2013 Platts, McGraw Hill Financial. All rights reserved.

Global LNG: Supply at what Price?

Desmond Wong Editor, Europe LNG
Mumbai September 2013
desmond.wong@platts.com
Flexible Sources of Supply:
Atlantic Basin
Pacific Basin
The Middle East
US Exports:
Which terminals and how much will be available
Can US supply help meet forecast demand
Base price comparisons
US projects vs Atlantic and Pacific basin
The competition
Asia Pacific buyers, Latin America and Europe
Global LNG: Supply at what Price?
2
Atlantic Basin Supply
3
Snhvit LNG- Norway
Capacity: 4.20/mtpa from 1 train
Startup: 2007
Stakeholders: Statoil 33.53%, Total 18.4%, GDF
Suez 12%, Hess 3.26%, RWE 2.81%, Petoro 30%

- Destinations: Primarily Atlantic basin, with cargoes
going into Europe and Latin America
Atlantic Basin Supply
4
Nigeria LNG - Nigeria
Capacity: 22.00/mtpa from 6 trains
Startup: 1999
Stakeholders: NNPC 49%, Shell 25.6%, Total 15%,
Agip (Eni) 10.4%

- Destinations: Global supplier with flexible cargoes
headed to Latin America, Europe, India and Asia
Pacific
Atlantic Basin Supply
5
Angola LNG- Angola
Capacity: 5.2/mtpa from 1 train
Startup: 2013
Stakeholders: Sonangol 22.8%, Chevron 36.4%, Eni
13.6%, BP 13.6%, Total 13.6%

- Destinations: Pure spot cargo play. Recent tenders
have been sent DES to Asia Pacific, with
commissioning cargo arriving in Brazil
Atlantic Basin Supply
6
Skikda - Algeria
Capacity: 4.5/mtpa from 1 train
Startup: 2013
Stakeholders: Sonatrach 100%

- Destinations: Atlantic basin partners, but cargoes
have been sold to Asia Pacific buyers
Atlantic Basin Supply
7
European Reload Markets:
- France
- Belgium
- Netherlands
- Spain
- Portugal
Re-export of contract cargoes to global
destinations: Spanish reload cost highest at around
$1.00/MMBtu, while Belgium is around
$0.40/MMBtu
Atlantic Basin Supply
8
Pacific Basin Supply

9
Gorgon LNG - Australia
Capacity: 15.60/mtpa from 3 trains
Startup: 2015
Stakeholders: Chevron 47.33%, Shell 25%,
ExxonMobil 25%, Osaka Gas 1.25%, Tokyo Gas, 1%,
Chubu Electric 0.42%.

- Destinations: Term commitments to buyers in Japan

Pacific Basin Supply - Australia
10
Gladstone LNG - Australia
Capacity: 7.80/mtpa from 2 trains
Startup: 2015
Stakeholders: Santos 30%, Peronas 27.5%, Total
27.5%, KOGAS 15%

- Destinations: Term commitments to portfolio players
and South Korea
Pacific Basin Supply - Australia
11
QCLNG - Australia
Capacity: 8.50/mtpa from 2 trains
Startup: 2015
Stakeholders: Train1 BG 50%, CNOOC 50%
Train 2 BG 97.5%, Tokyo Gas 2.5%

- Destinations: Term commitments to buyers in Japan,
China, and portfolio of BG

Pacific Basin Supply - Australia
12
Prelude - Australia
Capacity: 3.60/mtpa from 1 train
Startup: 2017
Stakeholders: Shell 67.5%, INPEX 17.5%, KOGAS
10%, CPC 5%

- Destinations: Term commitments to Japan, South
Korea, Taiwan and portfolio

Pacific Basin Supply - Australia
13
Middle East Supply

14
Qatargas- Qatar
Capacity: 42.00/mtpa from 7 trains
Startup: 1997
Stakeholders: Varies per train, but include Qatar
Petroleum, ExxonMobil, Total, Mitsui, Marubeni,
ConocoPhillips and Shell

- Destinations: Term supplier to global buyers in
Atlantic and Pacific, as well as portfolio

The Middle East - Qatar
15
RasGas - Qatar
Capacity: 37.00/mtpa from 7 trains
Startup: 1999
Stakeholders: Varies per train, but include Qatar
Petroleum, ExxonMobil, Itochu, LNG Japan, Korea
RasGas LNG

- Destinations: Major supplier to Asia Pacific, strong
relationship with South Korea and Japan.
The Middle East- Qatar
16
Drives pricing of spot
Nigeria and Snhvit down, Qatari supply fills the
gap, keeping spot prices stable
Return of Nigeria and Snhvit, spot prices soften as
market becomes well supplied
Provides marginal volumes for unexpected
demand, e.g. Cold winter in Atlantic and Pacific
Source of tender/strip volumes as seen most
recently with Mexico CFE tender
But the US is the wild card.

Why flexible supply matters
17

North American Proposed Export Projects
18
Source: BENTEK
9.6
24
1.8
24
15.6
17.6
10
4
11.5
18
22.5
12
7.8
8
5
9
16
274.3 mtpa (~36.6 Bcf/d) of capacity is planned
for North America higher than current total
global liquefaction capacity (~34.7 Bcf/d).

