Fearnley LNG

Concept for fast track import of LNG to India using fast track
FSU with shore based Regas (SBRG)

Introduction
The importation of LNG has traditionally taken place via the construction of
onshore receiving terminals. This is a long process taking approximately 6 years
at least from concept to first cargo. However energy markets, and gas demand in
particular, can change at rates that make such a time frame very unattractive,
leading to gas shortages and increased use of more expensive substitute fuels in
the interim period.

The first alternative approach to a land based terminal has been to use a floating
storage and regasification unit (FSRU) as pioneered by Excelerate of the USA.
The FSRU might be a purpose built vessel or a conversion from an existing ship.
The quickest project in terms of going from concept to first cargo was the Bahia
Blanca facility in Argentina which took only 6 months to come into service. Other
projects have followed, albeit with longer lead times.

There exists a third means of importing LNG that offers the advantages of speed
in execution, simplicity of configuration and modest capital cost, a significant
portion of which can be written down over a relatively short time period. This
configuration uses a conventional LNG carrier as a floating storage unit (FSU)
which discharges LNG into a small, shore based intermediate buffer tank from
where it is pumped to vaporizers which use heat exchange with ambient air to
vaporize the LNG. This configuration has been successfully implemented at
Mejillones in Chile as an interim solution whilst a large, conventional LNG tank is
being built to allow larger scale importation of LNG in due course. Fearnley LNG
is of the view that this type of configuration has application in other areas where
LNG import is required in a compressed timetable and where capital cost
exposure needs to be minimized. This note describes the concept in more detail.
Concept Configuration
Using this concept, which is proven in
operation, Fearnley LNG can work with our
customers and together with infrastructure and
equipment manufacturers to fast track the
import of LNG to any location with shore based
facilities where a vessel can be permanently
moored and where sea conditions allow. The
concept is to enable a project to be ready to
receive their first gas between 18-20 months of
receiving the required approvals from relevant
governmental and local entities.

The FSU with regasification onshore (SBRG) is intended as a viable alternative

for those locations where time to market would otherwise be more than 3 years.
There are a number of advantages to using an FSU with SBRG:

1. Time to Market. Approvals from relevant governmental bodies are sign-

ificantly reduced in comparison with those where a 100% shore based
facility is chosen. An FSU with SBRG can be in operation within 18-20
months of receiving a green light. The key is to use contractors best
placed to ensure that the project is executed on time and on budget.

2. Land usage. A FSU with SBRG will use limited land space as the footprint
of the terminal will be limited to the additional pier to enable cross jetty
load/discharge and the Regas modules that will be positioned on the pier
or closer to the location where the natural gas is intended to be used. By
comparison a conventional terminal has a far larger footprint that can
take considerable time to define, acquire and prepare.

3. Capital Cost. Utilizing older tonnage as storage tanks will have an impact
on the cost associated with building tanks on shore as such units are
related to the current market prices in the secondhand market.

4. Independence. Through a tailor made facility the off-taker is not exposed

to other external elements than those relating to the price of LNG on
either FOB or DES basis. Fearnleys can analyse the impact of these and
how to position the project in a separate strategic document. The use of
FSU with SBRG will effectively give the project autonomy and flexibility in
the event that the project is connected to a National Grid once this is
developed.

5. Modularity. An FSU with SBRG is completely modular and the

regasification capacity can either be increased as demand increases or
most of the equipment can be re-located to any new facility in the event
the old one is no longer economically viable or superseded by
conventional facilities.

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 6. Other key elements.
a. Security of supply
b. Amount of regas capacity required
c. Lead time on equipment
d. Documentation requirements.

For a FSU with SBRG there are a number of parallel processes that will have to
take place but with the right mix of local expertise and market input the first gas
to enter the intended power plant, refinery or other off taker should be possible
within 18-20 months subsequent to governmental approvals and FID. During the
time taken for confirmation of the relevant applications to state and local
government, much of the documentation and other work surrounding the FSU,
regas equipment and the import of LNG can be established.

Scope of Work/Elements of the Project

Storage vessel.
This is usually an older vessel 20 years or older.
It is important for the tanks or membrane and
secondary containment as well as hull and
pumping machinery to be sound and in good
condition (these may need an upgrade for the
project).

Re-gasification units.
These can be placed on the jetty or on-shore. The cost of re-gas units depends on
quantities throughput, availability and design criteria but generally Air
Vapourisers are economical especially in warm climates while Closed Loop are
more expensive.

Jetty.
Where an existing jetty/dockside can be
modified this is the cheapest option. The price to
build a jetty for the project will depend very
much on the location and prevailing sea and
weather conditions.

Appendix - documentation required

The scope of the agreements required to implement the project could be quite
wide. In this regard we set out below a listing of agreements that we would
expect to be placed into effect for this project and a listing of the key terms that
will need to be negotiated.

- Port Agreement(s)

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 - Customs and Excise Agreement
- Vetting and Inspections
- FSU Service Agreement
- Vessel operating requirements
- Additional background information

The above listing is not exhaustive but is designed to familiarize the FSU
PROJECT with the scope of the operation that will take place and which must be
reflected as much as possible in the set of agreements that define the project and
its operation. Fearnley LNG possesses the ability to assist the FSU PROJECT in
implementing this project in accordance with sound industry practice.

Fearnley LNG
Christian Steimler
November 2012
ces@fearnleys.no/+47 22 936 6000