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This presentation material contains confidential and privileged information intended solely for FGE clients.The dissemination, distribution, or copying by any means whatsoever without FACTS Global Energy’s prior written consent is strictly prohibited.
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Presentation to
Australian Institute of Energy National Conference
By Dr. Fereidun Fesharaki, ChairmanFACTS Global Energy
Adelaide, South AustraliaNovember 14‐16, 2010
Australian & World LNG
www.FGEnergy.com
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Agenda
• Oil price forecast
• Current state of the global LNG market
• Australian LNG issues
• Future trends and key issues
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Oil Price Forecast
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Oil Prices are Expected to Rise
4
20 30 40 50 60 70 80 90
100 110 120 130 140 150 160 170 180 190 200
Note: Actual up to 2009 and forecasts in 2010$ thereafter.
Base-CaseLow-Case
High-Case
What will choke off demand?
Dubai Forecast Price, US$/bbl
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Current State of the Global LNG Market
www.FGEnergy.com
Atlantic Basin Demand Prospects to 2020 are Fair
Entry and demand ramp‐up of new importing countries supports LNG demand growth, but US remains a wild card
Asian demand growth pulled cargoes east of Suez
(15)
(10)
(5)
0
5
10
15
20
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
mmt
Atlantic Basin LNG Imports by Country (Year‐on‐Year Change)
Canada
Chile
Argentina
Brazil
Mexico
Dominican Republic
Puerto Rico
Other
Ireland
Netherlands
Poland
US
UK
Greece
Italy
Belgium
Turkey
Portugal
Spain
France
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www.FGEnergy.com
Asia is Recovering From the Economic Downturn
(11.5)
(10.0)
(8.5)
(7.0)
(5.5)
(4.0)
(2.5)
(1.0)
0.5
2.0
3.5
5.0
6.5
8.0
9.5
11.0
12.5
14.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020
Asia Pacific LNG Imports by Country (Year‐on‐Year Change)
W. Americas
Other Asia*
China
India
Taiwan
South Korea
Japan
mmtpa
* IncludesNew Zealand, Pakistan, Philippines, Singapore, and Thailand.
‘Shrinking’ Demand
China will dominate y‐on‐y growth through 2020
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www.FGEnergy.com
‐
10
20
30
40
50
60
70
80
2009 2010 2011 2012 2013 2014 2015 2020
LNG Uncontracted Demand (mmtpa)Likely New Markets Uncontracted DemandIndia Uncontracted Demand
China Uncontracted Demand
Taiwan Uncontracted Demand
Korea Uncontracted Demand
Japan Uncontracted Demand
Likely uncontracted demand including contract renewals.
Asia Pacific LNG Import Forecasts Scenarios (mmtpa)
Base CaseTotal Asia Pacific
Japan South Korea Taiwan India ChinaLikely New Markets* Mature Markets
Emerging/ New Markets Total Asia
West American Coast
Total Asia Pacific
2008 69.3 27.3 9.0 8.2 3.3 105.6 11.5 117.1 0.2 117.22009 64.6 25.8 8.6 9.1 5.5 0.0 99.0 14.6 113.6 0.5 114.12010 65.6 30.5 9.9 9.2 8.8 0.0 106.0 17.9 123.9 2.6 126.52011 66.6 31.2 10.3 10.0 13.0 0.0 108.1 23.0 131.1 3.8 134.92012 67.7 31.7 10.5 11.1 16.9 0.3 109.9 28.4 138.2 6.0 144.22015 70.1 32.8 11.6 12.7 25.2 5.9 114.5 43.8 158.2 11.7 169.92020 73.9 36.7 14.2 15.1 37.5 11.7 124.8 64.3 189.1 14.3 203.5
Asia Needs To Secure LNG Supplies
Top two countries that will be under pressure to secure additional supplies are Japan and Korea.
* Includes Singapore, Thailand, and Pakistan.
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www.FGEnergy.com
Australia & Qatar: The Biggest Sources of Future Supply
In Operation/Under Commissioning Under Construction Planned Total
Qatar 61.5 15.6 77.1
Nigeria 22.2 40.5 ‐ 50.5 62.7 ‐ 72.7
Australia 20.1 19.8 59.0 ‐ 110.0+ 99.4 ‐ 149.9+
Russia 9.6 15.0 ‐ 80.4 24.6 ‐ 90.0
Iran 42.8 ‐ 44.8 42.8 ‐ 44.8
> 3 /4 of planned capacity globally
Liquefaction Capacity (in mmtpa)
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Prospective Sellers Must Capitalize on Qatari Pricing Inflexibility
Qatar still wants to diversify across markets…but Atlantic Basin market prospects disfavor large‐scale Qatari deliveries
Will Qatar respond?• US$4‐6/mmBtu differential → US$35‐53 million per Q‐max cargo
Unforeseen developments
• US shale gas revolution
• China and India proven market players
• Indonesia shifting focus to domestic market
• Most large LNG projects stalled
• Extraordinary increase in project costs
• Wide divergence between oil and natural gas prices
46.8 mmt
10
www.FGEnergy.com
10
15
20
25
30
35
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
mmt
East of Suez Implied Supply Surplus*
Implied surplus w/o Qatari mega‐train diversions (existing plus possible projects)
Implied surplus w/o Qatari mega‐train diversions (existing plus likely projects)
Implied surplus w/o Qatari mega‐train diversions (existing plus projects under construction)
Note: *Implied surplus based on supplies from East of Suez supply projects and LNG demand from mature markets, India, China, and Middle East.
