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<Title of Presentation> By: <Author Name>, <Organization>
<Date>
17th INTERNATIONAL CONFERENCE & EXHIBITION
ON LIQUEFIED NATURAL GAS (LNG 17)
Key Challenges for the Development of LNG
in Emerging Markets: Medium and Long
Term Outlook By: Dr. Fereidun Fesharaki, FACTS Global Energy (FGE)
April 18, 2013
17th INTERNATIONAL CONFERENCE & EXHIBITION ON
LIQUEFIED NATURAL GAS (LNG 17)
Longer-Term Oil Market: A Range to Consider
2
0
20
40
60
80
100
120
140
160
180
200
Brent in US$/bbl
Ceiling
US$150/bbl
Floor
US$80/bbl
2010-2012 are actuals. Forecasts in
$2013
0
25
50
75
100
125
150
175
200
225
250
275
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
mm
t
Asia Europe Americas Middle East
Global LNG Trade: 2000-2012 -2.6%
Global LNG Trade: Asia is Still King
Note: 2000-2012 data are actual.
72%
23%
5%
2000
70%
21%
8% 1%
2012
3
-
10
20
30
40
50
60
70
2013 2014 2015 2016 2018 2020
mm
tpa
LNG Uncontracted Demand
New Markets Uncontracted Demand
India Uncontracted Demand
China Uncontracted Demand
Taiwan Uncontracted Demand
Korea Uncontracted Demand
Japan Uncontracted Demand
Likely uncontracted demand including contract renewals.
Asia Overview: Imports and Uncontracted
Demand
4
Besides Japan and Korea, who will be under pressure to secure additional supplies,
new demand is emerging from Southeast Asian importers.
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015 2020 2025 2030
mm
tpa
Singapore Thailand Indonesia Malaysia Others*
*Vietnam, Pakistan, Bangladesh, and Philippines.
New Markets Add Substantially to the Demand
Pie
• New Southeast Asian markets of Thailand,
Malaysia, Indonesia, and Singapore coupled with
potential other new markets could add around 32
mmtpa by the end of this decade.
• Add Middle East to the picture and there could
be a further 15 mmtpa of demand by 2020.
5
Middle East: From Exporter to Importer
Middle East LNG Imports
0
5
10
15
20
25
30
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
5
203
0
mm
tpa
Saudi Arabia
Israel
Bahrain
UAE (Northern Emirates)
UAE (Dubai)
Kuwait
Despite the region’s massive
petroleum reserves, gas
production in almost all Middle
East countries is struggling to
keep abreast with demand,
especially in the industrial and
power sectors.
Middle Eastern energy market
dynamics shifted seismically in
2009 with the commencement of
Kuwaiti LNG imports. Kuwait and
subsequently Dubai’s status as
LNG importers illustrates the
Middle East’s growing
dependence on natural gas and
the rapidly increasing gap
between supply and demand.
Other countries like the UAE and possibly Bahrain will also use LNG to augment
domestic gas supply in the coming years. The gap between gas supply and demand is
therefore not confined to one or two Middle Eastern countries; it is truly regional.
6
Domestic Gas Prices Vary
0
5
10
15
20
25
China^ India Thailand Malaysia Indonesia Singapore
JLC** Oil Parity**
* Range based on retail prices to date of city gas (residential, commercial, industrial) and power sectors.
** 2012 JLC and JCC levels.
^Estimated from average prices paid by various sectors across China.
US$/mmBtu
~ 70%
market
share
~ 70%
market
share
7
Pacific Region to Stay Mostly Oil-Linked
*Supplies targeting East of Suez, up to Speculative Projects
100
200
300
400
500
2012 2015 2016 2017 2018 2019 2020 2025 2030 andbeyond
Incremental supplies* (mmtpa)
Oil-Indexation Hub-Indexation
Incremental volumes sold mainly on oil-
indexation are driven by new Australian projects.
Incremental volumes will be driven by
new USGC/Canada/East Africa projects.
While,
Most USGC volumes = Hub-Indexation
Canada/East African projects
=> Small % Hub-Indexation; Majority %
Oil-Linked
=> Due to high development costs.
Existing
8
Massive Australasian Budget Blowouts–
Oil-Linked Pricing Cannot be Broken!
* Origin Energy changed currency at Train 2 FID in July 2012—at the time, the Australian company
said that capital costs in US$ had increased but this was solely due to foreign exchange movements.
However, in Feb 2013, they upped the A$ cost to $24.7 bn, a 7% increase in A$ terms. This new total
is equivalent to US$25.5 billion, or a 26.5% increase on the original US$20 bn estimate.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
APLNG*
GLNG
QCLNG
PNG
Gorgon
Pluto
% Complete
% Over-budget
9
Will There be an Asian Hub?
Indigenous
ProductionLNG Importer LNG Exporter Pipeline Importer Pipeline Exporter
Japan*
South Korea*
Taiwan*
China
India
Thailand
Indonesia
Malaysia
Singapore
* Neligible small volumes of production
• Most new LNG importers have alternative gas supply sources which may help soften
the impact of an LNG supply disruption.
• Buyers that have adopted a ‘portfolio player’ role can cope more readily with supply
and pricing issues.
10
6
8
10
12
14
16
18
20
50 60 70 80 90 100 110 120
DE
S P
ric
e, U
S$
/mm
Btu
Oil Price Scenario (US$/bbl)
Hypothetical US LNG Price (FOB HH @ US$4-8/mmBtu)*
14.5% + Shipping LNG Price (assumed to Japan)
13% + Shipping
* FGE forecast HH prices for period 2015-2030
Note: Liquefaction + Shipping assumed around
Direct Purchases From the US …not always cheaper but does provide some savings at high oil
prices
11
Hub Pricing vs Oil Indexation
There is a reasonable middle ground for both sides and deals
can be construed to benefit both sides by sharing the risk.
• There is no such thing as cheap LNG, whatever the source.
• The price of LNG has a cost-based floor. Ultimately, the price of LNG
indexed to Henry Hub is not very different to the price of oil-indexed LNG
in a lower oil-price environment (in the US$80/bbl range).
• US$10-11/mmBtu or around US$70/bbl oil price is the minimum
breakeven price for most new LNG projects, whether they are from the
US, East Africa, or Australia, whether they are conventional or non-
conventional.
• Hub pricing in one way or the other will enter new LNG contracts. We
expect many suppliers of US LNG will end up selling at Hub-related
prices plus a margin.
• There are benefits to Hub-related pricing for both sellers and buyers. It is
not possible to insist that buyers should ignore Hub pricing and only use
conventional oil indexation. Buyers simply will not accept this argument.
12
Thank You
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