FinalReport:MarketsandSwaps(RevisedJune2017)

WB-MJM-MYN-LNG-SwapsReportVF(RevisedFinal).docx

Myanmar:Technical

AssistanceonLiquefied

NaturalGasOptionsfor

MyanmarPhase1

(Selection#1216215)

FinalReport:MarketsandSwaps

(RevisedJune2017)

22ndJune2017

MJMEnergyLimited

MJMEnergyLimitedThePeachTreeOffice

CroftersCourt,TheCrofts,Witney,Oxfordshire,OX284DD

UnitedKingdom.Telephone:+44(0)1993774736

www.mjmenergy.comCompanyregistrationnumber:3385119

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Disclaimer:ThisreporthasbeenpreparedbyMJMEnergywiththedegreeofreasonableskillandcaretobeexpectedofconsultantsspecialisingintheareaofenergyconsultancy.SuchadviceandInformationisprovidedingoodfaithandmayincludeadviceandinformationobtainedfromthirdpartysources.TheadvicegivenisbasedupontheinformationavailabletoMJMEnergy(suchasthestateofthemarket)andthemethodsappliedbyMJMEnergyatthetimetheadviceisgivenorthereportprepared.Alladviceandinformationisopentointerpretationandtypographicalerror.DocumentControlVersion Date Preparedby ReviewedbyDraftV.01 13/12/2016 WDerbyshire VF(RevisedJune2017) 22/06/2017 M.Madden P.Cassar

Address:ThePeachTreeOfficeFirstFloorCroftersCourtTheCroftsWitneyOxfordshireOX284DDUnitedKingdomwww.mjmenergy.comContactPerson:MikeMadden,ManagingDirectorEmail:mike@mjmenergy.comTelephone:+44(0)7768450534

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ContentsContents..........................................................................................................................................i

Tables,FiguresandBoxes..............................................................................................................iiiTables...........................................................................................................................................iiiFigures..........................................................................................................................................iii

Abbreviationsandacronyms.........................................................................................................ivExecutiveSummary.......................................................................................................................vi

1 Introduction.......................................................................................................................1

2 LNGmarketsandcontractingmodels.................................................................................22.1 Introduction.......................................................................................................................22.2 TheglobalLNGmarket.......................................................................................................22.2.1 Tradeflows.......................................................................................................................22.2.2 Prices................................................................................................................................42.2.3 Futuredevelopments.......................................................................................................72.3 LNGprocurementmodels..................................................................................................92.3.1 Traditionalcontracting.....................................................................................................92.3.2 Short-termandspotcontracting......................................................................................92.3.3 Unbundlingofactivities..................................................................................................112.4 ExamplesofnewLNGimporters......................................................................................122.5 Conclusions......................................................................................................................15

3 Myanmar’sLNGimportrequirements..............................................................................163.1 Introduction.....................................................................................................................163.2 Studiesreviewed..............................................................................................................163.3 Forecastdemand.............................................................................................................173.3.1 Powersectordemand.....................................................................................................173.3.2 Totaldemand..................................................................................................................193.4 Forecastsupply................................................................................................................203.5 ForecastLNGimportrequirements..................................................................................223.6 Conclusions......................................................................................................................24

4 Reviewofpotentialgasswaps.........................................................................................254.1 Introduction.....................................................................................................................254.2 Short-termswaps.............................................................................................................254.2.1 Outlinearrangement......................................................................................................254.2.2 Commercialandlegalrequirements..............................................................................274.2.3 Physicalrequirements....................................................................................................274.2.4 Cost-benefitanalysis.......................................................................................................304.2.5 Conclusionsonshort-termswaps...................................................................................304.3 Medium-termswaps........................................................................................................304.3.1 Outlinearrangement......................................................................................................304.3.2 Commercialandlegalrequirements..............................................................................314.3.3 Physicalrequirements....................................................................................................314.3.4 Cost-benefitanalysis.......................................................................................................314.3.5 Conclusionsonmedium-termswaps..............................................................................32

SectionA Demand-SupplyForecastsbyStudy.........................................................................34A.1 JICAPMP2014.................................................................................................................34

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A.2 EMP2015.........................................................................................................................35A.3 METI2016........................................................................................................................36A.4 e.Gen2016.......................................................................................................................37

SectionB OverviewoftheProjectTeam..................................................................................38B.1 MJMEnergyLimited.........................................................................................................38B.2 PenguinEnergyConsultingLimited(PEC).........................................................................38B.3 ECA..................................................................................................................................38B.4 DrennanMarineConsultancyLtd.....................................................................................39

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Tables,FiguresandBoxes

TablesTable1Supplyofgasbysource,2015-30............................................................................................21

FiguresFigure1Demandanddomesticsupplyofgas,2015-30......................................................................viiFigure2SupplydeficitandLNGimportrequirements,2015-30.........................................................viiiFigure3Illustrativegasswapsarrangement.........................................................................................ixFigure4LNGtradeflows,2015..............................................................................................................2Figure5LNGexportsandimportsbycountry,2015(Bcm)...................................................................3Figure6JapanLNG,crudeoilandcoalprices,2000-16.........................................................................5Figure7Gaspricesbyregion,2009-15(monthlyaverages)..................................................................6Figure8LandedLNGpricesbymarket,October2016...........................................................................7Figure9Liquefactioncapacity,2015and2021......................................................................................8Figure10HistoricandprojectedoilandLNGprices,2000-25(WorldBank).........................................8Figure11Growthinnon-longtermtrades,1995-2015.......................................................................10Figure12EstimateduncommittedLNGsupply,2015-25.....................................................................11Figure13Start-upsofLNGreceivingterminals,1980-2021................................................................12Figure14Importmarketsbyterminaltype,2000-21..........................................................................12Figure15LNGimportarrangementsinPakistan.................................................................................13Figure16ExamplespottenderdocumentationinJordan...................................................................15Figure17Gas-firedpowergeneratingcapacity,2015-30....................................................................18Figure18Powersectordemandforgas,2015-30...............................................................................19Figure19Totaldemandforgas,2015-30............................................................................................20Figure20Domesticsupplyofgas,2015-30..........................................................................................21Figure21Gassupplydeficit,2015-30..................................................................................................23Figure22LNGimportrequirements,2015-30.....................................................................................24Figure23Illustrativeshort-termgasswapsarrangement...................................................................26Figure24PTT’sonshoretransmissionnetwork...................................................................................28Figure25MajorpipelineconstraintsinMyanmar...............................................................................29Figure26Illustrativemedium-termgasswapsarrangement..............................................................31

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Abbreviationsandacronyms

Abbreviation Description

bbl Barrelsofoil

Bcm Billioncubicmetres

Btu Britishthermalunits

C&F Costandfreight

cm Cubicmetres

EMP Energymasterplan

FSRU Floatingstorageandregasificationunit

FY FinancialYear

GoM GovernmentofMyanmar

GSA Gassalesagreement

GW Gigawatt(1,000megawatt)

IPP Independentpowerproducer

JICA JapanInternationalCooperationAgency

LNG LiquefiedNaturalGas

METI MinistryofEconomy,TradeandIndustry(Japan)

mmbbl Millionbarrels

mmbtu MillionBritishthermalunits

mmcfd Millioncubicfeetperday

mmscfd Millionstandardcubicfeetperday

MOGE MyanmarOilandGasEnterprise

MT Milliontonnes

MTpa Milliontonnesperannum

MW Megawatt(1,000kilowatt)

PMP Powermasterplan

PSO PakistanStateOilCorporation

RLNG RegasifiedLNG

scf Standardcubicfeet

SNGPL SuiNorthernGasPipelinesLimited

SSGC SuiSouthernGasCorporation

Tcf Trillioncubicfeet

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ToR TermsofReference

tpa Tonnesperannum

TPA ThirdPartyAccess

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ExecutiveSummary

Introduction

ThisreportissubmittedtotheWorldBankundertheprojectTechnicalAssistanceonLiquefiedNaturalGasImportOptionsforMyanmarPhase1(Ref:1216215).ThisreportrelatestoTask1(c)whichcomprisesanoverviewoftheliquefiednaturalgas(LNG)marketsthatMyanmarmayaccessandanassessmentofthepotentialforphysicalswapsofLNGwithgasexportpartners.Theprojectalsoincludestwoothertaskswhicharecontainedinaseparate,accompanyingreport.Theseare:Task1(a)–analysisofpotentiallocationsforLNGimportfacilitiesinMyanmar;andTask1(b)–developmentofaprioritisationframeworkandaccompanyinganalyticaltoolforselectingLNGimportoptionsandlocations.Therearethreemainsectionstothisreport,inadditiontotheintroduction.ThesecoveradescriptionofLNGmarketswhichMyanmarmayaccess,areviewofforecastsforLNGimportrequirementsandanassessmentofthepotentialtoconductLNGforpipelinegasswaps.

LNGmarketsandcontractingmodels

ProcurementofLNGisbecomingincreasinglyflexiblewiththeadventofleasedFSRUsandproliferationofspotandshort-termcontracts.Thisofferssignificantbenefitstonewimporterswhoareunableorunwillingtocommittolong-termtake-or-payobligationsforlargeLNGvolumes.SuchislikelytobethecaseinMyanmaratthebeginningofimportsgiventheuncertaintiessurroundingthevolumesrequired.TheexamplesofPakistanandJordanhavebeenusedtoshowhowthisflexibilitycanbeused.InPakistan,theprocurementofaFloatingStorageandRegasificationUnit(FSRU)andofLNGhavebeenseparatedtobettermanagethecreditrisksinvolvedinthelatter.TheFSRUisremuneratedunderatollingarrangementwheretheterminalownerispaidforregasificationofdeliveredLNGonatake-or-paybasis,givingthemprotectionagainstprocurementrisksthatFSRUprovidersarenotnecessarilywell-placedtomanage.Importsstartedwithspotcargoesandhavenowextendedtoafive-yearcontractwithflexibilityovertimingofdeliveriesalongsidea15-yeartraditionalcontractarrangement.InJordan,prospectiveLNGsuppliersenterintoamastersalesagreementwiththepowercompany,whichthenconductstendersforsmallnumbersofcargoesonanas-requiredbasisunderthetermsandconditionsinthismasteragreement.Thispreservesflexibilityasregardsquantitiestobeprocuredwhileavoidingthetime-consumingneedtonegotiatenewcontractseachtimeaprocurementismade.

