eagle lng terminal and pipeline - efficient solutions for the balkans

Presentation: Eagle LNG Terminal and Pipeline - Efficient solutions for the Balkans

Fabio Greco, Project Director, Eagle LNG

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Eagle LNG Terminal & Pipeline

Efficient solutions for the Balkans Fabio Greco

Albania Oil, Gas & Energy 2015 Summit

17 March 2015, Tirana, Albania

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§  Project introduction p. 4

§  Milestones achieved p. 6

§  Development and construction p. 11

§  Strategic role p. 20

§  Benefits for Albania p. 22

§  Role in Europe, Italy and the Balkan Area p. 23

§  Conclusions p. 32

Introduction to Eagle LNG

Eagle LNG Terminal and Pipeline

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Albania is called by their people “Shqiperia” which means “land of the eagles”. The symbol of the double-headed eagle in the Albania flag has been used for the first time in black over red in the seals of general Skanderbeg, a national hero who led the revolt and won against the Ottoman Empire in 1449. This symbol is also used in the flag or coat of arms in other countries in the Balkans and Central/Eastern Europe.

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Eagle LNG: Project introduction

•  Burns, through its subsidiary Trans European Energy, signed in 2008 a thirty-year Permit Agreement with the Albanian Government concerning the construction and operation of the “Eagle LNG” project:

–  LNG import terminal: 4-8 Bcma floating FSRU vessel for the import and re-gasification of LNG, located offshore the Albania coast;

–  Subsea gas pipeline: 10 Bcma, 110 km connecting the terminal to Italy and Albania.

•  Total investment of around 700 mil Euro

•  Albania will in the first years absorb up to 0.5 - 1.0 Bcma for its own consumption and then up to 2 - 3 Bcma including export to other Southeast Europe – Western Balkan countries once the planned gas grids are developed. The balance will be exported to Italy and other EU countries.

•  Burns is an Italian gas integrated group active in gas import, marketing, trading and distribution. Their shareholders also own an infrastructure construction company that has build 300 km of gas networks in Italy.

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Eagle LNG : Business Idea

EAGLE LNG Import and Regasification Terminal Located in Albania and connected by pipeline

to Italy and to other Balkan countries

Brindisi

Levan

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The project development started in 2006 and in 2008 the project received by the Albanian Government a 30-year Permit Agreement – full and final agreement for construction and operation of the terminal and pipeline.

2006: Basic design for the LNG Terminal developed by Technip

2007: Following the submission of the EIA report, the Albanian Ministry of Environment has awarded the Environmental Licence for the LNG Terminal

2008: Signed a 30-year Permit Agreement with the Albanian Government (Industry and Energy Ministry), providing the right to build and operate an 8 Bcma (expandable to 12) LNG re-gasification Terminal and a gas pipeline to Italy

2009: The Albanian Council of Ministries ratified the Permit Agreement

2009: The governments of Italy and Albania (Industry Ministries - MSE and METE) signed an Intergovernmental Agreement on energy cooperation promoting interconnection of electricity and gas systems. The Eagle LNG project is supported by the agreement as a priority gas infrastructure.

Eagle LNG: Milestones achieved

Pre-Permit completed activities

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Post-Permit completed activities

2009: Adoption of the FSRU solution in lieu of of the land-based terminal

2010: Completed a substantial part of the basic engineering for the offshore pipeline and the connection to the Italian grid (metocean study, detailed marine reconnaissance survey, Italian landfall study, tender for Basic and FEED of offshore pipeline and connection in Italy)

2010: Successfully completed with minimal prescriptions the formal EIA Consultation Phase with the Italian Ministry of Environment on the Italian offshore/onshore gas pipelines and the receiving station (October)

2010: Commercial and technical offers received from charterers and operators of the FSRU

2011: Budgetary quote on EPC contract for the offshore pipeline received by SAIPEM

2011: Completed market and project competiveness independent studies with three leading international firms

2012: Start of process to select strategic FSRU partners, equity partners and tollers

2013: The Eagle LNG pipelines have been included to the National Gas Grid by a decree of the MSE (Italian Ministry of Industry)

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2013: The project has been selected by the EU Commission and the Energy Community as a “Project of Energy Community Interest (PECI)”. This label is granted to 10 gas infrastructure projects that have the “highest positive impact on the largest possible number of countries” and entitles the project to financial support a favorable tariff regime and an accelerated permitting.

