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CHENIERE ENERGY, INC.
23rd International Gas and Power Summit, Paris . November 22, 2018
The LNG market: new opportunities and challenges
Eric Bensaude Managing Director – Commercial Operations and Asset Optimization
CHENIERE ENERGY, INC. NYSE American: LNG
LNG MARKET OUTLOOK AND U.S. LNG’S FUNCTIONAndrew Walker – Vice President, Strategy and Communication IEEJ – November 15, 2018
IEEJ:December 2018©IEEJ2018
Safe Harbor Statements
2
Forward-Looking Statements This presentation contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical or present facts or conditions, included or incorporated by reference herein are “forward-looking statements.” Included among “forward-looking statements” are, among other things:
• statements regarding the ability of Cheniere Energy Partners, L.P. to pay distributions to its unitholders or Cheniere Energy, Inc. to pay dividends to its shareholders or participate in share or unit buybacks;• statements regarding Cheniere Energy, Inc.’s or Cheniere Energy Partners, L.P.’s expected receipt of cash distributions from their respective subsidiaries;• statements that Cheniere Energy Partners, L.P. expects to commence or complete construction of its proposed liquefied natural gas (“LNG”) terminals, liquefaction facilities, pipeline facilities or other
projects, or any expansions or portions thereof, by certain dates or at all; • statements that Cheniere Energy, Inc. expects to commence or complete construction of its proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions
then of, by certain dates or at all;• statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries
worldwide, or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure, or demand for and prices related to natural gas, LNG or other hydrocarbon products;
• statements regarding any financing transactions or arrangements, or ability to enter into such transactions; • statements relating to the construction of our proposed liquefaction facilities and natural gas liquefaction trains (“Trains”) and the construction of our pipelines, including statements concerning the
engagement of any engineering, procurement and construction ("EPC") contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;
• statements regarding any agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas, liquefaction or storage capacities that are, or may become, subject to contracts;
• statements regarding counterparties to our commercial contracts, construction contracts and other contracts;• statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines;• statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities; • statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections or objectives, including anticipated revenues, capital expenditures,
maintenance and operating costs, run-rate SG&A estimates, cash flows, EBITDA, Adjusted EBITDA, distributable cash flow, distributable cash flow per share and unit, deconsolidated debt outstanding, and deconsolidated contracted EBITDA, any or all of which are subject to change;
• statements regarding projections of revenues, expenses, earnings or losses, working capital or other financial items; • statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions; • statements regarding our anticipated LNG and natural gas marketing activities; and• any other statements that relate to non-historical or future information.
These forward-looking statements are often identified by the use of terms and phrases such as “achieve,” “anticipate,” “believe,” “contemplate,” “develop,” “estimate,” “example,” “expect,” “forecast,” “goals,” ”guidance,”“opportunities,” “plan,” “potential,” “project,” “propose,” “subject to,” “strategy,” “target,” and similar terms and phrases, or by use of future tense. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in“Risk Factors” in the Cheniere Energy, Inc. and Cheniere Energy Partners, L.P. Annual Reports on Form 10-K filed with the SEC on February 21, 2018, which are incorporated by reference into this presentation. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these ”Risk Factors.” These forward-looking statements are made as of the date of this presentation, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
IEEJ:December 2018 © IEEJ2018
Today’s Presentation
U.S. Gas Market Overview
U.S. LNG Update
LNG Demand Outlook
Impact of U.S. LNG
3
IEEJ:December 2018 © IEEJ2018
Cheniere Company Overview
US$16B*Market Cap
US$30BCapital Spend
LNG capacity 18 mtpa Operational
18 mtpa Under Construction
14 mtpa Under Development
1000+ Employees
6 Offices Worldwide− Houston− Washington− London− Singapore− Tokyo− Beijing
Building an industry leading U.S. LNG export platform
* Note: as of 1st Nov 2018
Sabine Pass Liquefaction ProjectLocated in LouisianaEntered service as an import terminal in 20084 Bcf/d send-out capacityConversion to bi-directional facility via theaddition of liquefaction capacityFirst export cargo early 2016
Corpus Christi LNG Terminal Located in South TexasFirst ‘greenfield’ export facility under constructionin the USAFirst LNG expected in late 2018
4
IEEJ:December 2018 © IEEJ2018
0
50
100
150
200
250
300
350
400
2000 2005 2010 2015 2020 2025 2030 20350
20
40
60
80
100
120
140
2000 2005 2010 2015 2020 2025 2030 2035
Forecast LNG Industry Growth to 2035
5
Qatar
Australia
Russia Mozambique
mtpa mtpa
Source: Cheniere interpretation of Wood Mackenzie data (Q2 & Q3 2018).
