© OECD/IEA 2013 © OECD/IEA 2014

Global LNG market trend and European position

Takuro Yamamoto

LNG Analyst

International Energy Agency

Madrid, 17 March 2015

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LNG is the only method to deliver gas from continent to continent

(Source: GIIGNL)

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Global LNG trade started to stagnate

LNG import volumes by region, 2008 - 2014 (bcm)

Global LNG trade increased by 40% from 2008 to 2011, although it is stagnating for past 4 years.

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The US shale production is one of the biggest game changer

LNG import volumes vs shale gas production in the US, 2007 - 2014 (bcm)

LNG imports to the United States are shrinking yearly, only receiving 1.6 bcm in 2014 against 200 bcm of receiving capacity.

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Low utilization rate in Europe. Last resort?

LNG import volumes vs import capacity in OECD Europe , 2010 - 2014 (bcm)

In spite of LNG import capacity increase, LNG import volumes are following downward trend in Europe every year.

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Weak gas demand in Europe is pushing out LNG away

LNG Re-export volumes in Europe, 2008 - 2013 (bcm)

10% of LNG imports to Europe was re-exported to other nations in 2013 without receiving in its region.

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Asian LNG demand have seen a slow down

LNG import volumes in major Asian countries, 2010 - 2014 (bcm)

Total import volumes of Japan and Korea have been stabilized as well as slower growth in Chinese demand.

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Second wave of new additional supply is coming soon

Additional LNG capacity , 2005 - 2015 (bcm)

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Qatar

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After four years of market tightening with few new LNG projects, second wave of large LNG additional capacities are coming from this year.

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Australia is expected to become the world’s largest LNG exporter

Top largest LNG exporters by 2020 (bcm)

17 new LNG projects with 175 bcm export capacity are under construction as of today, with Australia and the US accounting for roughly 80% of total.

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Will Asian price and European price converge?

Global gas price development in key regions, Apr 2009 - Feb 2015

Asian spot LNG price continued to slide in February and reached parity with European gas prices for the first time in 4 years.

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Asian LNG Spot Brent

Asia LNG spot price started to fall sharply well before the drop in oil price

Cheap oil-indexed LNG from the new Australian contracts will further reduce demand for spot LNG.

Oil price and LNG price development in 2014

USD/Mbtu USD/bbl

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There seems to be a wait and see position after recent oil price drop

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Jan-12 Jan-13 Jan-14 Jan-15

Brent

• DOE Approval • FERC Approval • LNG Contracts • Construction starts

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It is likely that many LNG contracts for the new US LNG projects have been made before recent oil price drop.

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Concluding remarks

• 2014 was a turning point in the global LNG market after 3 years of tightening.

• With new supplies coming from Australia and the US, together with weaker Asian demand, probability of LNG coming to Europe will increase.

• Recent low oil price is favorable for many LNG buyers, however there may be a delay in new export projects.

• In Europe, security of supply is achieved through supply diversity and LNG will continuously play an important roll.

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Thank you very much for your attention.