A BRIEF HISTOR OF LNG - British Chamber Of Commerce … A5... · · 2014-10-14which point the...

LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG / 1

A BRIEF HISTORY OF LNG

BG Group Connecting Singapore to the global LNG market

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Delivering Singapores Energy Supply Security_B5_withbleed.pdf 2 9/8/2014 5:16:02 PM


CONTENTS

Programme & Acknowledgements 04

Patron's Message 05

President's Message 06

E&U Chairperson's Message 07

A Brief History Of LNG 08

Energy & Utilities Business Group 22

COVER IMAGES:(Left to right) Methane Princess approaching the North Thames Gas Board jetty at Canvey Island U.K., Photo Courtesy of Singapore LNG Corporation; Prelude FLNG facility under construction; Photo courtesy of Shell Photographic Services, Shell International Ltd

ABOUT BRITCHAM

The British Chamber of Commerce (BCCS) is one of the largest foreign business networks in Singapore with a long and proud history celebrating its 60th Anniversary this year. The Chamber plays a pivotal role in raising the profile of British companies, establishing robust connections with the Singapore business community as well as facilitating business opportunities for companies in Singapore and the UK.

BCCS has also recently became a member of the UK business network, created by the British Chambers of Commerce and UK Trade & Investment, providing practical support for UK exporters.

With more than 400 corporate members, represented through currently 2,600 employees, the Chamber offers various platforms for businesses and leaders to connect, drive and develop business, learn and exchange insights. We are committed to delivering:

Building Networks - Provide a diverse and inclusive network to build opportunities for British, international and local organisations in Singapore with ties to British business.

Connecting Businesses - Encourage British trade and investment in Singapore and the Asia Pacific region and to be the authoritative voice of British business.

Creating Opportunities - Provide our member companies, and executives throughout their organisations, with practical support and advice, delivered via a range of scheduled events, on-line communities and to share knowledge and expertise.

4 / LNG 50 - A CELEBRATION OF THE FIRST COMMERCIAL SHIPMENT OF LNG

PROGRAMME

LNG 50: A celebration of the first commercial shipment of LNG

Tuesday 23rd September 2014

The British High Commissioner’s Residence at Eden Hall

19.00 Evening commences with champagne and canapés

20.00 Speeches & Toast

Welcome by Damian Adams, Vice President of Britcham and Chairperson of Britcham’s Energy and Utilities Business Group

Opening remarks by The British Deputy High Commissioner Judith Slater

Reflection of the Past, Present and Future of LNG by Roger Bounds, Global Head of Shell LNG and Steve Hill, President Global Energy, Marketing & Shipping, BG Group

Toast by Jerome Ferrier, Senior Vice President, Total and President of the International Gas Union

Closing remarks by Damian Adams

21.30 Carriages

Appreciation and thanks are due to all who have been part of the organisation of this event; to our sponsors Shell, BG, ExxonMobil and the Chamber team and E&U Group sub-committee, and of course to all attendees. Without such support the event would not have been possible.

We hope you will enjoy the video montage of LNG events, past and present that will be shown throughout the evening. We would like to thank all those who contributed photographs including BG Group, Shell, Brunei LNG, GDF Suez, ExxonMobil, Arthur Dixon AM, Excelerate Energy, Höegh LNG and the National Grid archive and to thank Keshav Sishta of Blackbird Productions for pulling it all together.

Special thanks go to Tony Regan, of Trizen International for having authored ‘A Brief History of LNG’

A soft copy of the LNG montage is available from http://britcham.org.sg/events/past-events/2383.

ACKNOWLEDGEMENTS

GOLD SPONSOR SILVER SPONSOR BRONZE SPONSOR


PATRON'S MESSAGE

In 1959, the first LNG cargo was shipped from Lake Charles, Louisiana to Canvey Island in the United Kingdom. This paved the way for development of the sector in the UK and, in 1964, it became the world’s first LNG importer, at which point the commercial LNG industry was truly born.

Today, over 400,000 jobs are supported by the oil and gas industry and few industrial sectors have generated greater prosperity for the United Kingdom. The importance of the LNG sector continues to increase, with natural gas being an essential part of the UK’s energy mix as we move towards becoming a low carbon economy and reduce our reliance on coal powered generation.

The UK’s industrial strategy for Oil and Gas reflects the Government’s commitment to working with the industry to create the right conditions to maximise opportunity and attract investment to the benefit of the whole UK economy.

I am delighted that we are celebrating the last half century of this crucial industry’s evolution in partnership with the British Chamber of Commerce, Singapore. Here, too, there is a focus on creating a forward looking dynamic LNG sector, with UK companies playing a key role. It is only appropriate that we commemorate the key milestones of the past together whilst looking forward to further successes in the future.

H.E. Antony PhillipsonBritish High CommissionerSingapore


PRESIDENT’S MESSAGE

The British Chamber of Commerce is one of the largest overseas business networks in Singapore, with a long and proud history that sees the Chamber celebrating its 60th Anniversary this year. The Chamber plays a pivotal role in raising the profile of British companies, by establishing robust connections with the Singapore business community as well as facilitating business opportunities for companies in Singapore and the UK.

Over the years, the Chamber has continuously adapted to the changing business landscape both locally and internationally. Ten years ago, members from the Energy & Utilities sector highlighted the need for more active engagement within the membership network and beyond, which resulted in the formation of our first Business Group. Today, we have twelve Business Groups which have become important pillars in the Chamber's ability to deliver its mission – Building Networks, Connecting Businesses and Creating Opportunities.

