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Prospectus
Q307_77807.05.001.01
LNG: The Expanding
Horizons of Liquefaction
Technology and Project
Execution Strategies
Prospectus
LNG: The Expanding Horizons of
Liquefaction Technology and Project
Execution Strategies
August 2007
909 Fannin Street, Suite 1275
Houston, TX 77010-1038
Tel: 713-982-5550 Facsimile: 713-739-0741
Contents
Section Page
1 Introduction.............................................................................................................. 1
1.1 DEVELOPMENT OF THE LNG INDUSTRY............................................. 1
1.2 GAS LIQUEFACTION ................................................................................. 2
1.2.1 Train Size Optimization..................................................................... 4
1.2.2 Choice of Compressor Drivers........................................................... 4
1.2.3 Gas Quality ........................................................................................ 4
1.2.4 New Project Execution Strategies...................................................... 5
2 Study Objectives & Scope ....................................................................................... 6
2.1 STUDY OBJECTIVES.................................................................................. 6
2.2 SCOPE AND ISSUES ADDRESSED........................................................... 6
2.2.1 Technology Evaluation ...................................................................... 6
2.2.2 Commercial Assessment.................................................................... 7
2.2.3 Review of Project Development Approaches .................................... 9
2.3 FINAL STUDY TABLE OF CONTENTS.................................................... 9
3 Nexant's LNG Experience....................................................................................... 15
3.1 NEXANT ....................................................................................................... 15
3.2 NEXANT’S LNG EXPERIENCE................................................................. 15
3.2.1 LNG Liquefaction Experience........................................................... 15
3.2.2 LNG Terminal Experience................................................................. 15
3.2.3 LNG Project Sponsors and Lenders................................................... 16
3.2.4 LNG Market Experience.................................................................... 16
4 Timing and Subscription Price ............................................................................... 17
4.1 TIMING ......................................................................................................... 17
4.2 SUBSCRIPTION PRICE............................................................................... 17
5 Contact Information ................................................................................................ 18
5.1 CONTACT INFORMATION........................................................................ 18
6 Authorization Form ................................................................................................. 19
LNG: The Expanding Horizons of Liquefaction i
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 1 Introduction
1.1 DEVELOPMENT OF THE LNG INDUSTRY
Methane was liquefied in the laboratory as early as 1877 and the U.S. Bureau of Mines
demonstrated natural gas liquefaction in association with helium recovery in 1917. A decade
later, the first commercial liquefaction project was developed at the CAMEL (now GL4Z) plant
in Arzew, Algeria. The first commercial LNG shipment from this plant was made in 1964 to the
Canvey Island terminal in the United Kingdom. LNG has since developed into a global trade
where LNG tankers move liquefied natural gas at -160oC between liquefaction plants and LNG
receiving terminals where the gas is revaporized for sale into local markets.
LNG is generally a more economic form of natural gas transportation than other options for
distances over 3,000 km and is employed to move gas from reserves in distant or stranded fields
to developed world markets.
Since its initial commercialization, the LNG industry has expanded significantly to the point
today where it represents over 25 percent of the internationally traded volume of natural gas.
LNG is currently produced in 13 countries, as shown in Figure 1.1, to supply markets in 15
countries.
Figure 1.1 Development of LNG Exports: 1964 – 2005
250
200
Billion Cubic Meters
150
100
Algeria – 0.11 bcm
50
0
1964 1974 1984 1994 2004 2005
Algeria Libya Nigeria Abu Dhabi Qatar Oman Australia
Brunei Indonesia Malaysia U.S. Trinidad Egypt
Q306_77807.05.001.01_Figures.ppt
LNG: The Expanding Horizons of Liquefaction 1
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 1 Introduction
The international trade of LNG has expanded at an impressive annual average growth rate of
about 8 percent since the mid-1990s. During this time, LNG has moved away from being a
niche premium fuel to a mainstream source of supply of natural gas.
Part of the reason for the growth of LNG has been attributed to advancements in liquefaction
technology, a critical segment of the LNG value chain and the focus of this industry study.
1.2 GAS LIQUEFACTION
Liquefaction forms the central element in the LNG supply chain, as shown in
Figure 1.2, although it is recognized that all elements are critical in supplying gas to market.
Figure 1.2 The Role of Liquefaction in the LNG Chain
FIELD BASE LOAD LIQUEFACTION PLANT LNG TANKERS IMPORT
PRODUCTION TERMINAL
Gas Natural Gas
Reserves Pre-treatment Storage and to End-user
Field Pre-treatment Storage and Storage and
Field (Removal of NGL Removal Liquefaction Export Storage and
Processing (Removal of NGL Removal Liquefaction Export Regasification
Processing Impurities) Facilities Regasification
Impurities) Facilities
Acid Gas
Acid Gas Fractionation
Fractionation
Treatment
Treatment
Oil or Sulfur Ethane LPG Natural
Condensate Gasoline
to Export
By-product Exports
Q306_77807.05.001.01_Figures.ppt
The fundamental process used for the liquefaction of natural gas is mechanical refrigeration,
where the gas is cooled and liquefied by heat exchange with a separate refrigerant. A number of
licensed processes have been developed over the last four decades based upon this fundamental
principle. Besides seeking to reduce unit investment and operating costs, the primary objectives
of these technological innovations is to increase the volume of LNG production gas and optimize
the efficiency of the refrigeration process employed.
