Webber Research: Celebrating Our 5-Year Anniversary

W|EPC: Golden Pass LNG Q324 Project Review – Client Call Weds 09/25 @11AM EST

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W|EPC: Plaquemines Parish LNG Project Update – Q324

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W|EPC: Costa Azul LNG – Project Update Q324

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W|EPC: Rio Grande LNG – Vacated FERC Permit Q324 – Analyzing Impact & Scenarios

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W|EPC: LNG Canada Q324 Project Update – Updated Timeline Ests, Satellite Image Review, & Analysis

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W|EPC: Qatar LNG North Field Expansion – Q324 Update & Project Estimates

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W|EPC: Cheniere’s Corpus Christi LNG – Q224 Project Update

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W|EPC: Client Call – Golden Pass LNG & Zachry Bankruptcy Impact – Weds 06/05 @11am

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W|EPC: Sempra’s Costa Azul (ECA) LNG Project Update – Q224

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W|EPC: Golden Pass LNG Project Update – Q224

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W|EPC Client Call: Venture Global’s Plaquemines Parish LNG – Tuesday 04/02 @11AM EST

W|EPC: Venture Global’s Plaquemines LNG Project Update – Q224

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W|EPC: LNG Canada Project Update – Q124

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W|EPC: Qatar LNG – North Field Expansion – Q124 Project Update

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W|EPC: Dow Chemical’s $7B Net Zero Ethylene Cracker, Early Analysis – Q124

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Webber Research: Impact of DOE’s Pause In LNG Approvals – Assessing 34 NA LNG Projects

W|EPC: Plaquemines Parish LNG – Q124 Update

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W|EPC: Forecasted LNG Project Timelines – Q423 Update

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W|EPC: Golden Pass LNG Project Update – Q423

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W|EPC: LNG Canada Project Update – Q423

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W|EPC: Sempra’s Costa Azul (ECA) Phase 1 Project Update – Q423

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Webber Research: Golden Pass LNG Project Update – Q323

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W|EPC: Venture Global’s Plaquemines Parish LNG – Q323 Project Update

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W|EPC: Kinder Morgan’s Elba Island – Analyzing ~$350MM In Project Claims vs. EPC LSTK Wraps (May 2023)***

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Conference Call Replay: Changes To DOE’s Non-FTA Process: Impact on Global LNG

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W|EPC: DOE Non-FTA Reg Changes & LNG Project Database Update Summary

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W|EPC: Golden Pass LNG – Project Timeline & Cost Estimates, Satellite Image Review – Q223

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W|EPC: LNG Canada Project Update Q123 – Data & Satellite Image Review

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W|EPC: Freeport LNG Train 4 – Project Update Q123

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Webber Research: Freeport LNG Project Update – Restart Analysis & Review Q123

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Webber Research: Venture Global LNG – Plaquemines Parish Q422 Project Update

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Webber Research: Golden Pass LNG Project Update Q422

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Webber Research: LNG Canada Q422 Project Update – Satellite Image Review, Revised Timeline, Cost Ests

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W|EPC: Energia Costa Azul (ECA) Phase 1 – Q422 Project Update

Access Full Report: Energia Costa Azul (ECA) Phase 1 – Q422 Update

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Webber Research: Qatar LNG NFE Expansion – Q322 Project Update

Access Full Report: Qatar LNG Q322 – Project Update

Webber Research: Golden Pass LNG (XOM, QP) Project Update & Cost Analysis – Q222

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Webber Research: Venture Global Calcasieu Pass LNG & Implications For Plaquemines – Project Update (H122)

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Webber Research: LNG Canada (Shell) – Q421 Project Update

W|EPC: LNG Canada – Q421 Project Update

W|EPC: Venture Global & Calcasieu Pass LNG – Q421 Update

W|EPC: Venture Global’s Calcasieu Pass LNG – Q421 Update

W|EPC: Golden Pass LNG – Q421 Project Update

W|PEC: LNG Canada Q321 Project Update

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W|EPC: LNG Canada – Q321 Timeline, Budget, & Progress Update

W|EPC: Nigeria LNG Train 7 – Baseline Report Q321

W|EPC: Golden Pass LNG Q221 Update – Revising Our Project Model & Cost Curves (XOM, QP)

W|EPC: Qatar LNG North Field Expansion – Baseline Report Q221

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W|EPC: Golden Pass LNG – Q121 Update (XOM, QP)

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Webber Research Downloads

W|EPC: Commonwealth LNG Project Update, Comps, & Due Diligence Questions Q121

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W|EPC: Mozambique LNG – Baseline Report & On-Site Satellite Image Analysis (Q121)

Mozambique LNG – Q121
Baseline Report & On-Site Satellite Image Analysis
Project Owners: Total, Mitsui, ENH, PTT, etc.
LNG Buyers: Tokyo Gas, JERA, Centrica, Shell, CNOOC, EDF, etc

For access information please contact us at [email protected]

Key Takeaways:
Mozambique LNG (MZLNG): After A Sluggish Start…The Next 6 Months Are Critical.

• Q320 & Q420 satellite images indications… (pgs. 15-18)
• 17-months after FID, meaningful piling, concrete, &/or structural steel erection [redacted]…
• Recent security issues (increasingly localized terrorism) could further hamper staffing levels and complicate the path forward (while also potentially creating the pretense for Force Majeure relief).

Schedule Analysis & Estimates: W|EPC Estimate MZLNG is…

• Our proprietary risk model implies a probability of the project meeting its original cost/schedule metrics is [redacted] (page 5)
• EPC Contract Exposure: ~$8B LSTK contract, via a consortium comprised of Saipem (74.95%, SAPMF), McDermott (24.98), MDR) & Chiyoda (0.07%,)
• Note: a successful project would boost Saipem’s reputation, while also certainly meaningful for a restructured MDR ($560MM Raise on Jan 5, 2021).

Mozambique vs. LNG Canada

• MZLNG & LNG Canada share similar characteristics, specifically: a remote area, greenfield, man-camp, etc. (page 4)
• Key differences: MZLNG’s has lower-cost construction wages, shorter project schedule, but 300% more peak labor (~11k craft workers).
• Should MZLNG require even more labor given the circumstances described in pages that follow, it would likely require an even more significant pull from local labor (on-site housing can support ~9.5k workers).
•  MZLNG is located in one of the least developed areas of Mozambique, which creates unique risks around that heavy lean on local labor, even before considering the uptick in localized terrorism. (page 12)

Mozambique LNG: Baseline Report Q121

Mozambique LNG: Baseline Report Q121 (Page 15)

W|EPC: Mozambique LNG – Baseline Report & On-Site Satellite Image Analysis (Q121)

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W|EPC: Future Of Transportation – Ranking & Evaluating Alternative Fuels – H2 ∙ BEV ∙ Methanol ∙ CNG Hybrid ∙ Ethanol ∙ Ammonia ∙ Diesel ∙ Biofuels

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Alternative Fuel Analysis…Will History Repeat Itself?

In 1992 & 2005, the Department of Energy (DOE) created & amended the Energy Policy Act (EPA) that addressed fuel research and tax benefits for vehicle manufacturing.

Battery Electric Vehicles (BEV), Hydrogen (H2), Hybrids, Biofuels, Ethanol and Methanol were analyzed in 2005, but vehicle manufacturers supported gasoline hybrid vehicles due to technology and production constraints.

Since then, fuel cell technology and global, federal, & state emission guidelines have accelerated innovation and the market is now actively deciding transportation alternatives.

Small Vehicle Applications

BEV have taken a leading role in the small vehicle category with minimal competition from Hydrogen.

Hydrogen’s price, lack of infrastructure, and safety concerns highlight the risk associated with new fuel applications; however, Methanol may have an opportunity to fill this role.

The Roland Gumpert Nathalie markets an impressive range and methanol costs are comparative to BEV, but the $450k price tag limits it’s applications until manufacturing scales up to reduce cost. 

Mid-Sized Vehicles and Truck Applications

Fuel energy density becomes a larger role as the size of a vehicle increases.

Fuel storage capacity, energy density, and vehicle efficiency play a large role in the range and cost for a vehicle.