The Chamber is delighted to celebrate the 50th anniversary of the first LNG shipment – a key milestone in the history of the E&U sector. I would like to thank HE Antony Phillipson for hosting us at his residence, our sponsors Shell, BG Group and ExxonMobil for their contribution and the continuous support of the E&U Business Group in making this event an incredible success.

Hugo WalkinshawPresidentBritish Chamber of Commerce Singapore


E&U CHAIRPERSON’S MESSAGE

Since being formed in early 2004 as the first business group of the British Chamber of Commerce, the Energy & Utilities (E&U) Business Group has strived to provide members of the Chamber and the wider energy community in Singapore with high quality events, relevant topics and expert speakers. So too with this landmark commemorative event, by which we mark 50 years since delivery into the UK of the first commercial LNG cargo. As you read through this booklet you will note a number of “firsts” in the history of the LNG industry; the first liquefaction of methane, the first commercial shipment of LNG to the UK and the world’s first purpose-built LNG tanker. Equally, the evening itself represents a first for the E&U Group, namely the first event of this scale and type conceived by a business group to mark an historic event. As we look back on 50 years of the LNG industry, we also take note of the present and look forward to what the future holds in store. Likewise with the E&U group. Despite having a shorter history of just over a decade, with over 1,700 people currently in the E&U network, a committed organising committee and high levels of enthusiasm and interest shown by supporters of our events, it is clear that the Group has a continuing role to play in bringing together the energy community in Singapore and the region to network, discuss, learn and celebrate.

Damian AdamsChairperson of the Energy & Utilities Business GroupBritish Chamber of Commerce Singapore


PATRON’S MESSAGE


2014 marks the 50th anniversary of the first commercial shipment of LNG from Arzew in Algeria to Canvey Island in the UK and the 136th anniversary

of the first liquefaction of methane by Louis Cailletet in 1878.

The liquefaction of methane. Cailletet 1878 Raoul Pictet’s (1846 – 1929) cascade process



EARLY DAYS

T he origins of liquefied natural gas (LNG) are to be found in the nineteenth century and the pioneering work done by Michael Faraday (1791-1867) in the early 1820’s on the liquefaction of gases. Faraday was able to liquefy gases with high critical temperatures such as chlorine, hydrogen sulfide, hydrogen bromide, and carbon dioxide by the application of pressure alone but could not liquefy oxygen, hydrogen, nitrogen carbon monoxide or methane. It was not until a half century later, that researchers found ways to liquefy gases with lower critical temperatures, such as oxygen, nitrogen, and carbon monoxide. The French physicist Louis Paul Cailletet (1832-1913) first liquefied methane by discovering that marsh gas liquefied at 180 atmospheres and 44.6 deg F in 1878 and the Swiss chemist Raoul Pierre Pictet (1846-1929) developed a cascade cooling apparatus for the liquefaction of gases and was able to liquefy oxygen. It was not until the end of the nineteenth century that the two gases with the lowest critical temperatures, hydrogen (-239.7°C) and helium (-267.7°C) were liquefied by the work of the Scottish scientist James Dewar (1842-1923) and the Dutch physicist Heike Kamerlingh Onnes (1853-1926), respectively. By 1900 all gases had been liquefied except helium which was liquefied in 1908.

The first air liquefaction plant was built by the pioneer of refrigeration, Carl von Linde (1842-1934) in 1895 utilising counter current cooling. In 1915 Godfrey Cabot of the USA patented a method for storing liquid gases at very low temperatures. It consisted of a Thermos bottle type design which included a cold inner tank within an outer tank; the tanks being separated by insulation. Cabot founded the Liquid Fuel Company in West Virginia to use LNG for welding but the plant was abandoned in 1921.

In 1937 Lee Twomey received patents for a process for large scale liquefaction of natural gas. The intention was to store natural gas as a liquid so it could be used for shaving peak energy loads during cold weather. The Hope Natural Gas Company built a trial plant in West Virginia in 1939 that was able to liquefy 400,000 cu.ft/day but this was dismantled in 1940 when The East Ohio Gas Company built a full-scale commercial LNG plant in Cleveland, Ohio, This was the first such plant in the world. Originally it had three spheres, approximately 63 feet in diameter containing LNG at -260 °F. Each sphere held the equivalent of about 50 MMscf of natural gas. A fourth tank, a cylinder, was added in 1942 with an equivalent capacity of 100 MMscf of gas. The plant operated successfully for three years but was shut down after a cylindrical tank ruptured on October 20, 1944, spilling thousands of gallons of LNG over the plant and nearby neighborhood. The resultant fire and multiple casualties delayed further implementation of LNG facilities for several years.

Over the next 15 years new research on low-temperature alloys, and better insulation materials, set the stage for a revival of the industry which started in 1951 when William Wood Prince, the President of the Union Stockyard Company of Chicago set out to find a cheaper source of gas for his power requirements than was available from his current supplier. He decided to access cheaper southern gas, liquefy it and transport it via the Mississippi to his Chicago stockyards to provide refrigeration for his cold storage plant and fuel for power generation. He commissioned the first FLNG unit - a barge to



1 Built by Pritchard (US) and Technip (France)

Methane Pioneer loading at Lake Charles, Louisiana 1959

liquefy, store and transport LNG. Continental Oil (now ConocoPhillips) came in to advise on gas processing issues and a barge, the Methane with a cargo capacity of 5,550 cubic metres (cu.m), was built at the Ingalls Shipyard. Although the initial economics looked good the partners soon had reservations about the economic viability of the project and it was not taken forward.