Only a handful of this will be built
mtpa
14
5
1.5
15.6
4
21
8

North American Exports (MOUs)
19
Source: BENTEK
87.1 mtpa (11.6 Bcf/d) of MOUs have been
signed on 93.4 mtpa (12.46 Bcf/d) of proposed
capacity. BENTEK expects 65.65 mtpa (8.8
Bcf/d) of these contracts to reach execution in
its Base Case forecast.
mtpa
20.45
15
12.8
4.6
8.8
4
1.8
4
4
1.8
15.6
North American Exports: Base Case Forecast
Sabine Pass
Freeport
Lake Charles
Cameron
Cove Pt.
Existing Import +
Proposed Export
Source: BENTEK
North East Exports:
Cove Point 0.75 Bcf/d (5.6 mtpa)
Gulf Coast Export Terminals:
Freeport LNG 1.76 Bcf/d (13.2 mtpa)
Lake Charles 2 Bcf/d (15 mtpa)
Sabine Pass 2.4 Bcf/d (18 mtpa)
Cameron 1.6 Bcf/d (12 mtpa)
Kitimat LNG
HN DC LNG
LNG Canada
Proposed Export
Canadian Exports:
BC LNG 0.25 Bcf/d (1.8 mtpa)
Kitimat LNG 1.4 Bcf/d (10 mtpa)
LNG Canada (Phase 1 ) - 1.6 Bcf/d (12 mpta)
South East Exports:
Elba Island FLNG 0.5 Bcf/d ( 4mtpa)
Elba Island
0
2
4
6
8
10
12
14
B
c
f
/
d

Kitimat Sabine Pass Freeport Cameron
Cove Point Lake Charles Elba Island DC
LNG Canada Capacity
North American Production Forecast
21
North American LNG exports will average 9.25 Bcf (69.45 mtpa) in 2020
11.71 Bcf/d
0
1
2
3
4
5
6
7
0
20
40
60
80
100
2013 2014 2015 2016 2017 2018 2019 2020
$
/
M
M
B
t
u

B
c
f
/
d

Demand - No U.S. LNG Exports Demand - U.S. LNG Exports Base
Henry Hub - No U.S. LNG Exports Henry Hub - U.S. LNG Exports Base
22
U.S. LNG Exports 8% of U.S. Demand in
2020
North American LNG exports and associated supply and demand changes in the market are
expected to lead to Henry Hub prices in 2020 that are about 28% ($1.45 in nominal dollars)
higher than they would be if there were no U.S. LNG export projects.
0
20
40
60
80
100
L
o
n
g
-
t
e
r
m

C
o
n
t
r
a
c
t
s

(
M
T
P
A
)

BG Portfolio BP Portfolio Gas Natural Fenosa Portfolio
GDF Suez Portfolio India Japan
Korea Mitsui Portfolio Shell Portfolio
Sumitomo Portfolio Total Portfolio UK
Production Forecast Production Capacity
11.71 Bcf/d
North American Production vs. Contracts
23
Source: BENTEK
Lack of policy certainty may hinder
export timeline. Provisions are
included in MOUs
(14)
(12)
(10)
(8)
(6)
(4)
(2)
0
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018 2019 2020
N
e
t

L
o
n
g
/
S
h
o
r
t

(
B
c
f
/
d


e
q
.
)

S
u
p
p
l
y
/
D
e
m
a
n
d

(
B
c
f
/
d


e
q
.
)

Supply Demand
Net Long/Short W/Out N.A. Global Net Long/Short Position W/N.A.
N.A. LNG Exports Help Balance LNG Market By 2020
9
9.5
10
10.5
11
11.5
12
2015 2016 2017 2018 2019
$
/
M
M
B
t
u

Cove Point DES Europe 12% Brent
25
U.S. Exports Will Be Competitive Into Europe
U.S. LNG exports will be competitive with oil-linked imports into European Market.
New Flexible Supply Cost

26
Export Competitive Analysis Case Study:
Japanese Market - 2018
Kitimat Sabine
Pass
(Phase
1)
Freeport

Cove
Point
Cameron Lake
Charles
Elba
Island
Gorgon APLNG Ichthys Prelude Wheatstone Angola
LNG
Sakhalin
II
Train 3
Abadi DSLNG PNGLNG
Location West
Canad
a
U.S. -
Gulf
U.S. -
Gulf

U.S. -
NE
U.S. -
Gulf

U.S. -
Gulf

U.S. -
SE

Australia Australia

Australia Australia Australia Angola Russia Indon
esia
Indone
sia
P.
New
Guin.
Capacity 10
MTpa
1.3
Bcf/d
8
MTpa
1.2
Bcf/d
13.2
MTpa
1.4 Bcf/d
5
MTp
a
0.7
Bcf/d
12 MTpa
1.4 Bcf/d
15 Mtpa
2 Bcf/d
4
MTpa
0.5
Bcf/d

