PNG LPG Supply to Pacific Islands Region

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Twinza Oil Introduction

The Twinza Story

Pasca A field

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New 3D seismic data processing offers superior imaging of the Pasca A reef.

Both interior and external geometries are seen in higher resolution.

Note the terraces visible on the outer surface of the reef.

Pasca C

Pasca A

Pasca B

1 A-3A-2

C-2C-1

Discovered in 1968 and has

lain fallow for almost 50 years

Rich gas-condensate field in a

high relief reefal carbonate of

Miocene age

High resolution 3D seismic

has significantly improved the

definition of the resource

Advances in offshore

engineering and gas

processing have significantly

reduced development costs

Pasca A field is capable of

very high flowrates enhancing

the economics

PNG’s first offshore

development and

infrastructure

Well located to supply to

regional markets

Field Layout – Engineering View

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Condensate FSO(Close-Moored)

LPG FSO

Central Processing Facility

Minimum Wellhead Platform

Pasca A LPG Production Profile

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Pasca A will produce 1.8 million tonnes of LPG

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• Pasca A LPG production business case sufficient to cover current PNG LPG retail market

• LPG offtake with be via refrigerated and pressure vessels

Approximate 1000 cbm combined daily production

• Two separate FSOs planned, each for storage of C3 and C4

Ambient pressurized LPG will be supplied to the FSO from production platform

Base plan for FSOs to be semi-refrigerated vessels

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300,000

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Ton

nes

per

an

nu

mPasca A - Production of LPG

Propane Butane

Energy Landscape: Challenged by Geography & Market size

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• Smaller populations, smaller markets

• Distant from supply

• Energy supply chain constraints

• Exposed to global energy price

• Support required for affordable & reliable energy

Energy use: Petroleum & Biomass dominate, LPG only 2%

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Source: LPG and Natural Gas as Alternative Energy Sources for the Pacific, Pacific Region Infrastructure Facility, 2015.

Transport applications Business and industrial applicationsRecreational applications Agricultural applicationsHome applications

According to the World LPG Association LPG has more than 1,000 applications

LPG is a very versatile energy source

Regional LPG Movements & Markets

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• Pacific Region mostly supplied via pressure ships out of Brisbane & Sydney

• Market is > 30,000 metric tons per annum Propane and ~ 50,000 metric tons per annum Butane

Pasca A Location – A Comparative Advantage (1)

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Voyage Duration

Saudi – Brisbane 24 days @ 13 knots

Saudi – Sydney 24 days @ 13 knots

4 days voyage

BNE – POM 5 days @ 11 knots

LPG Supply from PNG (Pasca A field) Reduces Delivery time to Regional Markets

Regionally supplied LPG from PNG reduces delivery time to regional markets by at least 30 days

Savings in related transport and port costs

Pasca A Location – A Comparative Advantage (2)

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• Controlling for ship size, LPG quantity and number of voyages per year,

Pasca A LPG shipment takes 117 days round trip to deliver 16k MT LPG to PNG market

Similar vessel delivering the same cargo from Brisbane takes 221 days (~180% more days than from Pasca A)

• Saudi Arabia (Ju Aymah LPG Terminal) voyage to Brisbane takes ~ 29 days

Pasca LPG supply is delivered in less time to PNG & Regional Markets.

Pasca A LPG Production & Regional Demand Profile

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LPG Storage Capacities indicate market size

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Pasca A LPG Production & Regional Demand Profile

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Pasca A LPG Production Sufficient to Supply Region

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• Pasca A LPG production is sufficient to cover project PNG domestic demand & PICTs LPG demand

• Assume constant demand growth based on economic growth and LPG market penetration

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Pasca LPG Production and Total Regional LPG Demand

Supply Excess Demand Demand PNG Demand Other South Pacific Demand Australia & Indonesia

Note: Australian demand refers to northern Queensland and Nothern Territory markets and Indonesian demand refers to West Papua province.

