Commercializing gas value chains to create and enhance demand for LNG
Ken Sauer | Commercial 3 | July 13, 2017
The company
Risco-AG&P: a snapshot
• RISCO-AG&P is a diversified oil and gas Infrastructure company
• RISCO-AG&P is backed by a strong Indonesian businessman with a proven track record in owning, managing and
operating oil and gas assets in Indonesia
• World-class engineering and fabrication capabilities
• World-class oil and gas operational safety standards and awards
• Delivering standardized, modular oil and gas infrastructure assets to our customers
• Aligning with the needs of the power, bunkering, mining, transportation and industrial sectors
• Focusing on midstream and downstream LNG infrastructure assets
• Engaging and providing end-user customer support from the early stage of the project’s life
• Investing in logistics, storage and associated infrastructure
Leadership • Senior LNG leadership team
• Proven operating and technical capabilities
• Strong deal origination ability, proprietary and captive deal control
• In-house design, fabrication, development and operations
• Unrivalled engineering and fabrication capabilities
Strategy
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“BMP” big market players – A to B trade
LNG trade 10 years ago
Natural Gas Markets
LNG Flows
Pipeline Flows
•Stable, long-term GSA and SPA contracts
•A to B deliveries on large scale with creditable counterparties only
•Limited inter-regional trade and breaking down of cargoes
•Segmented pricing regimes
•Limited new demand markets
Henry Hub/
NYMEX
European Gas
(oil-linked)
pricing
Russian Gas
(Brent-linked) pricing
JCC-linked
pricing
Challenges and opportunities
4
Demand
Small and stranded demand centers
Not comfortable with supply consistency
Customer reluctant to switch fuel source
No access to technology
Infrastructure
Very bad regional pipeline network
No medium or small receiving terminals
No current dynamic end-user support
platforms
No medium or small storage centers
No early stage development platform provider
Geography Some demand centers are isolated and have
geographic challenges
Size of demand points are expensive and do
not show good economic cases for
investment and development
Challenges
Demand
Indonesia’s PLN plan to develop gas IPP
and some need small gas solutions
Regional power players gas growth
Captive power users switching to gas fired
Industrial retail growth (already used in mining
trucks and vessels)
Infrastructure
Existing large regasification facilities can be
easily retrofitted for break-bulk facilities
Regional medium-small opportunities
Maritime bunker shuttle developments to
enhance infrastructure tolling scheme
Geography Maritime solutions that give maximum
optionality will be the solution for region
Break bulk modularized asset developments
will be solution for region
Opportunities
Midstream
and
Downstream
LNG
Solutions
5
Medium to small stranded demand centers
How to solve the Indonesian LNG market dilemma?
Namlea 10MW
MPP Maluku (Ambon) 70MW
PLTMG Ambon Peaker 30MW
Seram Peaker 20MW
Saumlaki 10MW
PLTMG Langgur 20MW
PLTMG Dobo 10MW
MPP Manokwari 20MW
Bintuni 20MW
Fak Fak 10MW
Biak 15MW
Serui 10MW
Nabire 20MW
Timika Peaker 10MW
MPP Tobelo 10MW
Malifut Peaker 5MW
MPP Sofifi 10MW
MPP Malut (Ternate) 30 MW
Minahasa Peaker 150MW
MPP Subagut 100MW
Tahuha 10MW
Gorontalo Peaker 100MW
MPP Kolaka Utara 5MW
MPP Sultra Kendari 50MW
MPP Bombana 10MW
MPP Wangi Wangi 5MW
Bau Bau 30MWSelayar 10MW
MPP Sulsel 50MW
Makasar Peaker 450MWSulsel Peaker 450MW
MPP NTT (Kupang) 30MW
Kupang Peaker 40MW
Alor 10MWMaumere Peaker 40MW
MPP Flores 20MW
Waipangu 10MW
Bima 50MW
Lombok Peaker 150MW
Sumbawa 50MW
Nunukan 2, 10MW
Malinau 6MWTanjung Selor 15MW
Senipah ST 35MW-IPP
Bangkanai 140MW
Kaltim Peaker 2, 100MW
Kalsel Peaker 1 200MW
MPP Kaltim 30MW
Kalsel Peaker 2 100MW
MPP Kalselteng 100MW
MPP Kalselteng 100MW
Pontianak Peaker 1, 100MW
MPP Kalbar 100MW
Natuna 2, 25MW - IPP
Tahuna 10MWSabang 4MW
Sumabagut 2 Peaker 250MW
Sumabagut 3 Peaker 250MW - IPP
Sumabagut 4 Peaker 250MW - IPP
Sumut 250MW
MPP Bangka 50MW
MPP Nias 25MW
Riau 150MW-IPP
Bengkalis 18MW - IPP
Tanjung Pinang 2, 30MW-IPPSelat Panjang 15MW - IPP
Riau Peaker 200MW-IPP
Riau 160MW-IPP
MPP Sumbagsel 100MW
Jambi Peaker 100MW-IPP
Bangka Peaker 2X50MW - IPP
Belitung Peaker 30MW - IPP
Sewa Lampung 2x100MW - IPP
Lampung Peaker 200MW- IPP
Peaker Jawa Bali 2, 500MW - IPP
Karimun Jawa 4MW
Jawa 3, 800MW - IPP
Grati 150MW