William Wood Prince had set up a research division that in 1952 became the Chicago Stock Yards Research Company which bought gas bearing properties in Virginia and expanded the research programme on barges to include ocean-going transport. In 1954 Continental

Oil reviewed the research programme and concluded that although the proposed scheme to supply the Chicago stockyard was not economic, trans-ocean shipments might be. In 1955 they joined Union Stockyards to form the Constock Liquid Methane Corporation with trans-ocean shipments in mind taking LNG from the gas fields of Venezuela to the UK. This caught the attention of the British Gas Council who in 1957 agreed with Constock to jointly convert a freighter into an LNG carrier. Constock would liquefy the gas near Lake Charles and BG would receive it at Canvey Island in the UK.

In January 1959, the world’s first LNG tanker, The Methane Pioneer, a converted World War II liberty freighter built in 1945 and originally called the Marline Hitch, carried 5,000 cu.m of LNG in five 7,000 bbl aluminum prismatic tanks with balsa wood supports and insulation of plywood and urethane from Lake Charles Louisiana to Canvey Island in the Thames estuary. She took a total of 8 cargoes of LNG from Lake Charles to Canvey Island, the last being in March 1960.In 1960, Shell joined Constock to form

Conch International Methane Limited (Shell & Continental Oil Co 40% each, Chicago stock Yard 20%) and attention moved from developing Venezuelan gas reserves to developing newly discovered gas reserves in Algeria. Conch formed the Companie Algerienne du Methane (CAMEL) with the French owners of the Hassi R’Mel gas field in Algeria and announced plans to build the Arzew LNG plant. Construction of the 1 million tonne pa (mtpa) plant commenced in 19611 and a Gas Supply Agreement was signed with the British Methane Ltd (50/50 BGC & Conch) in 1962.

FROM HASI R’MEL IN THE SAHARA TO LEEDS

The CAMEL liquefaction plant at Arzew was completed on the 10th September 1964 and was officially opened on 27th September. Conch International Methane (Shell 40%, Continental Oil 20%, Union Stock Year & Transit of Chicago 40%) had a 40% share in the plant. On the 7th of October 1964, the first commercial cargo of LNG was shipped from Arzew to Canvey Island on the Methane Princess. The cargo arrived on the 12th of October and the regasified LNG was dispatched from Canvey Island via the 250 mile Gas Council pipeline to eight gas boards in London, Birmingham, Manchester and Leeds. The Arzew plant had three parallel liquefaction trains each capable of producing

Canvey Island LNG terminal (BG Group)



2 A pint of beer in a Canvey Island pub cost 6 pence (20 US cents)!

3 There were 12 LNG carriers operating in 1973 and this number rose to 18 in 1975

4 Philips and Marathon had agreed to combine their Alaskan gas reserves in 1966

17,000 Bbls/day of LNG (about 1.5 MMscf/day). The total cost of the CAMEL LNG project was estimated to be US$89 million and the FOB price for the first cargo was 53 cents/MMBtu. Interestingly the delivered price was 76 cents/MMBtu2 suggesting the freight was a far larger component of the cost build up than it is today.

In March 1965 the first shipment to France was made on the Jules Verne to Le Havre. Two thirds of the production was now being sold to the British Gas Council and one third to Gaz de France.

In 1965 the Algerian government took a 20% stake CAMEL and In 1977 CAMEL was acquired by the Societe National pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures – or Sonatrach.

The first purpose built LNG carriers was built in 1963. The Methane Princess was built by Vickers Armstrong at Barrow in Furnace, launched in 1963 and entered service in 1964. This was followed shortly by the Methane Progress which was launched in 1964 from by the Harland and

Wolff shipyard in Belfast. Both ships were fitted with Conch independent aluminum cargo tanks and had a capacity of 27,000 cu.m. They were operated for British Methane Ltd by Shell Tankers UK and between them they made about 1,000 voyages. The Methane Progress went out of service in 1986 whilst the Methane Princess remained in service until 1997. The Jules Verne was built by the Le Trait shipyard and had cargo capacity of 25,000 cu.m.

“By the end of the next ten years there should be some 20-30 methane carriers3 in operation around the world, carrying, say 2,000 MMscf/d” C.P.Coppack, Managing Director, Conch Methane Services, Sept 1963.

THE GREAT RACE

In 1962 Phillips discovered natural gas in the North Cook Inlet near Kenai in Alaska, whilst in 1963 Shell discovered the South West Ampa gas field off Brunei. Both sought to monetize the reserves as LNG and sought sales into Japan. After an often bitter battle between the two parties Philips and Marathon4 signed the first Asian LNG sales and purchase agreement in March 1967 with Tokyo Gas and Tokyo Electric – at a price of 52 cents/MMBtu delivered Japan. The first delivery of Alaskan LNG into Japan’s first LNG receiving terminal at Negishi took place in November 1969.

The two train, 1.3 mtpa liquefaction plant at Kenai was built by Bechtel and cost considerably more than the Arzew plant at an estimated cost of US$200 million.

