LNG Bunkering Terminal Infrastructure: Opportunities and Challenges for LNG ships Mr Faizul Ismail Vice President, LNG Business 21 March 2013 LNG MALAYSIA FORUM 2013, Kuala Lumpur, Malaysia

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Disclaimer

Certain statements made in this presentation and in other written or oral statements made by MISC Berhad are “forward-looking statements” that involve subjective judgement and analyses and are subject to significant uncertainties, risks and contingencies, many of which are outside of, or unknown to MISC Berhad. A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: “believe”, “anticipate”, “expect”, “estimate”, “project”, “will”, “shall” and other words or phrases with similar meaning. Actual future events may vary materially from the forward looking statement and the assumptions on which the forward looking statements are based. Given these risks and uncertainties, readers should not place undo reliance on forward-looking statements as a prediction of actual results.

These forward looking statements speak only as of the date of this presentation. MISC Berhad disclaims any obligation or undertaking to publicly update or revise any of the forward looking statements in this presentation, whether as a result of new information, or any change in events, conditions or circumstances on which any such statement is based.

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Contents 1

Introduction

2

LNG Bunkering Value Chain Opportunities

3

• Forecast of LNG Bunker demand by 2020. • Global LNG bunkering infrastructure by 2020 • Forecast of LNG-fuelled newbuildings.

4

Challenges • Operational challenges • Ship design challenges

5

Conclusion

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Introduction

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Regulations are in place to cap the sulphur content in marine fuels Sulphur content %

ECA

Global

5 4.5

All shipping is subject to International Maritime Organisation regulations

4 3.5 3

Global limit likely to be pushed out to 2025

2.5 Some voyages are subject to regulations agreed within regional “Emission Control Areas”

2 1.5 1 0.5

0 2000

2005

2010

2015

2020

2025 Source: WoodMackenzie

Different alternatives that are viable for emissions regulations fulfillment: • Burning lower sulphur fuels such as low sulphur marine diesel oil or marine gas oil (MGO). • Fitting abatement technologies i.e. Heavy fuel oil (HFO) with an exhaust gas scrubbers. • Converting to LNG or ordering new LNG-fuelled ships.

Page  5

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Emission Control Areas are in force in the Baltic, North Sea and around North America; future ECA are under consideration

Established ECA

Established ECA under Emissions considerationControlled Areas Emissions Controlled Areas under consideration Shipping Critical points Shipping critical points

New regulations apply to all vessels (existing and newbuilds) © Copyright reserved MISC BERHAD

Value Chain

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Supply of LNG as a bunker fuel – which options to choose? LNG supply infrastructure

LNG bunkering options

LNG received as shipping fuel

1 Truck-to-ship LNG Onshore terminal

2 Jetty-to-ship 3 Ship-to-ship

Floating LNG terminal

4

Source: DNV

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Ship-to-ship

Available options

Potential future option

Opportunities

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Global LNG bunker demand by 2020 forecasted to be in between 4 to 7 Mtpa Source: Det Norske Veritas (DNV)

Northern Europe 1.4 – 2.2 Mtpa

China 0.3 – 0.8 Mtpa

0.07 – 0.09 Mtpa

North America 0.9 – 1.4 Mtpa

Japan & Korea 0.3 – 0.5 Mtpa Southern Europe 0.3 – 0.7 Mtpa Middle East & India 0.3 – 0.7 Mtpa

South East Asia 0.4 – 0.7 Mtpa

South America 0.3 – 0.4 Mtpa LNG Bunkering Demand 2012

LNG Bunkering Demand 2020 Equivalent to 4 – 7 Mtpa of LNG

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Australia & New Zealand 0.1 – 0.2 Mtpa

• ECA zones such as Europe and North America will dominate the LNG bunker demand until 2016 due to stricter emission control regulation. • The price of LNG and other alternatives, particularly on dual fuel engines, will strongly influence growth of LNG bunkering demand. • Strong government intervention and incentives are required for growth e.g. subsidies, tax reduction etc.

Current and forecast of global LNG bunkering infrastructure by 2020

DNV is cooperating with KOGAS on feasibility study of LNG bunkering in Korea Shell is anticipated to provide LNG barging and bunkering operation

Major global bunkering ports: 1. Singapore 2. Rotterdam 3. Fujairah 4. Antwerp 5. Hong Kong

DNV announced LNG Bunkering in Australia is feasible SLNG has awarded ECP for berth project at Jurong Island terminal to facilitate LNG bunkering

(2)

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(16)

(19)

Source: DNV, 2013

Newbuilding and number of LNG fuelled ships segment Source: Llyods and RS Platou, 2013

Highcase 67 Mt: 12.6% of newbuilds i.e. 1,963 LNG-fuelled NBs

Basecase: 4.2% of newbuilds i.e. 653 LNG-fuelled NBs YTD 48 LNG fuelled ships in operation and 43 confirmed LNG fuelled newbuilds

• The technology is proven with 48 ships in operation with LNG fuel capabilities and 43 new ships contracted as at 27 Feb 2013. • The Offshore vessels and ferries dominate the LNG fuelled fleet and order book today. • Discussions are on-going among yards, designers, equipment manufacturers and classification societies to develop conceptsreserved and designs most ship types. © Copyright MISCfor BERHAD

Challenges

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Whilst LNG bunkering infrastructure is developing, shipowners are facing several operational issues Truck-to-ship transfer • Supplying LNG in a small quantity (27 to 40 cbm only) • Only suitable for small-scale LNG vessels and regional operating vessels • LNG fuelled vessels for deepsea requires at least 500 cbm for operation

Jetty-to-ship transfer • Lack of unified local and international regulations and standard bunkering procedures • Permission from port state flag and port states have to be obtained for operation, causing complications if vessels calling at different ports

Ship-to-ship transfer via LNG bunkerbarge • BOG handling and LNG bunkering interface (manifold) from LNG bunkerbarge to receiving vessels have to depend on receiving vessels specifications. • Sensitive to adverse swell or weather conditions • Missing link: LNG bunkerbarge (still at conceptual stage)

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Shipowners are facing ship design issues in adopting LNG as bunker fuel Storage volume  LNG need 1.6 times more storage volume compared to HFO  taking up considerable amount of underdeck space, compromising cargo carrying capacity

Fuel tank types  Type C: safe, reliable, allow high loading rates and pressure, but consume 3 to 4 times larger volume  Type B: taking up space, require pressure maintenance and secondary barriers

Source: ABS

Source: TGE

Tank location  Can be located in enclosed spaces or on deck  Several risks involve:  Risk of fire  Risk of leaked flammable product causing fire  Risk of leaked cryogenic fluid - loss of structural integrity Source: DNV

TGE Type C Tank

LNG tank underneath accommodation unit Prismatic Type B Tank

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Conclusion

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Conclusion •

Technical and regulatory challenges need to be overcomed before LNG bunkering in ports become standard.

•

Concerted effort of regional governments for complete regulatory framework and incentives (e.g. sulphur tax exemption, NOx fund support) are needed to promote investments in LNG infrastructure

•

Availability of LNG with the growing global network of LNG liquefaction plants and regas terminals could significantly spur interest.

•

Coordinated efforts by all actors in the LNG supply chain are needed for establishing a “critical minimum” level of LNG infrastructure to meet the demand in 2015 to 2020.

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Dilemma: which one comes first?  LNG bunker suppliers are expecting off-takers to be ready and vice versa.  Shipowners are expecting shipyard to spur the development in terms of design, slot availability and vice versa.

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Thank You

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Economic Evaluation of Using LNG as bunker fuel on 14,000 Teu Container Ship Study done by: DSME

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The End

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