Ideal Gas Company of 2020Ideal Gas Company of 2020

GASTECH 2005GASTECH 2005

Joe Naylor, Vice President, Strategy, Planning and Business SuppJoe Naylor, Vice President, Strategy, Planning and Business Support ort ChevronTexaco Global GasChevronTexaco Global Gas

AndAnd

Rodney Schmidt, Managing DirectorRodney Schmidt, Managing DirectorPFC EnergyPFC Energy

March, 2005March, 2005

2GASTECH 2005

Outline

• Gas Company Definition

• Make-up of the “Ideal Gas Company”

• Hypothesis

• The Gas Industry – Past and Future

• Ideal Gas Company of 2020

• Conclusions

3GASTECH 2005

Provides a competitive return to its shareholders

Changes gas commodity to a customized solution on a global basis

Assembles (or secures) the avenues to move gas from its point of origination to a customer: scope and scale and repeatability

Gas is a commodityA “Gas” company is a company that

4GASTECH 2005

Make-up of the“Ideal Global Gas Company”

• Safest?

• Most socially responsible?

• Biggest reserves?

• Biggest gas production?

• Biggest balance sheet?

• Best ROCE?

• Best cash flow?

• Most integrated in its assets?

• Biggest marketer / trader?

• Most advanced in assembling new gas chains?

5GASTECH 2005

HypothesisIdeal global gas company of the future will

• Retain capabilities to vertically integrate

• Increasingly integrate horizontally, across:

– Multiple value chains

– Multiple market avenues

– Multiple fuels

• Be able to play selectively

• Adapt its position as markets change

• Leverage its global human capital

• Focus on country-and customer-specific needs

6GASTECH 2005

Asia Pacific Evolution ExampleImporter1985

Japan

Indonesia

AbuDhabi

Malaysia

Alaska

Source: PFC Energy

Exporter

7GASTECH 2005

Asia Pacific Evolution ExampleImporter2005

SouthKorea

TaiwanJapan

AbuDhabi

Brunei

Alaska

Australia

India

Europeand US

Qatar

Source: PFC Energy

Oman

Exporter

IndonesiaMalaysia

8GASTECH 2005

Gas Industry Past & Future

• Gas in Global Energy Demand

• Partnering - Role of NOCs

• Community Engagement

• Customers

• Technology

9GASTECH 2005

Gas in Global Energy Demand

• Gas demand growth drivers– Power generation– Industrial & commercial– GTL & GTChem– New, emerging gas markets

• Resource distance to market is significant

• Global gas trade is growing, creating opportunities for intermediaries

0

5

10

15

20

25

30

1985 1995 2005 2020

Number of LNG Importing Countries

bcm

GTLOtherResidential & ServicesIndustry

Power Generation

0

1000

2000

3000

4000

5000

2002 2010 2020 2030

World Natural Gas by Sector

10GASTECH 2005

PartneringTraditional Role of NOCs

NOCs owned the gas reserves

IOCs moved the gas reserves

Source: BP 2004 Statistical Review; PFC Energy estimates

Gas

~50% of Gas accessible WW TCF: 6,205

NOC Reserves (equity access)

Full IOC Access

Reserves held by new Russian companies

NOC Reserves(no equity access)

11GASTECH 2005

Partnering NOCs Going Forward

Self-Sufficientresource-rich

IOC-Likeresource-rich / resource-limited

Government Entity

SonatrachSonangolEGPCT-U-K

INOCLNOC

PertaminaOOCKMG

SaudiAramco

StatoilPetronasPetrobras

KOCQP

AdNOC

GAZPROMPdVSA

ONGCSINOPEC

CNOOCPetro-

China(CNPC)

Aggressive Expansionistresource-limited

12GASTECH 2005

Community Engagement

• Safety: maintain exemplary track record

• Environment

• Socially responsible

• Community engagement is critical– As new markets are opening– As new products are

introduced– As new entrants emerge

13GASTECH 2005

Customers

Customers and their needs are changing

• New countries emerging

• Multiple sectors

• Multi-sized customers

Customer ambitions are changing

• Impact on customer-supplier relationship

• Impact on the terms

• Impact on project structures

14GASTECH 2005

Technology

Technology-driven cost efficiencies making gas-based fuels increasingly competitive

Leader in advancing gas technology gains as the commercializer of either

• Third-party technology

• Technology developed in-house

• CO2 sequestration

• Hydrate productionCos

t

Time

GTL

LNG

15GASTECH 2005

Summary: Gas Industry – Past & Future

Past

Vertical integration; well-defined roles and limits

• Point-to-point trades• Illiquid, long-term arrangements• Government handled the public

interface• NOCs were resource owners• Most customers were monopoly

buyers • Technology concentrated on cost

efficiencies

16GASTECH 2005

Summary: Gas Industry – Past & Future

Past

Vertically integration; well-defined roles and limits

• Point-to-point trades• Illiquid, long-term arrangements• Government handled the public

interface• NOCs were resource owners• Most customers were monopoly

buyers • Technology concentrated on cost

efficiencies

Future

Vertical & horizontal optimization; boundaries disappearing, roles blurring

• Multiple supply, multiple market• Liquid, global trade• Global gas companies engage

community• NOCs have multiple roles• Customers needs / ambitions

changing• Technology expanding the gas

product slate

17GASTECH 2005

Conclusions

To play globally in 2020, the Ideal Gas Company will

• Selectively participate in, construct, manage all aspects of gas value chains – reconfigure over time

• Optimize across multiple gas value chains

• Successfully adapt to changing needs of

Customers PartnersCountries