Semi-Truck Range Is A Gating Issue For Future Fuels

New Semi-Truck concepts are ranging from shorter applications (<300 miles) to the long-haul market (>600 mile/day).

Daimler eCascadia seems to make sense for shorter applications and Hyliion’s Compressed Natural Gas (CNG) hybrid semi will likely apply well to long haul trades, if the marketing is as good as advertised.

W|EPC: Future Of Transportation – Ranking & Evaluating Alternative Fuels – H2 ∙ BEV ∙ Methanol ∙ CNG Hybrid ∙ Ethanol ∙ Ammonia ∙ Diesel ∙ Biofuels

W|EPC: Analyzing Energy Project Contract Terms – Risks, Strategies & Comps

Analyzing Energy Project Contract Terms – Part 1 – Risks, Strategies & Comps Across Stakeholder Groups – Q420

Analyzing EPC Risk Avoidance: Comps & Techniques For Investors, Owners, & Contractors

W|EPC analyzed ~$20B of publicly available EPC lump sum turn-key (LSTK) contracts, focusing on sensitive or contentious terms used to allocate risk, manage performance expectations, & establish a framework for third-party indemnification and liquidated damages, etc. (Pages 3, 5-7, & 9-17). Specific points of emphasis:

• Investors: Leveraging a project’s future expansion plans to protect ROE and/ maximize options (ROFR) options. (Pages 5, 9-11)
• Owners: Finding & justifying onerous contract terms as market or on-the-run.
• Contractors: Avoiding those onerous contract terms.

Analyzing Notable Risks

• Liability & Indemnity: Existing Facilities can be problematic for Contractors & expose stakeholders. (Pages 5, 9-11)
• Performance Guarantees & Damages: Numerous performance guarantees were publicly disclosed (likely inadvertently) that illustrates risks & production, emissions, and/or power consumption liabilities. (Pages 6, 12-14)
• Technical Risk Allocation: One project’s subsurface provisions are tighter and limit change orders provisions for differences in soils data. (Pages 7, 15-17)

Distributing Project Risk Amid A Ramp In Renewables

• The steep ramp in renewables demand & project development could create an opportunity/leverage for participating EPC providers to ultimately own less project risk.
• Certain renewable projects could struggle getting an EPC LSTK contract (typically advantageous for the project owner, at the expense of the EPC provider). Dominion Energy (D), for instance, was unsuccessful in finding an EPC provider to provide a LSTK contract for their Coastal Virginia Offshore Wind (CVOW) project.
• EPC providers may have some leverage here, at least for now. W|EPC believes integrating EPC contract strategies/terms earlier than traditional projects (i.e. hydrocarbons) will improve risk/reward.

W|EPC: Analyzing Energy Project Contract Terms – Risks, Strategies & Comps

Table Of Contents:

• Key Takeaways  – Page 2
• EPC Contracts Analyzed – Page 3
• Overview – Notable Risks for Any Projects – Page 4
  • Third-Party Indemnification – Page 5
  • Performance Guarantees – Page 6
  • Rely-Upon Information – Page 7
• Contract Analysis, Significance, Negotiation Strategies, & Comps – Page 8
  • Third-Party Indemnification – Page 9
  • Performance Guarantees – Page 12
  • Technical Risk Allocation – Page 15

For full access information, email us at [email protected], or at [email protected]

Webber Research: Reviewing California’s Rollout Plans For A Hydrogen Fueling Network

Webber Research: Reviewing California’s Rollout Plans For A Hydrogen Fueling Network Evaluating Safety, Cost, & Implementation Data

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In mid-November the California Air Resources Board (CARB) published initial plans detailing the development and implementation of a light-duty hydrogen fueling station networks, including a focus on financial self-sufficiency.

Specifically, CARB’s initial draft highlights:
1. Estimates around required state-support and eventual self-sufficiency
2. A comparison of existing market solutions, ongoing government research, and the latest awards in the Energy Commission’s Grant Funding program.
3. The economic sensitivity around FCEV deployment and the pace of network development.
4. Opportunities for cost reductions
5. Potential price reductions at the pump
6. Regional economic differences

Within the context of CARB’s report, we evaluated the economics and risks for deployment of Hydrogen fueling station options based on the following:
• Public Safety
• Climate Change and Air Quality – Tank to Wheel (TTW) – Well to Wheel (WTW)
• Gas Station Infrastructure Costs
• Hydrogen Costs at Pump for Consumer

W|EPC Takeaway: As highlighted below, if the primary goal of CARB is to reduce tailpipe emissions, we believe electric vehicles and hydrogen vehicles are the most viable options today. However, if the goal is to reduce total emissions and to implement hydrogen fueling as quickly, safely, and cost-effectively as possible, it opens the door for a mix of other fuel considerations – including biofuels, e-fuels, and other energy mediums to expedite the Hydrogen Economy. We believe how California ultimately balances those priorities will determine what it’s future fueling network looks like.

Climate Change & Air Quality
Air quality and the need for sustainable future fuels to reduce GHG emissions is driving alternative fuel technology development. CARB’s Low Carbon Fuel Credits (LCFC) are based on Well to Wheel Carbon Intensity Scores (CI) that identify upstream pollution caused by fuels.

Gas Station Infrastructure Costs
Future fuels (i.e. H2, Ammonia, Methanol) will require new infrastructure in almost all cases to meet federal and state emission guidelines. The Implementation cost of these can vary from storage retrofitting, to +$1 million infrastructure upgrades. The costs could further increase based on the engineering design and blast radius study results.
Hydrogen gas station equipment could include:
• Compressors – 350 bar pressure
• Above Ground Storage
250 bar pressure
250 kg storage
• H2 Dispenser Larger corporate gas stations may have the financial means to implement the costly infrastructure upgrades especially if supported by fuel tax credits. However, smaller gas stations may face challenges investing in the capital costs & the ~$2K/month electricity bill to own & operate the equipment.

Cost comparisons vs the low-cost alternative for Methanol:
• Hydrogen – See Figure 6. Multiple scenarios based on CARB capital cost estimates
• Methanol to Hydrogen in Vehicle – ~$50,000 per gas station to upgrade storage
• Methanol to Hydrogen at Pump – ~$1 million per gas station (250kg H2 storage)

Hydrogen Costs at Pump for Consumer: ~$16/kg and by 2030 as Low as $8/kg?
At the pump, the H2 price begins to stack up due to CAPEX, maintenance, safety, and production costs. We have provided a few options that have been considered for comparisons sake below that could further drive down the cost of hydrogen.

• Centralized Electrolysis: ~$8/kg
• Centralized Reformer (No Carbon Capture): ~$2.50/kg
• Methanol Reforming at Pump: ~$5/kg
Includes 250kg hydrogen storage and compression
• Methanol Reforming in Vehicle: ~$3.50/kg
Gas Station infrastructure cost are relatively minimal

For a methanol reforming at pump scenario, storage-related infrastructure costs could be lighter as Methanol is a potential mid-stream solution for hydrogen, and is generally easier to store in large quantities – potentially pushing the hydrogen cost at the pump level below $10/kg in a shorter timeframe.

For full access information, email us at [email protected], or at [email protected]

W|EPC: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review

Key Takeaways: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review

EPD PDH 2 – Project Delay Analysis.  In Q220, EPD announced a 3-month schedule slip (from Q123 to Q223), potentially limiting future change orders (i.e. cost escalation) related to COVID impact (based on typical EPC contract FM concepts).To reduce the COVID delay to only 3 months, we believe EPD implemented a schedule recovery plan that accelerated/compressed back-end construction activities to meet a Q423 COD forecast. (pgs. 10 – 13). We’ve independently estimated PDH 2’s slippage based on Q420 aerial project site images, with details found within our note… (pages 4 – 7).

Enterprise’s First ESG Guidance… : On October 28, 2020, EPD released their approach to ESG. In the report, EPD touts they are the largest Midstream producer of Hydrogen. With the addition of PDH2, Enterprise would increase their Hydrogen production by 140k tons/year, and we estimate ~150MW of electricity by incorporating fuel cells in their Mont Belvieu, TX facility.

