Valdez Alaska LNG Summit

13SEP12

Good afternoon ladies and gentlemen. I want to thank Bill Walker for inviting me to participate in this session of the LNG summit and I would also like to thank Mayor Cobb for hosting the event. I apologize for not being able to be there. I truly enjoyed my visit to Valdez last year and look forward to the opportunity of future visits. I have been asked to provide my opinions on the concept of placing an LNG liquefaction terminal immediately adjacent to the existing Valdez Marine Terminal (VMT) and also to comment on some of the potential advantages of having the terminals on essentially the same site. Please direct your attention to the first conceptual site plan that we have prepared. This is an overall site plan that includes the docks , VMT and proposed liquefaction terminal. The terminal includes 3 liquefaction trains of approximately 4 million tons per year of LNG. One of the assumptions of this plan is that the pre-treatment of the natural gas will be done on the North Slope or somewhere along the pipeline before it reaches the terminal. Pre-treatment is required to provide a dry gas free of carbon dioxide and other trace elements. It also assists in boosting up the pipeline pressure before going to liquefaction. Another major assumption is that due to reduced storage capacity requirements at the VMT, the current west crude tank farm can be demolished. It is our understanding that these tanks are not currently in active service. This overall site plan falls within the boundaries of what we understand is the current property boundaries of the VMT. The liquefaction terminal will require its own reliable source of power generation. This could be accomplished by installing a gas turbine generation plant that is fueled by the incoming natural gas supply. This plant is anticipated to be in the 100+ megawatt range and could be located where the existing power plant is currently located (in between the east and west tank farms). Replacing the existing power plant with an efficient and modern gas turbine power plant should provide the VMT with a much more cost efficient power supply system. It is my understanding that the current power plant provides flue gas to the fixed roof crude tanks for blanketing to remove oxygen in the vapor space to eliminate flammable conditions. In the event that floating roofs are not installed in the fixed roof tanks in the future to eliminate the vapor space then a nitrogen generating facility could be installed. Blanketing with inert nitrogen gas provides a safe and non contaminating means of controlling oxygen in the tank vapor space. A nitrogen supply is also important in the operations and maintenance of the liquefaction facility.

Page 2 The large area behind what once was Jackson Point could serve as a construction staging area and/or camp area. This area appears to be mostly unused or under- utilized at present. It has been my experience that providing construction logistics and access on remote sites is a large schedule and cost item. We have indicated a new LNG dock 6 to the west of existing dock 5. Two docks will most likely be required for a terminal of this size. The VMT is operating on 2 crude berths at the current throughputs at dock 5 and dock 4. Existing dock 3 is not in crude service at this time. Existing dock 5 could be reconstructed for LNG service. Existing dock 3 could be placed in crude service to assist the main crude dock at dock 4. A major item for comprehensive study in a liquefaction facility is the spacing of the trains, tanks and other structures. Please direct your attention to the second conceptual site plan which is a closer view of the onshore facilities. The spacing used in this concept is very preliminary but is representative of current liquefaction facilities. The LNG tanks may be placed in the area where the west tank farm is currently located. This will save an enormous amount of civil work and would allow the tank construction to begin very early in the project. The three liquefactions trains, or units, would be "stair stepped" down the base of the mountain. A little more separation between units due to existing topography and grading may be required in the final design than what we have indicated. The control room would be designed as blast proof and is centrally located. The buildings area can be spaced far enough away from the tanks and the trains to satisfy safe distance requirements. There are other items that can be placed on site such as the nitrogen generation, plant/instrument air system and refrigerant storage. The flare is currently placed on the NW corner to take advantage of the prevailing winds. Overall, it is my opinion that designing and constructing a liquefaction facility as indicated could provide large cost and schedule savings in the LNG construction and also be very beneficial to the existing Valdez Marine Terminal. Thank you very much for the opportunity to present this concept to you. Stan Lloyd Lloyd Engineering, Inc. __________________________________________________