“A new gas order is emerging, with US LNG helping to accelerate a shift towards a more flexible, liquid, global market.”
“The transformation of LNG markets creates a huge opportunity for gas users in Asia.”
IEA World Energy Outlook 2017
Asia Pacific
Asia Pacific is forecasted to remain the top importing region, representing ~65% of total global demand in 2035
Forecast LNG Supply by Country to 2035
Forecast LNG Imports by Region to 2035
Europe & FSU
Americas Middle East Africa
IEEJ:December 2018 © IEEJ2018
6
U.S. Gas Market Overview
IEEJ:December 2018 © IEEJ2018
0
10
20
30
40
50
60
2004 2006 2008 2010 2012 2014 2016 2018
Rest of US 'shale'
Permian (TX & NM)
Utica (OH, PA & WV)
Marcellus (PA, WV, OH & NY)
Haynesville (LA & TX)
Eagle Ford (TX)
Fayetteville (AR)
Barnett (TX)
Woodford (OK)
Bakken (ND & MT)
Antrim (MI, IN & OH)
US Natural Gas Production
7
US shale production has reached record levels: 56.4 Bcf/d as of July 2018
Source: EIA (2018), BP Statistical Review of Energy (2018)
Shale = 56 Bcf/d in July 2018, or 68% of total US natural gas production
US Shale Gas Production (2004 to date)
600
100
200
400
300
500
Bcfd Bcma
Russian Federation (2nd)
Iran (3rd)
Canada / Qatar (4th/5th)
Marcellus + Utica
US Shale
US shale & Marcellus/Utica cf. ranked producing countries (2017)
IEEJ:December 2018 © IEEJ2018
($12)
($10)
($8)
($6)
($4)
($2)
$0
$2
$4
$6
$8
$10
0 250 500 750 1,000 1,250 1,500 1,750 2,000
Brea
k-ev
en g
as p
rice
($/M
MBt
u)
Commercially recoverable gas resource (Tcf)
North America Natural Gas Cost of Supply Curve
8
An estimated 840 Tcf can be developed at $3 or less, compared to an assessment of 186 Tcf eight years ago
Break-even price at Henry Hub for North American natural gas resources (2018)
Source: IHS Markit July 2018; ‘The Shale Gale turns 10’ , Break-even price required to earn a 10% unlevered return
840 Tcf 1250 Tcf
Resource that can be developed at a HH of $3 or less
Resource that can be developed at a HH of $4 or less
Date of Assessment 2010 2018Tcf @ $3 or less 186 840Tcf @ $4 or less 952 1250
Source IHS Markit
IEEJ:December 2018 © IEEJ2018
EIA Price Outlook for Henry Hub and WTI
$0
$5
$10
$15
$20
$25
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
$/M
MBt
u (n
omin
al) WTI IEO 2018
WTI IEO 2017
HH IEO 2018
HH IEO 2017
9
WTI
HH
EIA Forecast Historical
Outlooks for oil shifted upwards in 2018, HH downwards.
