Pricing of LNG from Small Scale Facilities - Some Examples from Indonesia and Thailand

LNG Global Congress Asia Pacific 2013

Neil Semple
March 2012
Displacing Traditional Fuels with Onshore LNG

Context Main Points

Small scale LNG on a remote onshore gas field is a quick way to market production.

No need to wait to prove up huge reserves to justify a pipeline.

No need to then wait for the pipeline to be built.

Cost of Small Scale LNG infrastructure leaves plenty of headroom for reasonable upstream gas prices.

Some parts of small scale LNG equipment are now becoming standardised driving down costs.

Large potential market in Kalimantan and Sumatra to displace market diesel with LNG in mine trucks.

Displacement of industrial use of LPG and fuel oil might also be targeted.

Remote diesel generation sets might also be able to get LNG in pressurised container tanks

1
Indonesia

2 The Lantau Group

Coal Production in Indonesia

350 Coal production on the rise

300 For the whole of Indonesia

250 Kalimantan and Sumatra dominate

Both are near CBM gas fields that are looking

m tonnes

200
to sell gas
150

100

50

0
2007 2008 2009 2010 2011

Coal Production Indonesia

Source: Ministry of Energy and Mineral Resources

3 The Lantau Group

Diesel Displacement by LNG in Mine Trucks

This is for the whole of Indonesia which

350
means in practice Kalimantan and Sumatra
300
Assumes 11.4 litres of diesel used per tonne
250 of coal produced.
200 GFS technology displaces about half of the
mmcfd

diesel consumption.
150

100
LNG demand of about 1.1 mmtpa or 3,000
tonnes per day or 150 mmcfd.
50
Would need a mini-aggregator to collect LNG
0 from various gas fields.
2007 2008 2009 2010 2011

Diesel use converted to mmcfd This would also provide a level of security of
Trucks using half diesel and half LNG
supply to the buyers.
Source: The Lantau Group

4 The Lantau Group

54 CBM PSCs Soon to be Looking For a Market for Their Gas
Date awarded CBM Blocks Awarded Location Operator Participation
1 May-08 Sekayu South Sumatra Medco Medco, Batavia Energy, Ephindo
2 Jun-08 Bentian Besar East Kalimantan CBM Asia Ridlatama Mining Utama (farmed 70% to CBM Asia 2011 Oct?)
Riau, Central
3 Jun-08 Indragiri Hulu Sumatra Samantaka Mineral Prima Samantaka Mineral Prima
4
5
Nov-08 Barito Banjar I
Nov-08 Barito Banjar II
South Kalimantan
South Kalimantan
Indobararambai Gas Methan
Barito Basin Gas
Consortium of local KP holders, XOM
Consortium of local KP holders, XOM Wellhead breakeven
6 Nov-08 Kutai West East Kalimantan Kutai West CBM CBM Asia, Newton Energy Capital
7
8
Nov-08 Sangatta I
May-09 Ogan Komering
East Kalimantan
South Sumatra
Pertamina-Sangatta West CBM
Ogan Interior Gas
Ephindo, Pertamina, Arrow
Ogan Interior Gas (Santos)
is estimated in the
9 May-09 Sangatta II East Kalimantan Pertamina Hulu Energi Metana Kalimantan - Visi Multiartha Pertamina Hulu, Visi Multiartha (EMP)
10
11
May-09 Tabulako
Aug-09 Barito Tapin
Kalimantan
South Kalimantan
Artha Widya Persada
Trisakti Gas Methane
EMP, Bumi Resources
Trisakti Gas Methane, XOM
range of USD 6 to 7
12 Aug-09 Kotabu South Kalimantan Satui Basin Gas Satui Basin Gas
13
14
Aug-09 Ogan Komering II
Aug-09 Pulang Pisau
South Sumatra
Central Kalimantan
East Ogan Methane
Uangel Sigma Energi
East Ogan Methane (Santos)
Sigma Energy Bumi, Blue Tiger
mmbtu.
15 Aug-09 Tanjung Enim South Sumatra Pertamina Hulu Energi Mitra Enim Pertamina Hulu Energi Mitra Enim, Bukit Asam Metana Mitra Enim, Dart Energy
16 Nov-09 Barito South Kalimantan Trans Asia Resource - Jindal SS Indonesia Trans Asia Resoutrce, Jindal Stainless Indonesia
17