Companies like SK are working with fuel cell manufacturers to integrate high temperature Solid Oxide Fuel Cells (SOFC) into PDH units to use the hydrogen produced to reduce operating costs….this could help EPD’s ESG potential.

Project Timeline Catch Up – Risks & Benefits: A schedule recovery plan can be costly and is not guaranteed to succeed. PDH 2 schedule recovery risks/benefits include: Risks – An EPC lump sum contractor (S&B) compresses the schedule & may cause inefficient construction & cost escalation. Benefits – The COVID delay started before site prep and avoided a de-staffing of the project. Based on limited on-site progress, S&B likely hasn’t spent much of their field budget & may have available contingency to support acceleration costs/inefficiencies.

W|EPC’s estimated timeline shows site labor and progress can support pulling activities back to Q223 with a probability of success of…. (pgs. 10-13)

W|EPC: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review

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Webber Research Call Series – Monday, October 26th – Vogtle Nuclear Project Monitor – Key Decisions That Could Haunt Cost Prudency

Please join us for the latest Webber Research Client Call on Monday, 10/26 at 12PM, when we’ll discuss our latest deep dive into Southern Company’s Vogtle Nuclear expansion.

For access information, please contact us at [email protected], or our Institutional Sales Desk at [email protected]

W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

Key Takeaways: Vogtle Q420 Monitor – Key Decisions That Could Haunt Cost Prudency

Who Will Be Getting Stuck With +$2.1B In Cost Overruns? Once Vogtle Unit 4 reaches “fuel load”, Georgia Power/Southern Company (GP/SO) can request a cost prudency determination to push their portion of cost overruns (~$2.1B) into recoverable utility rates. (Page 4)

Regulators will determine cost prudency based on project data, testimony, and a simple question: What should a reasonable manager have done at the time of the decision? (Page 5)

We expect that process to be heavily scrutinized considering the scale of the overruns, and, in our opinion, some questionable GP/SO decisions. (Pages 4-5)

Decisions That Could Haunt GP/SO’s Prudency. We believe there’s a case to be made that multiple GP/SO management decisions ran contrary to industry standards, potentially contributing to ($) billions in cost overruns, including

• A failure to either include or implement multiple EPC contract……(Page 7)
• For the first 4-years of the project, GP/SO used only…..(Page 23)
• In 2017, it appears GP/SO did not validate critical underlying EPC…..(Pages 9- 10)

Analyzing 12-Years Of GP & SO Testimony… (Pages 20 & 23)

Please join us for our next Client Call at 12pm EST on Monday 10/26, to review our Vogtle Project Monitor. Please reach out to us for access details.

Table Of Contents:

• Key Takeaways – Page 2

• Who Owns $2.1B In Cost Overruns? – Page 3
• Georgia Public Service Commission 2018 Order – Page 4
• Cost Prudency Definition & Process – Page 5
• Decisions That Could Haunt GP/SO

• LSTK Contract Mismanagement  – Page 7
• Bankruptcy – Parent Company Guarantee Settlement – Page 8
• Estimate to Complete  – Page 9
• Transition from EPC LSTK to T&M – Page 10
• QRA – Cost – Page 11
• QRA – Schedule – Page 12

• GP Testimony & W|EPC Analysis (2009 to 2017

• EPC Contract Overview – Page 14
• October 2009 – Page 15
• October 2010 – Page 16
• April 2011 – Page 17
• November 2012 – Page 18
• June 2013 – Page 19
• October 2014 – Page 20
• October 2015 – Page 21
• December 2015 – Settlement of LD’s – Page 22
• December 2015 – Revised EPC Contract – Page 23
• October 2016 – Page 25
• April 2017 – Page 26

W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

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Webber Research: LNG Canada Q420 Update Call – Wednesday 10/21 at 12PM (EST)

Please join us for the latest Webber Research Client Call on Wednesday, 10/21 at 12PM, when we’ll discuss our latest thoughts on LNG Canada.

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W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

 Shell ∙ Fluor ∙ Mitsubishi ∙ PetroChina ∙ PETRONAS ∙ KOGAS

Table Of Contents:

• LNG Canada Q4 Monitor: Key Takeaways…………………………..….…Page 2
• LNG Canada Cost & Schedule Updates
  • Updated Estimates…………………………..……………….….……..Page 4
  • Project Milestones………………………………………………………Page 5
  • Progress Analysis…………………………………………….….….….Page 6
  • Analyzing Fluor’s 27.5% Reported Progress…….…………….……Page 7
  • Project Staffing……………………………………………..……….….Page 8
• Satellite/Aerial Image Analysis
  • July 2020 Overview………………….…………………….….………Page 10
  • Sep 2020 Site Analysis……………………………………….………Page 11
  • Jul vs. Sep 2020 – LNG Storage Tank…………………………..….Page 12
  • Module Yard Analysis………………………………………………….Page 13

Key Takeaways:

• Delays At LNG Canada Continue to Build   (Pages 4 – 7, 10 – 13)
  • Fluor reported ~27.5% Engineering, Procurement, Fabrication, & Construction (EPFC) progress in September, vs our current estimate of…
  • We believe Fluor’s 27.5% guidance implies module fabrication progress of ~45%, which is ~9x…
  • Fluor also referenced COVID-related project delays (without getting specific)
  • Our Current Delay Estimate:…..
  • Estimated Probability Of Maintaining Schedule:…..
  • Mind The Gap: There are several potential explanations for such a degree of progress variance…
• Examining Fluor’s Goal of 2,500 On-Site Workers By Dec-20 (Pages 4, 8, 10 – 13)
  • Aerial images suggest meaningful concrete, structural steel, and significant construction activities have yet to start (beyond piling)…
  • Pre-COVID, Fluor’s reported onsite labor was higher than the project’s publicly reported staffing levels, leading to cost overruns (Pages, 4, 8)
  • Limited construction work fronts could constrain Flour’s ability to…
• Kicking The Can Down The Road… LNG Canada Starting to Resemble Another Fluor/JGC Project… (Pages 4, 8)
  • In 3Q13, CPChem awarded Fluor & JGC a ~$6B EPC contract for an Ethylene Cracker in Texas. ~39-months later, Fluor/JGC announced the project would be over budget. The project was finished in mid-2018 (a year behind its baseline plan).
  • ~23-months after FID, we believe the LNG Canada (JFJV) schedule is slipping and costs are…

W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

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Hydrogen (H2) – The Production Process Roadmap – Upstream, Midstream, & Downstream – Q420

 Hydrogen  ∙  Ammonia  ∙  Methanol

Table Of Contents:

• Key Takeaways And Flow Of H2 & CO2………………………………………Page 2
• Hydrogen’s Upstream
  • Electrolysis Technologies & Market Leaders…………………….…..…Page 6
  • Blue Hydrogen CO2 Issue………………………………………….…….Page 7
  • Hydrogen Is Getting Cheaper………………………………………….…Page 8
  • Carbon Capture Systems & CO2’s Critical Role…………..………..…Page 9
• Hydrogen’s Midstream – Transportation
  • Ammonia Transportation – Green Hydrogen………………..….…….Page 12
  • Methanol Transportation – Blue & Green Hydrogen……………..….Page 14
  • Cryogenic Hydrogen Energy Loss Concern…………………….……Page 16
• Closer Look – Ammonia vs Methanol
  • Hydrogen Comparison…………………………………………………Page 18
  • Example Product Comparison…………………………………………Page 19
  • Converting Back To H2…………………………………………………Page 20
  • Ammonia & Methanol Co-Production Facilities………..….………..Page 21
• Marine and Fuel Cell Comps
  • Industry Impact – H2 Transportation…………………………………Page 23
  • IMO Driving LNG, Ammonia Or Methanol Fuel For Ships….……..Page 24
  • Carbon Neutral Marine Fuels – IMO 2050………………………….Page 25
  • Ammonia & Methanol Co-Production Facilities…………………….Page 26
• Technology Leaders and Applications
  • H2 – Industry Technology Leaders………………………………….Page 28
  • Applying Technology In The EPC Process…………….………..…Page 29
  • Technology Packaging & Trends…………………………….….….Page 30

Key Takeaways:

