Floating LNG Production Nothing worthwhile is easy…

1. Floating LNG ProductionNothing worthwhile is easy… 7th ANNUAL DOHA GAS CONFERENCE MARCH 9-11, 2009

2. Poten & Partners: Consultants to the Global Gas & LNG Industries • Over 60 years as an advisor and broker to the energy and ocean transportation industries • Providing strategic advisory services along the entire natural gas and LNG value chain • More than 35 LNG professionals in New York, Houston, London and Perth

3. FLNG view should balance concept’s pros and cons • Unprecedented level of interest in floating liquefaction • Diminishing gas supply, rising LNG prices spur development • Yet technical, commercial and legal obstacles remain • The first firm project commitment remains elusive Should Floating LNG’s backers be concerned? • FLNG on typical emerging technology development path • Obstacles can be overcome – tolerance for uncertainty advisable

4. FLNG opening more gas to development • Accesses gas unsuitable for baseload development • Eliminates pipeline & loading infrastructure costs • Reduces security and political risks • Constructed in controlled shipyard environment • Can relocate facility upon field depletion Data: Infield

5. Two distinct development paths emerging Shell 5-6 mtpa concept SBM Offshore 2.5 mtpa

6. Yet despite activity, a first FID remains elusive • Small-scale: • Flex LNG – Progress LNG FID delayed in Jan’09 • SBM Offshore – expecting to start client FEED in ‘09 • Höegh LNG – completing generic FEED-level design • Other concepts in earlier stages of development • Excelerate/Exmar, BW Offshore, Teekay, Bluewater, Sevan… • Large-scale: • Shell – bids and possible award later in ’09 • Candidate locations: Prelude, Greater Sunrise • Inpex – Abadi LNG startup planned for 2016

7. Marine settings present technical challenges • Waves, wind and currents • Process equipment performance • LNG storage “sloshing” • Open-water LNG transfers • Pretreatment requires up to 50% of available deck area • Favors feed gas with low levels of inerts and impurities • Condensates and LPGs increase processing, storage and offloading demands Flex LNG Producer - IHI SPB Containment System Source: Flex LNG Höegh FLNG Concept – Side-by-side Loading Source: Höegh LNG

8. Black & Veatch PRICO SMR Process Mustang NDX-1 Process (patent pending) Source: Mustang Engineering Liquefaction choices far from mature • Need simple, robust and compact liquefaction solutions • Single mixed refrigerant cycles • Gas expander-based cycles • Concerns • Process efficiencies • Scale-up performance • LPG refrigerant storage • Marine performance and reliability

9. Economics mired in uncertainty • Development costs look competitive, but require further critical analysis • Reserves depletion relevant to project’s economic performance • No long, slow depletion profiles • Additional drilling to sustain field’s production plateau; maintain feed gas pressures • FLNG relocation not necessarily easy • Balance costly, time-consuming retrofits vs. sub-optimal performance • Abandonment timing

10. 1 INTEGRATED PROJECT 2 MERCHANT PROJECT GSA 3 TOLLING FACILITY Tolling Agreement Commercial structure a challenge for FLNG developers • FLNG developer can gain broader reward/risk exposure through various “hybrid” structures • Ability to take on this broader role depends on • Project partners • Developer’s industry expertise • Developer’s ability to raise financing Resource Owner

11. Construction risk-sharing must be addressed • Risk allocation between the shipbuilder, process vendor, and EPC contractor needs definition • More construction risks will ultimately rest with project owners or LNG buyers • EPC contractors don’t have the balance sheet to bear completion or performance risks for emerging technologies • Licensing agreements for jointly developed technologies Source: Expro

12. Offshore production and loading affect fiscals; SPAs • Upstream fiscal terms must address LNG exports • FLNGs likely to have tighter logistical constraints • SPAs focus on scheduling issues Source: Bluewater

13. Financing will require proof of concept • FLNG concept not fully proven – greater project execution and operational risks • First project will be subject to rigorous review to establish financing precedents • Loan tenor aligned with production life • Movable asset has some financing merits • High level of investment concentrated on a single hull raises insurance issues

14. Legal/regulatory landscape can affect design • Marine setting brings FPSO-type legal frameworks into play • Which national legislation, flag state regulations, class rules and international conventions apply? • FLNG approvals similar to those for LNG vessels • Some legal issues can affect design • Ship vs. static facility? • Is the vessel transporting gas? • Fulfilling Domestic Market Obligations • Local content requirements

15. FLNG’s next steps • Small-scale FLNG’s needs • Appropriate stranded gas resources • Project sponsors • Large-scale FLNG remains domain of international oil companies • Deep engineering, project development and financial resources • Downturn could induce a pause in development • Changing economics • Evaporating sources of financing • On the positive side.. • Construction costs are falling • Shipyards looking to fill order books

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