resources energy, inc. - commonwealth north · the alaskan advantage • alaska has a 40+ year...
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RESOURCES ENERGY, INC.
April, 2015
REI’s 1 MPTA Cook Inlet LNG Project
• The Alaska advantage
• Sufficient 2P and 3P reserves in place
• Japanese demand for LNG
• Strong support from the State of Alaska
• Critical path components and REI agreements and milestones
2
The Alaskan Advantage
• Alaska has a 40+ year track record of delivering LNG to
Asia/Japan without interruption
• A US supply is viewed as strategic to diversifying Japan’s LNG
requirements
• Proximity - 9 shipping days and no Panama Canal Toll
• Not part of the lower 48 Shale debate and cumbersome DOE
review process
• All First Nation and Native land claim issues are resolved
3
A Win-Win for Alaska and Japan
• Alaska’s Cook Inlet is one of the best locations for the
export of high-value LNG to Japan
• Local land use permits for terminal and pipeline are possible
• Thousands of construction and permanent jobs will be created
• Support from SOA/AIDEA
• Utilizes stranded Cook Inlet Gas
• Allows for expansion of gas from other regions of the state –
such as the Foothills, Outer Continental Shelf , North Slope, etc.
when pipeline is to be in place
4
Reserves and Production
• The study evaluated 2P reserves (Risked Proved and Probable in
SPE/AAPG et al. 2011 terminology)
• Total range of 2P estimated at approximately 2.7-3.1 Tcf (2,700 –
3,100 Bcf)
• Approximately 40 years of utility load (approximately 80 Bcf/yr)
• REI’s 20 year supply of feedstock is 55 Bcf/yr
• Starts in 2019
• Represents 35-40% of the total 2P reserves
• Approximately 20-25 years of utility load would remain (2019-2039)
• These 2P reserves could support a daily production rate for REI of
160,000 Mcf/d
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Source: Michael F. Donnelly, Ph.D. Global Energy Consultancy
LLC, 2014
Critical Path Components
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Government to Government Agreements
- AIDEA
- SOA- Governor
- SOA – DNR
- Others
Japanese Buyers(PROPOSED)
- Government, Hyogo Prefecture, Kyoto, etc
- Industrial
- City Gas and Electric Companies
Joint Venture Partners
- Japan Companies
- US Companies and partnerships
- Native Corporations
REI Activities
January
- Business Plan “Alaska LNG (Kenai)”
April
- Memorandum of Understanding with Alaska Industrial Development and Export Authority
August
- “CA Third Extension” with DNR
December
- “Cooperation Agreement” with State of Alaska
2014
April
- Feasibility Study “Alaska LNG Project (North Slope)”
July
- “CA Extension” with DNR
December
- “CA Second Extension” with DNR
2013
March
- Preliminary Study Report “Alaska LNG Project (North Slope)”
September
- Participated “Solicitation of Interest” – Alaska Pipeline Project”
December
- Cooperation Agreement (CA) with Alaska Department of Natural Resources
2012
December
- Established Energy Resources, Inc. (Japan)
- Established Resources Energy, Inc. (USA)
- Opened Alaska Office (Anchorage)
- “MOU” with Alaska Natural Gas Development Authority
2011
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The REI Project
Greenfield LNG plant: 1 MTA plant
Aggregated Cook Inlet Gas supply as Feedstock
▪ Division of Oil and Gas Studies
▪ USGS report
▪ Cook Inlet reservoir and production analyses (June and July 2014)
Timeline is critical – prior to 2020 target for Export to Japan
• Earlier in-state demand for LNG could be made available
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COOK INLET
RESOURCE
POTENTIAL
19 TCF GAS*
*USGS 2011
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COOK INLET OIL AND GAS ACTIVITY
Estimated 2P Resource Usage
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2,700-3,100 Bcf Total
Utility Load
1,600-2,000
Bcf
20-25 years@
80 Bcf/year
REI Load
1,100 Bcf
20 years@
55 Bcf/yr
2014
2034-2039
2019
2039
Source: GEC LLC 2014, 2P Reserve Study,
Cook Inlet
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Gas Liquifaction & Regas Processes
Site Installation
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World Class Technical Feasibility Study
Participants
Outside Contractors that conducted the
Technical / Feasibility Study of the Project
Kellog Brown Root LLC (KBR) – Engineering Services
Global Energy Consultancy LLC (GEC) – Economics Analysis
Golder Associates Inc. (Golder) – Geotechnical Services
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Project Schedule
15
Target Year Activities
2015 FEED
FERC Request for Pre-Filing
DOE Application
2016 FERC Pre-Filing and Formal Application
2017 FERC Final EIS Issuance
Issuance of Authorization (FERC/ DOE)
2018-2019 EPC
2019-2020 First LNG
16
LNG Supply Demand Projections for Japan
17 Source: “Global LNG Supply & Demand Study”, PFC Energy, May
2013
2015(REI forecast) World LNG Demand= about 260 million tons
Asian LNG Demand= about 170 million tons(65% of World Demand)
Japan LNG Demand=about 76 million tons(30 % of World Demand) and
continue to be No.1 importer towards 2030.