18
Nov-09 Rengat

Nov-09 Sanga Sanga

Central Sumatra

East Kalimantan
Indon CBM

Vico Indonesia
Sigma Energy Bumi, Blue Tiger
Vico Indonesia, BP East Kalimantan, Lasmo Sanga Sanga, OPIC Oil Houston, Virginia Inter Co, Universe Gas
& Oil
But it will be several
19
20
21
Nov-09 Batang Asin
Nov-09 Muara Enim
Dec-10 Muralim
Central Sumatra
South Sumatra
South Sumatra
Bumi Perdana Energy - Glory Wealth Pacific
Trisula CBM Energy
Dart Energy (Muralim) E. Ltd
Bumi Perdana Energy, Glory Wealth Pacific
Pertamina Hulu Energi Metana Sumatra 2, Trisula CBM Energy (part of ASX listed Nu Energy)
Dart, Medco Energi
years yet before full
22
23
Mar-11 Kutai East
Apr-11 Kapuas I
East Kalimantan
Central Sumatra
Senyiur CBM
Transasia CBM
Senyiur CBM Consortium Inc. - Total E & P East Kutai
PT Transasia CBM consortium - BP Kapuas I Limited
commerciality is
24 Apr-11 Kapuas II Central Sumatra Kapuas CBM Indonesia Indonesia PT Kapuas CBM consortium - BP Kapuas II Limited
25
26
Apr-11 Kapuas III
Apr-11 Kutai West
Central Sumatra
East Kalimantan
Gas Methan Utama
Gas Methan
Methane Gas consortium PT Main - BP Kapuas III Limited
Gas Methan Abadi
achieved.
27 Apr-11 Muara Enim I South Sumatra Pertamina Hulu Energi Metana Sumatera I Konsorsium Pertamina Hulu Energi Metana Sumatera I & Indo Gas Methan
28 Apr-11 Muara Enim II South Sumatra Pertamina Hulu Energi Metana Sumatera 5 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 5 - PT Metana Enim Energi - PT Indo CBM Sumbagsel 2 Pte. Ltd.
29 Apr-11 Muara Enim III South Sumatra Pertamina Hulu Energi Metana 4 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 4 - PT Baturaja Metana Indonesia.
30 Apr-11 Sijunjung West Sumatra Global Lion and Tamarin Hill Senyiur CBM Consortium Inc. - Total E & P East Kutai
31 Jul-11 Belida South Sumatra Sele Raya Konsorsium Sele Raya Resource & Andalas Metana Energi
32 Jul-11 Kutai II, East Kalimantan East Kalimantan Ephindo Konsorsium Ephindo Kutai North Inc. & Resources Alam Energi
33 Jul-11 Lematang South Sumatra Medco Konsorsium . Medco Cbm Lematang; Methanindo Energi Resources; & . Saka Energi Indonesia
34 Jul-11 Melak Mendung I East Kalimantan Ephindo Ephindo Mega Methana Inc
35 Jul-11 Melak Mendung III East Kalimantan Deep Industries Konsorsium Deep Industries Limited & Monnetispat & Energy Limited
36 Jul-11 Suban II South Sumatra Pertamina Hulu Energi Consortium PT Pertamina Hulu Energi Metana Suban II PT. Suban Methan Gas
37 Aug-11 Suban I South Sumatra Pertamina Hulu Energi Konsorsium Pt Pertamina Hulu Energi Metana Subani & Pt. Suban Methan
38 Aug-11 Suban II South Sumatra Pertamina Hulu Energi Pertamina Hulu Energi Suban Ii& Pt Suban Methan Gas
39 Oct-11 Hulu Central Sumatra CBM Asia CBM Asia
40 Dec-11 Bangkanai I Central Kalimantan Bangkanai CBM Energi Sugico Graha
41 Dec-11 Bangkanai II Central Kalimantan Borneo Metana Energi Sugico Graha
42 Dec-11 Bangkanai III Central Kalimantan Bangkanai Energi Resources Sugico Graha
43 Dec-11 Bangkanai IV Central Kalimantan Bangkanai Jaya Perkasa Sugico Graha
44 Dec-11 Tanah Laut South Kalimantan Asam-Asan Methan Gas Asam-Asan Methan Gas, Sumber Daya Energi
45 Dec-11 Tanjung II Kalimantan Pertamina Hulu Energi Pertamina Hulu Energi
46 Apr-12 Air Komering Sumatera Selatan Baturaja Energi Konsorsium PT. Baturaja Energi PT. Anugrah Persada Energi
47 Apr-12 Air Benakat I Sumatera Selatan Pertamina Hulu Energi Metana Sumatera 3 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 3 PT. Petrobara Sentosa
48 Apr-12 Air Benakat II Sumatera Selatan Pertamina Hulu Energi Metana Sumatera 6 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 6 PT. Prima Gas Sejahtera
49 Apr-12 Air Benakat III Sumatera Selatan Pertamina Hulu Energi Metana Sumatera 7 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 7 PT. Unigas Geosinklinal Makmur
50 Dec-11 West Sanga Sanga East Kalimantan Sugico Graha Sanga Sanga Prima Energi
51 Sep-12 Benlagon East Kalimantan Dart CBM Dart CBM
52 Sep-12 Belawa South Sulawesi Bumi Parahyangan Energi Bumi Parahyangan Energi
53 Sep-12 Sekayu South Sumatra Ephindo and Star Energy Ephindo and Star Energy
54 Sep-12 Kuala Kapuas I Central Kalimantan CBM Asia CBM Asia and Tranaco Utama