2014: The project has been included in the ENTSOG 10-year Network Development Plan

and is candidate to receive the PCI label (Project of Common Interest) in 2015 from the European Commission with additional financial support. The PCI 2015 label is the highest EU recognition for energy infrastructure projects

2015: Both EBRD and EIB have have expressed an interest in providing financial support.

Post-Permit completed activities

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Eagle LNG: Milestones achieved PECIs Gas Infrastructure

EAGLE LNG is coded G002 •  Eligibility:

location in one Contracting Party (CP) and impact on at least two CP or a CP and a EU Member State

•  Evaluation: based on quantitative Cost-Benefit Analysis methodology

•  Public Consultation (Mar-Apr 2013)

https://www.energy-community.org/portal/page/portal/ENC_HOME/AREAS_OF_WORK/Instruments/Investments/PECIs/Maps

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Eagle LNG: Milestones achieved PECIs Gas Infrastructure

https://www.energy-community.org/portal/page/portal/ENC_HOME/AREAS_OF_WORK/Instruments/Investments/PECIs/List_PECI

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Eagle LNG: Development schedule

• Basic and FEED engineering for the offshore pipeline and the connection to the Italian grid

• Authorization to the construction of the pipeline and connection to the grid from MSE, inclusive of EIA and local approvals

• Formal TPA exemption from Albanian and Italian authorities

• Final safety study on FSRU vessel

• Tender EPC contract (detailed engineering and construction of the subsea pipeline and connection to the Italian grid)

• Chartering and O&M contract for FSRU

• Secure long–medium term Tolling contracts

Remaining activities before FID (2016)

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Eagle LNG: Construction schedule

§  Construction of the onshore pipeline in Italy and downward grid upgrade is expected to take about 24 months from FID and can be performed by SRG

§  The laydown and test of the offshore pipeline will take 2-3 months. Including the two landings, the pipeline will be operational 8 months from the delivery of the steel pipes in the harbour of Brindisi

§  If FID is reached in Q4/2016 and the subsea steel pipelines are delivered in Q4/2017, the offshore pipelines can be operational by Q2/2018.

§  The FSRU can be delivered within 24 months from order (at FID) which means that the whole project (regas and offshore pipeline system) can be ready from end 2018.

§  In the same 24 months period from FID, SRG would have connected the offshore pipeline to their grid. The whole system could then be ready with the Commercial Operation Date 2018.

Construction activities post FID

FID$ COD$$$ $$

2006$ 2007$ 2008$ 2009$ 2010$ 2011$ 2012$ 2013$ 2014$ 2015$ 2016$ 2017$ 2018$ 2019$$$ $$

APPROVAL$ ALBANIA$ ITALY$ $$$$ $$

ENGINEERING$ ALBANIA$ ITALY$ IT$ $$ $$$$ $$

CONSTRUCTION$STATION$$ITALY$ $$ $$ $$ $$ $$$$ $$

CONSTRUCTION$PIPELINE$OFFSHORE$ $$ $$ $$ $$$$ $$

DELIVERY$FSRU$ $$ $$ $$ $$ $$ $$ $$ $$ ! $$ $$

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Eagle LNG: FSRU solution

Offshore regasification – Floating Storage and Regassification Unit

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FSRU Mooring System The FSRU is compatible with Single Anchor Mooring System, which offer the maximum cost, safety and efficiency benefits. Complete Single Anchor Loading System, denoted SAL system, comprising: 1) SAL mooring system; 2) Riser system; 3) Anchor assembly

From an operational point of view, a system with the FSRU free to adopt optimum heading seems most feasible, both with respect to safety and efficiency.