(Note) 2012 Japan LNG Demand=85 million tons , about 9 million tons from 2011, was due to the emergency LNG imports
including spot cargoes to meet the gap caused by the suspension of about 50 units of nuclear power plants after
Fukushima disaster in March, 2011
Japan’s Imported LNG Price (2001-2014)
18 Source: “Japan Natural Gas Strategic Policy Review Update”, METI 2014
Japan Crude Cocktail
Japanese LNG Cocktail
National Balancing Point (UK)
Henry Hub
About
$13/mmbtu for
Feb JLC
Market Price Overview • Long term LNG contract price
• Feb JLC(Japan LNG cocktail) based on JCC(Japan crude oil cocktail) is $13 level/mmbtu which is about 3-5 months behind of current crude oil price decline (some hardship mitigation mechanism for seller and buyer)
• JCC defined: As Quoted by the Japanese finance ministry, it is designed to represent the “average CIF price of all imported crude oil and raw oil in a specified trading period. It is usually quoted on a monthly basis.”
• LNG spot price is to be agreed in reflection of such forward pricing as shown below.
• Prices of spot LNG for April delivery to Asia continued their downward slide , falling 59.8 % year over year to Average $7.279/mmbtu , according to Platts Japan/Korea Maker(Platts JKM) data for month-ahead delivery.
• New Pricing trends: Winds of change
• Henry Hub is America's gas pricing system which determines domestic prices for natural gas. But HH pricing is tipped to go global.
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Current and Projected LNG Sources
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Japan Electric Power & City Gas
Hokkaido EP
Tohoku EP
Tokyo EP/ Tokyo Gas
Chugoku EP
Kyushu EP
Shikoku EP Kansai EP/Osaka Gas
Hokuriku EP
Chubu EP /Toho Gas
Pacific Ocean
Japan Sea
2MM Tons Malaysia Qatar
20MMTons Indonesia Oman Malaysia Qatar
10MM Tons Australia Malaysia Qatar
5MM Tons Australia Qatar
2MM Tons Australia Oman
3MM Tons Indonesia Australia
0.36MM Tons Malaysia
Starting from 2018
No LNG import
Deregulations of Electricity and City Gas Business • 10 Electric Power Cos have occupied the retail market (85 million people with $80 billion market ), but this lucrative market is to be totally deregulated under full competition in 2016 , besides already deregulated commercial and industrial markets. • The unbundling of electricity transmissions/distributions
from power generation and sales sectors is to occur towards 2018-2020.
• City Gas retail market is also to be totally deregulated in 2017.
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Tokyo Electric and Chubu Electric Sign JVA
• Companies entered into a joint venture agreement in April
• Plan to execute further agreements to integrate into JVA company their existing fuel business, including:
LNG spas, LNG receiving terminals and LNG vessels as well as upstream assets
• Will have a combined LNG purchase quantity at around 40MTA
• Will become the world’s largest LNG buyer - Tokyo estimates that in around 2025, share of the new JVA
company’s LNG imports would be at 45 percent of the Japan’s total imports -@ 90mta
• Similar alliance is expected to occur among Japanese electric power and city gas utilities, eg. between
Kansai EP and TokyoGas.