Peaker Jawa Bali 1, 400MW - IPP
Peaker Jawa Bali 4, 150MW - IPP
Muara Tawar 650MWMuara Karang 500WJawa 2, 800MW
Peaker Jawa Bali3, 500 MW - IPP
Grati 300MW
MPP Lombok 60MW
Bangkanai 155MW
Muara Jambi 100MW - IPP
Indonesia current LNG infrastructure: can’t feed stranded demand
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Existing liquefaction LNG
Planned liquefaction LNG
Existing FSRU/Regasification
Planned FSRU/Regasification
Existing gas pipeline
Planned gas pipeline
Arun Import TerminalLocation: Arun
Capacity: 3 mtpa
Operator: PT Perta Arun
Gas (Pertamina)
FSRU Jawa BaratLocation: Jakarta bay
Capacity: 3 mtpa
Operator: PT Nusantara Regas
(JV Pertamina and PGN)
FSRU LampungLocation: Labuhan Maringgai,
Lampung
Capacity: 3 mtpa
Operator: PGN LNG
FSRU CilacapLocation: Cilacap – Central Java
Capacity: 3 mtpa
Operator: Pertamina
Onstream : 2016
FSRU SemarangLocation: Semarang –
Central Java
Capacity: 3 mtpa
Operator: Pertamina
Badak LNGLocation: Bontang
Capacity: 21.6 mtpa
Operator: PT Badak LNG
(Pertamina)
Donggi SenoroLocation: Banggai, Central
Sulawesi
Capacity: 2 mtpa
Operator: PT Donggi Senoro LNG
(JV Pertamina, Medco,
Mitsubishi, Korea Gas)
Tangguh LNGLocation: West Papua
Capacity: 7.6 mtpa
Operator: BP
Sengkang LNGLocation: South Sulawesi
Capacity: 2 mtpa
Operator: Energy World
Corporation
Masela FLNGLocation: Abadi gas field
Capacity: 4.5 mtpa
Operator: Inpex Masela
(JV Inpex and Shell)
LNG at a glance
Understanding the old ways to break it down
LNG project assessment
• Super majors as developers, large utilities as off-takers with back-to-back contracts
• Major player game
• Highly capital Intensive stick-built construction of liquefaction and receiving terminals
• Only players with proven track record and very risk averse to project finance
• Plain vanilla financing structures
• Historically, very long and complex development stage
• Medium-to-small players unable to survive the long project development window
• Costly process for medium and smaller owners and developers
• Project finance delayed and tough to align with project execution timeline
• Between FEED and FID, a make-or-break period for many developers
• Consequence – failure in development and building of new value chains
LNG contracts• Long-term oil linked pricing mechanism
• Major players offering long-term supply agreements with little flexibility or optionality
• Market contracts very structured and standardized
• Trades flows of LNG very “known” – Japan, Korea, Taiwan
• Direct and first-hand negotiations
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Dynamic new frontier for LNG
8
• Bringing functions like engineering in-house speeds up pre-development phases
• Investing in companies with gas applications and technologies to develop value chain solutions
• Build-to-lease approach offering standardized solutions to support the end-user
• End-to-end solutions including design, manufacturing, financing, leasing, operations and maintenance of modular
energy infrastructure to deliver lower cost gas to the end-user
The new LNG market is opening up to a dynamic new field of minds, technology and standardized approaches
Benefits of integration: removing nervousness
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• Shortens delivery schedule - no lead times on engineering
• Raises quality - standardized products allow for high quality work due to repeatability and experience of installation
• Drives cost down - designs and equipment technologies are standardized
• Builds references and increases the ability to look at smaller and medium project scopes for future demand points
• Ultimately this enhances the mindset shift to move to LNG and development smaller and medium value chain and
in turn drive demand for LNG
• Removes the nervousness for smaller and medium project developers to switch to LNG
The new LNG frontier
10
LNG at a glance
• New technology advancements and innovation in the sector
• Standardized technology and modular concepts that allow for a somewhat plug and play approach
• Transport volumes have changed
• In-house platform advancements have lowered costs
LNG contracts
• No longer only long term oil linked pricing mechanism
• Traders have entered the market
• Spot market has become more open and liquid
• Supply agreements have become more flexible and increased spot contracts
• Trades flows of LNG are opening up the “unknown” – Pakistan, India, Indonesia, Caribbean, etc.