Methane Progress

Jules Verne, (GDF SUEZ) Negeshi LNG terminal Tokyo, (Tokyo Gas)



Brunei LNG

1970’S – EARLY DAYS

Although Exxon’s proposed Marsa el Brega LNG plant in Libya had concluded sales agreements with

Italian and Spanish buyers in 1965 a number of problems and issues delayed construction and first commercial production was in April 1970. The four train Marsa el Brega plant used the then novel mixed refrigerant liquefaction technology provided by Air Products.

Shell, Mitsubishi and the Brunei government finally managed to sign sales and purchase agreements with Tokyo Electric, Tokyo Gas and Osaka Gas in 1970 and Brunei LNG came on stream in 1972. The plant, which initially

consisted of four trains able to produce 3.7 mtpa was significantly larger than its three predecessors. Algeria’s second liquefaction plant at Skikda also came on stream in 1972. Perhaps the most significant development of the 1970’s was the development of major export plants in Indonesia. In 1972 Pertamina, Huffco, Mobil and Nissho Iwai teamed up to develop Indonesian LNG exports based on two plants that would be built simultaneously in Bontang and Arun. Japan and the US were regarded as the only markets that could possibly support two plants but although Pacific Lighting Corp of California expressed interest in a 20 year purchase agreement with Arun they were unable to secure US government approvals and the focus turned to Japan.

The oil crisis of October 1973 heightened Japan’s interest in LNG and in December of that year Pertamina signed an SPA for a total of 8.18 mtpa with Chubu Electric, Kansai Electric,

Alaska

Algeria Libya

Everett 1971Kenai 1969Two trains 1.3 mill tn

LNG liquefaction plants

LNG receiving terminals

1964Arew

1969Alaska

1970Libya

1972Skikda, Brunei

1977ADGAS, Bontang

1978Arew, Arun

Canvey Island 1959Le Havre 1964Barcelona 1969La Spezia 1971Fos 1972

Negishi 1969Senbouku 1972 & 1977Sodeguara 1973Chita 1977Tobata 1977Himeji 1979

Brunei 19725 trains, 7 mill tn

Bontang 19772 trains 3.3 mill tonnes

Arun 19783 trains 5.1 mill tonnes

Arzew GL4Z 19643 trains 1.1 mill tn

Skikda 19723 trains 3 mill tn

Arzew GL1Z 19786 trains 7.7 mill tn

ADGAS Abu Dhabi 19772 trains 3.2 mtpa

Marsa El Brega 19704 trains 0.75 mill tn



First liquefaction projects 1964-1979

Mill tn Start Shareholders

Arzew GL 4Z T1-3 Algeria 1.1 1964 Sonatrach

Alaska USA 1.3 1969 Marathon, ConocoPhillips

Marsa El Brega Libya 0.8 1970 Sirte

Skikda Algeria 3 1972 Sonatrach

Brunei LNG Brunei 7 1972 Brunei Govt, Shell, Mitsubishi

ADGAS Abu Dhabi 3.2 1977 ADNOC, Mitsui, BP, Total

Bontang T1/2 Indonesia 3.3 1977 Pertamina

Arun T1-3 Indonesia 5.1 1978 Pertamina

Arzew GL 1Z T1-6 Algeria 7.8 1978 Sonatrach

32.6

Osaka Gas, Kyushu Electric and Nippon Steel. Bechtel were contracted to design, engineer and construct the two plants which were to cost US$1.64 billion, considerably more than the US$89 million the Arzew plant had cost ten years earlier. The two train Bontang LNG plant with a capacity of 3.3 mtpa came on stream in 1977 and the first cargo was delivered to Osaka in August of that year. The larger, three train 5.1 mtpa Arun plant, was commissioned in 1978. For the next twenty years Indonesia was the world’s largest LNG exporter.

The first LNG plant in the Middle East was built at Das Island in Abu Dhabi. The Gas Liquefaction Project Agreement was signed in 1971, a 20-year Sale Agreement with Tokyo Electric was signed in 1972 and construction of the ADGAS plant started in 1973. Trains 1 and 2 were commissioned in 1977, each with an operating capacity of 1.6 mtpa. A third 4 mtpa train, then the largest and most advanced in the world, was subsequently added in 1994. ADGAS is owned by Abu Dhabi National Oil Co. (70%), Mitsui (15%), BP (10%) and Total (5%).

Fifteen years after the start up of the first commercial LNG plant in Algeria there were eight liquefaction plants operating globally with a total capacity of almost 33 mtpa and the first plant at Arzew had been expanded to reach a total capacity of 8.9 mtpa. In 1979 Algeria exported 8.5 million tonnes of LNG and global sales reached 24.7 million tonnes. 14 million tonnes went to Japan and the second largest buyer was the USA, taking 5.3 million tonnes. The world fleet was then 52 ships.

THE US FALLS IN LOVE WITH LNG (ACT 1)

The Canvey Island receiving terminal opened in 1959, Le Havre in 1964, Barcelona and Negishi in 1969 and the first US terminal, Everett, Massachusetts opened in 1971. Gas was not permitted as a power generation fuel in the US causing a constraint on production and the perception that there was a shortage of gas. A number of companies therefore sought to import LNG and between 1969 and 1976 six long term LNG supply contracts were



signed and three more receiving terminals were built - Cove Point (1978), Elba Island (1978) and Lake Charles (1982). Unfortunately, price deregulation stimulated domestic production and gas prices fell, making LNG imports uncompetitive. Imports of LNG which had hit 5.3 million tonnes in 1979, fell to less than 2 million tonnes in 1980 and gradually declined to zero by 1987. This had a major impact in Algeria resulting in the Arzew and Skikda plants operating at less than half capacity for more than a decade and lengthy litigation as US buyers sought to terminate their contracts.