Upstream Sources Of Hydrogen – Blue & Green (Pages 4 – 9)
          >95% of Hydrogen (H2) is produced using Steam Methane Reformer (SMR) technology that produces 7 units of CO2/unit of H2 (on average)
SMR w/ a carbon capture system (Blue H2) is the preferred option to environmentally manage excess CO2. (page 7)
Green H2 provides minimal CO2 but current technology limits Green H2’s cost competitiveness. (Page 6)
H2’s Sprint To Market Share… Current Leaders (Pages 17 – 21, 27 – 30)
      We analyzed 13 Technology Companies spanning 12 Process industries, including ThyssenKrupp, Air Products, Air Liquide, & KBR/Johnson Matthey…the clear technology leaders include…
Frozen Industries – Marine, Automotive, & H2 Transport (Pages 22 – 26)
       Outside factors (i.e. carbon neutral fuels, fuel cells, regulations, safety, & other downstream applications) will play a large role in selecting the midstream transportation choice for H2.
International Maritime Organization’s (IMO) mandates for reduced emissions has many ship builders looking at LNG, Ammonia, and/or Methanol; without a clear long-term winner (yet), many shipbuilders are frozen.
Fuel pumps (gas stations) must receive H2 from high-pressure storage vehicles, pipelines, or by converting Methanol or Ammonia to H2 at the fuel pump, with a number of implications.…(page 20)
Midstream For Hydrogen – H2 Transportation Options (Pages 10 – 16)
     Ammonia, Methanol, and Cryogenic H2 are used to transport H2 long-distances.
Ammonia is the clear favorite to…
Methanol is the best option for…
Cryogenic H2 technology/costs…

W|EPC: The Production Hydrogen (H2) Production Roadmap – The Upstream, Midstream, & Downstream Process – Hydrogen ∙ Ammonia ∙ Methanol

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LNG Canada construction delay creates cost uncertainty, clouds world supply

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/lng-canada-construction-delay-creates-cost-uncertainty-clouds-world-supply-60534296

Webber Research: Technical & Commercial Project Consulting

Webber Research: Technical & Commercial Project Consulting Overview

We’re very pleased to share our most recent Webber Research Technical & Commercial Project Consulting Overview – detailing our expertise across a wide variety capabilities, services and experience. If you’re a project stakeholder, developer, creditor, or operator, we’re here to add value and minimize risk for your process.

Webber Research: Technical & Commercial Project Consulting Overview

Our Focus: LNG, Biofuels, Renewables, Petrochemicals, and broader Energy Infrastructure

Key Experience, Capabilities & Services: 

•       Proprietary Project Database: Includes schedules, satellite & drone images, & benchmarks
•       Lenders/Stakeholder’s Independent Engineer: $50B+ of global project’s executed
•       Commercial & Contracts Negotiations: Negotiated ~$30B in EPC proposals/contracts
•       Government/Regulatory Liaison: FERC, U.S. Army Corps of Engineers, etc.
•       Project Due Diligence: ~$1.5B investment that grew to ~$7B in ~8 years
•       Validate Schedule/Progress Reporting: Helping independent stakeholders can avoid surprises
•        Litigation Consulting/Claims: Supporting more than $1B in litigation, depositions, and expert witness

Unmatched Process. Industry Changing Results.

Webber Research: Renewable Biofuels – Refinery Conversions, Crack Spreads, & Risks Q420

Renewable Biofuels – Refinery Conversions, Crack Spreads, & Risks Q420

• Key Takeaways (page 2)
• Biofuels – Costs, Risks, & Incentives (page 3)
• Renewable Fuels vs. Traditional Refining Economics (page 4)
• Crack Spread Analysis – Ratios Matter (page 5)
• The California Renewable Fuel Rush (page 6
• Biofuels & Soybean Oil Supply/Demand (page 7
• Biofuels Project Tracker (page 8)
• Hydrogen’s Increased Demand in Biorefining (page 9)
• HVO vs FAME Biofuel (page 10)
• PSX’s Rodeo Refinery Conversion (page 11)
• Rodeo Refinery Conversion Overview (page 12)
• PSX Project Comp – WA vs. CA (page 13)
• EPC Dynamics (page 14)
• EPC Contractor Rankings (page 15)

 Key Takeaways:

• Renewable Fuel Production… Just in Time or Too Late? (Pages 4 – 8)
  • California & Oregon have mandated Carbon Intensity (CI) reductions in transportation fuels, which could increase demand by ~350%, from ~400MM gallons/year to 1,400MM by 2025. Ten other states are evaluating similar LCFS programs, which could potentially push U.S. demand toward 2,400MM gallons/year, up ~600%…
• Refinery Conversions: FAME vs. HVO (Page 10)
  • Emerging trend in Biofuels: a transition from Fatty Acid Methyl Ester (FAME) to Hydrotreated Vegetable Oil (HVO), which provides biofuels a longer storage life & can be used in colder climates.
  • FAME & HVO biofuels are produced using a refinery’s hydrotreater & isomerization, or a hydrocracking unit with a steady supply of hydrogen. HVO economics are dependent on hydrogen prices & feedstock ratios.
• Hydrogen’s Increased Demand in Biorefining (Page 10)
  • As of early 2020, traditional oil refining consumed ~1/3 of the global Hydrogen demand.
  • FAME biorefining requires similar Hydrogen consumption relative to traditional refining, but HVO biorefining uses significantly more Hydrogen depending on the process units…
• Speed To Market Matters: Owners, Operators, & Contractors (Pages 12, 13, 15)
  • ~10 years ago, companies were chasing another speed to market trend, NGL production and fractionation. Flexible and decisive companies (e.g. EPD, ET, etc.) quickly capitalized on this opportunity and captured market share.
  • Large Energy companies (e.g. Exxon, Shell, etc.) are not typically structured to move quickly refining industry (VLO, PSX, MPC) and take on the speed to market risk..

W|EPC: Renewable Biofuel Analysis Refinery Conversions, Crack Spreads, & Risks Q420

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W|EPC: Renewable Methanol & Hydrogen – Analyzing Methanex’s (MEOH) Geismar Facilities

Renewable Methanol & Hydrogen – Analyzing Methanex’s (MEOH) Geismar Facilities – September 2020

• Methanex & Renewable Methanol – Key Takeaways (page 2)
• Renewable Methanol (page 3)
  • Methanol Feedstock & Applications (page 4)
  • Hydrogen is Getting Cheaper (page 5)
  • Renewable Methanol Facilities (page 6)
• Geismar Methanol Facilities (page 7)
  • Methanex Overview (page 8)
  • History – Geismar Units 1 & 2 (page 9)
  • Geismar Unit 3 Comps (page 10)
  • GU3 Cost Overview (page 11)
  • Schedule – Key Milestones & Impact (page 12)
  • Monthly Progress Curves (page 13)
• EPC Dynamics – So Long KBR, Next Up?(page 14)
• Disclosures (page 15)

Lower-Cost Hydrogen Will Produce Cost Competitive Renewable Methanol: Pipe Dream or Reality? Global methanol demand sits near ~75 MTPA; with demand expected to ramp amid new EU and U.S. environmental mandates. Renewable Methanol (RM) is produced using Hydrogen (H2) from solar/wind and carbon dioxide (CO2) as compared to traditional methanol produced from fossil fuels (i.e. coal & natural gas). (Page 4)
Cost-competitive RM would open the door to green plastics and support various marine, fuel, & vehicle clean energy mandates but, costs are not competitive based on current technology. (Pages 4 – 5)                                                                      Limited project economics hasn’t stopped ~10 commercial scale renewable methanol facilities in various stages of development around the world. As these projects develop, lower costs and improved technology would be a game changer for the methanol industry while providing H2 more downstream applications. (Page 6)                                                                                                                                                                                                                                                                           

Tracking the 800 lbs. Methanol Gorilla…Methanex (MEOH). (Pages 8 – 9)

Geismar Unit 3 – Positioning vs. Competition. (Pages 10 – 13)

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W|EPC: Golden Pass LNG (XOM, QP) – Project Update & On-Site Satellite Image Analysis – Q320