Projects: Startups and Ramp‐ups from 2011 to 20131. Pluto T1 ‐ 4.8 mmtpa2. Peru LNG T1 ‐ 4.45 mmtpa3. Qatargas III T6 ‐ 7.8 mmtpa4. Qatargas IV T7 ‐ 7.8 mmtpa5. Yemen LNG T2 ‐ 3.35 mmtpa6. RasGas III T7 ‐ 7.8 mmpta
Projects: Startups and Ramp‐ups from 2014 to 2020
Under Construction1. Gorgon T1‐3 ‐ 15 mmtpa2. PNG LNG ‐ 7.5 mmtpaLikely1. QCLNG T1‐3 ‐ 12.75 mmtpa2. Wheatstone T1‐2 ‐ 8.6 mmtpaPossible1. Donggi ‐ 2.1 mmtpa2. GLNG T1‐2 ‐ 7.2 mmtpa3. Prelude LNG ‐ 3.5 mmtpa4. Pluto T2 ‐ 4.8 mmtpa5. CS CSG LNG ‐ 8 mmtpa
Existing + under construction
+ likely projects
+ possible projects
If Qatar moves divertible volumes from West to East, add under:- 40% scenario: ~13 mmt- 80% scenario: ~28 mmt
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Australian LNG Issues
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www.FGEnergy.com
Australian Export Potential Exceeds Qatari Capacity
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www.FGEnergy.com
Most Likely To Succeed
• Queensland Curtis LNG (8.5 mmtpa; 100% sold out)• Gladstone LNG (7.2 mmtpa; 70% committed)• CS CSG LNG (12‐16 mmtpa; offtake expected by Shell & PetroChina)
Possible Projects
• Asia Pacific LNG (up to 16 mmtpa; no sales)
Unlikely To Proceed
• Abbot’s Point LNG (2 mmtpa; no sales)• Fisherman’s Landing LNG (5.25 mmtpa; no sales)• Southern Cross LNG (0.7‐1.3 mmtpa; no tolling agreements)
Too Early To Say
• Kimberly LNG (LNGL/OBL; capacity TBD; no sales)• Newcastle LNG (up to 4.0 mmtpa; no sales• Metgasco stand‐alone/Flex LNG (3.0 mmtpa; no sales)
Experienced developers; access to sufficient gas reserves; LNG sales agreements
Plentiful gas reserves; experienced LNG players; no sales agreements
Inadequate access to gas reserves; inexperienced sponsors; no LNG sales
Project in formative stage; sponsors (largely) new to LNG sector
CBM Accounts for ~45% of Planned Export Capacity
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Planned CBM projects exceed 60.0 mmtpa, or >45.0% of all proposed Australian export capacity
www.FGEnergy.com
Australian Export Capacity to Reach ~70 mmt by 2020
• Around 80% of total capacity already committed• Expansion potential for certain projects (GLNG, Gorgon, Pluto, QCLNG, and Wheatstone)
0
10
20
30
40
50
60
70
80
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
mmt
Gladstone LNG
Prelude
Wheatstone
QCLNG
Gorgon
Pluto
Darwin LNG
NWS
Total contracts
15
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Future Trends and Key Issues
www.FGEnergy.com
Asian LNG Demand Unaffected By Unconventional Gas Production
Unconventional Chinese gas production could hit 2.6 bscf/d by 2020
Potential exists for consequent Asian LNG demand displacement, but it’s too early to determine extent
Unconventional Indian gas production could exceed 0.4 bscf/d by 20202009 5
2011‐2012
130
2015 1772017 2832020 424
2030530‐706
India CBM Resources (tcf)
Production (mmscf/d)
Total resource 120
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www.FGEnergy.com
Ongoing High CAPEX Costs Will Affect LNG Pricing
Future relief?
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
US$/t
Startup
Trinidad (Atlantic LN
G, T4)
Om
an (Om
an LNG
)
Qatar (R
asGas T3 &
T4)
Egypt (Idku)
Egypt (Dam
ietta)
Qatar (Q
atargas II)
Australia (N
WS, T5)
Yemen LN
G
Peru LNG Algeria (Skikda R
ebuilt)
Australia (Pluto,T1)
Indonesia (DonggiLN
G)
Nigeria (B
rass LNG
)
Equatorial Guinea
Indonesia Tangguh LNG
Angola LN
G
Algeria (A
rzew G
L3Z)
Australia (Ichthys)
PNG
LNG
Australia
(Brow
se)
Projects in operationProjects under constructionProjects planned
Australia (G
orgon)
2015 and Beyond
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www.FGEnergy.com
Projected Price of New Asian LNG Contracts vs HH, NBP, and JCC ($2010)
2
4
6
8
10
12
14
16
18
20
22
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
US$/m
mBtu
Delivery time
Crude Oil Parity (JCC) Asian LNG Price (Long‐Term Contracts)Asian LNG Price (Short‐Term Contracts) NBP (UK)HH (US)
Negotiation Period (LT)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
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www.FGEnergy.com
A New Price Marker in the Making?
Atlantic Basin
NBP/Zee/TTF Index
&
Brent/GO/FO Index
JCC/No Real Time Index
HH Index
Middle East
Middle East price marker in the
making?
Asia Pacific
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www.FGEnergy.com
Key Observations
Takeaway points…
Asian LNG buyers will sign more LNG supply contractsUnconventional gas won’t materially affect Asian LNG demand through 2020Australia and Qatar will be the primary competitors for Asian market share through 2020
Not all Australian LNG supply projects are created equalAustralian export capacity could approach Qatar’s by 2020
Oil and LNG prices are inextricably linked in AsiaShorter‐term contracts may employ alternate indexesOngoing high CAPEX prices underline need for oil‐indexed pricing
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Thank You
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