Methanizing the Mediterranean Area. TRIESTE & ROME 10-11/06/2015

FROM NORTH AND BALTIC SEA TO THE MEDITERRANEAN THE DEVELOPMENT OF A LNG CHAIN

Tord johnsson Area, Business development manager, Europe & Africa Oil & Gas Business WÄRTSILÄ POWER PLANTS Introduction – Wärtsilä Corporation

19,000 professionals Solutions for

Marine / Offshore Power Generation

Net sales by business 2014 Ship Power Services 36% Efficiency Flexibility Environmental 40% solutions

• Listed in Helsinki LEADER IN LEADER • 4.8 billion € turnover Power Plants • Solid financial standing 24%

4 © Wärtsilä 10 June 2015 Tord Johnsson Market Drivers

• EU is driving the development of LNG infrastucture out of two reasons

o Enviromental and the EU clean fuel strategy mainly related to the transport sector both at sea and at land with stricter emission legislation. ° First SECA area that went into force 1 January 2015 was the Baltic Sea and for part of North Sea with Mediterranean and remaining part of North Sea to follow in 2020 with the aim to have LNG bunkering facitilties in 139 ports. ° Blue Corridor with LNG truck filling stations each 400 km and CNG car filling stations each 150 km .

o Security of Supply, with the largely dependance on Russia for EU’s natural gas imports, EU wants to diversify its natural gas imports by both promote new pipeline like TAP and TANAP as well as increase the number of LNG receiving terminals. ° The recent decision for cancellation of the Russia’s South Stream pipeline project has reiterated calls for the rapid and structured development of an energy union within EU, which will have an impact on the LNG imports and purchasing developments. ° Azerbaijan and Turkey are important countries in the Southern Corridor and as partners to EU in this aspect. LEGEND • Cost, energy efficiency SECA Sulfur Emission Controlled Area TAP Trans Adriatic Pipeline • Renewable, infrastructure commonality TANAP Trans Anatolian Na tural Gas Pipeline

5 © Wärtsilä 10 June 2015 Tord Johnsson LNG cleanest shipping fuel available

Emission -25% values [%]

100

-85% 60 50

CO 2 -99% 30 NO x 20 -95% SO x 10

Particulates 0 Diesel Dual-Fuel engine engine in gas mode

6 © Wärtsilä 10 June 2015 Tord Johnsson Choice of Fuel / Technology

• Existing /Future Regulation • Low Sulfur MGO • Scrubber technology • Alternative fuels to LNG

Source; Terntank Rederi A/S

7 © Wärtsilä 10 June 2015 Tord Johnsson Wärtsilä Dual-Fuel References

MERCHANT OFFSHORE SPECIALS DF CONVERSION 2 STROKE DF DF POWER PLANTS

732 ENGINES132 ENGINES 61 ENGINES 28 ENGINES 11 ENGINES 352 ENGINES

168 LNG carriers 24 Offshore supply 9 Ferries 4 FPSO vessels 4 Chemical tankers 75 plants 8 Multigas carriers 5 FPSO vessels 6 Tugs 2 RORO vessels 4 Container vessels Output 4877 MW 2 Product tankers 4 FSRU vessels 3 ROPAX vessels 1 Chemical tanker 3 LNG carriers Online since 1997 1 Bulk tanker 2 Platforms 1 Navy vessel 1 Ferry 1 CNG carrier 1 FSO vessel 1 Icebreaker 1 IWW vessel 1 IWW vessel 1 Guide ship

>1,300 engines >12 million running hours

8 © Wärtsilä 10 June 2015 Tord Johnsson LNG as future volume in shipping

DMA study LNG demand 1.8 -5.5 million ton in 2020.

DNV high scenario 5.000 LNG fuelled ships globally by 2020.

Availability and price will determine the market in 2020.

10 © Wärtsilä 10 June 2015 Tord Johnsson Views from part of the LNG Value Chain

Source; SkanGas

11 © Wärtsilä 10 June 2015 Tord Johnsson Economical and funding aspects for Ship owner

° Energy efficiency

° Propulsion

° Ship design

°EU-support for new technologies/fuels Motorways of Seas /TEN-T etc

° Nox fond support for reduction of Nox

° Reduction of Fairways Dues

°Early movers rebate at Ports

16 © Wärtsilä 10 June 2015 Tord Johnsson LNG volume & share of total gas is growing

Growth of LNG • LNG supply • Shares of global gas consumption Bcf/d Bcf/d 80 40%

60 30%

40 20%

20 10%

0 0% 1990 2005 2020 2035 1990 2005 2020 2035 Other Africa Australia US Russia Qatar Total trade Pipeline LNG