The indicative cooling curve of a natural gas with the temperature shown in Figure 1.3 profiles
two superimposed routes to liquefaction with pure and mixed refrigerants. For commercial
liquefaction processes, the intent is to minimize the difference between the refrigerant curve(s)
and the natural gas cooling curve in order to produce higher volumes of LNG, taking into
consideration plant availability and equipment reliability.
LNG: The Expanding Horizons of Liquefaction 2
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 1 Introduction
Figure 1.3 Indicative Cooling Curves
20
0
(20)
Temperature, °C
Natural Gas
(40)
(60)
(80)
(100)
(120)
(140)
- Process 1
(160) - Process 2
(180)
0 20 40 60 80 100
% Enthalpy Removed
Q306_77807.05.001.01_Figures.ppt
The first two base load LNG plants installed in 1964 and 1969 utilized variants of cascade
liquefaction technology. From the early 1970s through the mid-1990s, the mixed refrigerant
liquefaction technologies dominated the liquefaction market. Since the completion of the first
train of the Trinidad Atlantic LNG project in 1999, however, the liquefaction technology market
has been much more competitive, with optimized cascade technology remerging as a viable route
to liquefaction in recent years.
Over time, process licensors have implemented innovations to improve efficiency and optimize
costs of the two dominant liquefaction technologies. The most significant recent and emerging
technological developments include:
Mixed Fluid Cascade Technology (MFC). The first plant using this process is being
installed on the island of Melkoya near Hammerfest in Northern Norway. This single
train plant uses plate-fin and spool wound cryogenic exchangers. This will be the first
Base Load LNG plant to use electric motors to drive the refrigeration compressors.
Dual Mixed Refrigerant Technology (DMR). This process will be used at the Sakhalin
LNG plant in Russia now under construction and is employing spool wound cryogenic
heat exchangers.
Propane PreCooled Mixed Refrigerant Plus Nitrogen Expander Technology (AP-X™).
This process is being used in mega projects that are presently under construction and will
employ large LNG trains with 7-8 million tons per year of production capacity.
LNG: The Expanding Horizons of Liquefaction 3
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 1 Introduction
The technological developments and project execution approaches to develop greenfield projects
or expand existing liquefaction capacity are presently focused on the following key issues:
1.2.1 Train Size Optimization
The size of the liquefaction trains has grown steadily over time as developers seek to realize
economies of scale in order to achieve lower unit costs. At the present time, the capacity of the
largest trains under construction ranges from about 5 to 8 million tons per year (MTPA). These
large sized plants will push turbine drivers and refrigerant compressors to their physical
limitations using existing standard technologies. As these units increase in size, the risks
associated with equipment mechanical reliability will also increase.
1.2.2 Choice of Compressor Drivers
Many of the older liquefaction plants use steam turbines to drive refrigerant compressors. This
type of driver is available in wide power and speed ranges and can easily be adapted to
refrigerant compressors. Newer plants have opted for industrial gas turbine drivers primarily to
reduce capital costs through the elimination of steam generation and boiler feed water treatment
facilities. The widespread adoption of industrial gas turbines for power generation is such that
their reliability has improved sufficiently for them to be considered for service in base load LNG
plants.
However, gas turbines are only available in discrete capacity ranges, thereby forcing the
refrigeration cycle to be designed around the available gas turbine power. More recently, in
order to minimize the impact of discrete turbine sizes, there has been interest in the use of
electric motors for driving the refrigerant compressors.
Therefore, the choice of compressor drivers is another important issue that must be addressed by
project developers, and is thoroughly discussed in this Study.
1.2.3 Gas Quality
Considerable industry analysis is in progress to determine the optimum application of
liquefaction technology according to the quality of the feed gas initially and over time. This
analysis is closely linked to the C2+ content of the gas and the availability of refrigerants to be
used in the gas cooling cycles.
Experience has demonstrated that a specific technology has a comparative advantage over other
technologies when constrained by a gas supply of a certain quality/composition. Assessments
have also demonstrated the possibility of improved project viability due to the recovery of
natural gas liquids (NGL) in some LNG plant designs as opposed to others that cannot justify
NGL recovery units because of the lean quality of the feed gas.
Technology choice as it relates to the application of liquefaction refrigerants is comprehensively
reviewed in this Study.
LNG: The Expanding Horizons of Liquefaction 4
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 1 Introduction
1.2.4 New Project Execution Strategies
The present critical shortage of engineering and project management services, skilled labor,
equipment, materials, and commodities are having a serious impact on the execution of projects.
