Asian LNG Market Outlook

Shasha Fesharaki Principal Consultant & COO

FGE

Platts 12th Annual LNG Conference February 12, 2013

Hilton Post Oak, Houston

This presentation material contains confidential and privileged information intended solely for Platts 12th Annual LNG Conference attendees. The dissemination, distribution, or copying by any means whatsoever without FACTS Global Energy’s prior written consent is strictly prohibited.

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world. The company was the first consulting firm to specialize in the downstream oil and gas markets with a focus on the East of Suez region.

Over the past decades, FGE has provided studies and advisory services to national governments, national oil and gas companies, major oil and gas companies, independent oil and gas companies, financial institutions, international and intergovernmental organizations, utilities, consultancies, and engineering design firms.

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Beijing

Singapore

Perth

Honolulu Dubai

London

Main Offices

Rep/Branch Offices

Global/Asian Headquarters

Tokyo California New York

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Hub vs. Oil Indexation for Asian Buyers

Asia’s Unconventional Gas Outlook

Asian LNG Demand/Supply

Overview

Concluding Remarks

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Asia Europe Americas Middle East

Global LNG Trade: 2000-2012

2%

Global LNG Trade: Asia is Still King

72%

23%

5%

2000

64%

27%

8% 1%

2011

Note: 2000-2011 data are actual, 2012 is forecast. 4

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Regional LNG Import Outlook (mmtpa)*

Europe

Middle East

Asia Americas

*Base-case scenario

87 123 152

2015 2020 2030

193 245 314

2015 2020 2030

18 20 19

2015 2020 2030

6 14 30

2015 2020 2030

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(8.0)

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020

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Asia Pacific LNG Imports by Country (Year-on-Year Change)

JKT CN+IN New Markets*

* Indonesia, Malaysia, Singapore, and Thailand.

Rising LNG price; ramping-up of alternative pipeline

gas imports

Longer-Term Outlook: Who Leads the Growth?

‘Shrinking’ demand

Recovery in LNG demand →↑

Industrial sector gas demand; cost competitiveness;

seasonality drivers

New terminals startups; domestic gas supply deficits

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Nuclear shutdowns

New terminals startups

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2013 2014 2015 2016 2018 2020

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LNG Uncontracted DemandNew Markets Uncontracted DemandIndia Uncontracted DemandChina Uncontracted DemandTaiwan Uncontracted DemandKorea Uncontracted DemandJapan Uncontracted Demand

Likely uncontracted demand including contract renewals.

Asia Overview: Imports and Uncontracted Demand

*Includes Indonesia, Malaysia, Singapore, and Thailand (started importing LNG in 2011). ** Other Potential Markets include Pakistan, Vietnam, Bangladesh, and Philippines.

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Asia Pacific LNG Base Case Import Forecasts Scenarios (mmtpa)

Year Japan South Korea Taiwan India China New

Markets*

Total Asia

Mature Markets

Emerging Markets

Other Potential

Markets**

Total Asia Pacific

Potential

2009 64.6 25.8 8.6 9.1 5.5 0.0 99.0 14.6 0.0 113.6

2010 70.1 32.6 10.8 8.9 9.4 0.0 113.5 18.3 0.0 131.8

2011 78.5 36.7 12.0 13.5 12.2 0.7 127.2 26.4 0.0 153.6

2012 87.3 36.3 12.5 13.9 14.7 1.0 136.1 28.6 0.0 164.7

2015 85.5 39.5 13.1 18.3 25.8 10.8 138.1 54.9 0.0 193.0

2020 89.3 43.5 14.6 24.5 42.0 23.0 147.4 89.5 7.7 244.6

Besides Japan and Korea, who will be under pressure to secure additional supplies, new demand is emerging from Southeast Asian importers.

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Who Will Surpass Qatar?

In Operation Under Construction Announced Total

Qatar 77.1 - - 77.1

Australia 24.5 61.8 62.0 148.3

Nigeria 22.3 - 40.5 62.8

Russia 9.6 - 47.4 57.0

United States - 9.0 232.0 241.0

Canada - - 55.0 55.0

East Africa - - 45.0 45.0

Liquefaction Capacity (mmtpa)

• North America and East Africa emerging as new LNG export provinces. • Shale gas driving force in North American gas supply while East African reserves

mostly offshore in Mozambique & Tanzania.

