Malaysia LNG Outlook

Malaysia LNG Outlook

Subbu BettadapuraDirector, Energy & Power Systems

Asia Pacific

25th October 2011

LNG Carriers ConferenceSeoul

Understanding LNG Demand

Table of Contents

Malaysia LNG Outlook

Technology developments and shipping companies’ preferences

Investments on LNG Infrastructure

11

22

33

2


Malaysia – Natural Gas Production and Consumption11

3

Natural Gas Domestic Production and Consumption

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Consumption

Production

BC

M

Source: Frost & Sullivan

66.5

35.7


Malaysia - Natural Gas Reserves11

4

Petronas and PSC Partners participate in upstream operations

38 Gas Producing Fields

TCF East Coast of Peninsular Malaysia

Offshore Sarawak

Offshore Sabah

Associated Natural Gas

8.4 3.4 1.3

Non-Associated

25.2 37.5 6.7

Total 33.6 40.9 8.0

Offshore Sarawak49.5%

East Coast of Peninsular

Malaysia40.7%

Offshore Sabah9.6%

Deepwater fields to be developed

Source: Petronas

GMB12.6%

PGB87.4%


Setting the Stage for Competitive Gas Supply Market11

5

Midstream Participants

Downstream Participants • With the construction of regasification terminals, Petronas is setting the stage for other suppliers to penetrate the monopoly market

• Any party can bring in LNG and supply gas to Tenaga Nasional Bhd or other customers

MMScfD2010

PGB 2178

GMB 315

Total 2493

LNG Complex

LNG Export Terminal

Peninsular Gas Pipeline System

Petronas subsidiaries and JV Partners

Petronas Gas Bhd (PGB) and Gas Malaysia Bhd (GMB)

Petronas to maintain its export contracts to the Far East.

Infrastructure Outlook

Gas pipelines

Gas Supply in 2010

Source: Petronas, Frost & Sullivan


Gas Consumption by End Users11

6

Transport, 0.8%Residential & Commercial,

0.1%

Self-generation, 4.1% Non-

Energy, 8.0%

Industrial, 33.3%

Power Stations,

53.7%

Gas Consumption by End Users, Malaysia (2010)Total Consumption: 35.7 BCM

Source: Suruhanjaya Tenaga


Gas Consumption: Power Sector11

7

Power Generation Fuel Mix

0

10

20

30

40

50

60

70

80

2002 2010 2020 2030

Coal

Oil

Gas

Hydro

Others

• Government's move to diversify fuel mix and reliance on coal

• Increase in share of coal• Decrease in share of gas

74%

45%

Source: Gas Malaysia

%

Understanding LNG DemandIndustrial Consumption: Industry locations are near the gas pipeline

11

8

Source: Gas Malaysia & Frost & Sullivan

Gebeng

Kedah26 Industrial Estates

Palau Pinang13 Industrial Estates

Selangor29 Industrial Estates

Federal Territory23 Industrial Estates

Negeri Sambilan17 Industrial Estates

Melaka17 Industrial Estates

Perak33 Industrial Estates

Pahang18 Industrial Estates

Terengganu21 Industrial Estates

Kelantan8 Industrial Estates

Johor31 Industrial Estates

Perlis5 Industrial Estates

Malaysian Rain Forest dominates internal regions

Understanding LNG DemandThe Malaysian industrial estates contain all industry sectors and there are limited specific industry clusters – all clusters are close to gas pipeline

11

9

Key to location of “clusters”:

Cement

Iron & Steel

Petrochemical

Fertilisers

Rubber

Glass

Ceramics

Food

Paper & Wood

Chemor Ceramic Park,

Perak

Foundry Park, Perak

Furniture Village Perak

Tanjung-Langsat Petrochemical and

Steel Complex

Gebeng Petrochemical

Complex

Kertih Petrochemical Complex

Proposed Halal Food Industrial Park

Kedah

Rubber Industrial Area,

Gombak

Petronas Fertilizer Complex

Source: Gas Malaysia & Frost & Sullivan


Subsidies to be eventually removed for Power and Industrial consumers11

10

Gas Subsidy(in US$ Billion)