THE 1980’S – MALAYSIA AND AUSTRALIA JOIN THE CLUB

Shell discovered substantial gas reserves off Sarawak in 1968, but it took ten years before the development options could be agreed with the

government of Malaysia. In 1978 Malaysia LNG Sdn Bhd was incorporated to develop the first Malaysian LNG project, MLNG Satu. Shareholders were Petronas (65%) Shell & Mitsubishi (each with 15%) and the Sarawak State Government (5%) and the project included 5

LNG carriers. SPA’s were executed with Tokyo Electric and Tokyo Gas and the first cargo sailed to Japan in January 1983. MLNG Satu contained three liquefaction trains with a total design capacity of 6 mtpa. MLNG Dua came on stream in 1995 and MLNG Tiga in 2003. Total capacity at Bintulu is now 24.4 mtpa.

Australia’s first LNG project had a similar lengthy gestation period. Woodside discovered the North Rankin gas in 1971, the West Australian government passed the North West Gas

Development (Woodside) Act in 1979, but it wasn’t until 1981 that the project participants were able to secure interest from Japanese buyers. A downturn in the Japanese economy and competition from other proposed projects, including the Canadian Dome Project, made it difficult to secure commitments, but in 1982 initial SPA’s were signed with five Japanese buyers. Mitsubishi and Mitsui joined the North West Shelf venture in 1984 and in May of 1985 formal SPA’s were signed with five Japanese power co’s and three gas co’s allowing the project to go ahead.

There were six joint venture participants in the North West Shelf Venture; Woodside, BHP Billiton, BP, Chevron, Shell and Japan Australia LNG (a JV between Mitsubishi and Mitsui) and the plant at Dampier started up in 1989 with three liquefaction trains with a total capacity of 7.5 mtpa. The project, which included the development of North Rankin A, then the largest gas production platform in the world, and subsea infrastructure to draw gas from the N.Rankin and Perseus fields, cost $25 billion, and was, at the time the largest resource development in Australian history and the largest engineering project in the world. A fourth train was added in 2004 and a fifth in 2008 bringing total capacity up to 16.3 mtpa.

25 YEARS

In 1989, 25 years after the first shipment of LNG from Algeria there were 10 liquefaction plants operating in Algeria, Abu Dhabi, Australia, Brunei, Indonesia, Libya, Malaysia and the USA. Exports had reached 48 million tonnes, Japan imported 32 million tonnes and the second largest importer was France at 7 million tonnes. The global LNG fleet now consisted of 70 vessels.

North West Shelf LNG Karratha WA



THE 1990’S AND THE ENTRY OF QATAR

The 1990’s were a period of rapid development for the LNG industry with the entry of Qatar, Oman, Nigeria and Trinidad. It hadn’t however been a smooth entry. Weak demand in the 1980’s had made it very difficult for these projects to secure customer support. The Qatar Liquefied Natural Gas Company Ltd was set up in 1984 by QGPC, BP and CFP (now Total) but struggled to secure customer interest, particularly as Australia’s NW Shelf project was developed. Mitsui and Marubeni joined the partnership in the late 1980’s and BP relinquished its share in 1992 to be replaced by Mobil who took a 10% interest. Qatargas was able to secure its first SPA with Chubu Electric in May 1992 and awarded the EPC contract for the construction of the plant in May 1993 to Chiyoda. The three train, 10 mtpa Qatargas plant came on stream in 1997. In August 1992 Ras Laffan Natural Gas Ltd (RasGas LNG) was established with QGPC holding a 70% interest and Mobil 30%. With support from Mitsui, RasGas secured a 25 year SPA with Korea Gas

Corporation in October 1995 and the 6.7 mtpa RasGas plant came on stream in 1999. The cost of the LNG plant and upstream facilities was US$3.26 billion. The early 1990’s was a sellers’ market allowing Qatar to secure additional SPA’s and considerably expand both projects until, in 2006, Qatar overtook Indonesia as the largest LNG producer with a total production capacity of 77 mtpa including six mega trains of 7.8 mtpa each.

An LNG Working Committee was formed in 1985 in Nigeria to promote an LNG project and in 1989 Nigeria LNG Ltd was formed owned by NNPC, Shell, Total and ENI. It took several years to secure customer support and arrange the financing but in 1995 an EPC contract was awarded to construct two trains with a capacity of 6.6 mtpa. These were commissioned in 1999 and the plant was subsequently expanded by the addition of train 3 in 2002, train 4 & 5 in 2006 and train 6 in 2007 to give it a total capacity of 21.1 mtpa. In 1999 Trinidad LNG came on stream to be closely followed by Oman LNG in 2000.



