FY2018

Study on business opportunity of High-quality Energy Infrastructure

to Overseas

“Development of Feasible Project Structure for LNG Distribution and Power Plants(LDPP) in Eastern Indonesia” Final Report

February 2019

Mitsubishi Heavy Industries, Ltd.

Kawasaki Kisen Kaisha, Ltd.

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CONTENTS 1. PREFACE 2. STUDY BASIS 3. DATA AQUISITION

3.1 Site data from PLN 3.2 Site investigation data 3.3 Metocean data from BPPT

4. LOGISTICS STUDY 5. FACILITY DESIGN

5.1 Storage and Regas sites, supply gas to on-shore 5.2 Storage, Regas and Power generation(Gas Engine) sites supply power to on-shore 5.3 Storage, Regas and Power generation (GTCC) sites supply power to on-shore 5.4 Storage, Regas and Power generation sites supply gas & power to on-shore 5.5 LNG storage and re-gas system 5.6 Power plant 5.7 LNG carrier

6. MARINE ENGINEERING

6.1 General 6.2 Marine engineering planning basis

7. INDONESIAN GAS MARKET

7.1 Image of industrial development for demand creation 7.2 History of expansion of LNG use in Japanese city gas industry 7.3 Natural Gas use expansion in North Sulawesi 7.4 Further progressive utilization of natural gas (Grand Design)

8. ECONOMIC EVALUATION 9. CONCLUSIONS

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1. PREFACE The Participants are aiming to support development of National Gas Roadmap Policy that was

previously launched by the Government of the Republic of Indonesia (hereinafter referred to as the “GOI”) to improve the service level of power supply and incentivize business development in the country. As the archipelago country, the distribution of gas will no longer rely only on pipeline network but also virtual pipeline. The virtual pipeline will require integrated facilities to deliver the gas from the refinery/source to the gas user such as municipal use, power plants and other utility plants.

In technology point of view, even though the technical components of the LNG’s generation systems are well known and well established, but not all projects manage to fulfill their objectives in time and within budget. In addition, the fact that geographically eastern Indonesia including small islands that are separated by sea, therefore configurations of power, and the uniqueness of demand will also affect to any aspect not only to those technology and commercial aspects of the LNG Distribution and Power Plants in Eastern Indonesia (hereinafter referred to as “the LDPP Project”). Meanwhile, commercial aspects and market conditions would have a significant influence in the success probabilities. Therefore, understanding the conditions, as well as, to know them in depth and adapt those considerations to the study of the LDPP Project accordingly will be the key for successful implementation of the project. With consider to those explained above, the study to be carried out will be able to provide analysis and presents the challenges and feasible solution that the sponsor of these types of projects faces and the opportunities to overcome them and be successful.

2. STUDY BASIS 20 sites, 825 MW in total, COD: 2018 to 2027 sites were selected for consideration.

3. DATA AQUISITION 3.1 Site data from PLN METI requested the necessary data for the study. PLN prepared their data for each site. We examined the data and planned the site investigation. 3.2 Site investigation data In consultation with officials of the Government of Indonesia and persons concerned with PLN, we set LNG delivery candidate sites in eastern Indonesia. Regarding the current status and location of these sites, we selected the sites for the field survey.

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3.2.1 West-Papua (1) SCHEDULE The field survey on West-Papua was carried out from 13th to 14th August, 2018. (2) DAY-1 : MEETING WITH PLN

PLN team presented Power Plant Project Master Plan for West Papua.

Fig.3-1 PLN power plant project master plan of West Papua

(3) MEETING WITH PT. PELINDO-IV PT. Pelindo IV team presented Development Plan.

(4) DAY-2 : MEETING WITH LOCAL GOVERNMENT OF SORONG

Local government presented Sorong Special Economic Zone (Kawasan Ekonomi Khusus-KEK).

(5) VISIT TO KEK SORONG Visit to existing jetty in KEK Sorong

3.2.2 Maluku and North Maluku (1) SCHEDULE The field survey on Maluku and North Maluku was carried out from 27th to 29th August, 2018. (2) MEETING WITH PLN

PLN team presented Capacity and Project for Maluku and North Maluku.