Source: US EIA IEO 2018 and 2017
IEEJ:December 2018 © IEEJ2018
0
20
40
60
80
100
120
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
US Gas Consumption By Sector
Source: US EIA 2018 AEO Reference Case
US Natural Gas Consumption by Sector
Bcf/d
Dom
estic
Con
sum
ptio
n Ex
ports
Residential
Commercial
Industrial
Transportation
Power
Production Net LNG exports
74 Bcf/d
118 Bcf/d Domestic consumption set to grow by 21 Bcf/d to 2050. Exports set to grow by 23 Bcf/d
49 Bcf/d
10
IEEJ:December 2018 © IEEJ2018
11
U.S. LNG Projects Overview
IEEJ:December 2018 © IEEJ2018
0
10
20
30
40
50
60
70
80
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22
MTP
A
Corpus Christi T3 Nov-18
Non-Cheniere Export Project
Cheniere Export Project
U.S. LNG Capacity : Operating and Under Construction
12
U.S. LNG capacity set to reach ~70 mtpa in 2020
Freeport T3
Freeport T2
Freeport T1
Cameron LNG T2
Corpus Christi T2
Cameron LNG T1
Sabine Pass T5
Elba Ph II
Cove Point LNG T1
Elba Ph I
Corpus Christi T1
Sabine Pass T1-4
Cameron LNG T3
IEEJ:December 2018 © IEEJ2018
Sabine Pass Terminal
1313
IEEJ:December 2018 © IEEJ2018
Sabine Pass Terminal
1414
IEEJ:December 2018 © IEEJ2018
Corpus Christi Liquefaction Terminal
15
October 2018
IEEJ:December 2018 © IEEJ2018
16
US LNG Projects: Permitting Status
74
395
97
14
157
53
0
50
100
150
200
250
300
350
400
Total No FERC filing Pre-filed Formal filing Approved FID
mtp
a
Alaska LNG Annova LNG Calcasieu Pass LNG Corpus Christi LNG Midscale Driftwood LNG Gulf LNG Energy Jordan Cove* Plaquemines LNG Port Arthur LNG Rio Grande LNG Texas LNG Freeport Train 4
Lake Charles SP T6 Cameron T4/5 Magnolia Golden Pass SP T1-5
Cameron T1-3 Freeport T1-3 Cove Point CC T1-3 Elba
Commonwealth LNG Fourchon LNG
Sources: US FERC, US DOE, and press reports Excludes Delfin LNG, which is outside FERC’s jurisdiction
FERC Status (as of September 2018)
*Previously denied by FERC and had to re-file
~ 23 mtpa online
~ 51 mtpa under construction
Over 300 mtpa proposed
16
IEEJ:December 2018 © IEEJ2018
17
LNG Demand Outlook
IEEJ:December 2018 © IEEJ2018
18
Qatar
Australia
USA
0
100
200
300
400
500
2000 2005 2010 2015 2020 2025 2030
LNG Trade Forecast
Supply / Demand Forecast Supports Project Growth
0
20
40
60
80
100
Malaysia U.S. Qatar Australia
Production Capacity
2015 2020
mtpa mtpa
Supply: E
xisting and Under C
onstruction
2015 to 2030 CAGR: 4.8%
New Supply
Source: Cheniere Research estimates; Wood Mackenzie for historical figures
IEEJ:December 2018 © IEEJ2018
0
200
400
600
800
Asi
a P
acifi
c
Mid
dle
Eas
t
N.A
mer
ica
Afri
ca
C&
S A
mer
ica
Eur
asia
Eur
ope
Bcm
a
-5000
5001000150020002500
Asi
a P
acifi
c
Afri
ca
Mid
dle
Eas
t
C&
S A
mer
ica
Eur
asia
N.A
mer
ica
Eur
ope
MTO
EAsian Market Context
A high growth region …
19
Primary energy consumption growth (2015-2040)
Gas consumption growth (2015-2040)
Source: IEA World Energy Outlook 2017 – New Policies Scenario
Asia Pacific = 62% of total
Asia Pacific = 44% of total
OpportunitiesDemand for gas in Asia Pacific region expected todouble by 2040
Forecast to become the largest gas consumingregion by 2030
New markets, new buyers and new demandsegments for LNG are emerging
A more liquid and more responsive global LNGtrade will make gas more attractive
But gas demand growth in Asia should not be takenfor granted …..