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§  FRSU of 170,000 cm, 2-3 skids, 4-6 bcma baseload (5-7 Bcma peak), open loop, chartering from a minimum of 10 years to 25 years

§  Alternatively FRSU of 215,000 cm, 4 skids, 7.5 Bcma baseload (10 bcma peak)

§  120 bar gas send-out pressure, no need for gas compression station in Albania

§  Compatible with both buoy and jetty mooring as mild weather allows 98% utilization

§  Fast track solution as FRSU is delivered within 24 months from order

§  Operations from early 2018 as construction of onshore and offshore pipeline will take one year

§  Fully expandable in short time from 2 to 3 skids

§  Consolidated technology

§  Cost advantage vs. land based solution

§  Flexible and modular solution

FSRU – Description

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Pipeline Levan to Brindisi §  110 km sub sea, max depth of -815 mt §  18 km onshore in Italy from beach to high

pressure national grid (south of Brindisi) §  Diameter: 28” - 32” offshore;

36” - 42” Italy onshore §  Pressure 120 Bar in Albania (send-out

pressure of FSRU) §  Pressure of 75 Bar at Italian landing (Brindisi)

Eagle LNG: The Albania-Italy Pipeline

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Eagle LNG: The Albania-Italy Pipeline

Bathymetric profile. Vertical exaggeration x30

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Eagle LNG: The Albanian Onshore Landing

The landing location of the offshore pipeline in Albania has been assigned by the GoA and is defined in the Permit Agreement with the GoA

View of the beach to SW

View of the beach to NE

View from the beach towards inland

Surveyed beach for Albanian landing

Selected landing onshore in Albania in an area uninhabited and not environmentally sensitive

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Eagle LNG: The Italian Onshore Pipeline

Selected 18 km corridor for onshore pipeline from beach to high pressure national gas grid

•  The landing location of the Italian pipeline has been selected in Puglia (south of Brindisi) among four alternatives to minimise the environmental impact onshore and offshore (seagrass Posidonia oceanica).

•  The project includes the construction of the receiving station in Italy, located appx 2 km onshore. From there Snam Rete Gas will build a16 km of onshore pipeline to connect to the high pressure national grid.

•  This interconnection in Italy will benefit from the planned Adriatica Pipeline, promoted by Snam Rete Gas, to reinforce the entry capacity in South Italy to transport up to 9 Bcma to North of Italy and in reverse flow towards central and Western countries trough Switzerland and Austria.

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Eagle LNG: Strategic Role 1/2

The project is strategic for Italy, Balkans and Europe: 1.   Increases security of gas supply – LNG means no long-term dependency on a single

supply country and no political risk in the transit countries.

2.   Brings cheaper sources of gas – as from 2017, LNG should be available in abundance at competitive prices for Europe from the USA (shale gas) and Qatar, which will divert some of its Asian volumes once the new mega-infrastructures exporting LNG from Australia are operational.

3.   Facilitates the gasification of SEE - Gas demand in SEE is expected to reach 41 Bcma by 2025. Eagle LNG would contribute to cover the expected gas supply gap in the region of 23 Bcma.

4.   Develops a gas hub in SEE and Italy – SEE: new suppliers, new market participants, connection with planned pipelines. Italy: increases competition and reduces the impact of oil formulas on gas pricing.

5.   Integration of market areas – pipeline implements a missing bidirectional interconnection between Italy/Western Europe/North Africa and the Balkans

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Eagle LNG: Strategic Role 2/2

6.   Coverage of peak demand – trough the LNG procurement and storage flexibility, trough the connection with planned underground gas storage in Albania

7.   Supports the Albanian economic development – Albania doesn’t currently have a high-pressure gas grid but the development of the gas infrastructure and the gas market is its highest energy priority. Albania needs to build at least 800 MW of gas-fired power plants to guarantee network stability and to develop its industry.