FY 2010 FY 2009 % Change Cumulative Subsidy

since 1997

Power Sector 3.7 4.2 (11.8%) 28.4

TNB 1.6 1.8 (7.4%) 12.2

Independent Power Producers (IPP) 2.0 2.4 (15.1%) 16.2

Non Power Sector – Including small industrial, commercial, residential users and NGV 2.5 2.2 +13.2% 9.8

Total Gas Subsidy 6.2 6.4 (3.1%) 38.2

• The electric utilities and industries in Peninsular Malaysia are likely to pay market prices for LNG imports

Source: Petronas


Natural Gas Production and Consumption Forecast11

11

0

10

20

30

40

50

60

70

80

90

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Consumption

Production

BC

M

Production and Consumption Forecast

Production expected to reach 88.5 BCM by 2020Consumption expected to be 52.3 BCM in 2020


88.5

52.3

20.5

21.0

21.5

22.0

22.5

23.0

23.5

2005 2006 2007 2008 2009 2010


LNG Exports11

12

MM

TP

A

China, 0.81India, 0.19

Japan, 12.84

Korea, 5.87

Kuwait, 0.07

Taiwan, 2.83

China, 1.19

Japan, 13.89

Korea, 4.96

Kuwait, 0.13Taiwan, 2.96

LNG Exports from Malaysia, MMTPA (2010)Total Exports: 23.13 MMTPA

LNG Exports from Malaysia, MMTPA (2009)Total Exports: 22.61 MMTPA

Source: Petronas


LNG Exports Forecast11

13

MM

TP

A

15.0

17.0

19.0

21.0

23.0

25.0

27.0

2011 2015 2020

LNG export forecast to be 26 MMTPA in 2020. Capacity expansion forecast due to increased production from deep water fields and development of associated infrastructure. Some of the infrastructure development includes:

Sabah Oil and Gas Terminal (SOGT) andSabah-Sarawak Gas Pipeline (SSGP)The 500km SSGP will transport gas from the SOGT in Kimanis to Bintulu for processing into LNG at the PETRONAS LNG Complex for export. The pipeline system also has provisions for future domestic consumption in Sabah and Sarawak.


26.0

23.1


LNG Imports Sources11

14

• From open market

• Import Contracts

• Petronas has a 27.5% stake in the Santos-led coalseam gas-based Gladstone LNG project in the eastern Australian state of Queensland and has a 20-year contract to buy 3.5 million mt/year of LNG from the project

• Petronas has signed a contract with France's GDF Suez for the supply of 2.5 million mt of LNG over three-and-a-half years. Shipments will start from August 2012

• Qatargas has signed an agreement with Petronas to supply the Malaysian company with 1.5 million mt/year of LNG, under a long-term contract. The agreement is for 20 years, with the first LNG cargo to be delivered in 2013.

Source: Industry Sources


LNG Imports Forecast11

15

0

1

2

3

4

5

6

7

8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

MM

TP

A

• Imports to start in 2012

• LNG imports forecast to reach 7.4 MMTPA by 2017


Module Original LNG Design Production Capacity (MTPA)

MLNG 3 Nos(module 1, 2 & 3)

8.4

MLNG Dua 3 Nos(Module 4, 5, 6)

7.8

MLNG Tiga 2 Nos(Module 7 & 8)

6.8


Existing LNG Infrastructure22

16

Petronas LNG Complex, Bintulu, Sarawak

Three LNG Plants

• All modules are based on the propane precooled mixed refrigerant process utilising the Air Products & Chemicals Inc. (APCI) main cryogenic heat exchanger (MCHE)

• MLNG, completed in 1980, uses steam turbine drivers for the main refrigerant compressors, and sea water cooling• MLNG Dua, completed in 1995, uses gas turbine drivers for the main refrigerant compressors, and hybrid sea water and

air cooling. • MLNG Tiga, completed in 2004, uses gas turbine drivers for the main refrigerant compressors, and air cooling. The

facilities share common LNG rundown, storage tank and export facilities.• The Petronas LNG complex, including power generation and utilities systems, is run by MLNG as an integrated facility.