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2016

Phase 1 Drilling

LPG Offtake: Demand Profile & Parcel Size

• Understanding specific parcel size crucial for LPG offtake to regional markets

Few LPG traders currently dominates regional LPG circulation

Understanding anchor off-taker’s and their onshore storage requirements is crucial for effective distribution

• Off-take requirements / parcel sizes, and distribution model will determine sizing of storage facilities

ISO containers

Small pressure vessels for milk runs through the Pacific Islands

• Regional LPG distribution is generally straightforward Existing LPG terminals in most islands

Only minor site works necessary for ISO containers

• Bulk LPG movement for power generation will require new terminals and storage hubs

LPG A Proven Fuel Source For Electricity Generation

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LPG a Potential substitute for diesel fired electricity generation

• Experience in Latin America and Caribbean proved conversion of base load power production from diesel and fuel oil to LPG lowers energy costs while promoting lower carbon emissions

• ~120 metric ton LPG required to generate 1 MWe per month @ shaft

• LPG is a good precursor for future gas use in CNG & LNG

Diesel Substitution With LPG in Electricity Generation

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Gasoline Diesel Marine Fuel LPG(PNG) LPG(Saudi) Natural Gas

Fue

l Co

st(U

S$/g

allo

n)

Alternative Hydrocarbon Fuels

Alternative Hydrocarbon Fuel Costs(March 2017)

LPG a Potential substitute for diesel fired electricity generation

1. Fuel prices shown are based on Port Moresby & Lae (PNG) prices2. Natural Gas price is based on US West Coast price ($/GGE)

• LPG landed cost is a determining factor to enhance cost competitiveness against diesel

• ~120 metric ton LPG required to generate 1 MWe per month @ shaft

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ark

et

Opport

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LPG Cost Build Up in the PICTs

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Saudi CP/FOB Terminal Charges Port Services Local storage Land transport Retail margin

Wholesale

Margin

Local

Storage

Wharfage

Port

ServicesFreight-

Small

Ships

OperatingCosts

Retail Price

Land Transport

2

Saudi CP

/ FOB

Freight-

VLGC

Terminal

Charges

Retail Margin

Saudi

Arabia

Australia

Retailer

/ Customer

Location

1

3

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Saudi CP or other benchmark used to determine FOB price from the producer. This may be a benchmark plus or minus charge depending on

commercial negotiations.

Avoided cost due to the proximity to the market. Ras Tanura to Sydney or Brisbane is around 24 to 30 ship voyage days, which is avoided if gas

sourced from PNG.

Initially, this may be avoided if demand is sufficient for direct transport from upstream FSO to market. Long-term will be via terminals in Port Moresby

and Lae.

Reducing landed costs of LPG and encouraging increased usage of LPG via diesel substitution will spur increased storage allowing for the retail

segment to benefit from improved economies.

Local

Wholesaler

1

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Where the opportunities lie for Twinza to make an impact pricing/cost

Way Forward

• Explore economies of scale in bulk LPG movements to increase domestic household use

• Engage regional governments on use of LPG in the energy mix of PICTs

• Develop strategic partnerships

Potential anchor customers for LPG in retail, manufacturing & power sectors

Regional fuel transporters & infrastructure related constraints

Govt. regulator and development partners to increase LPG in regional energy mix

• Work closely with agencies such as SPC & PRIF to address regional energy aspirations:

Liaise on ways to achieve SPC goal of reduced HFO reliance in fuel use

Determine enablers for more LPG in energy mix and less reliance on diesel

• Encourage gas to electricity projects in PICTs countries, starting with LPG

A pilot trial in the region is needed to appreciate the opportunities and constraints for the South Pacific region

PNG LPG supply to region requires cooperation between producer & off-takers

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Conclusion

• Current LPG supplies to Pacific regional markets have significant transport costs & little competition

PNG LPG supply potentially reduce transport-related costs for PICTs,

• LPG distribution to Pacific region requires support from multiple stakeholders

Producer, transporter, regional governments, bulk off-takers

• Success of bulk LPG movements will avail cost effective LPG to consumers in the retail space (economies of scale)

• Gas to electricity for the PICTs, starting with LPG is a proven concept in archipelagic and distributed markets such as the Caribbean and Indonesia

• PNG LPG supply addresses PNG and regional energy aspirations:

SPC pushing for reduction of heavy fuel oils use within Pacific Island countries

Contributing to reduced emissions targets

Sourcing LPG from PNG advantageous for South Pacific LPG markets

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