Myanmar’sLNGimportrequirements

Fourdifferentstudies,issuedbetween2014and2016,havebeenconsulted.Theseare:

• JICAPMP2014.[JICA(December2014),FormulationoftheNationalElectricityMasterPlan,FinalReport:Summary].

• EMP2015.[IESandMMIC(December2015),MyanmarEnergyMasterPlan].

• METI2016.[METI(February2016),GasValueChain].

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• e.Gen2016.[e.Gen(July2016),StudyonEconomicCostsofNaturalGasforMyanmarDomesticMarket,DraftFinalReport].

Thefourforecastsdiffergreatlyintheirexpectationsforfuturegasdemanddriven,inparticular,bydifferencesinassumptionsastothefuturedemandforgasfromthepowersector.TheEMP2015expectsinstalledgas-firedgeneratingcapacitytoincreaseonlyslightlyfromits2014/15levelof1.4GWto1.7GWby2020withlowercostcoal-firedandhydropowergeneratingcapacitybeingdevelopedthereafter.Thee.Gen2016studyexpectedamuchlargerincreaseto3.5GWby2020butwithnoadditionsthereafterascoal-firedandhydrocapacityisdeveloped.TheJICAPMP2014andMETI2016studybothexpectcontinuingadditionsofgas-firedcapacitywhichreaches4.6to4.8GWby2030.However,theMETI2016studyexpectsmuchgreaterrelianceongas-firedgenerationtomeetdemandgivenanassumedslowerexpansionofcoal-firedandhydropowercapacity.ThesupplyforecastscontainedintheEMP2015,METI2016ande.Gen2016studiesaresimilar,allshowingdecliningdomesticsupplyasproductionfallsfromtheYadanafieldpost-2020.TheexceptionistheJICAPMP2014whichexpectsproductioncomingon-streamfromnewfieldstosubstitutefordeclinesfromexistingfields.Thedemandandsupplyforecastsacrossthestudiesarecomparedbelow.

Figure1Demandanddomesticsupplyofgas,2015-30

Demand Domesticsupply

Source:JICAPMP2014,EMP2015,METI2016,e.Gen2016.Notetheforecastsareshowninmmscfd.Projectedsuppliesfromdifferentsourcesareadjustedaccordinglytoallowfordifferencesinheatingvalues.TheseverydifferentforecastsarereflectedintheuncertaintyaroundLNGimportrequirements:

• Atoneextreme,usingtheforecastsinJICAPMP2014,thereisnorequirementforimportsatallovertheperiodto2030.

• Attheotherextreme,usingtheMETI2016forecasts,requirementsforLNGimportsstartat

2.2MTpain2020andrisecontinuallytoreach8.7MTpaby2030.

• TheEMP2015forecastsimplyarequirementforLNGimportsstartingatverylowvolumesin2027andreachingonly1.4MTpain2030.

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• Lastly,themostrecentforecastsine.Gen2016wouldimplyLNGimportsstartingin2020at1.4MTpa,peakingin2025at3.7MTpaandthendecliningagainto2.3MTpain2030.

Figure2SupplydeficitandLNGimportrequirements,2015-30

Domesticsupplydeficit LNGimports

Source:Consultantcalculations.LNGimportestimatesassumethatthesecanonlybeginfrom2019.

Reviewofpotentialgasswaps

Allfourforecastsreviewedexpecttoseeasmallsupplydeficitduringtheperiodto2019/20whenanewLNGimportterminalmightcommission.Amongtheproposalsforaddressingthishasbeenthatofgasswaps,underwhichMyanmarwouldsubstituteLNGforpipelinegasexports,thusfreeingexportgastosupplythedomesticmarket.AsadditionalgaswillneedtobesuppliedtotheYangonareathisrequiresdivertingexportstoThailandgiventhelackoflinksfromtheShweexportpipeline.Separately,proposalshavebeenmadeforMyanmar,inthemedium-term,toprocureadditionalLNGcargoestobedeliveredtotheLNGimportterminalproposedbyPTTforfuturesupplytoThailand.ThesecargoeswouldbeusedtosubstituteforgasthatwouldotherwisehavebeenexportedfromYadana,allowingthistoberedirectedtodomesticsupply.Thesetwopossibleswaparrangementsareshownbelow.

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Figure3Illustrativegasswapsarrangement

Short-term(to2019/20) Medium-term

Ourassessmentisthatashort-termswaparrangementisinfeasible:

• ItisunlikelythatMyanmarOilandGasEnterprise(MOGE)canguaranteereliablesuppliesofLNG,leavingPTTatriskofinterruptions.

• PhysicalconstraintsonPTT’sgastransmissionsystemmeanthatLNGdeliveredintoMapTha

PhutcannotreadilybetransportedtotheRatchaburipowercomplexwhichcurrentlyreceivespipelinegasfromMyanmar.

• PhysicalconstraintsonMOGE’sgastransmissionsystemmeansthatthemaximumincrease

infirmgassuppliesthatcouldbereleasedbyaswapsarrangementwouldbeonlyaround50mmcfd(equivalentto35mmscfd).

Overall,weconcludethatshort-termswapsareunlikelytobeacceptedbyPTTandwouldbeunlikelytoreleasesignificantadditionalquantitiesofnaturalgastotheMyanmarmarket.However,eveniftheconstraintsontheThaisidewerelifted,Myanmarwouldstillneedtoovercomeinfrastructureandcapacityissues.Medium-termswapsusingaPTT-developedLNGimportterminallocatedinMyanmarwouldhavemuchreducedcommercialandlegaldifficultiesrelativetoshort-termswaps.Again,theywouldonlybeofvalueif,bymaintainingexistingvolumessuppliedthroughtheYadanatoYangonpipeline,theyavoidtheneedfornewinvestmentsinpipelinecapacityelsewhere.IfthisisnotthecasethensuchswapswouldsimplysubstituteLNGimportsintotheproposednewterminalforimportsintoaPTT-developedterminal.

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1 IntroductionThisreportissubmittedtotheWorldBankundertheprojectTechnicalAssistanceonLiquefiedNaturalGasImportOptionsforMyanmarPhase1(Ref:1216215).Theprojectcomprisesthreetasks:

• Task1(a)–Sitinganalysistoassesspotentiallocationsofliquefiednaturalgas(LNG)importfacilitiesinMyanmar.

• Task1(b)–PrioritisationframeworkandaccompanyinganalyticaltoolforLNGimportoptionsandlocations.

• Task1(c)–OverviewoftheLNGmarketsthatMyanmarmayaccessandanassessmentof

thepotentialforphysicalswapsofLNGwithgasexportpartners.ThisreportcoversTask1(c).Theotheridentifiedtasksarecoveredinaseparate,accompanyingreport.Itisstructuredasfollows:

• Section2-LNGmarketsandcontractingmodelsprovidesanoverviewofLNGmarketsandexamplesofLNGprocurementstrategiesunderconditionsofuncertaintyasapplyinMyanmar.

• Section3-Myanmar’sLNGimportrequirementsreviewsforecastsofdemandforand

domesticsupplyofnaturalgasinMyanmarand,fromthis,theimpliedLNGimportrequirementsto2030.

• Section4-ReviewofpotentialgasswapsassessesthefeasibilityofconductingLNGfor

pipedexportgasswaps,asawayofredirectinganincreasedshareofMyanmar’sgasproductiontothedomesticmarket.

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2 LNGmarketsandcontractingmodels

2.1 IntroductionInthissection,weprovideanoverviewoftheglobalLNGmarket,recentdevelopmentsleadingtogreaterflexibilityinprocurementandexamplesofhowothercountrieshaveusedthisincreasedflexibilitytobeginimportingLNG.TheintentisnottorecommendonaparticularprocurementstrategyforMyanmarbuttoraiseawarenessoftheopportunitiestoincreaseflexibilitywhich,aswediscussinthefollowingsection,canbeexpectedtobeofmajorimportancegivencurrentuncertaintiesoverLNGneedsinMyanmar.

2.2 TheglobalLNGmarket

2.2.1 TradeflowsIn2015,LNGrepresented32%ofglobalgasexportsand10%ofglobalgasconsumption.Themarkethasexpandedrapidly,withglobaltradevolumesreaching245MTin2015,upfrom100MTin2000.ThelargestvolumeoftradeshasbeenwithinthePacificBasin.Whilethisremainsthecase,itsshareisfalling(downto39%in2015)asEuropeancountriesshiftfrompipelineimports,domesticproductionfallsandLNGpricesdeclinemakingitmorecompetitive(seediscussionbelow).TheemergenceofQatarasthedominantLNGsupplierhasalsocontributedtothisgivenitspivotallocationbetweentheAsianandAtlanticBasins.Tradeflowsin2015areshowninFigure4,below.