• MLNG Dua capacity increased by 1MTPA in 2010 by de-bottlenecking.

• Increased production achieved by the up-rating of power available to the main refrigeration C3 and MCR systems and the addition of a new end flash unit

One LNG Export Terminal: MLNG Dua Terminal

Source: MLNG, Petronas


Existing LNG Infrastructure22

17

LNG Complex: Designer and Contractor Details

MLNG TigaThe MLNG Tiga Plant's EPCC Contractor comprised Consortium members JGC Corporation (JGC), Kellogg Brown & Root, Inc (KBR), Sime Engineering Sdn Bhd (Sime), JGC (M) Sdn Bhd (JMSB) and Kellogg (M) Sdn Bhd (KMSB).

MLNG DuaFor the MLNG Dua plant, the project specification was prepared by the same technical consultant, incorporating the latest development concepts and improvement based on the experience gained from other LNG plants worldwide. The construction was undertaken by a consortium of companies comprising JGC Corporation, MW Kellogg Co, Sime Engineering Sdn Bhd, JGC (M) Sdn Bhd and Kellogg (M) Sdn Bhd.

Malaysia LNGThe MLNG plant was designed by Shell Internationale Petroleum Maatschappij (SIPM), the technical services consultant for the project; and constructed by a consortium comprising JGC Corporation of Japan and Kellogg Overseas Construction Corporation/Pullman Kellogg of the United States of America

Source: MLNG, Petronas


Malacca LNG Import Terminal – Under Construction22

18

Project Owner: Petronas Gas BhdProject Status: ExecutionProject Value: US$ 952 millionProject Completion date: Q3 2012

FSU conversion

•MISC LNG Carrier Tenaga Satu being converted by MMHE, Malaysia

•MISC LNG Carrier Tenaga Empat being converted by Keppel Shipyard, Singapore

EPCIC Contract for the LNG Regasification Unit, Island Berth and Subsea Pipeline awarded in Jan 2011 to a consortium of Perunding Ranhill Worley Sdn Bhd and Muhiubbah Engineering (M) Sdn Bhd The contract is valued at US$ 352 million with a 70:30 split in favour of Ranhill, the consortium leader

The project comprises of:

An island jetty and regasification units, as well as subsea and onshore pipelines to transport the regasified LNG to Malaysia's Peninsular Gas Utilization pipeline network

The regasification facility will have maximum throughput capacity of 3.8 million mt/year

Two floating storage units to receive and store LNG

1

2

Source: Petronas Gas


Pengerang LNG Import Terminal – Planning Stage22

19

• Second LNG import and regasification facility at Pengerang in the state of Johor

• To be owned by Petronas

• To be part of Petronas’ US$20 billion Refinery and Petrochemical Integrated Development (Rapid) project.

• Onshore facility with 3.8 MMTPA capacity

• To be operational by 2016

Source: News Reports


LNG Shipping Company - MISC Bhd22

20

MISC Bhd is a Petronas linked shipping and engineering company

Current Fleet Charter-in Newbuildings

LNG Carriers 29 - -

Petroleum Tankers 53 30 11

Containerships 16 14 2

Others (Dry Bulk & LPG)

3 1 -

Current Facilities New Conversions

Offshore Floating Facilities

12 (FSPO 5, FSU 5, MOPU 2)

1 -

The company’s fleet profile as of 1 October 2011. Source: MISC Bhd

MISC owns and operates 8% of the global LNG Carriers Fleet (2010)

