perspectives of lng usage as a bunker fuel

2014

Начальник Департамента

внешнеэкономической деятельности

ОАО «Газпром»

Павел Одеров

Head of LNG Export Division

LLC Gazprom export

Igor Maynitskiy

Perspectives of LNG usage

as a bunker fuel

Gazprom could challenge the dominance of oil products

in the transportation sector with small scale LNG

• Competing with oil products will increase gas demand

1

Global transport market volumes by fuel type (mtoe)

2,500

2,000

1,500

1,000

500

0

Oil products

Natural Gas

Other

2011

2,445

93%

Global transport market volumes by sub-sector (mtoe)

761

248

126

Personal Vehicles

Road Freight

Marine

Aviation

Other

2011

2,445

1,054

256

CNG

LNGV

LNG Bunkering Natural Gas

can

challenge

oil products

in these

segments

• Source: International Energy Agency online; IEA World Energy Outlook 2012;

• Note: 1mtoe is approximately 0.77mt of LNG

2014





Changes in the underlying drivers of the transport fuel

market indicates that natural gas is able to compete with oil

products

• LNG and CNG as a fuel is a proven technology

• There are 37 ships using LNG as fuel (excluding LNG

carriers), and at least 34 confirmed LNG fuelled new

builds worldwide3

• Over 17 million vehicles are running on CNG and LNG

globally (24,000 refuelling stations)4

2

Price Availability

0

5

10

15

20

1985 1990 1995 2000 2005 2010 2015

Crude Oil

US HH

UK NBP

German Border

Historical oil & gas average prices1

($/mmbtu)

Gas has de-linked from the

increased oil prices

0

200

400

600

800

2025 2020 2015 2010 2005 2000 1995 1990

Historical and forecast of LNG supply2 (mtpa)

Global LNG volumes have

grown significantly and are

forecast to increase further Forecast

Technology Regulation

• Strict changes in regulations have emerged to

reduce emissions from the transportation sector

Source: 1) BP Energy Statistics 2013; 2) Woodmack; 3) DNV; 4) NGVA Europe

2014





Maritime regulation change is opening an opportunity for the

LNG bunkering market to develop

3

IMO sulphur emissions limits

International Maritime Organisation (IMO)

regulations will require significant reductions

in ship emissions in designated Emission

Control Areas (ECA) over the coming years:

1 January 2015:

• Sulphur limit in ECAs will be reduced to 0.1%

• NOx for Tier I levels in ECAs will be reduced by

80%, and by 20% for Tier II (global) compliance

By 2020:

• A global cap on sulphur content of 0.5% will be

enforced

Depending on stand alone ship economics as well as

% of sailing in ECA1 zone, ship owners will have the

following options to comply:

Ship operators’ comply options

Scrubbers and

SCR*

Marine Diesel Oil

LNG

No upfront investment

Higher operating costs

Refineries may not be able to meet

increasing demand

1

2

3

Capex investments

Operational constraints

Green shipping

Security of supply is constrained by

infrastructure

Larger capex investment

Lack of Infrastructure

Currently there are 37 ships running on LNG worldwide (equal number has been ordered

so far**)

LNG consumption in North-West Europe shows that demand comes from Ro-Ro ferries

(36%), PSV (22%) and Car shuttle ferries (22%)

In Norway LNG bunkering exists since 2000 helped by the incentives posed by the

Government:

NOx fund subsidizes the cost of LNG bunker fuel projects

Clear policies for LNG bunkering

* Note: SCR: Selective Catalytic Reduction, HFO: Heavy Fuel Oil

**Source: RS Platou

2014





Our vision is to develop an integrated SSLNG market

• Building economies of scale to reduce the cost of SSLNG as a competing fuel

4

OFF-GRID

CONVENTIONAL

LNGV & CNG

MARINE

BUNKERING

2014





GM&T LNG operations and trading

Building a diverse portfolio with global reach

5

Cumulative Cargoes Traded

Year LNG traded (MTPA)

2005 0.1

2006 0.3

2007 0.3

2008 0.4

2009 1.3

2010 1.7

2011 2.1

2012 1.3

2013 1.5

Source country

Market country

GM&T presence

2014





LNG – a key pillar of Gazprom’s growth strategy

6

Vladivostok LNG – 10 MTPA per annum. Commissioning –

2018 (1st line) Project status – feasibility

study completed

Sakhalin 2 Liquefaction Plant – 2 trains producing 9.6 MTPA per annum (March’09

startup)

Sakhalin 2 Expansion project – a third train ~5

MTPA per annum

Baltic LNG – 10 MTPA at 1st stage. Start date – end of

decade (1st line) Project status – pre-feasibility

stage

2014





Gazprom’s LNG fleet today

7

Lena River Velikiy Novgorod Pskov

LNG Pioneer Ob River Yenisei River

2014





Gazprom can build on the equity gas advantage and

become a key player in the Baltic

8

Gazprom must secure long term contracts with customers to establish in this new market. For this to

happen is necessary to:

• Build bunkering hubs in ports where the highest demand is expected

• Design/Build bunkering and feeder vessels

Equity gas in

the region

Early mover

advantage

Gazprom

expertise

Gazprom has a stronger position in the Baltic given that is the only supplier with equity gas:

• Ability to price LNG competitively

• Secure supply to its customers

Gazprom through the affiliate companies will add their expertise in LNG Shipping & Logistics

Key benefits for Gazprom

• Opportunity to build a new and additional business for Gazprom and increase market share in the EU

• Portfolio diversification for LNG trading from additional volumes of equity LNG in Europe

2014





Current challenges on LNG as a bunker fuel

• “Chicken and egg” situation on supply and demand

• Intermodal logistic problems

• Given market formation necessity and its challenges, all interested parties should endeavor to

develop its infrastructure.

– i.e. break bulk facilities, storage, feeder vessels, bunkering barges

• Regulatory framework

– implementation of EU member states of the EU legislation to develop cleaner fuel infrastructure

– ports to establish the regulatory framework for ship to ship bunkering operations

– ports to enforce the legislation and apply fines or give incentives for LNG fuelled vessels

– industry health and safety regulations for ship to ship bunkering and industry standards

9

Thank you for your attention

10

perspectives of lng usage as a bunker fuel

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