Golden Pass LNG: Our Delay & Contingency Fund Estimates Continue to Ramp

Key Takeaways:
• Chiyoda’s Engineering Delays Continue. We believe engineering delays have eroded a significant portion of the EPC risk, contingency, and profit, with the likelihood of ramping balance sheet exposure. (Pages 4 & 11)
• Our updated project timeline (delay) and contingency fund estimates are now material, sitting at….(continued)
• Our estimates point to Golden Pass project progress sitting closer to ~10% vs Chyioda’s report figure of 16% (Q2) based on both our satellite image review and….(continued)
• Sabine Pass Comparison. 18-Months after FID Sabine Pass LNG Trains 1 & 2 were 57.1% complete, vs our estimated range for Golden Pass LNG (~10-16%). (Page 8)

Table Of Contents

• Golden Pass Q320 Update – Key Takeaways (page 2)
• Revised Cost & Schedule Forecasts (page 3)
  • Cost Forecast (page 4)
  • Project Milestones (page 5)
  • Progress Analysis (page 6)
  • Analysis – Chiyoda’s 16% Reported Progress (page 7)
  • Putting It All Together – W|EPC Updated Contingency fund and project delay estimates
  • 18-Months After FID, Sabine Pass vs. Golden Pass LNG (page 8)
• Joint Venture Analysis (page 9)
  • Change Order Analysis vs. JV Structure (page 10)
  • Possible Impacts to Chiyoda (page 11)
• Satellite Image Analysis (page 12)
• Disclosures (page 17)

Golden Pass LNG Satellite Image Overview (page 13)

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W|EPC: Golden Pass LNG – Delay & Contingency Fund Estimates Continue To Ramp – Updated Project & Satellite Image Review

W|EPC: Assessing Force Majeure Impact on Calcasieu (Venture Global), Golden Pass (Exxon, QP) & Sabine (Cheniere)

Webber Research – Energy EPC

Marco & Laura Impact Could Last 7 to 14 Days…Depending on Damage & Craft Labor Retention

EPC contractors receive schedule relief for Force Majeure (FM) events (i.e. named storms such as Marco & Laura) in industry standard EPC contracts, which typically provides EPC contractors schedule relief but not cost relief.

EPC contractor FM claims on Calcasieu Pass, Golden Pass, and Sabine Pass LNG likely started yesterday August 24th, 2020 (due to mandatory evacuations & closures).
Something to watch…construction workers tend to scatter and chase higher paying (wages & per-diem) jobs post hurricanes/natural disasters, which creates headaches for on-going/planned projects and complicates FM claims.
Based on current Marco & Laura forecasts and expected rain/storm surge, we are forecasting a 7 to 14-day construction schedule delay on Calcasieu Pass LNG (CPLNG), Golden Pass LNG, & Sabine Pass LNG Train #6 (SPLNG6).

Impact & Timeline Implications

Often, impacts due to hurricanes occur well beyond the actual storm itself due to lost productivity and challenges restarting/staffing the project.

Flooding – enough drainage pumps installed and site drainage working sufficient to mitigate additional rain fall.
Storm Surge – levees/walls high enough to protect rising levels and all equipment moved to the highest elevation on the site (if practical).
Wind – cranes must be placed horizontally and structures secured to reduce/prevent damage.
Temporary Construction Facilities – if levees and/or drainage are not in place at temporary construction facilities, equipment and material stored in laydown yards/facilities could be damaged by water and cause unplanned long-term issues.

EPC contractors have a reputation for trying to use FM impacts to absorb existing self-inflicted schedule delays. Based on the current/expected forecast, we believe the following FM timeline is realistic.
Prep time for storms – 1 to 3 days
Marco & Laura storm duration – 2 to 4 days
Restart & productivity losses – 4 to 7 days

Our specific estimates and thoughts on individual projects in the pages that follow:

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W|EPC: Gorgon LNG – Operational Breakdown Could Have Contributed To Kettle Cracks – Mid-October A More Likely Restart Timeline

W|EPC: Gorgon LNG – Operational Breakdown Could Have Contributed To Kettle Cracks
Mid-October May Be A More Likely Restart Timeline

Key Takeaways:

Pump The Brakes: While potential fabrication errors have been the primary narrative around the Propane Kettle cracks that shut down Gorgon LNG, it’s feasible that operational issues (and one in particular) may have contributed or even partially caused the cracks on Train-2’s kettles, which could have significant and more complex implications.

• The propane kettle cracks were noticed ~3-years after the kettles were placed in-service (likely beyond any warranty period), potentially shifting costs to Chevron.
• According to our in-house engineers, a breakdown in the propane vapor transfer step could subject the propane kettles to temperatures significantly below the minimum design metal temperature; creating stress on the metal and an optimum environment to cause cracks.
• If the root cause involved an operational issue, it would require not just replacement or repairs, but more robust inspections, testing, and training, which would add to the out-of-service timeline (below).
• If a breakdown in the propane vapor transfer step did contribute to the cracks, it would have likely needed to be repeated routinely to cause the visible cracks on Train-2, increasing the likelihood that such an error would have been repeated on Trains 1 and 3 as well, given the likelihood of crew rotation.

Timeline Implications

According to recent press reports, Chevron has suggested an early September restart for Train 2 and provided train 1 & 3 inspection time-frames.

• Train 2 – Currently Down since July, Online Sep 20
• Train 1 – Shutdown Early Oct 20, Online Nov 20 to Jan 21
• Train 3 – Shutdown Jan 21, Online Mar 21 to Apr 21
• We think mid-October for Train 2 may be more realistic. While the repairs themselves may fit within a mid-September target, we believe a thorough assessment of the route problems, inspections, training, etc., likely push out the downtime. We don’t know yet what approvals and 3rd party reviews will be necessary to confirm the repairs were made in a satisfactory way, but this could impact the timelines given as well. Continued…

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W|EPC: Venture Global LNG – August 2020 Update

W|EPC: Venture Global & Calcasieu Pass LNG – Satellite Image Review (ICA & Fluor) & More Engineering Changes.

Key Points:

• Calcasieu Pass Revises Key Engineering Documents (Again). Over the past two weeks Calcasieu Pass (CPLNG) submitted engineering updates to FERC, most of which are marked as confidential. While the substance of the updates and revisions are unknown, the types of documents that were filed indicate possible changes to structural steel design & calculations, equipment flow rates, and the project’s mechanical equipment list. (Page 4)

• Q2 Progress: Pre-Treatment Unit Module Fabrication – ICA Fluor & the Tampico, Mexico fabrication yard. As previously noted, we believe ICA Fluor is fabricating the CPLNG Pre-Treatment Unit (PTU) Modules in their Tampico, Mexico fab yard. Satellite images show 

• Pre-FID Feedstock Specs Or Assumptions May Have Changed…

Calcasieu Pass LNG August Update – Key Takeaways.- Page 2
More Engineering Adjustments – Page 4
Changes To Feedstock Assumptions?- Page 4
Satellite Image Analysis – ICA Fluor (Tampico, Mexico) – Page 5
Pre-Treatment Unit Module Overview – Page 6
March vs. July 2020 – ICA Fluor Satellite Image Comparison – Page 7
Closer Look – March 2020 – Page 8
Closer Look – July 2020 – Page 9
Disclosures – Page 10

Previous ICA Fluor Satellite Image

W|EPC: Venture Global LNG: August 2020 Update

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W|EPC: LNG Canada Q320 Monitor – Labor Dynamics & Baseline Satellite Image Review

LNG Canada Q320 Monitor – Labor Dynamics & Baseline Satellite Image Review

Shell • Petrochina • Mitsubishi • Kogas • Petronas

1) Union Craft Avg. Wage Rate Escalators & Impact On JGC/Fluor, and broader project cost…

What’s Happened/Changed: Part of our current focus is on LNG Canada’s wage rate escalation and union labor agreements post-2023.
Why Does That Matter: EPC lump sum proposals generally include labor escalation between 1-3% per annum (rates vary based on geography/availability). Labor agreements supporting LNG Canada and other B.C. projects expire in 2023 and have a relatively advantageous average labor escalation rate of…..continued.
For context, union labor strikes, renegotiated agreements, and significant wage rate escalation supported Gorgon LNG coming in $20B+ over budget. 
What’s The Impact:…..continued (Page 3)