Source: BP MIGAS

5 The Lantau Group

GFS Corp LNG-fueled Mine Truck

The EVO-MT System for Caterpillar 793 Mine

Haul Trucks allows operators to substantially
reduce operating costs and improve
sustainability by replacing diesel fuel with liquid
natural gas (LNG)
The EVO-MT 7930 System is designed and
manufactured by GFS Corp of Weston, Florida
and is the worlds first commercial technology
that allows large mine haul trucks to operate on
natural gas.
Has to use between 30 to 50% diesel to get
ignition.
These trucks with 3,000 horse power are in a
separate class from road haulage which have a
tenth of that power.
Tests with four truck in Wyoming have been
running for six months and appear successful.
Demonstration in Kalimantan have not started
Source: GFS Corp yet.

6 The Lantau Group

Market Price Diesel Less Cost of Small Scale LNG
35
We show here the unsubsidized diesel price
which mining industry is supposed to pay.
30

Truck conversion cost estimate wrapped up in

25 netback bar.

If delivered LNG cost is USD20 mmbtu then

USD mmbtu

20
savings per day could approximate to USD
625 per truck per day based on 3,800 litre per
15
day use of diesel, or payback in a year.
10

0
Diesel Liquefaction, Transport, Rent and Wellhead and
Storage, Vapourisation Truck Conversion

7 The Lantau Group

Non Subsidised LPG Less Cost of Small Scale LNG

35 Here we show the price that large industrial

users pay for bulk LPG in 50 kg containers.
30
Subtracted is the LNG liquefaction, storage,
25 transport, storage and vapourisation cost.

This gives the potential price that upstream

USD mmbtu.

20

CBM PSCs could sell their gas for ex-PSC.