Local Governments Initiative to Import LNG for Thermal
Power Industry Use at Japan Seaside
Background
The Deregulation of Electricity and City Gas Business & Sale
▪ Municipalities & other industries can participate in Power Business, besides the major electric power
and city gas companies
Japan National Resilience Planning after Fukushima Disaster
▪ Importance of Energy Infrastructure(including LNG) at Japan Sea Side
(Note) 93% of LNG receiving terminals currently at Pacific Ocean side
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Maizuru Port
Japan Sea
Pacific Ocean
Basic Business Model Form PPP type organization for LNG project
▪ Maizuru Port: Kyoto Prefecture Government ▪ Himeji(Hirohata Port): Hyogo Prefecture Government
(Note) Future plan for natural gas pipeline connection between Maizuru and Hirohata.
LNG Receiving Volume: ▪ 500,000 tons / per year
▪ 2019～2020 start ▪ Maizuru 500,000 tons / Hirohata 500,000 tons
Total: 1,000,000 tons
LNG Use and Distribution for Maizuru: ▪ Local city gas, industrial use : 100,000 tons ▪ Power Plant (IPP 500 MW) : 400,000 tons
for Hirohata ▪ Local city gas, industrial use : 400,000 tons ▪ Power Plant (IPP 100 MW) : 100,000 tons
Size of the business(LNG terminal, Power Plant)
▪ US$ 700 million ～ 1 billion
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Proposed Project Structure
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Regulatory Schedule
Regulatory Regime Overview
▪ Satisfying regulatory requirements may require significant investment of time
and resources.
▪ In the United States, Section 3 of the Natural Gas Act (“NGA”) governs
construction of export facilities and export of LNG.
▪ Primary regulatory authority under NGA:
▪ FERC: LNG facility siting authority.
▪ Department of Energy (“DOE”): Approval for exports of the commodity.
Pipeline governed by Section 7 of the NGA.
▪ FERC: Regulation of pipelines.
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• U.S. Energy Secretary Ernest Moniz: “We Won’t Be Obstacle to Alaska Gas Exports.”
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“We want to be very explicit to say that we will treat Alaska differently. The public interest is not an issue for us” Ernest Moniz The DOE has exempted the Alaska project from new U.S. Dept of Energy rule that LNG export projects complete their environmental reviews before a federal LNG export licenses is issued
“There will no longer be a ‘queue’ for applications. Those will be processed when applicants complete national environmental impact statement, or EIS, typically with the Federal Energy Regulatory Commission.” Alaska, however, is again to handled separately. A “conditional” export license for Alaska will be granted when the project moves further along in its development.
Source: Article by Liz Ruskin for Alaska Public Media and article by Tim Bradner for Alaska Journal of Commerce
Moniz says the Obama Administration wants to spur a project to export North Slope natural gas, and he says the No.1 way his department can help is by staying out of the way
“Getting Alaskan gas monetized is good for the Alaska (economy), good for the country and good for our international security obligations.”
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HDR Regulatory Schedule
Port MacKenzie
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Milestones and Next Steps Cooperation Agreements with the State of Alaska
▪ Governor Walker – December 23, 2014
▪ DNR – December 2013
AIDEA agreements
▪ Formal Expression of Interest – December 23, 2013
▪ AIDEA Board Approval of CRA related to the proposed LNG facility of
REI – April 24, 2014
▪ Signed Cost Reimbursement Agreement – April 29, 2014
▪ AIDEA Board extends term and provides additional money for CRA,
December 16, 2014
Business Case and Economic Model
▪ Completed August 2014
Gas supply for Feedstock
▪ Reservoir and production analyses completed June/July 2014
LOIs from market in Japan – underway
KBR Study and Cost estimate
▪ Site plan and layout
Land Acquisition
▪ Option Agreement in place (valid through December 2015)
DOE and FERC preliminary discussions
Joint Venture Partners - underway
Targets by JUNE - September 2015:
▪ FEED to start
▪ Definitive Consortium/ Market participants
▪ Definitive Gas Supply
▪ Financial Arrangement 32
PROJECT CONTACT INFORMATION
REI LNG Contact Details
Shunichi Shimizu
President & CEO
+81 3 5211 6155
Eiji Maezawa
EVP & COO
907-563-0357
Mary Ann Pease
Vice President & General
Manager
907-563-0301
*primary contact
Eiji Hashio
EVP
+81 3 5211 6155
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Forecasting Price Effects: Wood Mackenzie
?