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Fig.3-2 PLN capacity and project of Maluku and North Maluku

(3) SITE VISIT TO AREA PLAN PLTMG AMBON 2

Visit to area plan PLTMG Ambon 2. (4) SITE VISIT TO PLTMG AMBON PEAKER

Visit to PLTMG Ambon Peaker Project. (5) MEETING WITH PLN UIP AMBON

PLN region Ambon - Maluku, cannot attend the meeting. (6) VISIT TO PLTMG TERNATE

Visit to PLTMG Ternate. (7) VISIT TO PLTD SOMAHODE SOFIFI

Visit to PLTD Somahode Sofifi. (8) VISIT TO AREA PLAN PLTMG TIDORE

Visit to area plan PLTMG Tidore. (9) VISIT TO PLTU TIDORE 2x7 MW

Visit to PLTU Tidore 2x7 MW. 3.2.3 North Sulawesi (1) SCHEDULE The field survey on North Sulawesi was carried out from 26th to 28th September, 2018. (2) MEETING WITH KEK BITUNG ADMINISTRATOR

Administrator of Special Economic Zone Bitung Presentation (Kawasan Ekonomi Khusus-KEK).

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(3) MEETING WITH PT. PELINDO IV (PERSERO) BITUNG

PT. Pelindo IV (Persero) Bitung presented Bitung Port Development Plan. (4) VISIT TO PT. PELINDO IV (PERSERO) BITUNG PORT

Fig.3-3 Port of Bitung PT. Pelindo IV (Persero)

(5) DAY-2 : MEETING WITH PLN

PT. PLN (Persero) presented power plant project status. (6) VISIT TO AMURANG POWER PLANT AND MVPP AMURANG

PLTU Amurang unit 1&2 is 25MW each and unit 3&4 is 30MW each with total capacity is 110MW.

(7) MEETING WITH PT. PELINDO IV (PERSERO) PT. Pelindo IV (Persero) Manado presented Manado Port Development Plan.

(8) VISIT TO MINAHASA PEAKER PROPOSED LOCATION Visit to MINAHASA PEAKER PROPOSED LOCATION.

3.3 Metocean data from BPPT In consultation with officials of the Government of Indonesia and parties concerned with PLN, LNG delivery candidate sites in eastern Indonesia were set up. In planning and designing pier and additional facilities etc. at these sites, it is necessary to consider sea weather conditions for each site. Therefore, in cooperation with the Indonesian Government's Technical Evaluation and Application

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Agency (Badan Pengkajian dan Penerapan Teknologi , BPPT), sea weather conditions for each site were investigated and evaluated.

Fig.3-4 Acquired data list from BPPT

No. Acquired data

1 Bathymetry data for each site

2 Wind and wave data for each site

3 Tidal analysis data for each site

4 Wave analysis data for each site (Fetch diagram & analysis, Spectral wave modeling data)

5 Current analysis data (Hydrodynamics modeling data, Current probability data)

6 Tsunami hazard assessment data for 5 megathrust (Potential earthquake size and dimensions data, etc.)

7 Tsunami directivity data

8 Time series data of Tsunami

4. LOGISTICS STUDY Each of the power plants in the eastern Indonesia is small in scale and the consumption of LNG is relatively small. We examined the small scale LNG distribution plan. 5. FACILITY DESIGN

Overall facility consists of Storage and Regas / Power Generation Site facilities. There are four types of sites configuration as follows;

(1) Storage and Regas sites, supply gas to on-shore (2) Storage, Regas and Power generation (Gas Engine) sites, supply power to on-shore (3) Storage, Regas and Power generation (GTCC) sites, supply power to on-shore (4) Storage, Regas and Power generation sites, supply gas & power to on-shore

5.1 Storage and Regas sites, supply gas to on-shore The basic functions of Storage and Regas sites, supply gas to on-shore are to; (1) Provide LNG storage, receive LNG from Small LNGC (2) Regas LNG and send gas to on-shore existing power generation plant(s)

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The design concept of the facility is; - The mooring jetty for the Small LNGC shall be provided. - Small LNGC will be moored to the jetty. - A FsRU (Floating storage/Regas Unit) shall be provided as per on-shore gas demand, which

shall be attached to the trestle between the jetty and shore. - The Jetty is connected to shore with trestle, which is provided with access way and pipe and/or cable rack.