2) Taking A Look At JFJV’s Longer-Term Labor Inflation Risk (Page 5)

3) JFJV’s Construction Activity – What does it tell us about the project timeline? (Page 8)

4) Satellite Image Analysis Baseline –  Benchmarks for Remainder of the Project…. (Pages 9-17)

W|EPC: LNG Canada Q320 Monitor – Labor Dynamics & Baseline Satellite Image Review

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W|EPC: Gorgon LNG’s Propane Kettle Cracks – Early Read

Overview:
On July 23, 2020, Reuters reported Australia’s Department of Mines, Industry Regulation & Safety (DMIRS) said “it plans to inspect Chevron’s Gorgon LNG plant as soon as possible following calls by a trade union to shut the plant.”
1. During routine maintenance, Chevron Australia discovered issues with the propane kettles on Train #2.
2. “The Australian Manufacturing Workers’ Union (AMWU) has called for Chevron to shut down the Gorgon plant for immediate safety inspections by a gov. regulator and for a report to be made public.”
3. Specifically, cracks up to 1 meter long and 30 millimeters deep were discovered by the non-destructive testing team (per AMWU). On July 28, 2020, a Chevron company spokesman said, “Chevron expected to restart Train #2 of its Gorgon LNG plant in early September after completing repairs.” Chevron said during routine maintenance that began on May 23rd and was scheduled to be completed by July 11, 2020, weld quality issues were discovered on 8 propane heat exchangers. Gorgon LNG Trains 1 & 3 are producing. On 07/29/20, inspectors from DMIRS were due on site to inspect the cracks after AMWUraised issues about the conditions of the South Korean-made kettles.

Key Takeaways:
• Inspectors from Western Australia’s “safety watchdog” were scheduled to inspect propane kettle cracks on Chevron’s Gorgon LNG Train-2 on 7/29
• Labor unions continue pushing back, requesting a full shut down of all three LNG trains for inspection.
• Publicly available technical details are limited, even for the folks who built Gorgon LNG (who we spoke with); however, we believe the 3-month estimated down time for repairs is….continued
• Primary rationale for a Train-1 and Train-3 inspection shut down would be…continued

W|EPC Thoughts & Observations
The publicly available technical details are limited, even for our contacts involved in building Gorgon LNG. However, we are watching the following:…continued

Concluding Thoughts…

Key Questions…

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W|EPC: Venture Global & The Approach Nexus – Drone & Satellite Image Analysis, Engineering Changes Q320

W|EPC: Venture Global – Nexus Approaching Drone &Satellite Image Analysis, Engineering Changes Q320

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• Calcasieu Pass Update – Key Takeaways (slide 2)
• Calcasieu Pass LNG Module Overview (slide 3)
• Importance Of Notification Window (slide 4)
• Engineering Changes: Pre-Treatment Modules (slide 5)
• Engineering Changes: Liquefaction Modules (slide 7)
• Technical Analysis: Changes & Impact? (slide 9)
• Satellite Image Analysis – Baker Hughes Module Yard (slide 13)
• Drone Image Analysis – Site Prep Update (slide 18)
• Remaining Questions (slide 23)
• Scenario Analysis & Predictions – Rubber Starting To Meet The Road? (slide 25)
• Disclosures (slide 27)

Key Highlights:
• Venture Global: The Looming EPC Nexus…
• Drone Image Analysis:
• Calcasieu Pass Outlook
• Consequential Damages, Predictions & Conclusions

Copyright: PLEIADES © CNES (2020), Distribution Airbus DS & W|EPC Analysis

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W|EPC: Dominion Energy (D) – Offshore Wind Project Monitor Q320

W|EPC: Dominion Energy (D) – Q320 Offshore Wind Project Monitor

• Dominion Energy (D) Q320 Capital Project Monitor: Key Takeaways (slide 2)
• Virginia Clean Energy Act – Why Should You Care? (slide 3)
• Energy Costs vs. Benefits (slide 4)
• Coastal Virginia Offshore Wind (CVOW) Project Overview (slide 5)
• Phase #1: A Closer Look At The Pilot Project (slide 7)
  • Regulatory Approval Timeline
  • EPC Contractor – Ørsted
  • Cost & Schedule Analysis
• Phase #2: The $8B Main Course (slide 13)
  • Overview & Status
  • How big Are 12MW Offshore Turbines?
  • Offshore Wind: Construction, Risk, & Insurances Overview (slide 16)
  • Conclusions: Thank A Rate Payer (slide 20)

Key Highlights:
• Offshore Wind… An Awesome Opportunity for Dominion, Right?
• Phase #1 Demonstrator Costs Ballooned By ~73%…
• Phase #2 (2.6GW) Is The Real Prize – But Definitely Worth Keeping An Eye On Costs…

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LNG Canada Update: Trouble Ahead For Shell’s LNG Flagship?

An Empty Module Yard & Mounting Schedule Delays

• Key Takeaways (pages 1, 5)
• Estimated LNG Canada Schedule Shifts (page 2-3)
• Satellite Image Review: COOEC Fluor Module Yard Layout (May 17, 2020) (page 4)
• Satellite Image Review: Module Layout Descriptions (page 5)
• Satellite Image Review: CFHI Module Yard Pre-Assembly Areas (page 6)
• Long-Term Thoughts & Key Questions (page 7)

Key Highlights:
• Still Moving At A Crawl. As of May, module fabrication was ~2% complete, well behind our ~11% estimate in W|EPC’s February 2020 (pre-COVID 19) schedule…
• Satellite Image Review: The COOEC-Fluor Heavy Industries (CFHI) module yard pre-assembly areas look…
• Playing Catch Up Won’t Be Cheap. The schedule slip should put even more pressure on the back-end of LNG Canada’s timeline…continued…

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W|EPC Risks: Venture Global – Keeping An Eye On Pile Design Changes

W|EPC Risks: Venture Global – Calcasieu Pass LNG – Keeping An Eye On Pile Design Changes

Key Takeaways:
• An engineering design change at Calcasieu Pass (CPLNG) required additional piling and out of sequence construction activities.
• Meaningful engineering changes during construction & fabrication can undermine the benefits of modularization, by creating cost overruns and delays.
• No Related Delays Are Visible Yet. However, we should get a better view of the actual impact as Calcasieu enters the mechanical phases of fabrication and construction – where the ramification of errors or changes becomes more evident.

Keeping An Eye Out For Material Quantity Growth. On May 22nd, 2020, CPLNG requested FERC approve eight (8) additional piles in the Pre-Treatment Common Pipe Rack 27X (PTC27X) area due to changes in the pipe stress data. Pipe stress calculations are developed to ensure the piping design and layout can support the expansions and contractions caused by processing hydrocarbons. Pipe stress data is one of the most important elementsin determining the piping layout, structural steel design, material quantities needed for the CPLNG modules, and pile layout.

The PTC27X pile construction design was previously submitted to FERC on December 30, 2019 and approved for construction on January 31, 2020. PTC27X piling submittal timeline:

• Original Submittal to FERC: 12/30/19
• FERC Approved: 1/31/20
• Revised Submittal to FERC: 5/22/20
• FERC Approved: 6/4/20

Was Module Engineering For PTC27X Finally Completed Last Month? On May 22, 2020 CPLNG requested FERC approve the PTC27X pipe rack foundations and steel construction. We believe the final PTC27X pipe rack module engineering is now complete, subject to FERC Approval. The PTC27X modules were designed per….continued

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EPC Risks: Energy Transfer (ET) Capital Project Monitor – Q220

W|EPC: Energy Transfer (ET) Capital Project Monitor – Q220

• Energy Transfer (ET) Q220 Capital Project Monitor: Key Takeaways (slide 2)
• Energy Transfer Capital Budget Overview (slide 3)
• Energy Transfer: NGL Fractionation History (slide 5)
• Tale of the Tape: ETvs. EPD (slide 6)
• Mariner East 2X (slide 8)
• Orbit Ethane Export Terminal(slide 9)
• Lone Star Express Pipeline (slide 11)
• Lake Charles LNG: Fighting Yesterday’s War? (slides 13-20)

Key Takeaways:
1. Does ET’s Frac 8 Have a Cost Advantage over EPD’s Frac 12?
2. Energy Transfer’s NGL BPD Frac Costs Keep Falling
3. Budget Cuts, COVID-19 Impact, & Schedule Delays
4. Lake Charles LNG – Fighting Yesterday’s War?