Source: MISC


MISC’s LNG Fleet22

21

Carrier NameContainment

System Country of Build Shipbuilder Capacity, m3 DeliverySeri Balquis GT NO 96 Japan Mitsubishi Nagasaki 152,000 Dec-08

Seri Balhaf GT NO 96 Japan Mitsubishi Nagasaki 152,000 Sep-08

Seri Bijaksana GT NO 96 Japan Mitsubishi Nagasaki 152,300 Feb-08

Seri Begawan GT NO 96 Japan Mitsubishi Nagasaki 152,300 Dec-07

Seri Ayu TZ Mk. III Korea Samsung 145,000 Oct-07

Seri Bakti GT NO 96 Japan Mitsubishi Nagasaki 152,300 Apr-07

Seri Angkasa TZ Mk. III Korea Samsung 145,000 Feb-07

Seri Anggun TZ Mk. III Korea Samsung 145,000 Nov-06

Seri Amanah TZ Mk. III Korea Samsung 145,000 Mar-06

Seri Alam TZ Mk. III Korea Samsung 138,000 Oct-05

Puteri Mutiera Satu GT NO 96 Japan Mitsui Chiba 137,100 Apr-05

Puteri Firuz Satu GT NO 96 Japan Mitsubishi Nagasaki 137,100 Sep-04

Puteri Zamrud Satu GT NO 96 Japan Mitsui Chiba 137,100 Jan-04

Puteri Nilam Satu GT NO 96 Japan Mitsubishi Nagasaki 137,100 Sep-03

Puteri Delima Satu GT NO 96 Japan Mitsui Chiba 137,100 Apr-02

Puteri Intan Satu GT NO 96 Japan Mitsubishi Nagasaki 137,100 Dec-01

Arranged by Delivery Year – Newest to Oldest

Source: MISC


MISC’s LNG Fleet22

22

Carrier NameContainment

System Country of Build Shipbuilder Capacity, m3 DeliveryAman Hakata TZ Mk. III Japan NKK Tsu 18,800 Nov-98

Puteri Firuz GT NO 96 France Atlantique 130,405 May-97

Aman Sendai TZ Mk. III Japan NKK Tsu 18,928 May-97

Puteri Zamrud GT NO 96 France Atlantique 130,405 May-96

Puteri Nilam GT NO 96 France Atlantique 130,405 Jun-95

Puteri Delima GT NO 96 France Atlantique 130,405 Jan-95

Puteri Intan GT NO 96 France Atlantique 130,405 Aug-94

Aman Bintulu TZ Mk. III Japan NKK Tsu 18,928 Oct-93

Tenaga Satu GT NO 88 France Dunkerque 130,000 Sep-82

Tenaga Tiga GT NO 88 France Dunkerque 130,000 Dec-81

Tenaga Lima GT NO 88 France La Seyne 130,000 Sep-81

Tenaga Dua GT NO 88 France Dunkerque 130,000 Aug-81

Tenaga Empat GT NO 88 France La Seyne 130,000 Mar-81

MISC has a total of 29 LNG Carriers in its fleet. Of these, two (Tenaga Satu and Tenaga Empat) are being converted to FSUs for the Malacca LNG Terminal

Arranged by Delivery Year – Newest to Oldest

Source: MISC


MISC Fleet – By Containment System and Builder22

23

GT No 88, 5

GT No 96, 16

TZ Mk. III, 8 Mitsubishi Nagasaki , 8

Samsung , 5Dunkerque , 2

La Seyne , 2

NKK Tsu , 3

Mitsui Chiba , 3

MISC Fleet: Containment System (Total 29 LNG Carriers)

MISC Fleet: Builder (Total 29 LNG Carriers)

Source: MISC

Technology Developments and Shipping Companies Preferences

FLNG Development in Malaysia33

24

• Mustang in joint venture with PETRONAS and MISC to develop FLNG solutions

• Objective to develop integrated floating LNG liquefaction, storage, and offloading solutions, using Mustang's LNG Smart liquefaction technologies

• The joint venture is owned by Petronas (60%), MISC (30%), and Mustang (10%)

• The first project for the joint venture will be the development of the front-end engineering design (FEED) for a floating LNG vessel, to be located offshore Malaysia.