As a result, project developers are seeking alternative strategies and approaches for contracting
and implementing engineering, procurement and construction (EPC) services. These include:
Lump-sum turn key bids
Cost reimbursable bids
Cost reimbursable with bonus/penalty
Bid cost reimbursable front-end with conversion to open book lump sum
Negotiated Awards
EPC Management
In the current environment of tight engineering contracting and equipment supply and the
corresponding cost challenges that this creates, the need to sustain the competitiveness of LNG
supplies to gas markets requires a closer, critical look at the technology and execution strategy
employed in every segment of the LNG value chain.
The volatility in commodity and equipment pricing and the high level of worldwide engineering
and construction activity is placing unprecedented strains on available EPC resources, which
affects more than project costs and economics. Thus, proper planning and implementation of
large projects, such as baseload LNG complexes, are more important than ever.
The alignment of the objectives of the project owners with those of the contractors must address
factors such as local client needs and labor availability and contractibility, in addition to project
budget, schedule, design, and turnover.
While there are advantages and disadvantages to each approach, it is imperative that all
stakeholders understand and thoroughly review the premises that must be tailored to project
specific objectives and constraints. That is, the owners, EPC contractors, and LNG technology
licensing teams must ensure that the engineering designs meet project intentions while remaining
within the boundaries of project constraints.
The search for competitive EPC contracting approaches, project management strategies, and risk
mitigation for base load LNG plants are among the key issues that this study focuses on.
LNG: The Expanding Horizons of Liquefaction 5
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 2 Study Objectives & Scope
2.1 STUDY OBJECTIVES
The objectives of this new Nexant LNG study are the following:
Technology Analysis – Review of liquefaction technology and comparative technical
analysis of the principal technologies and corresponding components.
Commercial Analysis – Review of global LNG trade and comparative economic analysis
of the evaluated liquefaction technologies when employed in base load LNG service.
EPC Contract Strategy Assessment - Review of project execution approaches and
assessment of strategies to manage risks and reduce cost and/or schedule.
2.2 SCOPE AND ISSUES ADDRESSED
The scope of the study is outlined below.
2.2.1 Technology Evaluation
Nexant has undertaken a detailed review and assessment of the status of the various process
routes. The study provides a simplified process flow sheet and description of the liquefaction
technologies currently available and in-depth investigation into the following technologies
employed in larger sized liquefaction trains:
2.2.1.1 Review of Liquefaction Technologies
Pure Refrigerant Process
Optimized Cascade
Mixed Refrigerant Processes
Dual Mixed Refrigerant
Multiple Mixed Refrigerant
Mixed Refrigerant with Propane Pre-cooling and Nitrogen Sub-cooling
The technology evaluation undertaken uses representative values for such parameters as
compression train configuration, feedstock volume, operating envelope, etc. The basis for
technical analyses and comparisons will be the utilization of a lean feed gas with the plant set in
a tropical environment. The effectiveness of each technology will be evaluated based on non-
confidential information.
LNG: The Expanding Horizons of Liquefaction 6
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 2 Study Objectives & Scope
LNG Train Components
Nexant has undertaken a review of the latest developments in LNG technology and the
associated equipment components. The analysis includes a review of the following aspects:
The choice of compressor drivers, heat exchangers, and refrigerants – large single shaft
gas turbines versus electric drives, spiral wound versus plate fin exchangers, and mixed
versus pure refrigerant streams.
An evaluation of the impact of train size to establish the trade off
- Do the proposed mega trains truly exhibit economies of scale when step-out in
equipment sizing and associated infrastructure are considered?
- Is there a “sweet spot” in regard to LNG train size?
2.2.2 Commercial Assessment
Nexant provides a general overview of the international LNG market, identifying and discussing
the manner in which unique supply and demand characteristics, such as market size and resource
endowment, could potentially impact the liquefaction technology selection process, as well as
project execution strategies.
Drawing on the technical evaluation and corresponding equipment and features unique to each
process, an assessment was undertaken based on the investment and operating costs developed
for each technology. Costs were developed on a stand-alone LNG plant basis.
The economic estimates include:
Installed Capital Costs
− Direct Costs (major equipment, bulk materials and labor)
− Indirect Costs
− Contingency
EPC Overhead
Operating and Maintenance Costs (cost of feedstocks and services)
− Feed Gas
− Other Materials and Supplies
− Utilities
− Labor Costs (operations and maintenance personnel)
− Maintenance Material
− General Plant Overheads and Insurance
Technical and Administrative Service
ROI and breakeven LNG prices on FOB basis
LNG: The Expanding Horizons of Liquefaction 7
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 2 Study Objectives & Scope
An analysis of the key advantages and disadvantages of each process according to a variety of
operating conditions, such as plant size and gas feed prices, was developed in the Study.
Illustrative types of sensitivities that are shown in Figure 2.1.