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W|EPC: Objections To Venture Global’s Storage Tank Design

Venture Global –  PHMSA Objects to Calcasieu Pass LNG’s Storage Tank Design

• A day after Venture Global successfully raised the first LNG storage tank roof
  (4/27/20) at its Calcasieu Pass LNG facility, PHMSA issued a memo (4/25/20) to
  FERC objecting to the LNG storage tank design, citing non-compliance with the
  National Fire Protection Association (NFPA 59A).
• LNG storage tanks must be designed and constructed to meet several regulations
  and codes, including NFPA 59A.
• The timing of PHMSA’s objection is notable since the tank design should
  have been approved by PHMSA & FERC prior to the start of construction.

Continued….
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Exxon, Qatar & Golden Pass: Something’s Gotta Give

Analyzing Project Costs & Logistics In The COVID Era
(Part 1 of 2 – Satellite Image Analysis Later This Week)

• Golden Pass: 4 Key Takeaways……………………………………Page 2
• EPC: Monthly Progress Evolution……………………………….. Page 3
• April 2020 Project Update…………………………………………Page 4
  • IP & Construction Activity ……………………………………Page 5
  • Labor Logistics In The COVID Era ………………………….Page 6
  • Cost Analysis – Significant Overruns Already?……………Page 8
  • COVID-19 Impact …………………………………………….Page 9
• December 2019 Baseline
  • Partner Organization, Key Participants ……………………Page 10
  • EPC Roles: MDR, Zachry, Chiyoda …………………………Page 12
  • Variance Analysis …………………………………………….Page 14

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Key Takeaways:

1) What’s Eating Golden Pass? QP & XOM Get Squirrelly In Press. On April 6th, the NYT ran an exclusive quoting Saad al-Kaabi (former QP CEO & current Qatar Energy Minister) as saying Golden Pass (GPX) was proceeding and on schedule. However, that was quickly followed by QP’s 30% partner Exxon (XOM) cutting $11B of 2020 CAPEX, delaying FID for Rovuma LNG (Mozambique), reiterating Coral LNG’s development, while ignoring GPX altogether. Since then, the NYT took down the article, energy markets are upside down, & questions mount. Based on actual EPC progress, we believe the reaffirmed GPX schedule falls somewhere between…..continued (Pages 2-3)
2) Is Golden Pass In Trouble? Monthly Progress Analysis. We believe GPX’s engineering has remained well behind schedule. Data suggests GPX has been attempting (unsuccessfully) to ramp labor earlier than planned…continued (Pages 9 & 13-14)
3) Labor Logistics In The COVID Era…On 4/17/20, GPX requested additional on-site parking amid challenges with safely busing craft workers to the site amid a global pandemic, however busing craft workers wasn’t supposed to begin for another year (2021). This minor, intuitive disclosure actually offers a few significant read-throughs for the project, as well as its path moving forward…continued (Pages 6-8)
4) Cost Overruns Poised To Accelerate From Here? Over the next 6 months we believe the project is already looking at construction cost overruns (relative to its baseline schedule) of at least…continued (Page 7)

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W|EPC: AEP Capital Project Analysis – Q220

Digging Into AEP’s Capital Project Backlog

• AEP Company Overview                                                       Page 2
• Key Takeaways                                                                         Page 3
• ERCOT Overview                                                                     Page 4
• AEP’s Activity Level vs Guided Capex                                 Pages 5-8
• Cost Overrun Analysis: Who Stays On Budget?
  • AEPT                                                                                    Page 9
  • SWEPCO                                                                            Page 10
  • ETT                                                                                       Page 11
• Ongoing Capital Projects – Current Status                          Pages 12 -15
• ETT’s CREZ Project Problem – Warranty Status?                Pages 16-17
• Project Profile: Solstice To Bakersfield, 345-kV T-Line      Pages 18-20
• Additional Management Questions                                     Page 21

American Electric Power (AEP, Market Cap ~$42B) has been in business for 114 years, with 5.5 MM customers across 11 states, including Texas. General Project EPC Background (AEP Subsidiaries):
American Electric Power Texas (AEPT) is a subsidiary of AEP, and provides transmission and distribution of electric power to ~1MM customers through Retail Electric Provider’s (REPs) in west, central, and south Texas, with an ROE sitting at at ~9.4%.

Southwestern Electric Power Company’s (SWEPCO), also an AEP sub, has 4K miles of transmission lines and 5K MW’s of generation capacity, supporting 536K customers primarily in Western Louisiana, North East Texas, the Panhandle of Texas, and Western Arkansas. SWEPCO’s ROE sit at ~9.6%.

Electric Transmission Texas, LLC, (ETT) is 50/50 JV between AEP and Berkshire Hathaway Energy Company, and owns/operates transmission facilities within Electric Reliability Council of Texas (ERCOT), primarily around the AEPT service territory.  ETT’s ROE sits at ~9.6%, and it’s capital budget is not broken out within AEP’s forecasted numbers. AEPT and SEPC 2020-2024 capital forecast (~$8.4B) comprises ~25% of AEP’s total expected spend (~$33B) over that period.

Key Takeaways:
• Why Utility Project Tracking Is Increasingly Important In This Environment…
• Estimated vs. Actual Project Costs – Who comes in well under budget…and who doesn’t? (Pages 9-11)
• AEPT & SWEPCO Capex Trending Materially Below Forecast (Pages 5-8)
• The Jury Is Still Out On $1.6B Of Project Costs (Pages 12-15)
• ETT – Ongoing Problems With CREZ Projects, But No Warranty Cost Recovery Claims? (Pages 16-17)
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W|EPC: Sempra’s Costa Azul – Is ECA Different? A Deep Dive Into SRE’s Mighty Mouse

Sempra LNG’s Costa Azul – Analysis & Risks As Larger Projects Falter

• Overview                                                                            Pages 1-3
• ECA Phase 1 & 2 Structures                                            Pages 3-4
• Supply Dynamics & Feedstock Analysis                       Pages 6-7
• Sempra LNG Commercial Arrangements                    Pages 8-9
• EPC Analysis
  • Project History & Dynamics                                    Pages 9-10
  • TechnipFMC – Historical Execution Details         Pages 10-12
  • Site Issues With Modularization                            Pages 12-13
  • Independent Site & Schedule Analysis                Pages 13-17
  • Project Cost Analysis & Major Risks                      Pages 18-26
• Shipping, Midstream                                                        Pages 27-28
• Management Questions                                                  Pages 29-30
• Conclusions                                                                        Pages 30-31

Mighty Mouse? Sempra’s (SRE) Costa Azul LNG (ECA, 2.4mtpa Phase-1) might be the only North American LNG project with a realistic chance at FID in 2020. As we saw last cycle, being small (and cheap) can be an advantage in difficult markets. As we note below, we’ve included our key takeaways around 1) Project viability in the current environment, 2) Site & Permitting Issues, 3) our independent project timeline & cost estimates, and 4) our Independent assessment of ECA’s project economics. 

Background: Energía Costa Azul (ECA) is a 1 BCF/d LNG import terminal located north of Ensenada, Baja California, Mexico, ~31 miles south of the U.S./Mexican border (San Diego-Tijuana). It’s owned by Infrastructura Energetic Nova (IEnova), one of the largest natural gas infrastructure developers in Mexico, and is listed on the Mexican Stock Exchange (BMV: IENOVA). Sempra Energy owns 66.43% of IEnova.
Existing Infrastructure: The current ECA import terminal (Figure 1) includes the following infrastructure: (1) a marine berth and breakwater; (2) two 160,000 m3 LNG tanks; and (3) LNG vaporizers, nitrogen injection systems, and pipeline interconnections. Similar to some existing U.S. exporters and brownfield projects, ECA will be turning their facilities around to export LNG.