8.   The simplest and quickest route to bring gas to Italy and the Western Balkans – project fully approved in Albania, Italian approval and completion of engineering expected in 2016, less than two years required for construction. No other gas project in Italy or Albania, either LNG or pipeline, will be capable of been completed by 2018

9.   Efficient cost base in the industry – due to the short length of the subsea pipeline, to the modern and efficient floating regasification technology (FSRU) and to the fast construction time. It doesn’t require expensive multi country agreements.

10. Minimal environmental impact – a floating vessel 6 km offshore in Albania and a gas pipeline in Italy

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§  Gas infrastructure hugely needed in Albania: §  no existing gas domestic production and import §  currently only renewable power generation which creates grid instability §  need for base-load gas fired power generation, clean and reliable

§  Eagle LNG is designed in particular to serve: §  the 97 MW Combined Cycle Power Plant of Vlorë (to be expanded) §  New built CCGT power plants in Albania §  industries located to the prospective Industrial Park of Elbasan §  the growing domestic and industrial demand §  the export to neighboring countries

§  Employment, modern technology and specialized know-how to Albania with training for local staff

§  The project will stimulate the socio economic development of the region and will help in improving infrastructure and in the emancipation of its population.

Eagle LNG: Benefits for Albania

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Source: IEA 2012

Eagle LNG: Role in Europe and Italy

Source: IEA WEO 2011 “Golden Age of Gas”, Nov 2011

EU gas supply/demand (bcma)

•  Oxford Energy predicts 88 Bcm of additional European demand between 2013 and 2030 •  Power sector gas demand affected since 2011 by low coal and CO2 prices •  A flexible source of gas needed for peak/mid merit gas fired plants to backup unpredictable

renewable energy. •  Main EU target of security of supply and diversification of sources •  Italy’s role as gas hub for Southern Europe

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Eagle LNG: Role in the Balkan Area 1/8

The Eagle LNG terminal might become a crucial source of gas for the region

Source: ECA

Gas import dependence

BIH: 100% Serbia: 92%

FYROM: 100% Croatia: 48%

Bulgaria: 92% Romania: 33%

•  Albania, Montenegro and UNMIK have currently no gas infrastructure

•  The remaining countries heavily depend on gas import, mainly from Russia (partial exception is Croatia)

Projected gas demand by country, Bcm 2015 2020 2025 2030

Croatia 2.1 2.9 2.9 3.1

Serbia 2.1 3.3 3.8 4.2

FYROM 0.6 1.1 1.9 2.1

Montenegro - - 0.1 0.1

Albania 0.6 1.0 1.6 1.9

Kosovo - 0.1 0.2 0.4

BIH 1.0 2.1 2.3 2.6

TOTAL 6.5 10.6 13.0 14.5

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•  Power sector gas demand significant to replace lignite

•  Gas to power projects key to provide anchor load

•  Industrial demand mostly driven by steel industry

•  Residential demand fragmented but politically relevant

Total gas demand projection by sector in West Balkan

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•  Gas fired generation in Balkans impacted by low cost of lignite

•  Including the cost of only CO2 emissions brings gas and lignite to parity in 2025

•  With 2015 oil at $ 50/bbl and HH gas at $2.75, LNG and gas in the Balkans become more competitive

Electricity full generation costs including emissions

Analysis by ECA in 2014 with oil price scenario at 105 $/bbl

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•  Consortium Approach Study for the development of Gas to Power and the Gas Ring in the Energy Community

•  Study performed by ECA and sponsored by World Bank and Energy Community

•  Consortium approach in form of Public Private Partnership to minimise the investments risks

•  Public sector guarantees for all major infrastructure that require offtake of gas and electricity volumes.

•  Public sector minority equity participation would also be beneficial.

•  Tolling arrangements to finance infrastructure

•  Focus on sub-regional cooperation between a small cluster of countries whose interests coincide more closely in scope and timing.