Figure 2.1 Sensitivities of the Various Technologies to Commercial Parameters
Unit Costs, $/ton Unit Costs, $/ton
TECH 1 TECH A
TECH 3 TECH C
TECH B
TECH 2
Maxium Feasible Capacity, MTPA Typical Plant Availability, %
Breakeven Price, $/MM BTU Simple ROI, %
TECH X
TECH 2
TECH 1 TECH 2
TECH Y
TECH Z
LNG Price, $/MM BTU LNG Price, $ / MM BTU
Q306_77807.05.001.01_Figures.ppt
LNG: The Expanding Horizons of Liquefaction 8
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 2 Study Objectives & Scope
2.2.3 Review of Project Development Approaches
Nexant reviewed the contracting strategies available for the execution of LNG liquefaction
projects and the recent trends that have developed in an attempt to optimize the development
costs and project schedules.
Innovative schemes for project planning and execution
Strategies for aligning project objectives with stakeholder needs
Templates for replicating successful projects
Concepts that blend lessons learned with the advantages of new technologies
Advantages and disadvantages of different approaches
Rewards and risks
2.3 FINAL STUDY TABLE OF CONTENTS
The contents of the study are presented below.
Section Page
1 Executive Summary ............................................................................................................. 1-1
1.1 INTRODUCTION..................................................................................................... 1-1
1.1.1 Objective ...................................................................................................... 1-1
1.1.2 Study Methodology...................................................................................... 1-1
1.2 LNG MARKETS OVERVIEW ................................................................................ 1-4
1.2.1 Global Trade ................................................................................................ 1-4
1.2.2 LNG Demand............................................................................................... 1-4
1.2.3 LNG Supply ................................................................................................. 1-6
1.2.4 Spot Market.................................................................................................. 1-7
1.3 LNG VALUE CHAIN .............................................................................................. 1-9
1.3.1 Field Production........................................................................................... 1-9
1.3.2 Base Load LNG Plants................................................................................. 1-9
1.3.3 LNG Storage ................................................................................................ 1-10
1.3.4 LNG Shipping .............................................................................................. 1-10
1.3.5 LNG Receiving Terminals ........................................................................... 1-10
1.4 LIQUEFACTION TECHNOLOGY ......................................................................... 1-11
1.4.1 Technology Overview.................................................................................. 1-11
1.4.2 Liquefaction Train Components .................................................................. 1-13
1.5 COMPARATIVE TECHNICAL ANALYSIS.......................................................... 1-18
1.5.1 Technologies Selected.................................................................................. 1-18
1.5.2 Design Philosophy ....................................................................................... 1-18
LNG: The Expanding Horizons of Liquefaction 9
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 2 Study Objectives & Scope
1.5.3 Capacity Spreads.......................................................................................... 1-19
1.5.4 Production Capacity ..................................................................................... 1-19
1.5.5 Compression Train Availability ................................................................... 1-19
1.5.6 Overall Plant Availability ............................................................................ 1-20
1.5.7 Production to Storage................................................................................... 1-20
1.6 COMPARATIVE ECONOMIC ANALYSIS........................................................... 1-21
1.6.1 Supply Costs ................................................................................................ 1-21
1.6.2 Economic Analysis ...................................................................................... 1-22
1.7 PROJECT EXECUTION STRATEGIES ................................................................. 1-24
2 Introduction .......................................................................................................................... 2-1
2.1 STUDY OBJECTIVE ............................................................................................... 2-1
2.1.1 Market Overview ......................................................................................... 2-1
2.1.2 Technical Analysis....................................................................................... 2-1
2.1.3 Economic Analysis ...................................................................................... 2-2
2.1.4 Project Execution Strategy........................................................................... 2-3
2.2 STUDY METHODOLOGY ..................................................................................... 2-4
2.2.1 Technical Analysis....................................................................................... 2-4
2.2.2 Economic Analysis ...................................................................................... 2-6
2.2.3 Project Development Approaches................................................................ 2-7
2.3 BACKGROUND....................................................................................................... 2-8
2.3.1 Feed Gas Quality.......................................................................................... 2-8
2.3.2 Feed Gas Source........................................................................................... 2-9
2.3.3 Why LNG?................................................................................................... 2-9
2.3.4 Gas Reserves and Gas Production................................................................ 2-9
2.3.5 Pipelines versus LNG................................................................................... 2-10
3 LNG Market Overview........................................................................................................ 3-1
3.1 INTRODUCTION..................................................................................................... 3-1
3.2 LNG SUPPLY........................................................................................................... 3-2
3.2.1 Global Overview .......................................................................................... 3-2
3.2.2 Middle East .................................................................................................. 3-3
3.2.3 Atlantic Basin............................................................................................... 3-6
3.2.4 Asia Pacific .................................................................................................. 3-9