BP Energy outlook 2035

9 © Wärtsilä 10 June 2015 Tord Johnsson Focus on markets and solutions where we can deliver best value for customers

HFO & DF UTILITY GAS LNG SPECIAL APPLICATIONS Maintain leading Grow strongly in Small and medium Grow in: position in HFO & large utility gas scale LNG terminal • Nuclear dual-fuel power power plant EPC emergency power plant markets markets • CHP • Oil & Gas • Biofuels

12 © Wärtsilä 10 June 2015 Tord Johnsson LNG infrastructure and synergies within Wärtsilä

• Small to medium scale LNG terminal market expected to grow • Increasing demand for decentralised power plants, energy intensive industries in remote areas & local gas grids • LNG has huge potential as fuel for ships

Regional gas availability enables

• Decentralised Smart Power Generation • Flexible gas power plants on islands supporting renewable energy • Gas and dual-fuel ships • Need for new small size LNG carriers • Building the infrastructure is key

13 © Wärtsilä 10 June 2015 Tord Johnsson LNG Receiving Terminals + potential additional terminal off-takers

LNG Carrier 120 000 – 140 000 m3 LNG Import Terminal Power Plant/Industry 10 000 – 160 000 m3 50 – 500 MW

The development project must be feasible based on key elements (example) National grid gas pipeline

Additional off-takers might be a bonus Power Plant in specific projects but shall not be a Trans Shipments LNG 15 – 200 MW must for the feasibility of a terminal 1 000 – 10 000 m3 SatelliteTerminal (= long project development time) Port

Additional off-takers will increase the terminal Ship Bunkering Fuel LNG volume ( → lower EUR/MWh price of 200 – 2 000 m3 Industry LNG) but will also allocate increased cost of both CAPEX and OPEX for the overall project.

LNG Power Plant 10 – 50 MW LNG Tank Trucks SatelliteTerminal 30 – 60 m3

14 © Wärtsilä 10 June 2015 Tord Johnsson Supply Chain – making LNG available for offtakers - what is the price of LNG ?

STS transfer

LNG production

Main distribution

Storage Power Generation

LNG import

Source; SkanGas & Wärtsilä Local distribution

€/MWh Value Chain LNG as bunker fuel – Average Case Example € 70,00 € 60,42 € 60,00 € 12,45 € 50,00 € 4,88 € 4,23 € 3,13 € 40,00 € 35,73

€ 30,00

€ 20,00

€ 10,00 TTF TTF €26/MWh € 0,00 Commodity Terminal X re-loading Shipping Terminal X Terminal Y handling, 100 % MGO (avg) - incl BOG surcharge to Terminal Y using including re-loading in room for small LNGC (7.500 bunkerbarge (avg) bunkerparties and m3) shipowners to invest

• In the Nordics and Baltics there are already several terminals and production facilities.

• Different sizes of terminals are under construction and being planned in the region.

• EU and national funding.

• The infrastructure is being developed

MANGA, TORNIO, FINLAND

”The Tornio Manga LNG terminal is a long-term infrastructure investment programme. The beneficiaries include shipping and road transportation companies, power and heat utilities, as well as other industrial and mining companies in northern Europe. We appreciate Wärtsilä’s participation as a valuable partner in this project with special value-adding capabilities in this field.” Pekka Erkkilä, Chairman of the Board, Manga LNG OY (Jan 2014)

• Client: Manga LNG Oy • Region / Country: Tornio, Finland • Scope: EPC • Estimated start up: Early 2018 • Tank net volume: 50 000m 3 • Ship unloading rate: 3 000m3/h • Outlet gas pressure: 6.0 barg • LNG in-tank pumps: 3 x 175m3/h • End user: Outokumpu Tornio steel mill, mines, factories and other industrial customers in Northern Finland and Sweden

20 © Wärtsilä 10 June 2015 Tord Johnsson Wärtsilä provides technology and services throughout the entire LNG distribution chain

• Wärtsilä LNG Business have just started and is here to stay – LNG will be the energy of the 21st century

• Wärtsilä is an EPC provider of LNG liquefaction plants in our market Small & Medium scale ( 4 000 – 300 000 TPA ) liquefaction plants for domestic use and export.

• Wärtsilä is an EPC provider of LNG import terminal plants with or without power plants and our market is Small & Medium scale ( 5 000 – 160 000 m3 storage) import terminals plants for domestic and regional use and import/export.

• Wärtsilä will form a important part of the LNG value chain

LNG IS THE FUTURE ENERGY Already today !