Figure4LNGtradeflows,2015

Source:IGU(2016),WorldGasLNGReport1

1Availableat:http://www.igu.org/publications/2016-world-lng-report

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Asof2015,17countriesexportedand33countriesimportedLNG.Fourcountriesbeganimportsin2015(Egypt,Jordan,PakistanandPoland).Inrecentyears,QatarhascometodominateLNGexportsbutAustraliaisrapidlyaddingcapacityandsawthefastestexportgrowthin2015(up6.1MTpaor8.3Bcmintheyear).ImportscontinuetobedominatedbyJapanandSouthKorea,whichareheavilydependentonLNGforpowergenerationandevenmoresointheaftermathoftheclosuresofnuclearpowerplantsfollowingtheFukushimaincident.Together,thesetwocountriesrepresentaroundone-halfoftotaldemand.However,EuropeanmarketshavegrownsignificantlywiththeUnitedKingdomandSpaintogetherrepresentingalmost10%oftotalimportsin2015.

Figure5LNGexportsandimportsbycountry,2015(Bcm)

EXPORTS

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IMPORTS

Source:BPStatisticalReview20162.ToconvertfromBcmtoMTpa,divideby1.36.

2.2.2 PricesAround75%ofLNGvolumesuseoil-indexedpricing.Unsurprisingly,thepost-2014declinesinoilpriceshavebeenreflectedinLNGprices.TheclosecorrelationbetweenoilandLNGpricesisshownbelow.Alsonoticeableisthat,whileLNGpriceshavehistoricallybeenbelowoil-equivalentlevels,thetwoconvergedpost-2012inJapaninresponsetothejumpindemandcausedbytheshutdownofnuclearpowerplants.

2Availableat:http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/downloads.html

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Figure6JapanLNG,crudeoilandcoalprices,2000-16

Source:WorldBankCommoditiesPrices3Historically,theLNGmarkethasbeensplitintotheAtlanticBasinandPacificBasinmarketswiththeformermarketseeingcompetitionagainstpipelinegaswhilethelattermarkethaslackedsuchcompetition.Asaresult,anAsianpricepremiumhasgenerallybeenobservedwithbuyerswillingtopayhigherLNGcoststoensuresupplysecurityintheabsenceofalternatives.Thedecliningshareofoil-indexedpricinginEuropeanmarkets,whichisnowbelow40%inEuropeinresponsetopressuresfromgas-on-gascompetition,hasalsocontributedtothedifferentialsinpricesacrossthemarkets.Themagnitudeofthesehistoricdifferencescanbeseenbelow.

3Availableat:http://www.worldbank.org/en/research/commodity-markets

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Figure7Gaspricesbyregion,2009-15(monthlyaverages)

Source:IGU(2016),WorldGasLNGReportThesedifferencesareexpectedtonarrowinfutureyearsasAsianbuyersincreasinglylooktopurchaseonbasesotherthanoilindexation(suchasHenryHub-plusprices)andasarbitragebetweenthetwomarketsgrowswithshort-termtrades.Japan,ChinaandSingaporearealsoalltryingtodevelopLNGhubswherepriceswillbesetbyspotmarketcompetitionbetweendifferentsuppliers.However,thefallinoilpricesandconsequentdeclineinoil-indexedLNGpriceshasalreadyeradicatedmuchofthepricedifferencesacrossmarkets.ThiscanbeseeninFigure8,below,whichshowslandedpricesforanumberofmajorimportersinOctober2016.

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Figure8LandedLNGpricesbymarket,October2016

Source:FederalEnergyRegulatoryCommission4

2.2.3 Futuredevelopments

Intheshorttomedium-term,expectationsareforfurtherincreasesinLNGsupplywhiledemandremainsrelativelyflat.WithinEurope,acombinationofeconomicslowdownandcompetitionfromlower-costcoalandrenewableshasledtostagnantgasdemand.WithinAsia,JapanandSouthKorea’spost-FukushimademandincreasesarenowbeingrolledbackwhileChinaisalsoseeingrelativelyflatdemandastheeconomyslowsandelectricitydemandgrowth,inparticular,falls.Atthesametime,largeadditionalexportcapacitiesarecomingonline,manyofwhichwerecommittedduringtherecentyearsofhighLNGpricesand,intheUSA,theshalegasproductionboom.Figure9showsnominalliquefactioncapacityin2015andprojectedfor2021.Globalcapacityisexpectedtogrowby142MTpa(equivalenttoalmost50%ofcurrentcapacityof301.5MTpa)by2021withthebiggestcontributionsbeingasfollows:

• Australia:6projectstotalling54MTpaby2018

• USA(GulfandEastCoast):5projectstotalling62MTpaby2019

• Russia:YamalLNGof17MTpaby2019

4Availableat:https://www.ferc.gov/market-oversight/mkt-gas/overview/ngas-ovr-lng-wld-pr-est.pdf

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Figure9Liquefactioncapacity,2015and2021

Source:IGU(2016),WorldGasLNGReportThecombinationofflatdemandandlargeexpansionofsupplymeansover-supplyseemslikely.Consequently,pricesarenotexpectedtoincreasesubstantiallybefore2020.Figure10showshistoricandWorldBankprojectionsforcrudeoil(in$/bbl)andJapaneseLNGprices.ProjectionsareforLNGpricestorisefromanestimatedaveragein2016of$6.8/mmbtuto$8.1/mmbtuin2020and$10.0/mmbtuin2025.However,theseincreaseslagbehindprojectedincreasesincrudeoilprices.Overthe10yearsto2025,LNGpricesareprojectedtoincreasebyaround50%whilecrudeoilpriceincreaseby90%.

Figure10HistoricandprojectedoilandLNGprices,2000-25(WorldBank)

Source:WorldBankCommoditiesPrices

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2.3 LNGprocurementmodels

2.3.1 TraditionalcontractingLNGinvestmentsarelargeandcapital-intensive,creatingmajorrisksforthesellerifitcannotfindabuyerforitsoutput.Traditionally,theserisksweremanagedbylong-term(20+years)contractsbetweenbuyerandsellerwithtake-or-payrequirementsonthebuyer.Inreturn,thebuyerisofferedsecurityofsupply.Pricerisksaresharedbetweensellerandbuyerthroughoil-indexation.Thebuyersharesintheupsideasoilpricesrisewhilethesellerisassuredthatgaswillremaincompetitiveagainstoil.ToensurebothpartiescanshareinanyrentsresultingfromdifferencesbetweenLNGpricesindifferentmarkets,contractvolumescannotbedivertedbythebuyertoothermarketswithouttheassentoftheseller.

2.3.2 Short-termandspotcontracting

Thistraditionalcontractingmodelischanging.Theshifttopricesbeingsetthroughgas-on-gascompetitioninEuropeandmovestowardsthisinAsiahavealreadybeennotedabove.Themarketisalsoseeingincreasingsharesoftradeundershort-term(lessthantwo-year)andspotarrangements.Thesechangesarebeingdrivenbyaninterlockingsetoffactors,including:

• IncreasedflexibilityinLNGimportingasaconsequenceofunbundling(seebelow).

• Increasedcompetitioninbuyinggasmarketsastheseareliberalised,makingbuyersunwillingtocommittolong-termcontractswhichmaybecomestranded.

• LegalinterventionsintheEUwhichhaveforcedtheremovalofdestinationrestrictions,

allowingLNGbuyerstoredirectcargoestoothermarkets.

• Newsuppliescomingontothemarketwhicharenotcontractedlong-term,eitherwillinglyorbecauseover-supplyhasledtoalackofbuyers.

• ReduceddemandforLNGintraditionalmarketsduetoslowingeconomicgrowthandlossofcompetitivenessagainstotherfuels,notablycoal.

• Increasedpricedifferencesbetweenmarketsinrecentyears.

• Thegrowthofportfoliotradersofgaswhodonotownfacilitiesbutlooktoarbitragepricedifferences.

Theextentofthechangescanbeseenbelow.In2000,onlyaround5MTparepresenting5%ofthetotalmarketwastradedonanon-longtermbasis(contractsoflessthanfiveyears).By2013,thishasrisento70MTpaandaround30%ofthemarket.Whilevolumesandshareshavedeclinedslightlysincethen,theystillrepresentmorethanaquarteroftotaltrades.Mostofthisisrepresentedbyshort-termtrades(undertwoyears)whichcomprised66MTor26%ofalltradesin2015.

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Figure11Growthinnon-longtermtrades,1995-2015

Source:IGU(2016),WorldGasLNGReportIn2014,thesplitofspotandshort-termtradeswasasfollows:

• Salesbyportfoliotraders:28MT(41%ofspotandshort-termtrades)• SalesbyQatarGasofuncommittedgas(withoutlong-termcontracts):25MT(36%)• Salesbyotherproducersofuncommittedgas:10MT(14%)• Re-exports5:6MT(9%)

PortfoliotradersincludeanumberofmajorgascompaniessuchasBP,Shell(ex-BG),ENI,Enel,Engie,ExxonMobil,GasNatural,Gazprom,Iberdrola,Pavilion,Total.Therearealsoanumberofcommodity-tradingcompanies(thatdonotownproductionfacilities)includingTrafigura,Gunvor,GlencoreandVitol.Lookingahead,volumesofuncommittedoravailableLNGsuppliesarelikelytorise.From11MTin2015(excludingsalesbyQatar),theyareprojectedtoincreaseto30MTby2020and,thereafter,remainatsimilarlevels.ThisisdrivenbynewAustralianandUSsupplynotcommittedtospecificmarketsand,noticeably,bynewAngolansupplies.Thegrowthrepresentsacombinationofgassellersbeingwillingtotakeonmarketriskandgasbuyersbeingunwillingtosignnewlong-termcontracts.Short-termtradingvolumesarelikelytorisealongsidethisgrowthinuncommittedsupply.

5Re-exportsarewhereacargoisunloaded,storedandthenreloadedfordeliverytoathirdcountry.Thismaybetotakeadvantageofmarketpricemovements.ItmayalsobeusedasawayofbypassingcontractualrestrictionsonredirectingLNGcargoes(‘destinationclauses’).