3.3 LNG DEMAND ........................................................................................................ 3-15
3.3.1 Global Overview .......................................................................................... 3-15
3.3.2 Americas ...................................................................................................... 3-17
3.3.3 Europe .......................................................................................................... 3-19
3.3.4 Asia .............................................................................................................. 3-22
LNG: The Expanding Horizons of Liquefaction 10
Technology and Project Execution Strategies
Q307_77807.05.001.01
Section 2 Study Objectives & Scope
3.4 SPOT/SHORT TERM MARKETS........................................................................... 3-26
4 LNG Value Chain................................................................................................................. 4-1
4.1 LNG VALUE CHAIN OVERVIEW ........................................................................ 4-1
4.2 FIELD PRODUCTION............................................................................................. 4-2
4.3 BASE LOAD LIQUEFACTION PLANTS .............................................................. 4-3
4.3.1 Types of Liquefaction Plants ....................................................................... 4-3
4.3.2 Main Components ........................................................................................ 4-3
4.3.3 Simplified Process Flow Scheme................................................................. 4-4
4.3.4 Gas Pre-Treatment and Heavy Hydrocarbon Removal................................ 4-5
4.3.5 NGL Extraction............................................................................................ 4-7
4.3.6 Liquefaction Train........................................................................................ 4-8
4.3.7 Nitrogen Removal ........................................................................................ 4-10
4.3.8 LNG Storage and Export Facilities .............................................................. 4-11
4.3.9 Boil-off Gas and LNG Rollover................................................................... 4-13
4.3.10 Optimum System Operating Pressure .......................................................... 4-14
4.4 LNG SHIPPING ....................................................................................................... 4-15
4.4.1 Tanker Ship Capacity................................................................................... 4-15
4.4.2 Future Shipping Trends................................................................................ 4-16
4.4.3 Tanker Ship Design...................................................................................... 4-17
4.4.4 Operational Safety........................................................................................ 4-19
4.5 LNG RECEIVING TERMINALS ............................................................................ 4-20
4.5.1 Types of LNG Receiving Terminals ............................................................ 4-21
4.5.2 Site Selection................................................................................................ 4-22
4.5.3 Vaporization Technology............................................................................. 4-23
4.5.4 Energy Integration........................................................................................ 4-23
4.5.5 Gas Interchangeability ................................................................................. 4-23
4.5.6 Recent Technological Developments........................................................... 4-24
5 LNG Liquefaction Technology............................................................................................ 5-1
5.1 LIQUEFACTION TECHNOLOGY OVERVIEW ................................................... 5-1
5.2 THE THERMODYNAMICS OF LIQUEFACTION ............................................... 5-4
5.2.1 The Concept of Energy ................................................................................ 5-4
5.2.2 The Minimum Work for Liquefaction ......................................................... 5-5
5.2.3 Thermodynamic Efficiency of Liquefaction Processes................................ 5-6
5.2.4 The Thermodynamics of Alternative Liquefaction Processes ..................... 5-7
5.2.5 Selection of Liquefaction Process ................................................................ 5-10
5.3 DESCRIPTION OF LIQUEFACTION TECHNOLOGIES ..................................... 5-11
5.3.1 Pure Refrigerant Cascade Technology......................................................... 5-11
LNG: The Expanding Horizons of Liquefaction 11
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Q307_77807.05.001.01
Section 2 Study Objectives & Scope
5.3.2 Single Stage Single Mixed Refrigerant Technology (PRICO) .................... 5-13
5.3.3 Multi Stage Single Mixed Refrigerant Technology (APCI) ........................ 5-15
5.3.4 Propane Pre-cooled Mixed Refrigerant Technology (C3-MR).................... 5-16
5.3.5 Double Pressure Mixed Refrigerant Technology (Teal) .............................. 5-18
5.3.6 Dual Cycle Mixed Refrigerant Technology (DMR) .................................... 5-19
5.3.7 Mixed Fluid Cascade Technology (Statoil-Linde MFC®) .......................... 5-22
5.3.8 Nitrogen Double Expander Technology (BHP) ........................................... 5-23
5.3.9 C3-MR plus Nitrogen (APCI APXTM) ....................................................... 5-25
5.3.10 Parallel Mixed Refrigerant Technology (Shell PMRTM)............................ 5-27
5.4 LNG PROCESS DE-BOTTLENECK AND PROCESS OPTIMIZATION ............. 5-29
5.4.1 SlipMR® Technology.................................................................................. 5-29
5.4.2 SplitPropaneTechnologyTM ........................................................................ 5-30
5.4.3 LNG End Flash ............................................................................................ 5-31
5.5 DESCRIPTION AND COMPARISON OF LIQUEFACTION TRAIN
COMPONENTS........................................................................................................ 5-32
5.5.1 Refrigerants.................................................................................................. 5-33
5.5.2 Heat Exchangers .......................................................................................... 5-37
5.5.3 Compressor Drivers ..................................................................................... 5-42
5.5.4 Refrigerant Compressors.............................................................................. 5-51
5.5.5 Liquid Expanders ......................................................................................... 5-51
5.6 OTHER CONSIDERATIONS.................................................................................. 5-53
5.6.1 Impact of Ambient Conditions..................................................................... 5-53
5.6.2 Cooling Medium .......................................................................................... 5-54
5.6.3 Plant Availability and Capacity Factors....................................................... 5-54
5.6.4 Process Efficiency........................................................................................ 5-55