5.2 Storage, Regas and Power generation(Gas Engine) sites supply power to on-shore

The basic function of Storage, Regas and Power generation(Gas Engine) sites supply power to on-shore are to;

(1) Provide LNG storage, receive LNG from Small LNGC (2) Regas LNG and send gas to FPP(s) power generation plant(s) (3) Supply power to on-shore grid The design concept of the facility is; - The mooring jetty for the Small LNGC shall be provided. - Small LNGC will be moored to the jetty. - A FsRU (Floating storage/Regas Unit) shall be provided as per power demand, which shall be attached to the trestle between the jetty and shore.

- FPP(s) (Gas Engine generator) shall be moored attaching to the trestle between the jetty and shore.

- The Jetty is connected to shore with trestle, which is provided with access way and cable rack.

5.3 Storage, Regas and Power generation (GTCC) sites supply power to on-shore The basic function of Storage, Regas and Power generation (GTCC) sites supply power to

on-shore are; (1) Provide LNG storage, receiving LNG from Small LNGC (2) Regas LNG and send gas to FPP(s) power generation plant(s) (3) Supply power to on-shore grid The design concept of the facility is; - The mooring jetty for the Small LNGC shall be provided. - Small LNGC will be moored to the jetty. - FPP(s) (GTCC) shall be provided as per power demand, which shall be attached to the trestle between the jetty and shore.

- The Jetty is connected to shore with trestle, which is provided with access way and cable rack.

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5.4 Storage, Regas and Power generation sites supply gas & power to on-shore The basic function of Storage, Regas and Power generation sites supply gas & power to

on-shore are to; (1) Provide LNG storage, receiving LNG from Small LNGC (2) Regas LNG and send gas to on-shore power plant and FPP(s) power generation plant(s) (3) Supply power to on-shore grid The design concept of the facility is; - The mooring jetty for the Small LNGC shall be provided. - Small LNGC will be moored to the jetty. - FsRU(s) (Floating storage/Regas Unit) shall be provided as per power demand, which shall be attached to the trestle between the jetty and shore.

- The Jetty is connected to on-shore with trestle, which is provided with access way and cable rack.

- FPP(s) (GTCC) shall be provided as per power demand, which shall be attached to the trestle between the jetty and shore.

5.5 LNG storage and re-gas system

There are two types of LNG storage and re-gas system with assumption as shown below. The LNG storage capacity for each site will be determined considering actual energy demand condition in each site. Floating types of LNG storage and re-gas system will be standardized in some capacity type considering economic impacts. As the result of the examination on the actual demand condition of each site, the on-shore type of LNG storage and re-gas system may be applicable and appropriate in some case.

5.6 Power plant

There are two types of power plant for HUB sites and those assumptions are shown as below. One is the GTCC FPP, the other is Gas-engine FPP. Power generating capacity for each site will be determined based on the RUPTL2018 considering actual energy demand condition of each site. Floating types of the power plant will be standardized in some capacity type considering economic impacts. As a result of the examination on the actual demand condition in each site, the on-shore type of power plant may be applicable and appropriate in some cases.

5.7 LNG carrier

New building small LNGC with bow thruster and CPP (controllable-pitch propeller) should be developed and constructed for the LNG distribution in eastern Indonesia. Reasons are as follows. It’s quite difficult to charter-in small LNGC(s) from market because number of small LNGC(s) is

very limited.

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Shallow depth is expected at each power plant sites at eastern Indonesia where have not been developed yet. A shallow draft small LNGC contributes to achieve low jetty construction costs.

Port facilities such as tug boat / operator are not enough in eastern Indonesia at this moment. It’s better to install bow thruster, CPP and other equipment to a small LNGC so that its maneuvering is improved to achieve berthing and unberthing without tug boat assistance.

6. MARINE ENGINEERING 6.1 General

This Section includes the preliminary planning of Marine Engineering of Study cases. Marine Engineering consists of marine jetty facility to moor the GTCC FPP/Gas Engine FPP/FSU/FsRU and to receive the LNG carriers. This section also includes connecting trestle to shore and interconnection to the tie-point with existing and/or new facilities, provided by others. 6.2 Marine engineering planning basis

Since the original installation plans of power station was on-shore base LNG receiving /storage /re-gasification, there might be various constraints to build new on-shore facilities. The proposing concept is to provide off-shore storage, regasification, plus power generation, which might resolve the constraints for quicker project realization. The key factors to success will be to minimize on-shore construction and to improve /accelerate the project commencement and completion. Following main focus shall be evaluated for each site and the basis of planning will be established.