2000-2010 - A DECADE OF FAST GROWTH

The 1990’s saw 55 mtpa of new LNG capacity come on line from ten projects but the next decade saw a boom in LNG plant construction with almost 160 mtpa of new capacity coming on line from 17 projects in 14 countries. The LNG business went truly global from Peru in South America to Sakhalin on the Russian Pacific coast via Snohvit in northern Norway. The chief driver for this rapid expansion was US demand – or in particular, forecast demand. In 2003 the National Petroleum Council forecast that domestic gas production would only be able to meet 75% of US demand, with the balance having to be imported as LNG. By the end of 2003, 31 LNG receiving terminal projects had been announced in the US, Canada and Mexico

and over the next few years 11 new liquefaction projects were announced in Norway, Equatorial Guinea, Yemen, Angola, Peru, Indonesia, Qatar, Egypt and Trinidad with the assumption that the bulk of their production would be supplied to North America. The US reopened its 3 mothballed LNG import terminals and built 11 more but, for many, the LNG never arrived. LNG imports peaked at 16 mtpa in 2007 and declined thereafter due to the development of domestic shale gas.

By 2010 global sales of LNG had reached 193 million tonnes from 24 projects in 18 countries. The largest importer in 2010 was Japan (69 mtpa) followed by Korea (33 mtpa) Spain (20 mtpa) and the UK (14 mtpa). India started importing LNG in 2003 and China in 2006 and by 2010 imports into China had reached 9.5

New liquefaction projects 1991-2000


Bontang TF Indonesia 3.2 1993 Pertamina

ADGAS T3 Abu Dhabi 4 1994 ADNOC, Mitsui, Total

MLNG Dua Malaysia 7.8 1995 Petronas, Shell, Mitsubishi, Sarawak Govt.

Qatargas Qatar 10 1997 Qatargas, ExxonMobil, Total, Marubeni, Mitsui

Bontang TG Indonesia 3.2 1998 Pertamina

Bontang T H Indonesia 3.2 1999 Pertamina

Atlantic LNG Trinidad 3.2 1999 BP, BG, Repsol, NGC T&T, CIC

RasGas Qatar 6.7 1999 Qatar Petroleum, ExxonMobil, Itochu, LNG Japan, KOGAS

NLNG T1/2 Nigeria 6.6 1999 NNPC, Shell, Total, Agip

Oman LNG Oman 7.1 2000 Oman Govt, Shell, Total, Korea LNG, Mitsubishi, Mitsui, Itochu, Partex

55





NLNG T3 Nigeria 2.9 2002 NNPC, Shell, Total, Agip

Atlantic 2/3 Trinidad 6.6 2003 BP, BG, Repsol

MLNG Tiga Malaysia 6.3 2003 Petronas, Shell, Nippon Oil, Mitsubishi

RasGas II Qatar 4.7 2004 Qatar Petroleum, ExxonMobil

NWS T4 Australia 4.4 2004 Woodside, BHP, BP, Chevron, Shell, Mitsub-ishi, Mitsui

ELNG Egypt 3.6 2005 BG, Petronas, Egas, EGPC, GdF Suez

ELNG T2 Egypt 3.6 2005 BG, Petronas, Egas, EGPC

SEGAS Egypt 4.9 2005 Union Fenosa, ENI, Egas, EGPC

RasGas II T2 Qatar 4.7 2005 Qatar Petroleum, ExxonMobil

Qalhat LNG Oman 3.7 2005 Oman Govt, Oman LNG, Union Fenosa, Itochu, Mitsubishi, Osaka Gas

Atlantic LNG T4 Trinidad 5.2 2006 BP, BG, Repsol, NGC T&T

NLNG T4/5 Nigeria 7.6 2006 NNPC, Shell, Total, Agip

Darwin LNG Australia 3.7 2006 ConocoPhillips, ENI, Santos, Inpex, Tepco, Tokyo Gas

NLNG T6 Nigeria 4 2007 NNPC, Shell, Total, Agip

mtpa. Korea built its first LNG carrier in 1994 (HHI’s Hyundai Utopia) and by 2000 became the world’s largest LNG shipbuilder constructing 10 out of 13 ships in that year.

THE PRESENT AND THE FUTURE

Woodside’s Pluto LNG (5 mtpa) project in Western Australia came on stream in 2012 and Angola LNG (5.3 mtpa) in 2013. The latest addition to the LNG family is PNG LNG (6.9 mtpa) which was completed in April 2014 and the first shipment left for Tokyo Electric in May. Production reached full capacity in July by which time 15 cargoes had been exported. BP had first proposed an LNG project in PNG after

discovering the Hides Field in 1987. In the early 2000’s plans to export the gas by pipeline to Australia were developed but in 2007 this plan was dropped in favour of exporting as LNG. In 2008 a Gas Agreement was signed by the project sponsors and the PNG government which established the fiscal and legal framework for the PNG LNG Project, including a unique Benefits Sharing Agreement to ensure economic benefits flowed to the PNG people. The project was sanctioned in December 2009 and between December 2009 and March 2010 sales and marketing agreements were signed with four major customers (Sinopec,

Spirit of Hela loading the first shipment of LNG from PNG LNG May 2014 (ExxonMobil)



Osaka Gas, Tokyo Gas and CPC). Construction work began in early 2010 and in April 2014, the PNG LNG Project started production of LNG ahead of schedule. The partners in PNG LNG are ExxonMobil 33.2%, Oil Search 29%, National Petroleum Company of PNG Limited (NPCP) 16.6%, Santos 13.5%, JX Nippon Oil 4.7%, MRDC (PNG landowners) 3%.