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Figure12EstimateduncommittedLNGsupply,2015-25

Source:CorbeauAandDLedesma(2016),LNGMarketsinTransition6

2.3.3 UnbundlingofactivitiesIncreasedshort-termcontractinghasbeenaccompaniedandfacilitatedbytheunbundlingoftheLNGindustry.Inplaceofverticalchainswherebuyerstypicallyownedtheimportterminalsandregasificationfacilitiesandhadownershipstakesintheproducing,liquefactionandshippingcompanies,thesefunctionsarenowbecomingseparatelyowned.Inpartthisisduetotheintermediationofferedbyportfoliotraders.However,italsorepresentschangesintechnologyand,inparticular,theriseofFloatingStorageandRegasificationUnits(FSRUs).Bytheirnature(asdiscussedmuchmoreextensivelyintheseparatereportonsitingoptions),thesecanbereadilyredeployedwherenolongerneededandscaled-upbyaddingfurtherFSRUswheredemandgrows.ThisflexibilityalsomeansthatownersofFSRUsarenolongeratthesamelevelof‘holdup’riskasonshorefacilitiesface—wherethesearededicatedtoasinglebuyerandsoexposedtoex-postpressurestorenegotiatecontractsortobecomingstrandedaftertheinvestmentismade.Inturn,thisreducedriskandflexibilityhasmeantthatFSRUscanbeleasedratherthanhavingtobepurchasedoutright.ThisallowsLNGimporterstostartupinarelativelylowriskway,byleasinganFSRUforaperiodoftimewiththeoptionofterminatingthecontractratherthanbeingleftwithanimportfacilitythatisnotrequired.Aswellasthis,FSRUsoffertheadvantagesofspeedofdeploymentand,ingeneral,lowercostsforsmaller-sizedfacilitiescomparedtoonshoreterminals.DemonstratingthewaythatFSRUshavebecomethefavouredapproachfornewimportingcountries,Egypt,JordanandPakistanallstartedtheirLNGimportsin2015usingFSRUs.OfsevencountriesplanningtobecomenewLNGimportersby2017,fiveareusingFSRUs.TherearecurrentlytwoFSRUswithinSEAsia,bothinIndonesia(Nusantara,2012andLampung,2014).ThetwofiguresbelowillustratehowFSRUshavebecomeagrowingshareofthemarket.Themajorityofnewimportterminalsopenedsince2013useFSRUs.Of33importingcountriesin2015,

6Availableat:https://www.kapsarc.org/wp-content/uploads/2016/05/LNG-Markets-in-Transition_A-Corbeau-and-D-Ledesma.pdf

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nine(oraround30%ofthetotal)usedonlyFSRUsandafurtherfiveusebothonshoreterminalsandFSRUs.ThiscompareswithjustonecountrytenyearsagousingFSRUs.

Figure13Start-upsofLNGreceivingterminals,1980-2021

Source:IGU(2016),WorldGasLNGReport

Figure14Importmarketsbyterminaltype,2000-21

Source:IGU(2016),WorldGasLNGReport

2.4 ExamplesofnewLNGimporters

TheincreasinglyflexibleLNGmarkethasopenedupnewroutesforcountriestobeginLNGimports.Ratherthanthetraditionalmodelofastatemonopolysigninglong-termsupplycontracts,countriesarenowexploringoptionsincludingmultiplebuyersusingthesameimportinfrastructure,short-termcontractingandmasterframeworkcontractswithvaryingvolumesbeingprocuredcompetitivelyunderthese.In2015,thenewimportingcountriesofEgypt,PakistanandJordan(fortwo-thirdsofdemand)allreliedonshort-termcontactsPakistanprovidesagoodexampleofhowthesenewimportershavestructuredtheircommercialarrangements.Originally,Pakistan’spolicywasthatprivatefirmswouldprocureandimportLNGandselldirectlytocustomersusingtheirrightsofthirdpartyaccess(TPA)totheonshorepipeline

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networks.ThisfailedasnoprivatefirmswereabletotakeonthesubstantialcreditrisksandnosupplierswerewillingtosellLNGgiventhelackofcreditworthypurchasers.ThemodelthathasworkedtobeginLNGimportsisillustratedinFigure15,below.Itsmainfeaturesare:

• ProcurementofLNGisseparatedfromownershipoftheimportterminal.

• LNGprocurementisbyPakistanStateOilCorporation(PSO).Aswellashavingexpertiseininternationalprocurementofpetroleumproducts,PSOalsoholdsagovernmentguaranteeenshrinedinlaw.

• PSOpurchasesLNGthroughtenders.Eachdeliveredcargoisimmediatelyresoldatthe

contractpriceplusasmallmargintoSuiSouthernGasCorporation(SSGC),theownerofthegastransmissionanddistributionnetworkinsouthernPakistanwheretheimportterminalislocated.Whilemajoritystate-owned,SSGChasnoformalgovernmentguarantee.InsertingPSOasanintermediarybetweenLNGsuppliersandSSGCallowsitsgovernmentguaranteetobeusedtoprovideconfidencetosuppliersthattheywillbepaidinfull.

• TheimportterminalisanFSRUleasedfromExcelerateEnergy,aprivatefirm.SSGCpays

Excelerateafixedfeetoregasifyandsend-outLNG—a‘tolling’arrangement.Atake-or-payarrangementisinplacesothatExceleratetakesnovolumerisk—itispaidregardlessofactualvolumesregasified.ByseparatingLNGprocurementandterminaloperationinthisway,therisktotheoperatorisreducedincreasingprivatesectorinterest.

• SSGCsellspartoftheregasifiedLNGtoitsowncustomersandparttoSuiNorthernGas

PipelinesLimited(SNGPL)whichsuppliesthenorthernpartofPakistan.

Figure15LNGimportarrangementsinPakistan

Source:Consultantresearch

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WeprovidebelowasummaryofthestageddevelopmentofLNGimportsintoPakistanunderthismodel.Thisprovidesanexampleofhowuseofaterminalcangraduallybeexpandedasdemandsbecomemorecertain.DevelopingLNGimports–theexampleofPakistanThefirstsixcargoeswereprocuredonaspotbasisfromQatarGas(FOB7basis).ThisrequirementwaseffectivelyimposedbyaccessrestrictionstotheterminalduetofailurestodredgechannelswhichledtotheFSRUitselfbeingusedtoloadanddeliverthecargoes.Followingthis,aseriesofshort-termcontractswerecompetitivelytendered(DESbasis8)Thesetenderswereinitiallyfromonetosixcargoesatatimeandforuptotwocargoestobedeliveredpermonth.Thefirstsuchtenderwasissuedinearly-May2015withafour-weekperiodallowedforbids.Thefirstcargounderthetenderarrivedinmid-July2015.WhilePakistanhastriedtoprocurecargoeswithasshortalead-timeasonemonth,itisreportedthatthesehavegenerallyattractedlittleinterestduetolimitedavailablecargoes.Procurementstwoormoremonthsaheadhaveseensignificantinterestfromtradingcompanies.Pakistanhasnowmanagedtomovetolonger-termcompetitiveprocurements.InDecember2015,Pakistanlaunchedtwotendersof60cargoeseachtobedeliveredfromJanuary2016untilDecember2020.ThewinnerswereShellandaSwiss-basedtradingcompany,whichofferedapriceof13.83%and13.37%indexationtoBrentoilprices,respectively9(~$6.5/mmbtu).Government-to-GovernmentnegotiationswithQataroverlong-termsupplycontracttook18monthstoconcludewiththePakistansignatorybeingthestate-ownedandguaranteedPakistanStateOilcompany.InFebruary2016,PakistanStateOilsigneda15-yearLNGsupplycontractwithQatarGas.

AnotherexampleisofferedbyJordan,whichalsostartedLNGimportsin2015.ThemainfeaturesoftheJordanprocurementmodelare:

• Apoolofpotentialsuppliersispre-qualified.

• AllbidderssignaMasterSalesandPurchaseAgreementwhichsetsoutthestandardtermsandconditionsforLNGpurchases.

• Theprocuringagency,theNationalElectricPowerCompanyofJordan,issuesnoticesfor

spotprocurementsasandwhenrequired.Thesespecifythevolumesanddeliverywindow.Allotherconditionsarealreadyspecifiedinthemasteragreement.

• Bidderssubmitpriceofferstosupplytherequestedcargoeswiththelowest-costbeing

accepted.Excerptsfromanexampletendernoticeareshownbelow.Theflexibilityandspeedofthisarrangementisapparent.Oneweekisallowedforreceiptofbidsandtwodaysforevaluation.Thefirstcargoisduefordeliverywithinsevenweeksofconfirmationofthewinningbidder.7Free-On-Board,orpricewhenloaded.Itisthebuyer’sresponsibilitytoarrangeshippingfromtheportofloadingtotheportofdelivery.8Delivered-Ex-Shiporpricewhenoffloaded.Itistheseller’sresponsibilitytoarrangeshippingfromtheportofloadingtotheportofdelivery.9http://www.icis.com/resources/news/2015/12/16/9953654/pakistan-awards-mid-term-lng-tenders-to-two-winners-sources/.IndexationrepresentsthelinkageoftheLNGpricetotheoilpricesothatanindexationof13.37%,forexample,wouldmeantheLNGprice(onaDESbasis)iscalculatedas0.1337multipliedbythereferencecrudeoilprice(in$perbarrel).