ChallengesDemand uncertainty a common theme across Asiaas the energy transition and market liberalisationsgather pace
Regional import dependency forecast to increasefrom 23% in 2015 to 39% in 2040
Although barriers to entry for LNG are reducingsome new markets will require help with thecommercial or technical aspects of LNG
Coal likely to remain cheap – and tempting
Gas needs to remain affordable, reliable and secure
IEEJ:December 2018 © IEEJ2018
0
50
100
150
200
250
300
350
400
450
2005 2010 2015 2020 2025 2030 2035
Bunkers - Atlantic
Africa
Europe
North America
Central & South America
0
50
100
150
200
250
300
350
400
450
2005 2010 2015 2020 2025 2030 2035
Bunkers - Asia/Middle East
Middle East
Other Asia
China
India
JKT
Forecast LNG Imports by Region
Source: Cheniere interpretation of Wood Mackenzie data (Q3 2018)
C. & S. America
mtpa Asia and Middle East Atlantic Basin mtpa
EuropeJKT
China
India
Other Asia
20
IEEJ:December 2018 © IEEJ2018
Indonesia
Thailand
Malaysia
Singapore
VietnamPhilippines
ChinaIndia
Pakistan
Bangladesh
Sri Lanka
Taiwan
South Korea
Australia
Japan
(40)
(20)
-
20
40
60
80
mtp
a
5 drivers of Asia Pacific demand growth
Declining indigenous/piped supply
Increased private sector activity
New LNG consuming segments (eg.bunkering & trucking)
Pro-gas energy policies
LNG demand growth: 2017 to 2035
Supplement to renewable generation
Focus on Asia Pacific Markets
21
China continues to dominate the headlines But South East Asia important as a region – in terms of growth and new importers
Source: Cheniere interpretation of Wood Mackenzie data (Q3 2018)
?
IEEJ:December 2018 © IEEJ2018
22
Impact of U.S. LNG
IEEJ:December 2018 © IEEJ2018
0
50
100
150
200
250
300
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
mtp
a
Commercial Evolution of LNG
23
* Contract duration of 4 years or less (GIIGNL) Source: CEDIGAZ World Outlook for 1965 – 1985 (assumes no spot volume), Poten and Partners (2001) 1985 to 2000, GIIGNL (2018) 2000 to 2018
LNG trade by contract length
Spot & short-term
trade*
Mid & long-term contract
trade
27%
73%
Bilateral deals Slow evolution Growing flexibility
0%5%
10%15%20%25%30%35%
1995 2000 2005 2010 2015
Spot & short-term trade % of total
IEEJ:December 2018 © IEEJ2018
U.S. LNG Exports Driving Change in the Industry
Price diversity and greater pricetransparencyDestination flexibility at buyer’s directionGrowing liquidityFOB and DES hub formationSustainable low-cost supply overthe long-run
A more responsive, more competitive, more diverse, and more resilient LNG trade system
24
IEEJ:December 2018 © IEEJ2018
Sabine Pass Cargo Destinations
Cheniere Office
Cheniere LNG Facility
Portugal,
Kuwait, UAE,
Pakistan India, Thailand
Brazil
Argentina
Houston, TX
Washington, DC
London, U.K.
Singapore
Cargo Delivery Destination
China, Taiwan
Spain
Mexico
Dominican Republic, Panama
Italy, Malta, Egypt, Turkey, Jordan, Israel
Japan, South Korea
More Than 475 Cargoes (>1,700 TBtu) Exported from Sabine Pass Since Startup Delivered to 29 Countries and Regions Across the Globe
Chile
Tokyo, Japan
France, Lithuania, Poland, Netherlands,
United Kingdom Beijing, China
Colombia
01020304050607080
0
1
2
3
4
5
6
Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
cargo countmillion tonnes
Asia Latin America ASIA MENA
Sabine Pass Exports by Destination Region
Sources: Cheniere Research, Kpler Note: Cumulative cargoes and volumes as of October 31, 2018. MENA – Middle East & North Africa
25
IEEJ:December 2018 © IEEJ2018
The LNG Trade is Evolving
JKM Swaps
2 4 3
9
17
28
0
5
10
15
20
25
30
2012 2013 2014 2015 2016 2017
mtp
a
2015 2016 2017 2018
Trading House Activity LNG volumes accounted for by the four
commodity trading houses with the largest LNG volumes
10% of total trade in 2017
Equivalent to 9.9% of total trade YTD 2018
0
10
20
30
40
50
60
70
80
90
2000 2005 2010 2015
mtp
a
Spot and Short-term*
Short-term
Spot
Spot and Short-term Quantities Spot volumes
(~60 mt) = 21% of total trade in 2017
0
100
200
300
400
500
600
700
800
2013 2014 2015 2016 2017
Carg
oes
BuySell
Tendered Cargoes
Source: Cheniere interpretation of ICIS Heren GLM publication (2013, 2014, 2015) and Wood Mackenzie LNG Tender Tracker (2016 , 2017) Source: Cheniere interpretation of Platts news reports (2018)
Source: Cheniere interpretation of Wood Mackenzie data (2018) Source: GIIGNL Annual Reports.