Many of the recent developments in the industry have been driven by technological advancements including:

The development of horizontal drilling and hydraulic fracturing in North America, which has enabled gas and oil to be extracted from shale. The rapid ramp up of production has lead to a significant number of parties developing plans to export the gas as LNG. 26 LNG export facilities have been proposed in the USA and 20 in Canada. Two, Sabine Pass (18 mtpa) and Cameron LNG (12 mtpa) have been sanctioned and these hope to start up in 2015 and 2018.



Equatorial Guinea

E. Guinea 3.4 2007 Marathon, Sonagas, Mitsui, Marubeni

RasGas II T3 Qatar 4.7 2007 Qatar Petroleum, ExxonMobil

Snohvit LNG Norway 4.1 2008 Statoil, Total, GdF Suez, Hess, RWE-DEA

NWS T5 Australia 4.4 2008 Woodside, BHP, BP, Chevron, Shell, Mitsub-ishi, Mitsui

Qatargas II T1 Qatar 7.8 2009 Qatar Petroleum, ExxonMobil

Qatargas II T2 Qatar 7.8 2009 Qatar Petroleum, ExxonMobil, Total

Sakhalin LNG Russia 9.6 2009 Gazprom, Shell, Mitsubishi, Mitsui

Yemen LNG Yemen 3.4 2009 Total, Hunt, YGC, SK, KOGAS, Hyundai, YGA

RasGas III Qatar 7.8 2009 Qatar Petroleum, ExxonMobil

MLNG Dua Exp Malaysia 1.7 2009 Petronas, Shell, Mitsubishi, Sarawak Govt

Tangguh Indonesia 7.6 2009 BP, MI Berau, CNOOC, Nippon Oil, KG Berau, LNG Japan, Talisman

RasGas III T2 Qatar 7.8 2010 Qatar Petroleum, ExxonMobil

Peru LNG Peru 4.5 2010 Hunt, SK, Repsol, Marubeni

Qatargas III Qatar 7.8 2010 Qatar Petroleum, ConocoPhillips, Mitsui

Qatargas IV Qatar 7.8 2010 Qatar Petroleum, Shell

Yemen LNG T2 Yemen 3.4 2010 Total, Hunt, YGC, SK, KOGAS, Hyundai, YGA

159.5



Unconventional gas production in Australia has put Australia on track to becoming the world’s largest LNG producer by about 2018. Seven LNG projects are under construction in Australia with three, (Queensland Curtis, Gladstone LNG and Australia Pacific) being built on Curtis Island at Gladstone in Queensland using coal bed methane as their feedstock. The world’s first CBM to LNG plant, BG’s 8.5 mtpa Queensland Curtis facility is expected to be completed in Q4 2014.

The first floating storage and regasification vessel (FSRU) went into operation off Louisiana in the USA in 2005. Floating storage has proved to be much cheaper than conventional onshore storage terminals and can be deployed in months rather than the 3-4 years it takes to build a conventional onshore terminal. 17 FSRU’s are now in operation around the world with five more scheduled to go into service in 2014/15 in Lithuania, Jordan, Egypt, Uruguay and Puerto Rico.

These have been a real “game changer” and now the majority of terminal proposals assume utilising an FSRU.

The next big “game changer” will be the introduction of “floating liquefaction” plants (FLNG). Shell sanctioned the first floating liquefaction project, Prelude, in 2011 to be followed by Petronas and Exmar in 2012. Four FLNG units are now under construction with two expected to start up in 2015. Eight more FLNG projects are at the pre FEED/FEED stage of development with 20 more at the planning/development stage. The Prelude FLNG unit will be the largest vessel ever built and is designed to

Queensland Curtis LNG facility, Queensland (BG Group)

LNG FSRU (Hoegh LNG)

Prelude FLNG (Shell)

produce 3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of LPG. It is being built at Samsung Heavy Industries’ Geoje shipyard in South Korea and once constructed the facility will be towed to its location over the Prelude gas field, approximately 475 kilometres north-northeast of Broome, Western Australia where it will remain permanently moored at the location for around 20-25 years before needing to dock for inspection and overhaul. The shareholders are Shell 67.5%, Inpex 17.5%, CPC 5% and Kogas 10%. Petronas has sanctioned two FLNG units the first of which is scheduled to go into service off Sarawak in 2015.

Today:• There are 29

liquefaction projects in 20 countries with a total capacity of 310 mtpa.

• Fourteen new l i q u e f a c t i o n projects are under construction plus additional trains at Arzew and Bintulu bringing on over 120 mtpa of new liquefaction capacity between now and 2018.

• Seven of the new plants are in Australia and by 2018 liquefaction capacity there will reach 86 mtpa and Australia may overtake Qatar as the largest LNG producer.

• An unprecedented 65 proposed projects are offering in excess of 600 mtpa of new



LNG capacity into the project pipeline with over 530 mtpa being offered from five countries – USA, Canada, Russia Mocambique and Tanzania.

• LNG exports were 241 million tonnes in 2013.

Demand had been expected to double between 2010 and 2020 but after three years of flat growth (2012-2014) it now looks unlikely that it will. However it could be close, which means that despite all the new capacity coming on between now and 2018, there is a need for several more projects to be sanctioned in the next couple of years to bring on a further 35 million tonnes by 2020.

Growth over the next 5 years is going to be mainly in China and India with uncertainty about Japan. China will overtake Korea as the second largest LNG importer with imports of about 50 mtpa by 2018.

