Global LNG Market Overview

London, 18 March 2014

Andrew Walker – VP Global LNG

Methane Shirley Elisabeth LNG vessel

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2

3

• Review of 2013

– Supply

– Markets

– Trade dynamics

– Prices

• Outlook for 2014

– Key influences

• And beyond ….

– When will the current market

tightness end?

Global LNG market update

LNG supply by year: 2005 to 2013

4

120

140

160

180

200

220

240

260

2005 2006 2007 2008 2009 2010 2011 2012 2013

mtp

a

Source: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Nig

eria

Eg

yp

t

No

rwa

y

Ind

on

esia

US

(K

en

ai)

UA

E

Ru

ssia

Alg

eria

Lib

ya

EG

Bru

ne

i

T&

T

An

gola

Peru

Om

an

Qa

tar

Au

str

alia

Ma

laysia

Ye

me

n

mt

Supply by country: 2013 YOY

5

Total = +1.1 mtpa

+7.9 mtpa -6.9 mtpa

Source: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

Markets: 2013 YOY

-5

0

5

Spain

UK

Fra

nce

US

A

Tu

rke

y

Italy

Ind

ia

Gre

ece

Be

lgiu

m

Ca

na

da

Ku

wa

it

Po

rtu

ga

l

Ch

ile

Ne

the

rla

nd

s

UA

E

Ta

iwa

n

Do

m R

ep

Me

xic

o E

P R

ico

Isra

el

Th

aila

nd

Ja

pa

n

Ind

on

esia

Sin

gap

ore

Arg

en

tin

a

Ma

laysia

Bra

zil

Me

xic

o W

Chin

a

Ko

rea

mt

6

Total = +1.1 mtpa

Source: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

+7.8 China/Korea

+5.5 Americas

+4.3 Other Asia

-16.9 mtpa

-4.1 N. Europe

-9.6 M. Europe

+18.0 mtpa

LNG trade balance: 2013 vs 2012

-15

-10

-5

0

5

10

15

Su

pply

Asia

/ M

.E.

La

tin

Am

.

US

/ C

an

N. E

uro

pe

M. E

uro

pe

mt

7

-$5.00

-$4.00

-$3.00

-$2.00

-$1.00

$0.00

$1.00

$2.00

Asia

n s

po

t ($

/mm

Btu

)

JC

C (

$/b

bl)

YOY prices

Source: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

Platts, Petroleum Association of Japan

Latin America = Argentina, Brazil, Chile, Mexico, Puerto Rico, Dominican Republic

M. Europe = France, Italy, Spain, Portugal, Greece, Turkey

European LNG imports: 2010 to 2013

0

2

4

6

8

10

12

Ja

n-1

0

Ja

n-1

1

Ja

n-1

2

Ja

n-1

3

bc

fd

Netherlands

UK

Belgium

Turkey

Spain

Portugal

Italy

Greece

France

8

3-month moving average

Main Europe -21.0

North Europe

-9.8

Spain

France

Italy

Turkey Portugal Greece

United Kingdom

Belgium

-35

-30

-25

-20

-15

-10

-5

0

5

mt

2013 vs. 2010

Source: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

Netherlands

LNG market has tightened

9

Source: 2008-2013: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

*Forecast – BG Group outlook 2013

LNG imports by region 2008-15 (mtpa)

0

50

100

150

200

250

300

2008 2009 2010 2011 2012 2013 2014 2015

Total supply

Asia Pacific

Europe

North America

Supply outpacing Asia demand growth Asia demand growth outpacing supply

Market loosening Market tightening

M. East

FORECAST*

S.America

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014 2015

$/m

mb

tu

Gas and LNG prices

10

Oil parity

NBP

HH

Asia long-

term proxy Asia spot

Global

recession

Asia

recovery

Fukushima

earthquake

Note: Asia long-term proxy = 14.85% JCC + 0.50

Oil parity = JCC = Japanese average crude price

Source: Platts, Heren, Petroleum Association of Japan and Bloomberg (as of Mar 6, 2014)

2013: Year in review

• Supply

– Effectively flat YoY – two new trains had limited impact

– Unplanned outages and declines weighed on supply

• Markets

– Growth & diversification: 10 new terminals & three new markets added

– Nuclear impacts in Japan and Korea

– Unexpected Latin American demand; Mexican tender and Brazil drought

• Trade dynamics

– Continued market tightness – Europe the balancing market

– Record Atlantic-to-Pacific basin trade flows

– European re-exports

– Asian 2013 average spot price up nearly $1.00/MMBtu YoY

11

Global LNG re-exports

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

Ja

n

Ma

r

Ma

y

Ju

l

Sep

Nov

Ja

n

Ma

r

Ma

y

Ju

l

Sep

Nov

Ja

n

Ma

r

Ma

y

Ju

l

Sep

Nov

Ja

n

Ma

r

Ma

y

Ju

l

Sep

Nov

Ja

n

Ma

r

Ma

y

Ju

l

Sep

Nov

Ja

n

Ma

r

Ma

y

Ju

l

Sep

Nov

2008 2009 2010 2011 2012 2013

bcfd

Belgium RE Brazil RE France RE Mexico RE Netherlands RE

Portugal RE South Korea RE Spain RE US RE

Re-exports (mtpa)

2013 4.4

2012 3.5

2011 2.3

2010 1.0

2009 0.2

2008 0.3

Source: BG Group interpretation of IHS Waterborne data (Feb 2014), delivered volumes

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Outlook for 2014: key influences

• Supply

– Timing of Australasian ‘LNG’ wave: PNG and QCLNG start-ups

– Angola LNG ramp-up

– Overall industry performance: declines and unplanned outages

• Markets

– Start-up of Japanese nuclear capacity

– Chinese gas and LNG demand growth

– Latin America: tenders/continued drought

• Trade dynamics

– European LNG minimum – how low can Europe go?

– How much volume will Qatar send to the UK?

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Looking beyond 2014 …

• When will the current market tightness end?

• Supply factors

– Ramp-up of Australian supply

– Project FIDs for next material wave: US, Canada, Mozambique

(In 2013 10 new projects planned FID – one took it)

• Market factors

– Asia LNG growth (China, south-east Asia, Japan)

– New markets: FSRUs are reducing lead-time and cost of access

• Trade dynamics

– Australia arrests growing tightness – but new supply is required to reverse it

– LNG industry likely to be tight through the end of the decade

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Summary

• What did the market tell us in 2013?

– Underlying tightness

– Europe the balancing market

– Seasonal overlay: weather, storage, market sentiment & foresight

– Increasing resilience: surprises are the ‘new normal’

• When will the current tightness end?

– Dependent upon timing of new supply vs market growth

– New supply will take longer than many envisage

– LNG market will remain tighter, for longer than many assume

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