Permitting: ECA has received most of the major Mexico and U.S. permits needed to begin construction, but still lacks a key Mexican land-use permit. ECA LNG is not subject to FERC review under the National Gas Act (NGA) or National Environmental Policy Agency (NEPA). However, ECA is subject to various Mexican state and federal regulatory agencies, such as the Secretaris de Medio Ambiente y Recursos Naturales/ Ministry of Environmental and Natural Resources (SEMARNAT) and the Agencia Nacional de Seguridad Industrial y de Proteccion al Medio Ambiente del Sector Hidrocarburos/ National Agency for Industrial Security and Environmental Protection for the Hydrocarbon Industry (ASEA), as well as the U.S. Department of Energy (DOE).…continued
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W|EPC: Force Majeure & The LNG Supply Chain: Scenarios For BH, Kiewit, & Venture Global

Reviewing Satellite Images Of Italian Fabrication Yards & Force Majeure Flow Charts

• Supply Chain Overview                                                                                    Pages 1-2
• Satellite Images: BH’s Fabrication Yard In Avenza, Italy                              Pages 2-4
• Implications Of Calcasieu’s Unique Contractual/Structural Dynamics     Pages 3-5
• Force Majeure Flow Charts: Wrapped vs Unwrapped                                Pages 4-5
• Pertinent Questions From Here                                                                       Pages 5-6

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The LNG Supply Chain & Force Majeure Dominoes. Given the continued, rolling implications of the global response to COVID-19, we thought it was worthwhile to examine potential points of friction as it pertains to the implications of Force Majeure (FM) declarations on large-scale, multi-faceted LNG export projects. We believe such a scenario is relevant for Venture Global’s Calcasieu Pass (CPLNG) project given its globally linked supply chain – including its liquefaction modules which are being fabricated at a Baker Hughes (BH) fabrication facility in Avenza, Italy. (Satellite images on Pages 2-4)

Venture Global’s Potential FM Predicament Is Unique. A typical, fully wrapped, EPC contract would typically just keep an owner on the hook for extensions to a contractor’s guaranteed completion date. However, the less expensive, decentralized contracting structure that Venture Global has assembled for CPLNG could potentially expose the project to contractors looking to recover mitigation and prolongation costs. (Pages 2-4)

Implications Of FM Claim For BH, Kiewit, & VG. We believe work on CPLNG’s modules was still progressing last week (with non-essential personnel working from home), given the escalation in restrictions we believe those productivity dynamics are (justifiably) fluid. Should BH file a successful FM claim, it would most likely be granted… (Pages 3-6)

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W|EPC Utilities & Energy – Sempra Deep Dive – Oncor, March 2020

 Sempra (SRE) Capital Project Analysis – Oncor March 2020.

As part of our W|EPC Utility & Energy Project coverage, we’ve put together a deep dive into a number of large public utilities, including SRE, SO, D, AEP, CNP, ENB, EPD, ET, KMI, XOM, TOT, RDS:A, and others. We’ve included more information about our W|EPC Utility & Energy project coverage in the back of this presentation.

Given its size, and the sheer volume of projects and jurisdictions, we’re breaking our Sempra (SRE) coverage down into underlying components, with our Oncor deep dive below. Oncor Electric Delivery Company, LLC, is headquartered in Dallas, TX and is a regulated electrical distribution and transmission business. It is owned by two investors, SRE (80.25%) and Texas Transmission Investment LLC (19.75%).

Our Key Takeaways On Oncor:

• Out-sized Role In Critical TX Projects
  • Oncor is involved with 5 out of the 10 most important projects to provide more efficient electricity dispatch, while supporting the increasing electrical demand in Texas. (Page 5)
• Oncor vs. Other Investor Owned Utilities
  • Oncor has 156 more projects scheduled to be completed in 2020 than AEP, ET (50% AEP/50% Berkshire Hathaway) and CNP combined. (Page 8)
• Final Estimates vs. Final Actual Costs
  • Over the last 15 months, Oncor’s reported final construction costs for 190 projects were 12% higher than their final estimated costs. (Pages 9-10)
• Lubbock Power and Light
  • Oncor’s May 2019 acquisition of InfraREIT included a variety of electricity transmission and distribution projects & assets, which included ~$3600MM joint project with Lubbock Power and Light (LP&L). (Pages 13, 17-20)
• Future Project Opportunities
  • The integration of LP&L to ERCOT should reduce congestion costs in the Panhandle of Texas and increase demand for new transmission projects in/and around Oncor’s coverage area. (Page 4)

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LNG Canada Update: Shell, Fluor, JGC, & Force Majeure

• **March 18 Update………………………………….Page 2
• Executive Summary…………………………………Page 3
• COVID-19 Impact……………………………………Page 4
• EPC Schedule Analysis……………………………..Page 5
• Site Labor Analysis 6………………………………..Page 6
• Site Labor EPC Cost Impact……………………….Page 7
• Conclusions…………………………………………..Page 8

Update: In light of yesterday’s announcement that the Shell-led LNG Canada project was cutting its staffing levels in half over the coming days, we felt it worthwhile to pass along our LNG Canada Update from late February, along with a slide on our updated thoughts. (Page 2)

COVID-19 Impact Updates
1. The World Health Organization (WHO) officially declared COVID-19 a pandemic on 11-Mar-20.
a. JFJV may have a stronger FM claim now that WHO has declared the COVID-19 a pandemic, to the extent that JFJV specifically has “pandemic” or “epidemic” listed as an FM event in their contract.
b. FM Impact of Chinese module fabrication yards…….Page 4

2. On 17-Mar, LNG Canada and JFJV both announced that JFJV’s on-site workforce in Kitimat would be halved in order to increase social distancing and help prevent the spread of COVID-19. Given that the announcement was made jointly between JFJV and LNG Canada – impact on FM/schedule relief.…..Page 5

3.While JFJV did not announce when the site at Kitimat would resume a full workforce, it took “several” weeks for workers to return to JFJV’s Chinese fabrication yards…..Page 5

LNG Canada Planned Vs Foretasted Progress – Where Were We In February, and Where Are We Heading Now?…..Pages 5-8

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Noisy Neighbors: A Commonwealth LNG Deep Dive & Venture Global’s Engineering Update

Energy EPC: Venture Global’s Engineering Update & A Detailed Look At Their Commonwealth LNG

Venture Global LNG: Costs Ramping At Calcasieu?

Headcount, Parking Data Suggest Material EPC Inflation

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• Construction Details:                                                           Pages 1-2
• Parking & Headcount estimates                                        Pages 2-3
• Previous CPLNG Cost Curve                                               Page 3
• Our New CPLNG Labor Cost Estimates                           Page 3 
• EPC Costs – Expanded                                                         Page 4
• Key Questions From Here                                                   Pages 4-5

Forcasted Ramp In Craft Labor Headcount Indicate Costs Likely Trending Above Plan. Recent filings indicate that Calcasieu Pass LNG’s (CPLNG) average on-site workforce is set to more than double compared to company Pre-FID plans, while also introducing a night-shift. While there are likely several variables in play here, we believe the data (analyzed in the pages that follow), suggests that CPLNG’s on-site craft labor costs could increase materially……(data and our estimates on pages 2-5).

Parking Lot Infrastructure: In addition to the craft labor increases, there’s usually an increase in both indirect construction support infrastructure and the associated cost for that infrastructure. An example of this phenomenon is the reported increases by CPLNG in parking lot infrastructure. While not usually top-of-mind, ancillary factors like parking carry a real cost for projects this large, and significant increase in parking requirements would be felt in a projects budget. This same correlation is true for other indirect costs like lunch tents, lavatories, office spaces, personal protective equipment, health & safety supervision, small tools and consumables, radios and other IT equipment, trash removal, security, craft training, and on and on. That trend in data over the past year shows….(continued on pages 2-3).

While there could be several explanations for the ramp in labor (too many to list within a single note), if we were stakeholders we’d want to understand what’s actually driving the ramp in labor, and how any associated overrun in direct and indirect costs are being accounted for by CPLNG. While our cost overrun estimate (pages 2-3) is just that – an estimate – we’re confident the
fundamental relationship between labor head count and project costs have us pointed in the right direction.
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