5.6.5 LNG Train Assembly – Modular Construction............................................ 5-56
5.6.6 Economies of Scale ...................................................................................... 5-56
5.6.7 Safety ........................................................................................................... 5-57
6 Comparative Technical Analysis ........................................................................................ 6-1
6.1 STUDY METHODOLOGY ..................................................................................... 6-1
6.1.1 Boundary Conditions ................................................................................... 6-2
6.1.2 Technology Selection................................................................................... 6-4
6.2 COMPARATIVE TECHNICAL ANALYSIS.......................................................... 6-6
6.2.1 Comparison of Technology Development Stage ......................................... 6-6
6.2.2 Comparison of Design Philosophy............................................................... 6-7
6.2.3 Comparison of Capacity Spreads ................................................................. 6-8
6.2.4 Comparison of LNG Production Capacity ................................................... 6-9
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Section 2 Study Objectives & Scope
6.2.5 Comparison of Compression Train Availability .......................................... 6-9
6.2.6 Comparison of Overall Plant Availability.................................................... 6-11
6.2.7 Comparison of LNG Production to Storage................................................. 6-12
6.3 DESIGN OF LARGER LIQUEFACTION TRAINS ............................................... 6-13
6.3.1 DMR LNG Technology ............................................................................... 6-13
6.3.2 Optimized Cascade Technology .................................................................. 6-15
6.4 CAPITAL AND OPERATING COST ESTIMATES .............................................. 6-18
6.4.1 Installed Capital Costs ................................................................................. 6-18
6.4.2 Annual Operating Costs ............................................................................... 6-27
6.4.3 LNG Economics........................................................................................... 6-29
7 LNG Economics.................................................................................................................... 7-1
7.1 LNG VALUE CHAIN ECONOMICS...................................................................... 7-1
7.1.1 Gas Field Development and Production ...................................................... 7-1
7.1.2 Base Load Liquefaction ............................................................................... 7-2
7.1.3 LNG Shipping .............................................................................................. 7-2
7.1.4 LNG Receiving Terminal............................................................................. 7-2
7.1.5 Total LNG Supply Costs.............................................................................. 7-3
7.2 COMPARATIVE ECONOMICS ANALYSIS......................................................... 7-5
7.2.1 Assumptions................................................................................................. 7-5
7.2.2 LNG Breakeven Prices................................................................................. 7-6
7.2.3 Net Present Value, IRR and Investment Efficiency ..................................... 7-8
7.2.4 Specific Net Present Value........................................................................... 7-9
7.3 SENSITIVITY ANALYSIS...................................................................................... 7-11
7.3.1 LNG Price Sensitivity .................................................................................. 7-11
7.3.2 Capital Costs Sensitivity .............................................................................. 7-12
7.4 ECONOMIC RANKING .......................................................................................... 7-14
7.5 SUMMARY AND CONCLUSIONS........................................................................ 7-15
8 Project Execution Strategies ............................................................................................... 8-1
8.1 LNG PROJECT RISKS ............................................................................................ 8-1
8.1.1 Project Uncertainties .................................................................................... 8-1
8.1.2 Integrated Project Risks ............................................................................... 8-2
8.1.3 Gas Reserve Risks........................................................................................ 8-2
8.1.4 Technology Risks......................................................................................... 8-4
8.1.5 Generic and Specific Risks .......................................................................... 8-6
8.1.6 Project Financing & Risk ............................................................................. 8-7
8.1.7 Risk Management ........................................................................................ 8-11
8.2 PROJECT MANAGEMENT .................................................................................... 8-15
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Section 2 Study Objectives & Scope
8.2.1 Project Logistics........................................................................................... 8-16
8.3 CONTRACTUAL APPROACHES .......................................................................... 8-17
8.3.1 Worldwide Project Growth Environment .................................................... 8-17
8.3.2 LNG Project Growth Environment .............................................................. 8-20
8.3.3 Owner and Contractor Alignment................................................................ 8-22
8.3.4 EPC Contracts for Oil & Gas Projects ......................................................... 8-24
8.3.5 EPC Contracts for Base Load LNG Projects ............................................... 8-30
8.3.6 LNG Contract Strategies .............................................................................. 8-32
8.4 SUMMARY .............................................................................................................. 8-42
9 Glossary................................................................................................................................. 9-1
10 References ............................................................................................................................. 10-1
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Section 3 Nexant's LNG Experience
3.1 NEXANT
Nexant, a leading global provider of consulting services to the energy and chemicals industries,
was established on 1 January 2000. Originally formed from a core group drawn from Bechtel’s
Technology and Consulting Group, the company has since grown organically and through
acquisitions and now totals over 350. In 2001, Nexant acquired the leading refining and
chemical consultancy, Chem Systems, which is now fully integrated into Nexant’s Oil and Gas,
and Chemicals Business Units.