15 MTpa
2 Bcf/d
9 MTpa
1.20
Bcf/d
8.4 MTpa
1.1 Bcf/d
3.6 Mtpa
0..47
Bcf/d
8.9 Mtpa
1.19 Bcf/d
5.2
MTpa
0.69
Bcf/d
5 Mtpa
0.7 Bcf/d
2.5
Mtpa
0.33
Bcf/d
2 Mtpa
0.27
Bcf/d
6.6 Mtpa
0.88
Bcf/d
CAPEX
$/ton
Liq.
capacity
1000 700 758 535 500 600 500 3467 2833 4048 3600 3258 1731 1400 4800 1400 2879
Break
Even FOB
($/MMBt
u)
7.76 8.98

9.15 9.10

8.28 8.65 9.37

8.50 6.95 9.93 8.83 7.99 4.24 3.43 11.77 3.43 7.03
Transp.
Cost to
Japan
($/MMBt
u)
1.46 3.21 3.21 3.32

3.14 3.21 3..26

1.46 1.57 1.67

1.36 1.46 2.97 0.70 1.25 1.17 1.55
Break
Even DES
($/MMBt
u)
9.22 12.19

12.36 12.42

11.49 11.86 12.63 9.96 8.52 11.6 10.19 9.45 7.21 4.13 13.02 4.60 8.58
Source: BENTEK
Competitiveness Factors
Rising costs of Australian projects likely to make
them uncompetitive against US exports over time
Pacific flexible cargoes frequently committed to long
term East Asian buyers
Panama Canal expansion slated for 2015, allowing
another direction of flow towards the Pacific basin
for US exports
Angola well situated to provide spot/string cargoes




28
Flexible Supply Competitors

29
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
2
4
6
8
10
M
T

Japanese LNG Imports vs.
Nuclear Capacity Utilization
Asia - Pacific Middle East
Atlantic Basin Re-Export
Nuclear Capacity Utilization %
Source: BENTEK
Atlantic Basin Supply

0
2
4
6
8
10
12
14
16
18
M
T


Asian LNG Imports
Japan South Korea Taiwan
China India Thailand
Indonesia Singapore YTD Average
Fukushima Crucial to Higher Asian LNG Demand
F
U
K
U
S
H
I
M
A
Hokkaido 3 reactors at Tomari plant
Kansai 2 reactors at Takahama plant, 2 reactors at
Oi plant
Shikoku 1 reactor at Ikata plant
Kyushu 2 reactors at Sendai plant, 2 reactors at
Genkai plant
TEPCO 2 reactors at Kashiwazaki-Kariwa plant
So far only 3 teams available, with 6 months per
plant and at least 6 plants to inspect at the start
Prefectural votes to extend delay

Reactor submissions
32
-90
-70
-50
-30
-10
10
30
0
50
100
150
200
250
300
350
400
450
G
l
o
b
a
l

N
e
t

L
o
n
g
/
S
h
o
r
t

P
o
s
i
t
i
o
n

(
M
T
P
A
)

G
l
o
b
a
l

D
e
m
a
n
d

(
M
T
P
A
)

Demand (60% Restart) Demand (40% Restart)
Demand (20% Restart) Demand (5.2% Restart)
Global Net Long/Short Position Position (20% Restart)
Position (40% Restart) Position (60% Restart)
Global Demand Forecast with Japanese
Nuclear Restart Sensitivities (MTPA)
33
Nuclear
Restarts 2
Year Ramp
Up Period
Source: BENTEK
South Korea faces own nuclear situation
5 nuclear power plants still down
China still has a plan for terminals along eastern coast,
aiming to reduce coal power
Gas to take up 10% of total energy demand by 2020 in
China


Near term demand drivers
34
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
G
W
h

Hydro Thermal Nuclear Wind
Brazilian Electricity Production: Year-over-
year change
35
Source: BENTEK
Historically more than 85% of Brazilian
power sourced from hydro. Drought has
significant impact.
Latin America Near Term Demand Support
36
Drought in Brazil provides one-off support
Mexico and Argentina structural growth driven by
economic growth and domestic production declines
Latin America short of contracted volumes secures
spot cargoes at high prices. However, volumes are not
as high as Pacific basin demand, but bids drive market
and provide a home for Atlantic volumes at higher than
hub prices
Mexico demand may drop off by 2014 once
infrastructure is developed

IMO sulphur regulations to kick in by 2015
LNG as a marine and industrial fuel leading the pack as
the alternative to heavy fuels
Gasnor to sell at 20% discount to competing low-
sulphur marine gas oil, Rotterdam cleared to offer LNG
bunker
Bank of America Merrill Lynch to enter Scandinavian
market in 2014
Vessel conversion underway: Tote, Viking Lines
Industry waiting for someone to make the first move
European Commission funding through TEN-T: 2.1
billion to equip 139 seaports and inland ports with LNG
bunker stations by 2025.

Further down the curve
37
Desmond Wong
Editor, Europe LNG
desmond_wong@platts.com
Direct: +44 (0)207 176 3506