Executive Summary CNG for commercialization of small volumes of associated gas Prepared by TRACTEBEL ENGINEERING S.A. October 2015 The study has analysed current Compressed Natural Gas (CNG) technology for its potential to monetise small volumes of this gas (1-15MMscf/d) and avoid or reduce the gas flaring. Introduction Compressed Natural Gas (CNG) is natural gas transported and stored in compressed form (pressurised to between 100 and 250 barg) in order to reduce the volume to be transported or stored by between 150 to 300 times that of gas at atmospheric pressure. Historically, CNG has been used onshore for gas supply over short distances and in relatively small volumes. While the cost of delivered CNG depends on project specific conditions such as gas volume, in general CNG can be economically viable for volumes up to around 5 MMscf/d and distances up to 800 km. Compressed Natural Gas (CNG) is mainly used as an alternative fuel for vehicles. Natural gas vehicles are very popular worldwide, particularly in countries such Pakistan, Argentina, India and China. Use of CNG as fuel for road vehicles has been driven by two main factors: rising gasoline prices and increased environmental concerns. Use of CNG at a larger scale is not yet commercially viable but is being investigated by several companies as a potential economically viable alternative to Liquefied Natural Gas (LNG). The CNG Chain The CNG chain is composed of four elements: Production, Transportation, Receiving and Storage. Production CNG production consists of gas pre-treatment and compression. The pre-treatment process is simpler than in an LNG liquefaction plant and is generally set by the requirements of the end users. The main pre-treatment activities are:  Removal of heavy hydrocarbons to avoid condensation when storing as CNG,  removal of contaminates: hydrogen sulphide, carbon dioxide, etc., and  dehydration. The amount of compression required depends on the delivery pressure of the source gas reservoir and gas quality. Transportation CNG may be transported on-shore or off-shore (marine). There are a number of different options available for each alternative. i Marine CNG Transportation Transportation cost is the most important factor in the CNG chain. The cost of CNG marine transport is directly proportional to the volume of gas and distance between the gas source and the consumers. Since the early 1960’s the marine transport of CNG has been investigated and analysed by various developers. The current marine CNG developers and their transportation concepts are as follows: CETech EnerSea Sea NG TransCanada Knutsen Trans Ocean VotransTM Corporation CNG OAS Gas CoselleTM Technologies Shipping Type of Composite or X80 steel coiled X70 line Composite X80 steel Composite Containment X80 pipe steel cylinders pipe forming a reinforced steel cargo tank HDPE and ; composite carrousel Gas Transport cylinders fibreglass (Iso (Coselle) Modules (GTM) (CTC) cylinders container) (MEGC) Development concept stage advanced advanced concept stage concept Concept stage status concept concept stage stage for MEGC stage container only Transport capacity 85-319 75 – 1,000 51 - 531 (ship) 12 - 100 70 - 1,200 Variable as a (MMscf) (+ 60 to (ship) function of 120,000 the number of m³oil) containers 200 – 1,200 10-100 ?-80 (barge) variable (barge) (container) On-shore CNG Transportation On-shore CNG transportation is a proven technology that has been used for decades. The on-shore CNG transportation system consists of:  gas compression and truck loading at the gas source location;  truck offloading, heating, let-down and metering at the customer site. Analysis of the cost of delivered CNG for a number of volumes and distances (see below) shows that, for production capacities higher than 5 MMscf/d, delivery of CNG by truck becomes difficult not only due to the substantial number of vehicles required (especially for longer distances), but also the significant extent of loading and offloading facilities required. The CNG storage type used for transportation is the main difference between the various suppliers. The main characteristics are as follows: ii Tube type Luxfer-GTM type III Lincoln type IV Galileo MAT Container material Steel – High Aluminum inner wall Carbon fibre/epoxy ISO 9809 steel strength steel wrapped with carbon composite cylinder fiberglass Trailer max capacity up to 0.29 up to 0.44 up to 0.36 up to 0.25 (MMscf) Pressure (barg) 187-227 248 250 200-250 Corrosion resistance - ? ++ - Gas/container weight 0.24 0.41 0.79 0.2 ratio (t/t) Comparative cost base case ++ ++ + Examples