• The project is expected to achieve first gas from a floating LNG FPSO facility in 2013.

• The joint venture hopes to assist with full project development of gas reserves in Malaysia and other countries worldwide, using floating LNG FPSO solutions. The joint venture will also focus on the adaptation, enhancement, and development of floating LNG technologies, and project implementation.

• PETRONAS will provide assistance in gas field sourcing and the marketing of LNG• MISC will provide assistance in LNG shipping fabrication; and • Mustang will provide engineering design, procurement, and project management services

related to LNG liquefaction processes and gas pre-treatment for topsides facilities

Source: News Reports


Best in Class LNG Carriers in Qatar Gas’ Fleet33

25

Q-Flex and Q-Max LNG Carriers – Each ship has a cargo capacity of between 210,000 and 266,000 cubic metres These large vessels have many innovative features to maximise cargo deliveries and to ensure the highest levels of safety and reliability.

Among them are:•Membrane type cargo containment system•Twin engines and shafts to ensure maximum propulsion safety and reliability, with reduced environmental footprint•Slow speed diesel engines which are more thermally efficient than steam turbines and therefore burn less fuel, which will produce 30 percent lower overall emissions compared to traditional existing LNG carriers.•Cargo re-liquefaction plants return cargo boil off to the cargo tanks and therefore maximise the cargo outturn at the discharge port.•Underwater coatings using the latest technology silicon anti-fouling system, which not only enhances the speed and performance of the vessel, but is also beneficial to the marine environment since it does not release any biocides into the sea to prevent marine growth on the hull.•Fire fighting specifications include combinations of Hi-Ex foam, Hi-fog water systems and safer and cleaner fire extinguishing agents to eliminate the need for CO2

Source: Qatar Gas


Next Generation LNG Carrier from Mitsubishi33

26

Mitsubishi Heavy Industry has launched “EXTREM”, the next generation Liquefied Natural Gas (LNG) carrier, featuring Moss-type LNG containment system

The EXTREM combines the advantages of Moss-type carriers with energy-saving features and higher LNG cargo transport capacity.

The EXTREM is a newly developed “Sayanedo” series carrier, featuring a peapod-shaped continuous cover for the Moss spherical tanks which is integrated with the ship’s hull instead of conventional hemispherical cover

The new design provides a greater structural efficiency, plus a reduction in size and weight, resulting in improvement in fuel consumption as well as compatibility with LNG terminal and its maintainability. The new design will be used as the hull reinforced material for overall strength on the ship

The EXTREM measure 288 m in length , 49.0 m in width, 26.0 m in depth and 11.5 m in draft. The ship has cargo tank capacity of 155,000 m3 using four Moss-type tanks

Better compatibility with major terminals in Japan and other countries in view of cargo manifold and gangway landing arrangement.

Source: Mitsubishi Heavy Industries


Containment System: Moss Type versus Others33

27

Containment System

Fleet Capacity, m3

No. of LNGCarriers

Moss 14,392,719 108

GT No 96 16,590,390 106

TZ Mark III 16,899,108 102

TZ Mark I 920,211 10

GT No 85 1,016,328 8

GT No 82 410,251 7

GT No 88 916,000 7

CS 1 381,100 3

Esso 82,000 2

IHI SPB 179,760 2

Total 51,787,867 355

LNG Carriers Fleet by Containment System, 2010» Moss containment system leads the LNG carrier

market in units of LNG carrier. However, TZ Mark III leads from fleet capacity perspective