35
Global LNG Demand by Country
European recovery may slow
demand but switching away
from nuclear and improved
economic conditions gradually
increaces demand
Post Fukushima, gas
demand continues to grow
gradually in Japan, Taiwan
and Korea
China´s shale & CBM
production will grow but
demand should outstrip
domestic supply through 2020
Mid East demand
could grow much
more rapidly than this
forecast indicates
As SE Asian
production matures
imported supplies
may rise quickly
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Asian LNG Short Term: IHS CERA
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LNG Prices a Function of Geography?
• Price indexation for long term
contracts has been based on
geography with gas prices directly
tied to Brent .
• The exception is in north America
where Henry hub has permanently
decoupled itself from oil indexing.
• Variations in premium to Brent occur
in Europe largely due to Russian
tarriffs and LNG (gas on gas market
prices) while in East Asia they are
affected by oil linked and LNG
shipment costs.
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Contracts by export country (mmtpa) - Firm (includes GSPAs
only)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Qatar 29,5 29,6 36,9 55,3 71,2 74,3 68,6 62,7 61,1 61,3 61,3
Malaysia 20,2 21,4 22,1 23,4 23,6 24,1 24,2 24,2 21,4 18,6 17,2
Nigeria 16,4 19,2 20,3 20,3 20,3 20,3 20,3 20,3 20,3 20,3 20,3
Australia 14,6 15,1 17,0 16,9 17,0 19,2 20,6 22,5 29,2 41,0 50,2
Indonesia 23,6 23,1 23,5 25,7 14,9 15,5 14,8 12,8 10,8 10,4 10,4
Trinidad & Tobago 13,9 14,2 14,4 14,3 14,4 14,8 14,4 14,4 14,4 14,4 14,4
Algeria 16,4 14,5 14,5 14,5 14,5 14,5 14,5 14,5 11,6 10,2 9,9
Egypt 12,2 12,3 12,2 11,8 11,8 11,8 11,2 11,3 11,3 11,3 11,3
Russia 0,0 0,0 4,2 8,2 9,1 9,1 8,9 8,9 8,9 8,9 8,9
Oman 8,5 8,5 9,1 8,8 8,8 8,8 8,8 8,8 8,8 8,8 8,8
Brunei 6,7 6,7 6,7 6,7 6,7 6,7 1,7 0,0 0,0 0,0 0,0
Yemen 0,0 0,0 0,8 4,6 6,6 6,7 6,7 6,5 6,5 6,7 6,7
United Arab Emirates 4,3 4,6 4,5 4,3 4,3 4,3 4,3 4,3 4,3 4,3 4,3
Peru 0,0 0,0 0,0 1,1 3,7 4,2 4,2 4,2 4,2 4,2 4,2
Norway 0,7 4,1 4,1 4,1 4,1 4,1 4,1 4,1 4,1 4,1 4,1
Equatorial Guinea 1,5 3,4 3,6 3,7 3,7 3,7 3,7 3,7 3,7 3,7 3,7
Angola 0,0 0,0 0,0 0,0 0,0 2,7 4,8 5,2 5,2 5,2 5,2
Libya 0,7 0,7 0,7 0,7 0,7 0,7 0,7 0,7 0,7 0,7 0,7
Papua New Guinea 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,6 4,3 6,4 6,5
USA 1,3 1,2 0,8 0,6 0,2 0,0 0,0 0,0 0,0 4,0 10,1
Total 170,5 178,7 195,4 225,1 235,8 245,6 236,8 229,9 230,9 244,5 258,3
Contracts by Exporting Country
Source: Woodmackenzie
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LNG Demand by Country - mmcfd
2000 2005 2010 2015 2020
Japan 7.010 7.561 9.185 11.917 12.510
South Korea 1.988 2.905 4.425 5.033 5.254
Spain 938 2.204 2.756 1.427 2.184
UK 0 50 1.799 738 2.231
Taiwan 586 931 1.483 1.574 1.601
France 1.119 1.269 1.293 1.666 2.849
US East 599 1.673 1.267 406 442
China 0 0 1.231 3.828 6.692
India 0 598 1.110 2.456 4.001