As an independent company with a number of shareholders, Nexant provides impartial advice to
clients in the energy sector.
Nexant offers global coverage through its major offices in London, White Plains (New York),
Houston, San Francisco, and Bangkok, with project offices in New Delhi, Abuja (Nigeria) and
representatives in Singapore, Tokyo and Seoul.
Nexant’s consulting services cover all areas of the natural gas business and our gas specialists
have a strong track record throughout the LNG chain, both technically and commercially. We
have successfully completed a large number of key LNG assignments and are very familiar and
up-to-date with recent technical and commercial developments taking place in the different
segments of the LNG chain.
3.2 NEXANT’S LNG EXPERIENCE
The following is a shortlist of recent Nexant studies in support of LNG projects.
3.2.1 LNG Liquefaction Experience
Due Diligence Assessment of Base Load LNG Project – West Africa
Benchmarking LNG Base Load Capital and Operating Costs – Latin America
LNG Liquefaction Feed Gas Techno-Economic Assessment
Advances in LNG Technologies – PERP multi-client study
Advances in Gas Processing Technology – PERP multi-client study
LNG Technology Comparison Study – Single client studies
LNG Supply Feasibility Studies – Various countries
Due Diligence Analysis of LNG Project – Latin America
Gas Quality Deliverability Forecasts – Various countries
3.2.2 LNG Receiving Terminal Experience
LNG Terminal Due Diligence Project – Asia Pacific
LNG Terminal Feasibility Study – Spain
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Section 3 Nexant's LNG Experience
LNG Terminal Development – Eastern Mediterranean
LNG Terminal Technical Review – Korea
Advances in LNG Re-gasification Terminals – PERP multi-client study
LNG Supply Feasibility Studies – Various countries
3.2.3 LNG Project Sponsors and Lenders
Nexant has been the Technical and Market Consultant to the sponsors and lenders on numerous
projects, including:
Gas Consultant – International Gas Tender – India
Gas Advisor – International Gas Tender - China
Gas Market Advisor – Middle East LNG export project
Technical & Commercial Advisor –West African LNG Liquefaction Plant Due Diligence
Market Advisor – Future LNG development at Ras Laffan for Qatar Petroleum
Technical and Market Advisor – LNG terminal development – S.E. China
Technical & Market Advisor – LNG terminal development - Spain
3.2.4 LNG Market Experience
LNG Transport Study - India
LNG Competitiveness for South East Asia LNG Supply
Expert Witness - Commercial Value of Gas Supply – Gulf of Guinea
LNG Market Evaluation – South Asia
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Section 4 Timing and Subscription Price
4.1 TIMING
Anchored with Nexant’s extensive experience and in-house database, the Study is available for
immediate delivery.
4.2 SUBSCRIPTION PRICE
The cost of the report, “LNG: The Expanding Horizons of Liquefaction Technology and
Project Execution Strategies”, is US$23,000.00 (twenty-three thousand U.S. dollars).
Each subscriber will receive two (2) hard-bound copies of the Report and access to electronic
downloads of the report via a password-protected area at www.chemsystems.com. Additional
hard copies of the Report can be ordered for a cost of US$500.00 per copy, which represents the
costs associated with producing and delivering additional copies.
LNG: The Expanding Horizons of Liquefaction 17
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Section 5 Contact Information
5.1 CONTACT INFORMATION
Please visit www.chemsystems.com to authorize engagement of the study or return the following
authorization form to one of Nexant’s offices listed below.
Mr. John Servello Mr. Clive Gibson
Project Manger Manager, Oil and Gas
Principal Nexant (Thailand) Limited
Nexant, Inc. 20th Floor, Zone B
909 Fannin Street, Suite 1275 SCB Park Plaza, West Tower 2
Houston, TX 77010-1038 18 Kwaeng Chatuchak, Khet Chatuchak
U.S.A. Bangkok, 10900
Thailand
Tel: 1-713-982-5552
Fax: 1-713-739-0741 Tel: + 66-2-937-5150
e-mail: jservello@nexant.com Fax: + 66-2-937-5145
email: cgibson@nexant.com
Mr. Graham Hartnell Ms. Heidi Junker Coleman
Vice President, Oil and Gas Multi-client Programs Administrator
Nexant Limited Nexant, Inc.
Griffin House, 1st Floor South 44 South Broadway, 5th Floor
161 Hammersmith Road White Plains, NY 10601
London W6 8BS U.S.A.