15

10

0
LPG Delivered Bulk Market Liquefaction, Transport, Rent and Wellhead
Price Storage, Vapourisation

8 The Lantau Group

High-level Cost Assumptions for Small Scale Onshore LNG
Small Scale LNG Cost Assumptions
Liquefaction: USD 2000 per tonne per year (USD5.1 mmbtu)
Opex: 2% of capex (USD 0.75 mmbtu)
Tractor and trailer capex: USD 500,000 (USD0.70 mmbtu)
Tractor and trailer opex: USD 0.50/mmbtu
Storage: USD 1,500 cubic metre and 10 days of capacity
plus opex: USD 2.2 mmbtu
Vaporisation: USD 1.0/mmbtu
Overheads and marketing: USD0.75 mmbtu
All in USD 11.0 mmbtu
Small-Scale LNG Market Participants
Current Projects in China (2.5 mmtpa, 6,800 tpd or 350
mmcfd capacity, with the same again under construction)
some recent additions are:
Suchuan Huayou Gas Guangan 700 tpd, 35
mmcfd
Xinjiang Borli Energy 250 tpd, 12 mmcfd
Bayanzouer Huayou Gas 250 tpd, 12 mmcfd
Lanzhou Kunlun Gas 250 tpd, 12 mmcfd
Upstream infrastructure suppliers - Air Products, Black &
Veatch/Chemtex, CIMC ENRIC, Chart, Cryostar,
Furuise, Kryopak, Linde, Technip, Cryogas.
Tractors and trailers Volvo, Daimler, Chart, numerous
local suppliers in China.

Small Scale LNG Liquefaction LNG Delivery by Truck LNG Offloading Storage & Ambient Air Regas

Source: Linde Source: Linde Source: GasNor Source: GasNor

9 The Lantau Group

PLNs Power Plants by Type and Region

10 The Lantau Group

PLN Data on 2011 Diesel Gensets and Diesel Usage

Macro scale At the typical plant level

PLN 2011 Yearbook says there are 4,786 diesel- Power plant MW 0.4
Hours per Day 20
fired power plants outside the island of Java.
HHV mmbtu MWh 10
With installed capacity of 2,467 MW and rated mmbtu per Day 80
LNG mmbtu per tonne 50
capacity of 1,490 MW which gives an average LNG Tonnes per day 1.6
of close to 2,000 MW or about 0.4MW per plant. LNG Tonnes per week 11.2
LNG Tonnes per year 582
These are mostly gen-sets and consume some
4.6bn litres of diesel a year, or the energy
equivalent of about 4.7 bcma, or 450 mmcfd. This level of demand is very unlikely to support
conventional small scale LNG delivery chain.

11 The Lantau Group

New Solution Might be LNG in a Pressurised Tank

Filled up at the domestic LNG plant and sits inside a 20

ISO 20 Tank TEU or 40 TEU container frame which contain 8 tonnes or
16 tonnes of LNG respectively.
Slope of 11% based on Indonesia Crude Price would
indicate a price of about USD 11 mmbtu.
Delivered on a back of a low loader truck to
a ship and offloaded by crane onto a low loader to go to the
power plant which are often near the port
or directly by road to a power plant.
A small 0.4MW power plant genset at 80% capacity factor
might use 1.6 tonnes per day or 11.2 tonnes per week. So
that would need just under two ISO 20s a week or one ISO
40 a week in round numbers.
This works out at a levelised capex number of about USD 2
per mmbtu.
The tank can contain the LNG for over 10 to 15 days before
Ambient Air Vapourisation some boil off is needed to release pressure. So these tanks
as well as being heat insulated are also built to take quite a
bit of pressure (10 to 15 bar or 145 to 220 psi) after which
boil off has to happen.
Vapourisation could be by ambient air technology given
relatively warm climate.
This works out at a levelised capex of close to USD 1
mmbtu.
Gensets would need modified to use a mixture of mostly
regasified LNG and some diesel for ignition, or else buy new
gas engines that only use gas.
Probably still plenty of headroom, even after allowing for
freight cost and genset modification, when compared to
Source: Cryogas Equipment diesel price of about USD 30 per mmbtu
12 The Lantau Group
Road Haulage

13 The Lantau Group

Conventional Road Haulage Infrastructure and Dual Fuel Diesel Engines

Australia LNG Refuellers Pte Ltd

Tasmania - Designed in 2006 and opened in 2008 with 50 tonnes per day or 2.5 mmcfd and five
refuelling stations. This was designed to support trucks carrying product from Gunn forestry,
which has hit financial troubles and demand is below forecast.