Shown by year of cargo delivery – includes multi-
year tenders & tenders not awarded / unknown if
awarded
Equivalent to ~17% of
total trade in 2017*
*assuming 1 cargo = 0.07 mt
*Spot = delivered within 90 days, Short-term = 90 days to 4 years
632015 2016 2017 2018 YTD
Volume (mt) 0.5 2.4 9.8 23.2Cargoes 9 42 169 403% of trade 0.2% 0.9% 3.4% 9.9%Cargoes pd eqv. 0.03 0.11 0.46 1.48
26
IEEJ:December 2018 © IEEJ2018
27 Note: 2018 YTD = As of Oct. 15, 2018Source: Cheniere interpretation of Wood Mackenzie data (Q3 2018)
Perception that market was well supplied, wider supply choice, plus growing demand uncertainty resulted in increasing buyer focus on shorter-term / smaller volume contracts in recent years.
To what extent is this cyclical versus structural?
01020304050
2011 2012 2013 2014 2015 2016 2017 2018YTD
ACQ of Contracts by Duration
< 5 years 5-10 years 11-19 years ≥ 20 years
mtpa
01020304050
2011 2012 2013 2014 2015 2016 2017 2018YTD
ACQ of Contracts by Volume
<1 mtpa 1 to <2 mtpa 2 to <3 mtpa3 to <4 mtpa 4 to <5 mtpa 5 mtpa and larger
mtpa
01020304050
2011 2012 2013 2014 2015 2016 2017 2018YTD
ACQ of Contracts by Pricing Indexation
Oil European hub Henry Hub/AECO Hybrid
mtpa
01020304050
2011 2012 2013 2014 2015 2016 2017 2018YTD
ACQ of Contracts by Source
Portfolio supply Project specific
mtpa
IEEJ:December 2018 © IEEJ2018
Contracting Behavior Reacting to Changing Market Environment
Sabine Pass Liquefaction Project (Louisiana) Corpus Christi Liquefaction Project (Texas)
Cheniere’s LNG Supply Projects
Our long-term customers
28
Building an industry leading LNG export platform along the U.S. Gulf Coast
IEEJ:December 2018 © IEEJ2018
0
5
10
15
20
25
30
35
40
45
50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Qatar Australia U.S. Other
Slowdown in LNG Supply Project FIDs Since 2015
FIDs Per Annum (Total Volume)
Source: Cheniere interpretation of Wood Mackenzie data (Q3 2018)
mtpa U.S. Hiatus Qatar Hiatus Australia
29
IEEJ:December 2018 © IEEJ2018
Tortue FLNG
Competing Supply
Non-Cheniere liquefaction project (source Wood Mackenzie LNG FID Tracker Q3 2018 (1)) FID reached in October 2018
Cheniere liquefaction project
Corpus Christi Expansion
Sabine Pass Expansion
Arctic LNG 2
Mozambique LNG (Area 1) Rovuma LNG (Area 4)
Qatar Expansion
PNG LNG Expansion
Other U.S. Gulf Coast projects
Woodfibre LNG Sakhalin-2Expansion
Pluto Expansion
Notes: (1) FID Imminent or Building Momentum, Company FID Target 2020 or earlier, or Wood Mackenzie expect FID 2020 or earlier if no company date given
Multiple LNG Export Projects Competing for 2022+ Market Demand
Fortuna FLNG
LNG Canada
30
IEEJ:December 2018 © IEEJ2018
U.S. LNG: Changing the Industry
U.S. LNG has already changedthe industry
Price diversification and greater pricetransparency
Destination flexibility at buyer’sdirection
Increased supply availability andgreater market competition
A sustainably low-cost supply over thelong-run
And is set to drive further change
Growing liquidity / hub formation /price discovery
Resulting in a more competitive andmore resilient trade system
31
15
72
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019 2020 2021 2022
Forecasted U.S. LNG Output to 2022mtpa
Source: Cheniere interpretation of Wood Mackenzie data (Q3 2018)
U.S. will be the third largest exporter by 2020
IEEJ:December 2018 © IEEJ2018
32
IEEJ:December 2018 © IEEJ2018