» In the period 2000 to 2010, about 251 LNG carriers were ordered, out of which membrane containment system accounted for 208 carriers or about 81%

» Prior to 2000, majority of LNG carriers built were based on Moss containment system

» There are only two LNG carriers with IHI SPB system, however this container system is preferred for LNG FPSO, and LNG carriers for Arctic Ocean route despite its high cost

Source: Frost & Sullivan, Industry Sources

» Membrane containment system is preferred due to the following benefits over Moss containment system– Less capital investment– Less operating expenditure

» The weakness, in GTT is ‘sloshing’. To solve this problem, GTT provides new membrane technology that reduces sloshing

» In 2010, only 3 LNG carriers were being built with Moss containment system; All these three were by Kawasaki Heavy Industries (KHI) of Japan

» Implication for a related raw material supply industry: Aluminum plate is used only for Moss and SPB containment system, so its demand has gone down considerably. Demand of aluminum plates depend on growth of LNG carriers for Arctic route, and growth of LNG FPSO

Technology Developments and Shipping Companies PreferencesConsiderable Shift from Moss Containment System to GTT Membrane Containment System

32%

30%2%

2%

2%

27%

3%1% 0% 1%

Moss GT No 96 GT No 85 GT No 82 GT No 88TZ MK III TZ MK I CS 1 Esso IHI SPB

LNG Carrier Fleet by Containment System, 2010

42%

8%

50%GT No 96

Moss

TZ MK III

LNG Carriers Under Construction by Containment System, 2010

33

Source: Frost & Sullivan 28


Selection Criteria for Containment Systems

• For LNG ships the choice is largely (if not entirely) driven by economics.

• Shipbuilders are generally standardized on a specific containment system (only Mitsubishi and Hyundai presently can offer either MOSS or Mark III Membrane).

• The vessel owner will generally go through a tendering process, allowing both MOSS and membrane designs to compete. The shipowner and LNG project company decide on the containment system

• For FLNG the owner’s role is more pronounced, though emphasis is still on functional requirements rather than specifying a specific containment system

Selection Criteria for Shipbuilders

• Reliability, Past Experience, Price and Payment Terms• Availability of delivery slots is an important factor• The role of shipyards in terms of financing is generally limited.

Selection Criteria33


29

Decision Makers

Emergence of Chinese LNG Carrier Builders

• The development of LNG ship construction in China has been very much government driven, imposing domestic LNG import by Chinese built ships. This has increased the participation of Chinese builders in the market

Selection Criteria for suppliers – Shipbuilders or shipowners decide on supplier• Performance record (quality or products, reliability of supplier, reputation of supplier)• Competitive Price• Production capacity• Technical acceptability

Who decides ?• Purchasing team and design team are involved in selecting suppliers, however, the final decision is made by the

purchasing team• For each LNG carrier project, a contract is developed between shipbuilder and supplier; Shipbuilders only procure

what is needed for the project and keep inventory to the minimum

Technology Developments and Shipping Companies Preferences33


30


Benchmarking LNG Carriers Operators33

31

Process:

1.Measure and compare performance metrics between peers2.Gap analysis3.Identify steps for improvement

Benchmarking is a well established business improvement tool in the oil and gas process industry

Benchmarking has not yet penetrated the LNG carriers businessLNG carriers fleet is increasing at a rapid pace. New Technology is being adoptedA third party external perspective can provide valuable input to operators

Result:

Improved business performance

Participants are anonymous and the benchmarking participants are only able to identify their own LNG carrier fleet in comparisons

Operational Performance Metrics:•Health & Safety•Operating Costs•Ship Availability & Utilization•Port Performance•Cargo Management•Personnel•Environmental Impact

Note: Shell Global Solutions developed the pilot benchmarking study for LNG Carriers Source: Frost & Sullivan

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Subramanya BettadapuraDirectorEnergy & Power [email protected]

Malaysia LNG Outlook

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