Wesfarmers EVOL LNG

Western Australia Opened 2009 with 175 tonnes per day or 8.75 mmcfd supports remote power
plant, industry and 130 trucks that can travel 1,200 km on a tank of LNG.
China At the 200 tonnes per day or 10 mmcfd level local manufacturers can handle most of EPC work,
larger plant needs imported design and components.
Between 9 and 14 bcma (900 mmcfd to 1.4 bcfd) used in transport sector, and most of this is CNG
but also LNG in local municipalities, which is roughly 10% of total gas consumption in China of 130
bcma.
Many local manufacturers of CNG and LNG kits and vehicles and some JVs such as Weichai
Westport on LNG heavy duty engines.
Cummins-Westport Just new on the market. 1% diesel and 99% LNG in compression with no need for sparking. Now
HPDI available in Volvo trucks in Europe and States. Reported to have same power and torque as
engine running on diesel, which is what haulage industry has been waiting for. (Might also be used
on trains in Canada and India).

Source: Chive Ltd, LNG Refuellers, TLG, Westport

14 The Lantau Group
Thailand

15 The Lantau Group

LPG to Industry Price Raised to Level That Raises Attractiveness of Switch to
Small Scale LNG

35 The industrial price of LPG has now been

raised to THB 30 per KG which is close to
30
USD 21 mmbtu
25
Potential market size in northeast, north and
central Thailand of the range 20 to 25 mmcfd
USD mmbtu.

20

Political pressures have for the moment

15
called a halt and in some cases a slight
10
retreat by the government and its move to
market prices for LPG and NGV
5

0
LPG Delivered Bulk Market Liquefaction, Transport, Rent and Wellhead
Price Storage, Vapourisation

16 The Lantau Group

Fuel Oil Price is Now Sufficiently High to Merit Switch to Small Scale LNG

35
The fuel oil price is less subject to political
considerations and is generally linked into the
30 world price plus local excise taxes and duties

25
Potential market size in north, northeast and
central Thailand of the range 30 to 40 mmcfd
USD mmbtu

20

15

10

0
Fuel Oil Delivered Market Liquefaction, Transport, Rent and Wellhead
Price Storage, Vapourisation

17 The Lantau Group

Main Industrial LPG and Fuel Oil Upcountry Demand

Up-country Thailand LPG and Fuel Oil Demand Overview

Current demand
Northern region LPG demand centred around
Chiang Mai, Lamphun, and Lampang. The
ceramic industry is substantial and represents
the key LPG consumer in the region.
Central region demand is dominated by food
and meat processing companies using LPG and
fuel oil.
Most demand in Northeast centred around the
provinces and capital towns Khon Kaen and
Korat using mostly fuel oil.
Major users include glass manufacturers,
breweries, auto-parts, food and beverage
producers and a ceramics company

Source: Thailand.com

18 The Lantau Group

Key Takeaways

Small scale LNG on a remote gas field can be a quick way to market production.

No need to wait to prove up huge reserves to justify a pipeline.

No need to then wait for the pipeline to be built.

Cost of LNG infrastructure leaves plenty of headroom for reasonable upstream gas prices.

Some parts of small scale LNG equipment are now becoming standardised driving down costs.

Large potential market in Kalimantan and Sumatra to displace market diesel with LNG in mine trucks.

Displacement of industrial use of LPG and fuel oil might also be targeted.

Remote power generation sets might also be targeted with LNG in pressurised container tanks

19 The Lantau Group

Contact Us

For more information please contact us:

By email
Power Utilities Energy
Direct Communications
nsemple@lantaugroup.com
mthomas@lantaugroup.com
Insight
By phone
+852 2521 5501 (office)
Rigour
By mail
4602-4606 Tower 1, Metroplaza
Value 223 Hing Fong Road,
Kwai Fong, Hong Kong

Online
www.lantaugroup.com

The Lantau Group

20 | The Lantau Group