We are also on the cusp of the development of a major new market for LNG – the transportation sector. There is growing awareness of the economic and environmental drivers favouring the adoption of LNG as a transportation fuel with it looking as if in many countries truck, train and heavy plant operators may be able to reduce fuel bills by about 30% by using LNG rather than diesel. First movers were in the US

Floating liquefaction projects under construction

Leader(Constructor)

TopsidesLiquefac-tion

LNGmtpa

HullContain-ment

Storagem3

Project status LocationProject

Shell(Samsung)

TechnipShell DMR

3.6 BargeMembrane

220,000 +90,000 LPG +126,000 Conden-sate

FEED completed 2009Sanctioned May 2011Start Up 2017

AustraliaPrelude

Petronas(DSME)

Technip/LindeAP-NTM

1.2 BargeMembrane

FEED completed 2012Sanctioned 2012Start up Q4 2015

MalaysiaSarawak

Exmar(Wison)

Black & VeatchSMR

0.5 Barge 16,100 +140,000 floating storage

Sanctioned 2012Start up Q1 2015

ColombiaPacific Rubialas

Petronas(Samsung)

JGCAP-NTM

1.5 BargeMembrane

FEED completed 2013Sanctioned 2014Start up 2018

MalaysiaSabah



and Canada, but the largest and fastest growing market is in China. There is a focus on offering LNG as marine fuel in Europe and North America ahead of a significant reduction in permitted fuel sulphur levels in 2015, but in China the focus is on the truck market, in Indonesia the focus is on remote power and mining plants and in Australia to mines and road train operators. LNG is a very attractive diesel replacement in many countries and potentially this market could be as large, and possibly larger, than the traditional power, city gas and industrial markets.

The “Golden Age of Gas” is leading to the “Golden Age of LNG”. LNG exports now account for 10% of world gas consumption and this share will grow over the next few year. LNG is no longer a niche business with producers, mainly in Asia and the Middle East focusing on the market in NE Asia but is rapidly becoming global. LNG liquefaction is no longer the preserve of major NOC’s and multinational oil companies with new independent players entering the market. Instead of LNG having to be delivered into large import terminals before distribution to multiple

end users it can now be delivered to individual plants and customers. Nearly every country that does not currently import LNG seems to have plans to build LNG receiving terminals. On 7 August the Ministry of Energy in Myanmar gave eight companies permission to import LNG and the first small parcel of 1,780 tonnes arrived on the 23rd August marking Myanmar’s entry as an LNG importer. Vietnam and the Philippines hope to follow shortly and, from there being no LNG importers in South East Asia in 2010, we could find that all South East Asia countries, with possible exception of Cambodia and Laos, will be importing LNG by 2020.

The future looks bright for LNG and we have come a very long way since the first commercial shipment in October 1964.

Tony Regan of TRI-ZEN International would like to thank Arthur Dixon AM for his early history of liquefaction, BG and Shell for their valued contributions and, in particular, Philip Weems of King & Spalding LLP for permitting the inclusion of material from his paper “LNG at 50, History and Projected Future for Natural Gas Exports.

PAST E&U BUSINESS GROUP EVENTS

3 July 2012: Energy and Environment in a Changing ClimateSpeaker: Lord Oxburgh KBE

22 October 2012:Global LNG Market Forward OutlookSpeaker: Matt Schatzman - Executive Vice President, Global Energy Marketing and Shipping, BG Group

1 November 2013:The Outlook for Energy: A View to 2040Speaker: Rob Gardner - Manager, Economics & Energy Division, Corporate Strategic Planning Department, ExxonMobil Corporation

COMMITTEE MEMBERS

ChairpersonDamian AdamsSimmons & Simmons

Group RepresentativeBenjamin ArnottStandard Chartered Bank

Group RepresentativeAnthony BarkerBG Asia Pacific Pte Ltd

Group RepresentativeRichard BaileyDNV GL - Oil & Gas

Group RepresentativePhilip De WaalMaxwell Drummond International

Group RepresentativeNicola HewettBritish High Commission

Group RepresentativeDon MackayBW Maritime

Group RepresentativeBree MiechelSimmons & Simmons

Group RepresentativeTim RockellKPMG

Group RepresentativeTony ReganTri-Zen International Pte Ltd

The Energy and Utilities Business Group has regular events open to members, their guests and the invited wider energy-related community. Activities are often coordinated and shared with other energy-interest groups in an attempt to provide a truly broad and open forum. Over the past few years events have seen distinguished energy business figures address the issues that are impacting the business in our region. Speakers have come from across the sector including from multi-nationals, such as Shell, ExxonMobil, BG and BP; thought leaders such as Lord Oxburgh, economic gurus from Energy Intelligence, Platts and Petroleum Argus as well as Singapore LNG, DNV-GL, Flex LNG, the Energy Studies Institute and the Indonesian Petroleum Association.

ENERGY & UTILITIES BUSINESS GROUP

Fifty years ago, Shell was proud to have been involved in the world’s first commercial liquefaction plant in Algeria and the voyage of the first commercial liquefied natural gas (LNG) cargo. Now, Shell is at the forefront of the next first for the LNG industry: floating LNG (FLNG), which will allow gas to be liquefied at sea.

LEARN MORE ABOUT THEPIONEERING PRELUDE FLNG AT:www.shell.com/flng

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