• Will LNG price be linked to oil or a Hub basis?

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Asia’s Unconventional Gas Outlook

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North AmericaUSA 482Canada 388Mexico 681 150 - 459Total 1551** Recently downgraded by Geoscience Australia

EuropeOriginal EIA

Estimates (tcf)Non-EIA

Revisions (tcf)France 180Germany 8Netherlands 17Norway 83UK 20Denmark 23Sweden 41Poland 187 12 - 27Turkey 15Ukraine 42Lithuania 4Others* 19Total 639* Bulgaria, Hungary and Romania.

South AmericaOriginal EIA

Estimates (tcf)Non-EIA

Revisions (tcf)Venezuela 11Colombia 19Argentina 774Brazil 226Chile 64Uruguay 21Paraguay 62Bolivia 48Total 1225

AfricaOriginal EIA

Estimates (tcf)Non-EIA

Revisions (tcf)South Africa 485Libya 290Tunisia 18Algeria 231Morocco 11Western Sahara 7Mauritania 0Total 1042

Asia (incl. AU)Original EIA

Estimates (tcf)Non-EIA

Revisions (tcf)China 1275 886India 63Pakistan 51Australia 396**Total 1785

Non-Conventional Supply: Global Technologically Recoverable Shale Gas Resources (tcf)

Total Recoverable Resource: 6,242 tcf

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12 Already banned!

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EIA Shale Study: Outside the US Focus: Shale gas potential beyond the US

• EIA Shale Gas Study in 2011 estimates technically recoverable shale in 32 countries outside the US

• China holds the largest reserves of 1,275 tcf FGE’s forecast: China

… but this still lags behind CBM production:

China’s production limited by: 1. Industry still in initial stages of

development with a wait-and-see approach by investors

2. Geological challenges—fundamentally different from the US

3. Scarcity of water & other environmental concerns

4. Limited technical know-how 5. Infrastructural constraints (e.g.,

pipeline access) 6. Lack of competitive

independent developers 7. Potential acreage access

conflicts with coal miners

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Total resource* 4,747 2012 0.0Recoverable^ 886 2020 1.8Proven geological reserves nil 2030 4.4

China Shale Resources (tcf) Production** (bscf/d)

Total resource* 1,300 2012 1.3Recoverable 385 2020 2.7Proven geological reserves 10.2 2030 3.9

* Within depth of 2,000 m** 2012 productions are preliminary, 2020 & 2030 are forecasts.^Estimate from China's Ministry of Land and Resources

China CBM Resources (tcf) Production** (bscf/d)

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Outlook for China’s Unconventional Gas Production

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Shale Gas Output CBM Output Share in Domestic Production(bscf/d) Share

*2012 data are estimates.

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Hub vs. Oil Indexation for Asian Buyers

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JCC

• Major price indexation for Asian buyers • Hard to manipulate

Brent

• Observed in some long-term deals and several short-term deals • To hedge against price volatility

JLC/JKM?

• To ensure contract formulae are close to Japanese benchmark prices • JLC: translates to a slope of over 12 for the past five years • JKM: a new marker

HH/NBP

• Pre-Japan disaster: Several short-term deals observed • Long-term contracts isolated to recent US deals • Recently attracted buyers’ interests as long-term price components

East of Suez–Emerging New Price Indexations

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Direct Purchases From the US …not always cheaper but does provide some savings at high oil prices

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e, U

S$/m

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Oil Price Scenario (US$/bbl)

Hypothetical US LNG Price (FOB HH @ $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 US$6.50/mmBtu

Range of HH prices + cost to land in Asia

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Pacific Region to Stay Mostly Oil-Linked

16 *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

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Take-Away Points

• Asia will still account for the majority of global LNG imports in 2020. Incremental growth stems from China and India but Japan and Korea under the most pressure to contract further supplies.

• Asia’s unconventional gas production is primarily a post 2020 story with China offering the greatest potential though a repeat of what is happening in North America is unlikely.

• New LNG supply centers in North America and East Africa will give Asian buyers increased flexibility and price diversification.

• US exports could be equivalent to 15% of Asian demand in 2025 though all wont go to Asia. South America and Europe likely to be attractive destination for US exports.

• Many buyers now seek hub-related pricing. Some are under the impression that this guarantees lower prices. FGE believes that the price impact of US LNG exports on Asian prices will be marginal.

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Thank You

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