemar.com Website www.braemar.com Braemar Engineering 2800 North Loop West, Suite 900 Houston, TX 77092 USA

E xamining the N orth A merican M arket “ W hat is the P otential for F LNG”