• LNG brokers have emerged removing a portion of the once direct firsthand negotiations
LNG project assessment
• Working to tailor solutions to customers’ needs
• Design, build, finance - many market participants are now offering “total package solutions”
• Medium to small players don’t survive the long project development window
• Costly process for medium and smaller owners and developers
• Project finance is delayed and tough to align with project execution timeline
The LNG tipping point…
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Market is at a
dynamic period
• The Asian market players and consumers are all moving towards cleaner energy fuels
• Governments and policy are changing to sustain economic growth
• Maritime policies are changing to enhance usage of LNG
• Power players are looking for cleaner and better solutions to providing electricity
• Industrial users are seeking alternative fuels such as LNG
LNG demand
• Steadily increasing over the next 5-7 years
• Customers becoming more “in the know” surrounding LNG usage
• LNG technology advancements and innovations are growing
• More market participants are now involved in LNG - traders, banks, etc.
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New dynamic structures are breaking into trade flows
LNG trade in 2017
Markets
LNG
Pipeline
Henry Hub/
NYMEX
NBP & Other
Hubs
Brent (85%), NBP
(15%)Long Term: JCC
Short Term: NBP/Other
Hubs
South
America
(TBD, but some deals to HH
& Brent)
•Off take contracts becoming more flexible and adding options
•Liquid markets of US & Europe enable flexible volumes
•Regional two-tier pricing formulas are emerging and allowing for resales
•Increased LNG traders developing new markets and pricing trends
•Alternative fuels star to become an option-switch from diesel to gas
13
Regional compartment and point to point trade
LNG trade10 years ago
Natural Gas Markets
LNG Flows
Pipeline Flows
•Stable, long-term GSA and SPA contracts
•A to B deliveries on large scale with creditable counterparties only
•Limited inter-regional trade and breaking down of cargoes
•Segmented pricing regimes
•Limited new demand Markets
•Siloed LNG suppliers, buyers and infrastructure players
Henry Hub/
NYMEX
European Gas
(oil-linked)
pricing
Russian Gas (Brent-
linked) pricing
JCC-linked
pricing
14
New demand centers are emerging
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16
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Million tons
Red = Replacing other gas supplies
Green = Replacing oil/coal
Southeast Asia is driving point behind new LNG flows
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Why LNG? Indonesia gas balance declining
National gas imbalance between supply and demand
2.7 bcfd gap in 2020 to be met through LNG imports
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Potential Demand 34 220 308 419 560 974 1187 1342 1624 1886 2171 2460 2773 3104 3458 3859 4266
Ekspor (Committed) 156 195 32 229 521 521 522 521 509 436 446 508 45 120 41 29 12
Domestic (Committed) 1346 1863 2303 2586 3774 4315 4824 5128 5482 5624 5927 5877 6053 6072 6146 6158 6178
Ekspor (Contracted) 3409 2711 2537 2444 2013 1977 1895 1517 1526 1151 845 770 653 617 625 384 357
Domestic (Contracted) 4549 4624 4275 4130 3282 2746 2466 2189 1744 1534 1071 962 761 753 641 331 331
Projection of Exploration Discovery 0 0 0 0 27 59 300 631 996 1248 1628 2045 2699 3021 3320 3391 3515
Potential Supply 0 1 15 41 61 59 59 60 23 1020 1020 1020 1020 1020 1020 1015 1012
Project Supply 206 910 1571 2231 3124 3910 4084 3970 3869 3480 3060 2717 2305 2022 1555 1178 1048
Existing Supply 6764 6658 6318 5694 5197 4476 3771 3350 2902 2557 2246 2010 1694 1594 1378 1290 1278
0
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4,000
6,000
8,000
10,000
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2.7 bcfd
Conclusion
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• Demand centers in the region are growing
• LNG pricing continues to become more and more dynamic and flexible
• Oil has put LNG to sleep. Only recently has LNG become not as competitive to oil due to the downturn in oil
prices. Which has led to a decrease in industrial fuel prices making customer hesitant to switch
• The region is not suitable for huge growth in pipeline business leaving medium and small infrastructure the
only solution
• Standardization and modular solutions are to provide turn key solutions to customers is the key link to
enhance future demand for LNG
Region presents good opportunities
www.agp.ph