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Figure16ExamplespottenderdocumentationinJordan

2.5 Conclusions

ProcurementofLNGisbecomingincreasinglyflexiblewiththeadventofleasedFSRUsandproliferationofspotandshort-termcontracts.Thisofferssignificantbenefitstonewimporterswhoareunableorunwillingtocommittolong-termtake-or-payobligationsforlargeLNGvolumes.SuchislikelytobethecaseinMyanmaratthebeginningofimportsgiventheuncertaintiessurroundingthevolumesrequired(seethefollowingSection3).TheexamplesofPakistanandJordanhavebeenusedtoshowhowthisflexibilitycanbeused.InPakistan,theprocurementoftheFSRUandofLNGhavebeenseparatedtobettermanagethecreditrisksinvolvedinthelatter.TheFSRUisremuneratedunderatollingarrangementwheretheterminalownerispaidforregasificationofdeliveredLNGonatake-or-paybasis,givingthemprotectionagainstprocurementrisksthatFSRUprovidersarenotnecessarilywell-placedtomanage.Importsstartedwithspotcargoesandhavenowextendedtoafive-yearcontractwithflexibilityovertimingofdeliveriesalongsidea15-yeartraditionalcontractarrangement.InJordan,prospectiveLNGsuppliersenterintoamastersalesagreementwiththepowercompany,whichthenconductstendersforsmallnumbersofcargoesonanas-requiredbasisunderthetermsandconditionsinthismasteragreement.Thispreservesflexibilityasregardsquantitiestobeprocuredwhileavoidingthetime-consumingneedtonegotiatenewcontractseachtimeaprocurementismade.

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3 Myanmar’sLNGimportrequirements

3.1 IntroductionInthissectionweprovideestimatesofthedemandforLNGinMyanmardrawingonanumberofrecentstudies.ThereisnorequirementintheTermsofReferenceforthisassignmenttodevelopourownforecastsofnaturalgasdemandandsupplyinMyanmarandoftheconsequentneedsforLNGimports.Theanalysishighlightstheuncertaintiesaroundbothforecastsofdomesticsuppliesofgasand,critically,thedemandforgasinMyanmar.TheimpactsoftheseuncertaintiesonthepotentialrangeofrequiredLNGimportsisshown.Allforecastsforgasdemandandsupplyinthissectionarepresentedinmillionsofstandardcubicfeetperday(mmscfd).Whereindividualstudiespresentforecastsoncubicfeet,thesehavebeenconvertedtostandardcubicfeetbyadjustingfordifferencesinheatingvalues10.

3.2 StudiesreviewedFourdifferentstudies,issuedbetween2014and2016,havebeenconsulted.Theseareasfollows:

• JICAPMP2014.[JICA(December2014),FormulationoftheNationalElectricityMasterPlan,FinalReport:Summary].Thisstudywasconductedforthethen-MinistryofElectricPowerduring2014byaconsultantteamfundedthroughtheJapaneseInternationalCooperationAgency(JICA).Itrepresentsthefirstpowermasterplan(PMP)preparedforMyanmar.ThePMPisnotcurrentlypublicly-availableandisundergoingrevisions,againwithJICAassistance,inthelightofchangesinpolicyfollowingtheformationofthenewGovernmentinearly-2016.Thesechangesincludebarringfuturecoal-plantdevelopmentandsuspendingexpansionoflargehydropowerprojectspendingfurtherassessmentoftheirsocialandenvironmentalimpacts.

• EMP2015.[IESandMMIC(December2015),MyanmarEnergyMasterPlan].TheEnergy

MasterPlan(EMP)wasissuedinitsfinalforminDecember2015.TheEMPwasdevelopedduring2014-15fortheNationalEnergyManagementCommitteebyaconsultantteamunderAsianDevelopmentBank(ADB)fundingandcoverstheoil,naturalgas,coalandpowersectors.AcopyoftheEMPisavailableat:http://www.burmalibrary.org/docs22/2015-12-Myanmar_Energy_Master_Plan.pdf

• METI2016.[METI(February2016),GasValueChain].Thisstudywaspreparedforthe

MinistryofEconomy,TradeandIndustry(METI)inJapanbyaconsortiumofNipponKoei,Mitsui&CoandTokyoGas.ItprovidesacomprehensiveoverviewofMyanmar’sgasindustryincludinghistoricandprojectedsupplyanddemand.AcopyofthefullstudyreportinJapaneseisavailableat:http://www.meti.go.jp/meti_lib/report/2016fy/000957.pdf.AnEnglish-languagesummaryisavailableat:http://www.meti.go.jp/meti_lib/report/2016fy/000958.pdf

10Thecalorificvaluesusedare:1scf=1,027Btu,1cfYadana=722.7Btu,1cfZawtika=944.8Btu,1cfShwe=987.8Btu,1cfonshore=1,014.1Btu(volume-weightedaverageofNyaungDongandApyaukfields).Noadjustmentismadeforsupplyfromnewfields.

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• e.Gen2016.[e.Gen(July2016),StudyonEconomicCostsofNaturalGasforMyanmarDomesticMarket,DraftFinalReport].Thisstudywaspreparedbye.GenConsultantsfortheWorldBank.Itcalculatestheeconomicorlong-runaveragecostofgassupplyinMyanmar.Aspartofthis,thestudyprovidesprojectionsoffuturegassupplyanddemandbylocationinMyanmar.ThefinalstudyreporthasnotyetbeenpubliclyissuedbutanoverviewofthestudyispublishedintheformoftheInceptionReport,availableat:https://energypedia.info/wiki/File:Final_Inception_Report_Economic_Costs_of_Natural_Gas_for_Myanar_Domestic_Market.pdf

Therearesomeinterdependenciesbetweenthedifferentstudies.Inparticular,theMETI2016study’sprojectionsofgas-firedcapacitydrawontheJICA2014powermasterplan.However,eachstudyhasultimatelydevelopeditsownforecastsofgasdemandandsupplywhile,ineachcase,relyingheavilyondataprovidedbyMOEE.

3.3 Forecastdemand

3.3.1 Powersectordemand

Theprojectedgas-firedpowergeneratingcapacityundereachstudyisshownbelow.Ascanbeseen,thesevarywidely.Installedgas-firedcapacityin2014/15isreportedat1,411MW11.Projectedcapacityin2016/17rangesfromalowof1,270MWintheEMP2015toahighof1,905MWinthee.Gen2016study.Expansionpathsthereafteralsodivergewidely.TheEMP2015expectsonlyverylimitedadditionstogas-firedcapacity.Instead,powersectordemandismetfromexpandedhydropowerandcoal-firedcapacity(itshouldbenotedthattheEMPwascompletedpriortotherecentchangesinGovernmentpoliciesonpowersectorexpansion).Thee.Gen2016study,basedonthemostrecentdataonplannedprojectsprovidedbyMOEE,projectstheadditionof1,500MWofgas-firedcapacityto2020/21but,afterthat,expansionofgeneratingcapacitybecomesdrivenbyotherfuels.Bycontrast,bothJICAPMP2014andMETI2016projectamoregradualbutlargerexpansionofgas-firedcapacityoverthenext10years.By2030,gas-firedcapacityreaches4.6GWunderJICAPMP2014,1.7GWunderEMP2015,4.8GWunderMETI2016and3.5MWundere.Gen2016.

11Deloitte(August2015),MyanmarPowerSectorFinancialAnalysisandViabilityActionPlan,InceptionReport.Availableat:https://energypedia.info/wiki/File:TA-financial-action-plan_Final_Inception_Report_-_16_Sep_2015_vF.pdf

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Figure17Gas-firedpowergeneratingcapacity,2015-30

Source:JICAPMP2014,EMP2015,METI2016,e.Gen2016Theseverydifferentforecastsforgas-firedgeneratingcapacityarereflectedinthevariousstudies’forecastsforgasdemandfromthepowersector.Theseareshownbelow.Demandin2014/15wasequivalentto257mmscfd.UnderEMP2015thisisprojectedtodeclineaslower-costhydropowerandcoal-firedgenerationcomestodominate.Undere.Gen2016,gasdemandapproximatelydoublesby2025and,thereafter,remainsconstant.TheJICAPMP2014seesdemandataround350mmscfdto2020andalmostdoublingfromthisby2030asgas-firedcapacityexpands.TheMETI2016studyprojectscontinuinglargeincreasesingasdemand,reflectingitsassumptionsthatcoal-firedcapacityexpansionisdelayedwhileelectricitydemandgrowsrapidly,reachingover1,100mmscfdby2030.

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Figure18Powersectordemandforgas,2015-30

Source:JICAPMP2014,EMP2015,METI2016,e.Gen2016

3.3.2 Totaldemand

TheJICAPMP2014andMETI2016studybothforecastthatdemandfromnaturalgasfromusersotherthanthepowersectorwillbearelativelysmallpartoftotaldemand,at140to160mmscfdin2020(20%to30%oftotaldemand)andreaching115to280mmscfdin2030(15%to20%oftotaldemand).Theapparentfallinnon-powersectordemandforgasinJICAPMP2014isnotexplained.Thee.Gen2016study,basedonbottom-upassessmentsdevelopedwithMOEEinputs,forecastshigherdemandfromthenon-powersectorwhichreach280mmscfdin2020orhalfoftotaldemand.TheoutlierisEMP2015whichbothforecastshighernon-powersectordemandand,becauseofitsmuchlowerexpectationsfordemandforgasfromthepowersector,amuchlargersharefornon-powersectordemandintotaldemandforgas.By2020,EMP2015forecastsnon-powersectordemandof230mmscfd(70%ofthetotal)risingto430mmscfdby2030(80%ofthetotal).Thisdemandgrowthislargelydrivenbyconsumptionofgasinindustry.Othercontributingfactorsaretheassumeddevelopmentofa50,000barrelperday(BPD)hydro-crackingrefineryandtheconstructionoftwonewfertiliserplantstoenableMyanmartomeetmostofitsrequirementsdomestically.Eachoftheseconsumesapproximately30mmscfdmeaningatotaladditionaldemandnearing100mmscfdrelativetootherforecaststhatassumenosuchdevelopments.Forecasttotalgasdemandincludingbothpowersectorandnon-powersectorusesunderthedifferentstudiesisshownbelow.Duetoitsmuchlowerforecastpowersectordemand,totaldemandunderEMP2015isforecastataround500mmscfdby2030,despitethemuchlargernon-powersectordemandforecast.TheJICAPMP2014ande.Gen2016studiesbothforecasttotaldemandin2030ofaround800mmscfd,althoughnon-powersectordemandformsamuchlargerpartoftotalforecastdemandinthelatter.TheMETI2016studyforecastsamuchhighertotaldemandof1,400mmscfdby2030reflectingthescaleofforecastdemandfromthepowersector.