Italy 349 240 861 649 1.621
Turkey 435 486 717 437 464
Belgium 411 258 638 406 738
Mexico East 0 0 317 370 370
Brazil 0 0 290 313 54
Chile 0 0 283 435 470
Kuwait 0 0 279 384 384
Portugal 0 170 270 279 504
Canada East 0 0 206 51 51
Mexico West 0 0 201 415 197
Argentina 0 0 176 556 276
Greece 49 43 89 76 47
Dominican Republic 0 26 86 88 114
Puerto Rico 34 63 72 107 166
Dubai 0 0 14 236 320
Bahrain 0 0 0 0 60
Bangladesh 0 0 0 0 87
Canary Islands 0 0 0 0 48
Cyprus 0 0 0 0 34
Germany 0 0 0 0 447
Indonesia (Java) 0 0 0 157 206
Ireland 0 0 0 0 40
Israel 0 0 0 0 0
Jamaica 0 0 0 0 65
Jordan 0 0 0 0 97
Malaysia (Peninsular) 0 0 0 384 769
Morocco 0 0 0 0 62
Netherlands 0 0 0 159 416
New Zealand 0 0 0 0 10
Pakistan 0 0 0 0 249
Philippines 0 0 0 0 51
Poland 0 0 0 119 135
Singapore 0 0 0 389 630
South Africa 0 0 0 0 48
Thailand 0 0 0 185 235
Uruguay 0 0 0 0 47
Total 13.517 18.477 29.048 35.239 47.275
LNG Demand by Country
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LNG Demand by Basin- mmcfd
2000 2005 2010 2015 2020
Atlantic 3.933 6.482 10.836 7.847 13.405
Pacific 9.583 11.995 18.212 27.393 33.870
Total 13.517 18.477 29.048 35.239 47.275
Source: Woodmackenzie
LNG Demand by Basin
41
LNG Pacific Demand - mmcfd
2000 2005 2010 2015 2020
Japan 7.010 7.561 9.185 11.917 12.510
South Korea 1.988 2.905 4.425 5.033 5.254
Taiwan 586 931 1.483 1.574 1.601
China 0 0 1.231 3.828 6.692
India 0 598 1.110 2.456 4.001
Chile 0 0 283 435 470
Kuwait 0 0 279 384 384
Mexico West 0 0 201 415 197
Dubai 0 0 14 236 320
Bahrain 0 0 0 0 60
Bangladesh 0 0 0 0 87
Indonesia (Java) 0 0 0 157 206
Jordan 0 0 0 0 97
Malaysia
(Peninsular) 0 0 0 384 769
New Zealand 0 0 0 0 10
Pakistan 0 0 0 0 249
Philippines 0 0 0 0 51
Singapore 0 0 0 389 630
South Africa 0 0 0 0 48
Thailand 0 0 0 185 235
Total 9.583 11.995 18.212 27.393 33.870
Source:
Woodmackenzie
LNG Demand Pacific Basin by Country
42
LNG Demand by Region - mmcfd
2000 2005 2010 2015 2020
Asia Pacific 9.583 11.995 17.435 25.923 32.294
Europe 3.300 4.721 8.423 5.956 11.759
Middle East 0 0 293 620 860
North Africa 0 0 0 0 62
North America 633 1.761 2.148 1.437 1.405
South & East Africa 0 0 0 0 48
South America 0 0 749 1.304 848
Total 13.517 18.477 29.048 35.239 47.275
Source: Woodmackenzie
LNG Demand by Region
43
Key Markets for LNG 2025
• 7 Markets are the primary importers of LNG with 4 in Asia – Japan, China, Korea and
India consuming more than 50% of all demand
• The UK, Spain and France should continue to be the primary consumers in Europe
through 2025
Source: Potens & Partners Feb 2012
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Japan: The Largest LNG Market
LNG Pacific Demand - mmcfd
2000 2005 2010 2015 2020
Japan 7.010 7.561 9.185 11.917 12.510
• Post Fukushima, Japan took a huge leap in LNG
demand
• Long term growth is expected to continue at
around 1% per year
• Commands the highest premium for gas Source: Wood Mackenzie Aug 2012, Potens & Partners Feb 2012