of CNG chain costs The sizing and cost of the different elements of the chain depend on the specific characteristics of each project such as: gas volume and composition, distance to consumers, storage and infrastructure requirements, geographical location etc. The unit cost (capital and operating) for four scenarios have been evaluated: Gas volumes of 3 and 10 MMscf/d, and short and long distances to customers. It must be noted that these cost estimates are only indicative as specific circumstances (e.g. a challenging physical environment, high labour costs in an overheated business environment such as the Bakken in N. Dakota), can affect the costs and hence economics significantly. Transport Long distance method Capital & Operating cost, USD2015/MMBTU Item Marine 3 MMscf/d / 550-800 MN Marine 10 MMscf/d / 550-800 MN Offshore Gas treatment 0.42 0.21 Compression/loading 0.73 0.70 Transport 6.43 5.22 Delivery 0.50 0.50 Total 8.08 6.63 Capital & Operating cost, USD2015/MMBTU Item Truck 3 MMscf/d / 750-1000 Mi Truck 10 MMscf/d / 750-1000 Mi Onshore Gas treatment 0.42 0.21 Compression/loading 0.73 0.70 Transport 8.81 8.79 Delivery 0.50 0.50 Total 10.46 10.20 iii Transport Short distance method Capital & Operating cost, USD2015/MMBTU Item Marine 3 MMscf/d / 55-150 MN Marine 10 MMscf/d / 55-150 MN Offshore Gas treatment 0.42 0.21 Compression/loading 0.73 0.70 Transport 3.00 2.40 Delivery 0.50 0.50 Total 4.65 3.81 Capital & Operating cost, USD2015/MMBTU Item Truck 3 MMscf/d / 0-250 Mi Truck 10 MMscf/d / 0-250 Mi Onshore Gas treatment 0.42 0.21 Compression/loading 0.73 0.70 Transport 2.20 2.20 Delivery 0.50 0.50 Total 3.85 3.61 Short distance, Onshore Long distance, Onshore 11.0 11.0 10.0 10.0 9.0 9.0 8.0 8.0 USD2015/MMBTU USD2015/MMBTU 7.0 7.0 6.0 6.0 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 Truck 3 MMscf/d / 0- Truck 10 MMscf/d / Truck 3 MMscf/d / 750- Truck 10 MMscf/d / 250 Mi 0-250 Mi 1000 Mi 750-1000 Mi Gas treatment Compression/loading Gas treatment Compression/loading Transport Delivery Transport Delivery iv Short distance, Offshore Long distance, Offshore 11.0 11.0 10.0 10.0 9.0 9.0 8.0 8.0 USD2015/MMBTU USD2015/MMBTU 7.0 7.0 6.0 6.0 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 Marine 3 MMscf/d / Marine 10 MMscf/d / Marine 3 MMscf/d / Marine 10 MMscf/d / 550-800 MN 550-800 MN 550-800 MN 550-800 MN Gas treatment Compression/loading Gas treatment Compression/loading Transport Delivery Transport Delivery The above cost estimate examples can be summarized as follows: CNG: Onshore transport CNG: Offshore transport 11.0 9.0 10.0 8.0 9.0 8.0 7.0 USD/MMBTU USD/MMBTU 7.0 6.0 6.0 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 0 200 400 600 800 1000 0 200 400 600 800 Miles Nautical miles 3 MMSCFD 10 MMSCFD 3 MMSCFD 10 MMSCFD CNG market overview Onshore There are currently almost 20 million road vehicles in the world in a wide range of countries using CNG as fuel. The ten countries with the largest CNG vehicle fleets (in millions) are: Rank Country Registered fleet Rank Country Registered fleet 1 Iran 3.50 6 India 1.50 2 Pakistan 2.79 7 Italy 0.82 3 Argentina 2.28 8 Colombia 0.46 4 Brazil 1.75 9 Uzbekistan 0.45 5 China 1.58 10 Thailand 0.42 World total = 18.09 million vehicles The fast growth of CNG as fuel for vehicles has been to a large extent driven by government subsidies and initiatives to promote conversion to CNG for environmental and economic reasons. v Other uses of CNG, such as for power generation; industrial consumers etc., are currently less developed mainly because the gas volumes required are often too high for truck distribution. Offshore The lack of proven commercial options for marine transportation of CNG is the main obstacle to faster business development in these areas. Indonesia may become the first-mover in marine transportation of CNG. A 2,200m³ CNG carrier is currently being built to supply gas to a CNG storage facility in Lombok. The project is planned to start commercial operations in 2016. Conclusions CNG on-shore transportation is well established in a number of countries since the 1990s. Marine CNG transportation, however, is still under development and with no units yet in commercial operation. While the cost of delivered CNG depends on project specific conditions such as gas volume and composition, in general:  On-shore delivered CNG can be economically viable for volumes up to around 5 MMscf/d and distances up to around 500 miles (800 km).  Marine CNG is not yet commercially proven but could be economically viable for large volumes and distances up to around 2000 nautical miles. vi