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Figure19Totaldemandforgas,2015-30

Source:JICAPMP2014,EMP2015,METI2016,e.Gen2016

3.4 ForecastsupplyOfthefourstudies,three(EMP2015,METI2016ande.Gen2016)concurthattherewillbeaslowdownwardtrendindomesticgassupplyto2030.Thecomingon-streamoftheZawtikaandShwefieldsinitiallyraisessuppliesfromtheir2014/15levelof330mmscfd(whenthesefieldswereonlypartiallyoperational).However,subsequentdeclinesinproductionfromtheYadanaandZawtikafieldsleadtoadeclinefrom2020onwardswhichisonlypartiallyoffsetbynewsuppliesfromBlockM-3startingfrom2022(underEMP2015)or2025(e.Gen2016).Thee.Gen2016studyalsoincludesproductionfromtheBadamyarblockfrom2030.NoneofthesethreestudiesassumesupplyfromeithertheA-6orAD-7blockscommencingwithintheperiodoftheforecasts,unsurprisinglygiventhatWoodsideonlyannounceditsgasdiscoveriesintheseblocksinthe2016Q1.TheJICAPMP2014alsoforecastsdecliningsupplyfromtheYadanafieldcommencingfrom2020andfromtheZawtikafieldfrom2025withthisbeingpartiallyoffsetbythecommencementofproductionfromBlockM-3from2020.However,itincludesassumedlargesuppliesfromunnamednewfieldswhichmorethanoffsettheseproductiondeclinesandaresufficienttomeetMyanmar’stotaldemandforgas.Thesupplyforecastsinthevariousstudiesareshownbelow.TheseareforavailablesuppliestothedomesticmarketinMyanmaronly,notfortotalproductionincludingexportstoThailandandChina.Intheory,thereispotentialtoincreasesupplybyredirectingsomeoftheseexportstothedomesticmarket—apossibilitydiscussedinthefollowingSection4.

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Figure20Domesticsupplyofgas,2015-30

Source:JICAPMP2014,EMP2015,METI2016,e.Gen2016InTable1,wesummarisethebreakdownofthesupplyforecastsunderthedifferentstudiesforselectedyears(theMETI2016studyisexcluded,asthisdoesnotprovideforecastsfordomesticsupplyonafield-by-fieldbasis).Thisprovidesanindicationofwherethedifferencesarisebetweenthestudies.Theforecastsarepresentedinmmscfdand,therefore,maydifferfromthevaluesfrequentlyquotedwhichareforsuppliesinmmcfdwithoutnormalisingthesetoastandardheatingvalue.Inadditiontothepointsnotedabove,itisnoticeablethatthemorerecente.Gen2016forecastsaresignificantlymorepessimisticthanthoseinbothJICAPMP2014andEMP2015asregardsthepotentialtoincreaseonshoreproductionbutaremoreoptimisticasregardscontinued,althoughdiminished,suppliesfromtheYadanaandZawtikafields.

Table1Supplyofgasbysource,2015-30

Allmmscfd Onshore Yadana Zawtika Shwe M-3 Othernew(a)

Total

2014/15 Actual 60 187 57 25 0 0 3292019/20 JICAPMP2014 61 105 88 92 61 0 407EMP2015 64 110 92 96 0 0 363e.Gen2016 42 176 92 96 0 0 4062024/25 JICAPMP2014 90 47 76 92 131 390 826EMP2015 96 38 39 96 150 0 419e.Gen2016 32 74 92 96 0 0 2942029/30

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Allmmscfd Onshore Yadana Zawtika Shwe M-3 Othernew(a)

Total

JICAPMP2014 97 0 8 92 131 689 1,018EMP2015 104 0 0 96 150 0 350e.Gen2016 25 56 92 96 142 47 458

Source:JICAPMP2014,EMP2015,e.Gen2016(a)Badamyarfieldfore.Gen2016forecasts.UnidentifiedforJICAPMP2014forecasts.

3.5 ForecastLNGimportrequirements

Figure21,below,bringstogetherthedemandandsupplyforecastsabovetoshowtheresultingforecastdeficitsindomesticsupplyrelativetodomesticdemandundereachstudy.Ascanbeseen,thesevarywidely:

• JICAPMP2014forecastsasmalldeficitupto2020but,afterthis,increasedsupplyfromnewdomesticfieldsmeansdemand-supplybalanceisrestored.

• EMP2015forecastsaverysmalldeficitupto2020andthentherestorationofbalanceuntil

around2025,afterwhichthedeficitstartstogrow,reaching200mmscfdby2030.

• METI2016forecastsdeficitsthroughouttheperiod,startingataround300mmscfdin2017andrapidlygrowingfrom2020onwardstoreach1,100mmscfdby2030.Thisreflectsthelargeprojecteddemandforgasfromthepowersectoralongsidetheassumptionthatnonewlargedomesticfieldswillstartproductionoverthisperiod.

• e.Gen2016alsoforecastsdeficitsthroughouttheperiod.Whilereaching400mmscfdby

2020,asundertheMETI2016forecast,theyareflatthereafterduetotheexpectedlackofgrowthinpowersectordemandforgas.By2030,withthestartofM-3andBadamyarproduction,thedeficitisforecasttodeclineslightlytoaround300mmscfd.

ComparisonsofdemandandsupplyforecastsfortheindividualstudiesarepresentedinSectionA.

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Figure21Gassupplydeficit,2015-30

Source:JICAPMP2014,EMP2015,METI2016,e.Gen2016TheresultingrequirementsforLNGimportstoclosetheseforecastdeficits,assumingtheseimportscanstartfrom2020,areshownbelow.ThesearepresentedinmilliontonnesofLNGreceivedperannum(MTpa).TheimpactsoftheuncertaintyaroundfuturegasdemandanddomesticsupplyinMyanmaronestimatedLNGimportrequirementsareimmediatelyapparent:

• Atoneextreme,usingtheforecastsinJICAPMP2014,thereisnorequirementforimportsatallovertheperiodto2030.

• Attheotherextreme,usingtheMETI2016forecasts,requirementsforLNGimportsstartat

2.2MTpain2020andrisecontinuallytoreach8.7MTpaby2030.Thisisequivalenttoaround55cargoes12annuallyby2030androughlyequivalenttoSpain’scurrentannualimportvolumes(theseventh-largestimporterintheworldatpresent).

• TheEMP2015forecastsimplyarequirementforLNGimportsstartingatverylowvolumesin

2027andreachingonly1.4MTpa(equivalenttoninecargoesperyear)in2030.

• Lastly,themostrecentforecastsine.Gen2016wouldimplyLNGimportsstartingin2020at1.4MTpa,peakingin2025at3.7MTpa(equivalentto23cargoesperyear)andthendecliningagainto2.3MTpa(equivalentto15cargoes)in2030.

12Assumesacargosizeof160,000m3.

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Figure22LNGimportrequirements,2015-30

Source:ConsultantcalculationsEstimatedLNGimportrequirements,basedonthesefourrecentstudies,would,therefore,meananythingfromtheneedtodevelopalarge-scaleimportfacilityimmediately(undertheMETI2016forecasts)tobeingabletodefertheneedforimportstosometimeafter2025andthenonlyrequiringtheseonasmallscale(undertheJICAPMP2014andEMP2015forecasts).

3.6 ConclusionsTheuncertaintyovernaturalgasdemandanddomesticsupplyinMyanmarisreadilyapparentfromthecomparisonofforecastsinthissection.Inturn,thismeansthattheneedforLNGimportsandthetimingoftheseimportsisextremelyuncertain.Overall,theconclusionreachedisthatthelevelofuncertaintyissuchthatpreservingflexibilityisparamountindecisionsonthesizing,locationandcommercialarrangementsforLNGimports.Thisimpliesthattheemphasisindevelopingprocurementstrategiesshouldbetopreserveflexibility.Ratherthanenteringintolong-termsupplycontracts,Myanmarshouldbelookingtoinitiallyrelyonshort-termandflexiblearrangementsinordertobeabletoadaptimportvolumestoneeds.ThisisalsoconsistentwiththeuseofanFSRUunderaleasearrangementwhichallowsforreplacementorremovaloftheterminalifimportrequirementsprovetobehigherorlowerthaninitiallyexpected.

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4 Reviewofpotentialgasswaps4.1 Introduction

Allfourforecastsreviewedintheprecedingsectionexpecttoseeasmallsupplydeficitduringtheperiodto2020whenanewLNGimportterminalmightcommission.AmongtheproposalsforaddressingthishasbeenthatofgasswapsunderwhichMyanmarwouldsubstituteLNGimportsintoThailandforpipelinegasexports,thusfreeingupgaspreviouslyallocatedtoexporttosupplythedomesticmarket.Otheroptionsincludebuybackofsomegascommittedtoexportandtheuseoffueloilasasubstituteforgasinpowergeneration.Weconsiderthepotentialforshort-termswapstobelimitedtoThailand.AsdiscussedinourseparatereportonsitingoptionsfortheproposedLNGimportterminal,additionalgaswillinitiallyneedtobesuppliedtotheYangonarea.Intheshort-term,thisisonlyphysicallypossiblebydivertingexportstoThailandgiventhelackofanyavailablepipelinecapacitylinkingtheShweexportpipelinetoYangon.Separately,proposalshavealsobeenmadeforMyanmartoprocureadditionalLNGcargoestobedeliveredtotheLNGimportterminalbeingproposedbyPTTforfuturesupplytoThailandasoutputfromYadanaandZawtikadeclines.ThesecargoeswouldbeusedtosubstituteforgasthatwouldotherwisehavebeenexportedfromYadana,allowingpartofthistoberedirectedtodomesticsupply.Asthismedium-termswaparrangementsintroducesdifferentconsiderationsfromshort-termswaps,wediscussitseparatelybelow.