- Small LNGC access and mooring for LNG unloading. - Cost effectiveness of marine facility (Jetty/Trestle)

7. INDONESIAN GAS MARKET 7.1 Image of industrial development for demand creation History of the LNG spread in Japan was city gas industry. Cases of gas use promotion in commercial and industrial by introducing LNG are follows:

- Kitchen for business use - Air conditioning - Industrial boiler - Combined heat and power

Case of the gas use development in the North Sulawesi state assumed as follows:

- Gas use development to other fuel users - Gas use development to new industrial parks

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7.2 History of expansion of LNG use in Japanese city gas industry In Japan, Oil-based Gas or Coal-based gas used to be major feedstock for City Gas until around

1960s. But after that, Natural Gas has attracted a lot of attention as feedstock for City Gas, and LNG import started from 1969. The reason why Natural Gas has attracted a lot of attention is that its investment efficiency on pipeline because Natural Gas has higher calorific value than Oil-based Gas in comparison by per unit volume as well as improvement of safety. In addition, Natural Gas is more environmental friendly fuel. From 1980s, the demand of Natural Gas for Industrial use including industrial furnace and industrial boiler has rapidly increased as alternative of other fuel such as oil.

Furthermore, the use for Natural Gas has been expanded to Kitchen appliances for business use, Air conditioning, Fuel cell, FCV and NGV by reason of Energy conservation. Therefore, Natural Gas utilization in City Gas business in Japan has increased continuously.

Fig.7-1 Historical LNG consumption in Japan

It shows typical products and facilities using Natural Gas in Japan. Compared with Japan,

Natural Gas demand as a source of heat in Indonesian household sector is expected to be not so much because average temperature in Indonesia is higher than Japan. But, we think demand of Natural Gas for commercial use and industrial use have sufficient potential to expand in Indonesia by taking advantage of its environmental friendliness and supply capacity to areas with large energy demand.

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Fig.7-2 Products and facilities using natural gas

“Combined heat and power” is the generic name of a system to produce and supply both

electricity and heat from single fuel. The electricity generated by combustion engine is supplied in combination with electricity supplied from commercial power grid. Meanwhile, steam and warm water generated from waste heat are used as heat sources for manufacturing process, absorption chillers or hot water. Combined heat and power enable users to use energy more efficiently.

Fig.7-3 Basic configuration of CHP

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7.3 Natural Gas use expansion in North Sulawesi In the northern part of North Sulawesi, there are 3 towns named Manado, Bitung and Likupang,

and those are located closely. We choose these 3 towns for our study this time. Manado is the capital city of North Sulawesi and has features of a commercial city. Bitung is an industrial area and has a development plan for new industrial estate in a Special Economic Zone. Likupang is a resort area and has construction plan for new power plants which are described in the latest RUPTL. In the study, we divided the assumed scenario for Natural Gas use expansion in these 3 towns into 3 phases based on the degree of progress. Phase 1 is the stage of “Fuel conversion of existing facilities”. Phase 2 is the stage of “Utilization as solutions for challenges and future plans of the region”. Phase 3 is the stage of “Further progressive utilization”.

7.4 Further progressive utilization of natural gas (Grand Design)

An image of Smart City utilizing Natural Gas in phase 3 is shown below. Once LNG has been brought to the site, “Smart City” or “Smart Community” can be realized in the future. Furthermore, a model of Natural Gas utilization like this can be applied not only to North Sulawesi but also to the other areas in Indonesia.

Fig.7-4 Further progressive utilization of natural gas

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8. ECONOMIC EVALUATION (1) Transaction volume Larger power transaction volume makes Indonesia more beneficial through this project.

Fig.8-1 LNG distribution cost vs. Total capacity

(2) Firm demand

Firmed demand for power and LNG supply is required for reducing LNG distribution cost.

Fig.8-2 Firmed demand for power and LNG supply

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(3) Matching demand & supply It reduce LNG distribution cost to increase the capacity factor of power plant by developing

demand.

Fig.8-3 LNG distribution cost vs. capacity factor of power plant 9. CONCLUSIONS

(1) Feasible COE (Cost of Electricity) could be achieved. (2) In practical applications, it is desirable to choose the site which has large demand or large

demand potential.