D ESCRIPCIÓN DE LAS CLASES

In Shaw Consultants’ opinion, constructing separate LNG terminals at each of the ABC Islands makes no sense, given the high capital cost for the LNG terminals. However, if an LNG terminal is built in Curacao, it could perhaps provide sendout gas to the other islands.

Aruba is approximately sixty-two nautical miles away from Curacao over an ocean span with a maximum water depth of approximately 4,000 feet. Bonaire is 45 nautical miles away with a maximum water depth of 5,350 feet. It is technically feasible to lay pipeline in these water depths. However, the potential Bonaire gas demand is too small to be considered economically feasible.

If Curacao were to construct an LNG terminal sized to handle both the Curacao and Aruba gas demand load, a subsea natural gas pipeline could be constructed to export sendout gas from Curacao to Aruba.

With the refinery in Aruba now idle, the potential natural gas demand from Aruba would be for power generation only. The additional natural gas consumption from Aruba when added to the Curacao demand would help justify the investment for an LNG terminal in Curacao. This is especially the case if the Isla Refinery in Curacao is also idled.

5.7 CONCLUSIONS

With respect to LNG supply, Shaw Consultants has developed the following conclusions.

 Although the Curacao LNG annual supply requirement is relatively small when compared to the traditional large LNG regas terminal contracts, it will be feasible to contract for LNG supply.

Since the annual quantities are small, Curacao may have to pay a slight premium for the LNG (US$0.40 to US$0.50/MMBtu).

 Atlantic LNG in Trinidad will likely be the most attractive LNG supply source considering the short transport distance. However, LNG supply from Sabine Pass and Freeport Liquefaction Plants will be competitive alternatives.

 Curacao should consider either contracting with a major LNG supplier (such as BP, BG, Shell, Total, etc.) or perhaps contracting with a reputable marketer/terminal operator such as Gas Natural (e.g. the Puerto Rico LNG Terminal operating strategy).

 Based on the Curacao gas demand forecast, the LNG supply requirements will be as follows:

 Years 2015 to 2018 Aqualectra Only (20 MMscfd) - Approximately 0.138 mtpa LNG.

- One LNG ship load every 5 months based on 140,000m³ capacity ship.

 Years 2018+ With Aqualectra + CRUC + Refinery Steam Boiler Loads (110 to 120 MMscfd) - Approximately 0.759 to 0.833 mtpa LNG.

- One LNG ship load every 28 to 26 days based on 140,000m³ capacity ship.

 With the recent large-scale shale gas development projects in the U.S., gas production has exceeded demand and prices at Henry Hub have declined significantly during the past few years.

As a result, new liquefaction projects are being advanced to produce LNG for export from the existing LNG receiving terminals at U.S. Gulf Coast locations such as Sabine Pass, Freeport, and possibly others. As new U.S. Gulf Coast LNG export supply comes on stream during 2016 to 2018, it is anticipated that LNG prices in the Atlantic Basin marketing region will remain stable at current pricing levels or perhaps experience some slight downward pricing pressure due to LNG on LNG competition. The LNG market conditions will likely make LNG imports to Curacao attractive since Atlantic Basin LNG pricing is not linked to crude oil and fuel oil prices.

 Historically LNG pricing mechanism for Atlantic Basin LNG sources have a market clearing netback price based on the UK or European NBP gas prices. However, LNG supply is currently being contracted from U.S. Gulf Coast LNG suppliers with pricing provisions linked to 110% to 120% of Henry Hub monthly gas prices plus liquefaction fees of approximately US$2.50/MMBtu. These Gulf Coast LNG contract terms reflect calculated netback clearing prices exceeding the UK or European NBP price. Shaw Consultants used the Henry Hub pricing mechanism for LNG to assure that the calculated delivered gas costs are conservative.

6.1 OVERVIEW

Worldwide events in the natural gas and LNG sectors over the last five years have triggered major changes in the overall framework for LNG shipping. The LNG industry and gas markets have seen increased production from Nigeria, Peru, Qatar, and Yemen. In addition, major increases in production of shale gas in the United States and worldwide are impacting the global gas industry and the LNG shipping sector. Several projects to export LNG from the U.S. Gulf Coast are moving forward and will impact the LNG market in the Atlantic Basin. The companies producing LNG on the Gulf Coast and shipping the LNG eastward into the Atlantic basin will be potential sources of supply for the Curacao LNG project.

The following table provides a snapshot of the worldwide LNG fleet, the order book for new vessels, and spot and long-term freight rates.

Table 6.1-1 Worldwide LNG Fleet

Another major change over the last five years is a shift in emphasis in the LNG value chain from companies concentrating on access to natural gas resources over to companies emphasizing the ability to control LNG shipping. Only about 25% of the current LNG Carrier (LNGC) new buildings shown in the table above are dedicated to specific projects. The remainder of the vessels on order is either speculative, without specific charter trades, or dedicated to trading companies for use in their short and medium-term trading activities. The secondary market for LNGCs has become more active. The LNG shipping market is splitting into long-term, medium-term, and spot access to shipping. However, it will be more difficult for small LNG import projects such as Curacao to get direct access to LNG shipping.

Concurrent with changes in the overall worldwide supply and distribution of natural gas and LNG, and from a cost perspective the LNG shipping industry has gone through a period of oversupply of shipping five years ago to a situation today where access to shipping has become very tight. Over the last five years spot charter rates for LNG carriers have increased from approximately $50,000 per day in 2007 to spot charter rates in the range of $100,000 to as high as $130,000 per day in 2012. This analysis is based, in part, on information derived from the following sources:

 Drewry LNG Shipping Market – 2011 Annual Review and Forecast;

 Drewry Shipping Insight – Monthly Analysis May 2012;

 Zeus Development Corp LNG Ship Database;

 Update on LNG Shipping – February 2012 Platou LNG; and

 Port to Port Distance Tables – UK Hydrographic Office.

Source: Drewry – Monthly Analysis of Shipping Markets, May 2012

The ship databases from the Drewry Report and Zeus Development Corporation are included in the appendices for future reference.