4.2 Short-termswaps

4.2.1 Outlinearrangement

Ashort-termswaparrangementwouldbeatemporaryexpedientusedtoincreasegassuppliedtotheMyanmarmarketpriortothecommissioningofthenewLNGterminal.Ataconceptuallevel,MyanmarOilandGasEnterprise(MOGE)wouldimportLNGcargoesintotheexistingMapThaPhutLNGterminallocatedinThailandforPTT’suseand,inreturn,wouldreceiveanincreasedallocationofgasproductionfromtheYadanaand/orZawtikafieldsfordomesticconsumptioninMyanmar.Thearrangementisillustratedbelow.

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Figure23Illustrativeshort-termgasswapsarrangement

Thereislittleexperienceofsimilarcross-borderswapsofLNGforpipelinegas.Thosewehaveidentifiedare:

• Apipeline gas for LNG swap in2005,whenGazprom swappedan increase inpipeline gassuppliedtoGazdeFranceinreturnforasingleLNGexportcargooriginatedbyGazdeFrance.

• The swapping, in 2013, of six LNG cargoes from the Tangguh gas facility in Indonesia for

contractedexportstoSouthKoreafromtheArunLNGfacility,alsoinIndonesia.ThesecargoeswereswappedforpipelinegasdeliveriesfromtheArunfacilitytoalocalfertilisercompanywhichdidnothaveitsownLNGimportfacilities.

• Morerecently,Gazpromin2015proposedswappingpipelineexportstoIran’snorthforLNGcargoesexportedfromitssouth(throughaGazprom-ownedterminal,tobeconstructed)butnoprogressappearstohavebeenmade.

Giventhislackofprecedents,wehavemadeourownassumptionsonhowashort-termswapsmodelmightoperate.WeassumethatMOGEwouldprocurecargoesfordeliveryintoThailand’sMapThaPhutLNGreceivingterminalonaDESbasis.MOGEwouldalsoberesponsibleforpayingallchargesassociatedwithunloading,storing,regasifyingandsending-outregasifiedLNG(RLNG).TransferoftitletotheRLNGandresponsibilityfordeliverytocustomerswouldtransfertoPTTattheentrytoPTT’stransmissionpipelinesystem.InreturnforthedeliveredLNG,PTTwouldreleasecorrespondingamountsofgasforuseinMyanmartobedeliveredthroughMOGE’stransmissionpipelinesystem.

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Below,wereviewthekeyissuesrelatedtosuchanarrangementwhicharethecommercialandlegalrequirements,thephysicalrequirementswhichderivefromthephysicalcapacityofPTT’sandMOGE’sgastransmissionsystemstohandlesuchanarrangementandthecostsandbenefitsofsuchanarrangementforMyanmar.

4.2.2 Commercialandlegalrequirements

Weunderstandthat,astheexistinggassupplyagreementsbetweenMyanmarandThailandweresignedonaGovernment-to-Governmentbasis,significantamendmentswillrequireapprovalbyThailand’sOfficeoftheAttorney-GeneralandbytheNationalEnergyPolicyCouncil(equivalenttoaCabinetcommitteeandchairedbythePrimeMinister).Suchapprovalswillonlybegrantedifitcanbeshownthatanychanges,suchasaswapsarrangement,donotincreasecostsorrisksofsupplyinterruptionstoThailand.Atthistime,itwouldbeveryhardtoprovidethenecessaryassurances.MOGEhasnoexperienceinLNGprocurementand,therefore,isinnopositiontoinitiateLNGpurchasesintheimmediatefuture.Evenifthisbarriercanbeovercome,MOGEwillstillbefacedwiththeneedtoprovideadequateguaranteesofitscapabilitytopayforLNGcargoesgivenitslackofatrackrecordandthepoorfinancialconditionofitsmaincustomer—thepowersector.Thesemaybeverysubstantial.AsingleLNGcargoof140,000cubicmetreswouldcostaroundUS$16.5million13,evenatcurrenthistoricallylowprices.ThiseffectivelylimitsMOGEtoonlypurchasingindividualorsmallnumbersofLNGcargoesatatimewhich,inturn,meansitcannotguaranteesupplytoPTT.

4.2.3 Physicalrequirements

PTT’sonshoregastransmissionsystemThefollowingconstraintshavebeenidentifiedindiscussionswithPTT:

• LNGterminalcapacity.UntilcommissioningofPhase2oftheMapThaPhutLNGterminal,expected in 2017, PTT is concerned that theexisting terminal has insufficient storage andsend-outcapacitytobothensuresecurityofgassupplytoPTT’scustomersinpeakperiodsandtoaccommodateadditionalvolumessubstitutingforMyanmarpipelineimports.

• Onshore transmission. After Phase 2 of the terminal is commissioned, there will still be

constraintsonPTT’s transmissionpipelinesystemwhichwouldmean incrementalvolumescannotbeflowedfromtheMapThaPhutterminaltotheRatchaburipowerplantcomplex,which is currently supplied by imports fromMyanmar. These constraints will be partiallyrelaxedwiththecommissioningofanewcompressorstationin2019andfullyoncetheFifthOnshoreTransmissionPipelineiscommissioned,whichisexpectedin2021.

• Gasspecifications.Theremayalsobeissuesrelatedtochanginggasspecifications.Atpresent,theRatchaburipowerplantsareconfiguredtoburnamixoflow-calorificvalueYadanagasand higher-calorific value Yetagun and Zawtika gas. Reducing imports of Yadana gas andreplacingthemwithRLNGwouldchangethegasmixand,therefore, itsspecifications.This

13Assumesa140,000cmcargo,aconversionrateof21.04mmbtuto1cmofLNGandaDESpriceof$5.6/mmbtu(FERC’sestimateoflandedpricesintoIndiaasofOctober2016is$5.57/mmbtu-https://www.ferc.gov/market-oversight/mkt-gas/overview/ngas-ovr-lng-wld-pr-est.pdf)

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willreducethecombustionefficiencyoftheplants’burnersandincreasefuelconsumptionandcosts.

Thecompressorstationconcernedisunderstoodtobethe4thOnshoreMidlineCompressor,asillustratedonthestylisedmapofPTT’sonshoretransmissionpipelinenetworkshownbelow.

Figure24PTT’sonshoretransmissionnetwork

Source:PTT(http://ptt.listedcompany.com/misc/presentations/20160301-ptt-investor-update-201603-05.pdf)Overall,itappearsthatanyincreaseinLNGsuppliesdeliveredintoMapThaPhutunderaswapsarrangementcouldnotreadilybetransportedtoRatchaburitosubstituteforimportsfromMyanmar.MOGE’sgastransmissionsystemAnyincrementalgasmadeavailabletothedomesticmarketonashort-termbasiswouldneedtoflowfromeithertheYadanafieldtoYangonviatheexistingpipeline(24”capacity)orfromtheKanbauklandingpointforthevariousoffshorepipelinestoYangonviaMawlamyine(24”and20”capacity).However,neitherpipelinecouldreadilyaccommodateanincreaseingasflows:

• Yedana–Yangonpipeline.Theexistingonshoresectionofthepipelinehasacapacityof200mmcfd,althoughthisistobeincreasedto250mmcfd.UtilisationasofOctober2016is177mmcfdbutthisrisesto200-210mmcfdinthehotseasonwhenelectricitydemandpeaksand

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hydropowergenerationisatitslowest.Therefore,additionalsuppliesthroughthispipelineduring the hot season, when they are most needed, would be limited to 40-50 mmcfd(equivalentto35mmscfdafteradjustingforheatingcontent).Thiscomparestoapotentialdeficitofupto200mmscfddependingontheforecastsused(seeSection3.5).

• Kanbauk – Yangon pipeline. The pipeline has a maximum capacity of 100 mmcfd to

Mawlamyine.UtilisationasofOctober2016was56mmcfdandthisrisesto100mmcfdinthehot season, implyingnoadditional gas supplies releasedaspartof an LNG swap couldbetransported.Capacityislimitedbythelowpressuresatwhichthepipelineoperateswhich,inturn,areconstrainedbythepoorconditionofthepipeline.MOGEisreplacingthepipelinetoMawlamyinebutfacesbudgetconstraints.Asofend-2015,35mileshadbeenreplacedbutonly5-10milesofreplacementisbudgetedin2016.Atthisrate,fullreplacementofthe180milepipelinewillrequirefromfiveyearsupwards.

Physicalconstraints,therefore,suggestthatthemaximumsupplythatcouldbereallocatedonafirmbasistodomesticconsumptionunderashort-termswapsarrangementwouldbe50mmcfdorsofromtheYadanafield.Thepipelineconstraintsareillustratedbelow.

Figure25MajorpipelineconstraintsinMyanmar

Source:ConsultantsandMETI2016

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4.2.4 Cost-benefitanalysisInprinciple,thebenefitsofsuchashort-termswaparrangementappearhigh.TheywouldenableMyanmartomeetdemandforelectricityusingnaturalgasratherthanoilfuels,reducingcostssignificantly.However,inpractice,thephysicalconstraintsidentifiedabovemeanthatthesepotentialbenefitscannotberealisedwithoutsignificantinvestmenttorelievetheseconstraints.Aswellasthedirectcostsoftherequiredinvestmentsthesewillprobablydelaytherealisationofthepotentialbenefitsforatleasttwotothreeyears,bywhichtimetheoriginalmotivationfortheswaps(toclosethesupplyanddemandgapwhileadedicatedLNGterminalisbeingdeveloped)isnolongerapplicable.