•  Final report expected by Summer 2015

SEE Gas Power Consortium

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Gasification of the Balkan Region: The Gas Ring Project •  The Gas Ring Project could develop

transmission infrastructure connecting seven of the ungasified or less gasified countries in the in the Balkan region with the major import transmission pipelines delivering gas in SEE countries

•  The project is divided into several stages –  In the first stage gas will be delivered to

power plants in ungasified areas on the Adriatic cost

–  In the following stage new areas will be gasified and new supply points connected

•  The project will also link SEE markets with Bulgaria, Romania, Greece and Hungary and will create the conditions for region-wide gas trading

The Eagle LNG terminal might become a crucial gas source to supply Albania and the countries connected to the Gas Ring

Source: Energy Community NOTE: countries to be connected are Albania, Bosnia-Herzegovina, Croatia, Kosovo, Macedonia, Montenegro and Serbia


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Albanian Gas Reservoirs and Salt Domes

•  Depleted gas reservoirs and salt domes in Albania constitute a very important contributing element to security of supply and trading.

•  Total storage capacity of about 2-3 Bcm. •  The salt dome at Diapir of Dumrea (1-2 Bcm)

and the depleted gas field of Divjaka (1 Bcm) are close to the LNG terminal and good areas to serve as a peak and seasonal storage.

•  The design of underground gas deposits is a project of regional interest and with a particular importance for Albania and Italy.

•  The gas storage will provide a strategic reserve for the region and flexibility to complement the supply from the LNG Terminal to the benefit of Albania, SEE and Italy.


2323

Location of possible underground gas storage. Location of possible underground gas storage.

DumreaDumrea Salt Dome and Salt Dome and DivjakaDivjaka Depleted Gas FieldDepleted Gas Field

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Energy Community Study on Security of Gas Supply

•  Study to asses if N-1 criterion is met at single state or Energy Community (EnC) region under different gas infrastructure scenarios

•  Existing gas supply infrastructure in EnC can’t met N-1

•  Several new projects have been considered to fill the gap

•  Without South Stream a scenario with all UGS, other gas interconnections and Eagle LNG meets the criterion from 2015

•  N-1 criterion for Albania met by TAP or Eagle LNG

•  Without South Stream the N-1 criterion for the EnC region requires several infrastructures altogether including Eagle LNG


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•  Eagle LNG is an efficient solution

–  Quick development: because of low complexity, cost and environmental impact

–  Sound investment: competitive tolling fees and superior returns on investment

•  The terminal will operate in the European dimension, in the light of the foreseen Italian future role as a European Gas Hub and future Albanian interconnection with other Balkan countries

•  The pipeline will have strategic value as reversible interconnection between Italy and the Balkans

Eagle LNG together with TAP, IAP and the gas storage projects is well suited to have an important role in Albania, in Italy, in the fast track development of the Balkan gas

markets and for the security of supply in Europe.

Eagle LNG: Conclusions

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Eagle LNG: Bexcrown Investments

Bexcrown Investments is responsible for the project direction of Eagle LNG since 2007 and is retained as exclusive Financial Advisor. Bexcrown Investments is a London-based M&A, Corporate Finance and Energy Advisory boutique. The company has advised energy clients across Europe, has executed sell and buy side mandates, originated commodity supply and sales contracts, JV agreements, directed investments on LNG, gas, power and renewable assets. Fabio Greco Bexcrown Investments - Managing Director Eagle LNG Project Director and Financial Advisor Fabio Greco is the founder of Bexcrown Investments. He has 25+ years of experience focusing on the energy sector on a pan-European basis. He spent the last 16 years in London where he has advised energy clients and originated several energy investment and structured finance transactions. Before founding Bexcrown, Fabio Greco has been with Merrill Lynch in London in the Corporate Finance team as Head for the Southern European and Middle East region commodity financing, origination and derivatives and at Deutsche Bank in London with similar responsibilities. He also worked with energy trading companies, as Managing Director of Dynegy Italia and General Manager of Enron in Italy. Prior to Enron, Mr Greco spent seven years as a business consultant in Italy and France with Bain & Co. and Finsiel Group. He holds a M.Sci in Physics with honors from the University of Rome and an MBA from INSEAD.

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