United Kingdom
Tel: 1-914-609-0381
Tel: + 44-207-950-1520 Fax: 1-914-609-0399
Fax: + 44-207-950-1550 e-mail: hcoleman@nexant.com
e-mail: gxhartne@nexant.com
LNG: The Expanding Horizons of Liquefaction 18
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Section 6 Authorization Form
1. The undersigned (hereafter "Client") hereby subscribes to purchase from Nexant, Inc. (“Nexant”), Nexant’s
study, “LNG: The Expanding Horizons of Liquefaction Technology and Project Execution Strategies”,
in accordance with the following terms and conditions.
Nexant will provide to Client the following information and services:
(a) Two (2) bound copies of the report
(b) Access to electronic downloads of the report via a password-protected area at
www.chemsystems.com
2. While the information supplied by Nexant to Client represents an original effort by Nexant, based on its
own research, it is understood that portions of the report involve the collection of information available
from third parties, both published and unpublished. Nexant does not believe that such information will
contain any confidential technical information of third parties but cannot provide any assurance that any
third party may, from time to time, claim a confidential obligation to such information.
3. The information disclosed in this report will be retained by Client for the sole and confidential use of Client
and its 51 percent or greater owned affiliates in their own research and commercial activities, including
loaning the reports on a confidential basis to third parties for temporary and specific use for the sole benefit
of Client.
4. Client further agrees that it will use reasonable efforts to keep the information in the reports for its sole use;
however, this restriction shall not apply to information which is or becomes generally available to the
public in a printed publication, which is already in the possession of Client, or which is received by Client
in good faith from a third party without an obligation of confidentiality.
5. Client shall not republish any of the report or sections except within its own organization or that of its 51
percent or greater owned affiliates. Client further agrees to refrain from any general publication of the
reports, either directly or through its affiliates, so as to constitute passage of title into the public domain or
otherwise jeopardize common law or statutory copyright in said report or sections.
6. Client will be billed by and shall pay Nexant the total subscription fee of US$23,000.00 (twenty-three
thousand U.S. dollars). Amounts are due upon receipt of invoice and payable within thirty (30) days. Late
payments shall accrue interest at the rate of 1.5 percent per month. Fees quoted do not include any
applicable sales tax, or use tax, or value added tax, all of which are for the account of Client.
7. Additional copies of the report are available at US$500 each. The report will also be available
electronically on CD-ROM at a cost of US$500 each.
8. The obligations of paragraphs 3 and 4 shall terminate five (5) years from receipt of reports.
9. Unless specified otherwise, there are no warranties of any kind for reports and consulting services provided
under this Agreement. Nexant’s total liability under this Agreement is limited to the total amount paid to
Nexant for the reports.
10. This Agreement will be governed by the laws of the State of New York.
LNG: The Expanding Horizons of Liquefaction 19
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Section 6 Authorization Form
AUTHORIZATION FORM
AGREED TO AND ACCEPTED BY: AGREED TO AND ACCEPTED BY:
CLIENT: NEXANT, INC.
Name: Name:
Signature: _____________________________ Signature: _____________________________
Title: Title: _____________________________
Date: Date: _____________________________
Reports to be sent to:
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
Phone: Fax: _________________________________
E-mail address: _____________________________________________________________________
OPTIONS:
Report Subscription : _____ US$23,000.00
Additional Number of Hard Copies: ______ @ US$500.00 each
Number of CD ROM copies: ______ @ US$500.00 each
Total Cost: US$___________________
If purchase order is required, please provide the purchase order number below:
Purchase Order Number: _____________________________
NEXANT, INC.
44 SOUTH BROADWAY, 5th Floor
WHITE PLAINS, NY 10601-4425, U.S.A.
Fax: 1-914-609-0399 Web: www.nexant.com
LNG: The Expanding Horizons of Liquefaction 20
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Nexant, Inc.
44 South Broadway, 5th Floor
White Plains, NY 10601-4425
U.S.A.
Telephone: +1 914 609 0300
Facsimile: +1 914 609 0399
Nexant, Inc.
909 Fannin Street, Suite 1275
Houston, TX 77010-1038
U.S.A.
Tel: +1 713 982 5550
Fax: +1 713 739 0741
Nexant, Ltd.
Griffin House
1st Floor, South
161 Hammersmith Road
London W6 8BS
United Kingdom
Telephone: +44 20 7950 1600
Facsimile: +44 20 7950 1550
Nexant (Thailand) Ltd.
20th Floor, Zone B
SCB Park Plaza, West Tower 2
18 Ratchadapisek Road
Kwaeng Chatuchak, Khet Chatuchak
Bangkok 10900
Thailand
Telephone: +66 2 937 5150
Facsimile: +66 2 937 5145
Nexant, Inc.
Yoshida Building 7F
1-2-2 Hirakawa-cho, Chiyoda-ku
Tokyo 102-0093
Telephone: +81-3-3237-3383
Facsimile: +81-3-5212-1708
Nexant, Inc.
Head Office
101 Second Street, 11th Floor
San Francisco, CA 94105
U.S.A.
Telephone: +1 415 369 1000
Facsimile: +1 415 369 9700
www.nexant.com
e-mail:info@nexant.com
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