4.2.5 Conclusionsonshort-termswaps

Thelackofprecedentssuggeststhatanysuchtransactionwouldfacesignificantobstaclestoitsdevelopmentandimplementation.Ourownanalysishasidentifiedanumberofmajorconstraints:

• It is unlikely that MOGE can guarantee reliable supplies of LNG, leaving PTT at risk ofinterruptions.

• PhysicalconstraintsonPTT’sgastransmissionsystemmeanthatLNGdeliveredintoMapTha

PhutcannotreadilybetransportedtotheRatchaburipowercomplexwhichcurrentlyreceivespipelinegasfromMyanmar.

• PhysicalconstraintsonMOGE’sgastransmissionsystemmeansthatthemaximumincrease

in firm gas supplies that could be released by a swaps arrangementwould be around 50mmcfd(equivalentto35mmscfd).

Overall,weconcludethatshort-termswapsareinfeasible.TheyareunlikelytobeacceptedbyPTTand,evenifimplemented,wouldbeunlikelytoreleasesignificantadditionalquantitiesofnaturalgastotheMyanmarmarket.However,eveniftheconstraintsontheThaisidewerelifted,Myanmarwouldstillneedtoovercomeinfrastructureandcapacityissues.

4.3 Medium-termswaps

4.3.1 Outlinearrangement

PTTiscurrentlyinvestigatingthepotentialtodevelopanLNGimportterminal(intheformofanFSRU)atKanbaukfrom2020-21.ThiswouldbeusedforLNGimportstosupplytheRatchaburipowerplantcomplexusingtheexistingexportpipelinesfromMyanmarandwouldsubstitutefordecliningproductionfromtheYadanaandYetagunfields.ThiscreatesthepossibilityforswappingadditionalLNGimportsthroughthenewPTT-ownedterminalforoffshoregasproductionpreviouslyallocatedforexport.Thiswouldallowexistinglevelsofsupplyfromthesefieldstothedomesticmarkettobemaintainedevenastotalproductionfalls.SuchaswapsarrangementwouldallowareductionintheneedfornewLNGimportsforMyanmar’sownconsumptiontomakeupfordeclinesindomesticsupplyfromexistingexport-orientedfields.Thearrangementisshownbelow.

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Figure26Illustrativemedium-termgasswapsarrangement

4.3.2 Commercialandlegalrequirements

Thecommercialconstraintsonsuchanarrangementwouldbelessthanunderashort-termswapsarrangementasdiscussedabove.WeassumethatPTTwouldberesponsibleforLNGimports,relievingMOGEofthisresponsibility.MOGEwouldneedtocompensatePTTforanydifferencebetweenthecostofimportsandthepricepaidforredirectedgasthatwouldotherwisehavebeenexported.Whiletherewouldstillbeaneedforhigher-levelapprovals,weexpectthatthesewouldbeeasiertoobtainandthereisalsoalongerlead-timetodoso.

4.3.3 Physicalrequirements

ImportedLNGwouldbetransmittedtoThailandusingthesparecapacityonexistingexportpipelinesreleasedbydivertingexportstodomesticsupply.AsdomesticsupplyfromtheYadanaandZawtikafieldswouldbemaintainedatcurrentlevelsunderthesearrangements,MOGE’sexistingonshoretransmissioncapacityshouldbeadequate.

4.3.4 Cost-benefitanalysisWhethersuchaswaparrangementisadvantageoustoMyanmardependsonwhethertherewillbecontinuedphysicalconstraintsondeliveryofnaturalgastotheYangonareafollowingtheexpectedcommissioningofadedicatedLNGimportterminal.Ifconstraintsdoexistthenitissensibletomakemaximumuseofexistingpipelinecapacitywhichwouldimplyreplacingdecliningdomesticsupply

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fromtheYadanaandZawtikafields,giventhatthesehavepipelineconnectionstoYangon.Inthiscase,thebenefitswouldbethereducedneedfornewpipelineinvestmenttotransportnaturalgastoYangon.Atthisstage,wearenotabletoquantifythemagnitudeofthesepotentialsavingsintheabsenceofdecisionsonthesizeandlocationofanewdedicatedLNGterminalandonfuturepipelineinvestmentplans.Intheabsenceofsuchpipelineconstraints,MyanmarcanmeetitsdemandforgasfromLNGimportsthroughitsowndedicatedterminal/s.Insuchacase,theproposedswapwouldeffectivelymeanPTTimportingpartofMyanmar’srequirementsindirectlyratherthanthisbeingdonedirectlythroughadedicatedterminal.Thisisunlikelytobemorecost-efficient.

4.3.5 Conclusionsonmedium-termswaps

Medium-termswapsusingaPTT-developedLNGimportterminallocatedinMyanmarwouldhavemuchreducedcommercialandlegaldifficultiesrelativetoshort-termswapsandwouldnotfacethesamephysicalconstraints.IftherecontinuetobeconstraintsonsupplyingnaturalgasintotheYangonareafollowingthecommissioningofanewdedicatedLNGimportterminalthenthenetbenefitstoMyanmarofsuchswapswouldbelikelytobepositive.IfinvestmentsassociatedwiththenewLNGterminalrelievestheseconstraintsthenthenetbenefitstoMyanmarofswapswouldappeartobezerotoslightlynegative.

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ANNEXES

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SectionA Demand-SupplyForecastsbyStudy

ThefiguresbelowshowtheindividualdemandanddomesticsupplyforecastsforeachofthefourstudiesreferencedinSection2.Ineachcase,thesearepresentedinmmscfd.

A.1 JICAPMP2014

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A.2 EMP2015

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A.3 METI2016

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A.4 e.Gen2016

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SectionB OverviewoftheProjectTeam

B.1 MJMEnergyLimited

MJMEnergyisaUK-basedfirmprovidingtechnicalandcommercialconsultancythroughouttheworldwithaclearfocusonnaturalgasandLNGrelatedprojects.

OverthelastfewyearsMJMEnergyhasadvisedonthecommercial,operationalandregulatoryaspectsofLNGimportsthroughouttheworld.InPakistanMJMEnergyprovidedtechnicalandcommercialsupporttotheGoPandSSGC(theincumbentmonopoly),facilitatingthefirstLNGimportsintoPakistanviaaFSRU.MJMEnergyhasalsoadvisedonFRSULNGimportprojectsinChile(ECL)andGhana(VRA),workingwithECLindevelopingTerminal-User-Agreements(TUA’s)inChileandanRFPforVRAinGhana.MJMEnergyworkedonanumberofland-basedLNGimportprojectsinGreece,Singapore,theUKandtheNetherlands.Finally,MJMEnergyrecentlypublishedamajorstudyofworldLNGsupplies,examiningthecurrentandfuturepotentialofLNGsuppliesfromovertwenty-eightdifferentcountriesovertheperiod2015–2035.MJMEnergyalsohasawell-establishedtrainingbusinessprovidingcapacitybuildingtoclientsthroughouttheworld,includingLNGtrainingtoclientsfromonedayoverviewsoftheglobalLNGmarketthroughtofivedaycoursesonLNGeconomics,marketsandmodelling.Inadditiontothemainteamengagedwiththisproject,wealsohaveastrongbackofficeteamprovidingsupporttotheprojectteamintermsofprojectadministrationandtechnicalsupport.

B.2 PenguinEnergyConsultingLimited(PEC)

PenguinEnergyConsulting(PEC)isaUK-based,independentenergyindustrytechno-commercialconsultancyandtrainingprovider.PEChasbeeninvolvedin46LNGprojectsin28countriesover20years,whichhasincludedonshoreandoffshoreliquefactionand

regasificationfacilities,smallscaleLNG,andpeakshavingunits.Projectroleshaveincludedtechnologydevelopment,conceptandfeasibilitystudies,siteselection,owner’sengineer,commercialsupport,safety,environmentalaspectsandtraining.PenguinEnergyConsultantsLtdhascontractsandarelationshipwiththeSocietyforGasasaMarineFuelfordevelopmentofexpertiseandregulationsconcerningtheuseofnaturalgas,primarilyasLNG,formarinefuel.

B.3 ECA

EconomicConsultingAssociatesLimited(ECA)wasformedin1997toprovideeconomicandregulatoryconsultingservicestoindustryandgovernment.ECA’steamandapproacharebasedonmanyyears’experienceofcarryingouteconomicandpolicyanalysis,intheUKandworldwide.ECAspecialisesinadvisingoneconomics,

policyandregulatoryissuesintheutilitiesindustries,withparticularexpertiseinthegassector.Thefirmhasatotalof20professionalstaffmembers,basedinofficesinLondon,Bangkok,andNewZealand.Allstaffmembersholdqualificationsineitherorbothofeconomicsandengineering.ECAhasundertakenover450assignmentsinover50countriesaroundtheworldhavingworkedwithover30regulatoryauthoritiesandover15nationalutilities.

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B.4 DrennanMarineConsultancyLtd

DrennanMarineConsultancyLtdisaLNGmarinespecialistwithexperienceworkinginover20countriesworldwideandiswellusedtorankingmultiplelocationsinastructuredandconsistentwayagainstrelevantmarinecriteriaincludingnaturalshelter,navigationalriskandthecapabilityoflocalservices.AsaqualifiedMasterMariner,TomhasacompleteunderstandingoftheneedsandpreferencesoftheLNGindustryintermsofsuitableLNGsites.