CHENIERE ENERGY, INC. - eneken.ieej.or.jpeneken.ieej.or.jp/data/7600.pdf · CHENIERE ENERGY, INC....

CHENIERE ENERGY, INC.

IEEJ – 20 October 2017

Andrew Walker

VP Strategy and Communication

LNG Market Outlook and US LNG’s Function -

The Perspective from Cheniere

IEEJ：November 2017 © IEEJ2017

Today’s Presentation

Update on US LNG

projects

U.S. Gas Market

Overview

Impact of U.S. LNG on

Global LNG Dynamics

2

Sabine Pass First Cargo: 24th Feb 2016


Safe Harbor Statements Forward-Looking Statements

This presentation contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities

Exchange Act of 1934, as amended. All statements, other than statements of historical or present facts or conditions, included or incorporated by reference herein are “forward-looking statements.” Included among

“forward-looking statements” are, among other things:

• statements regarding the ability of Cheniere Energy Partners, L.P. to pay distributions to its unitholders or Cheniere Energy Partners LP Holdings, LLC or Cheniere Energy, Inc. to pay dividends to its

shareholders or participate in share or unit buybacks;

• statements regarding Cheniere Energy, Inc.’s, Cheniere Energy Partners LP Holdings, LLC’s or Cheniere Energy Partners, L.P.’s expected receipt of cash distributions from their respective subsidiaries;

• statements that Cheniere Energy Partners, L.P. expects to commence or complete construction of its proposed liquefied natural gas (“LNG”) terminals, liquefaction facilities, pipeline facilities or other projects,

or any expansions or portions thereof, by certain dates or at all;

• statements that Cheniere Energy, Inc. expects to commence or complete construction of its proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions then

of, by certain dates or at all;

• statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide,

or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure, or demand for and prices related to natural gas, LNG or other hydrocarbon products;

• statements regarding any financing transactions or arrangements, or ability to enter into such transactions;

• statements relating to the construction of our proposed liquefaction facilities and natural gas liquefaction trains (“Trains”) and the construction of the Corpus Christi Pipeline, including statements concerning the

engagement of any engineering, procurement and construction ("EPC") contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and

anticipated costs related thereto;

• statements regarding any agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding

the amounts of total LNG regasification, natural gas, liquefaction or storage capacities that are, or may become, subject to contracts;

• statements regarding counterparties to our commercial contracts, construction contracts and other contracts;

• statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines;

• statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;

• statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections or objectives, including anticipated revenues, capital expenditures,

maintenance and operating costs, run-rate SG&A estimates, cash flows, EBITDA, Adjusted EBITDA, run-rate EBITDA, distributable cash flow, and distributable cash flow per share and unit, any or all of which

are subject to change;

• statements regarding projections of revenues, expenses, earnings or losses, working capital or other financial items;

• statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;

• statements regarding our anticipated LNG and natural gas marketing activities; and

• any other statements that relate to non-historical or future information.

These forward-looking statements are often identified by the use of terms and phrases such as “achieve,” “anticipate,” “believe,” “contemplate,” “develop,” “estimate,” “example,” “expect,” “forecast,” “goals,” ”guidance,”

“opportunities,” “plan,” “potential,” “project,” “propose,” “subject to,” “strategy,” “target,” and similar terms and phrases, or by use of future tense. Although we believe that the expectations reflected in these forward-looking

statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak

only as of the date of this presentation. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” in the

Cheniere Energy, Inc., Cheniere Energy Partners, L.P. and Cheniere Energy Partners LP Holdings, LLC Annual Reports on Form 10-K filed with the SEC on February 24, 2017, which are incorporated by reference into this

presentation. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these ”Risk Factors.” These forward-looking statements are made as of the date of

this presentation, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information,

future events or otherwise.

Reconciliation to U.S. GAAP Financial Information

The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, as amended. Schedules are included in the appendix hereto that reconcile

the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.


LNG Trade Today – A Snapshot

53 years old

264 mt (35 bcf/d) in 2016

19 exporting countries

40 importing countries*

~435 trading ships**

~10% of all gas consumed worldwide

~30% of internationally traded gas

4

Source: GIIGNL Annual Report 2016, BP Statistical Review of World Energy June 2017, Affinity LNG

*including small scale importers; Norway, Sweden, Finland

**excludes FSRUs, small vessels, laid-up vessels



Update on US LNG

projects

U.S. Gas Market

Overview


Global LNG Dynamics

5



Cheniere LNG Platform Along United States Gulf Coast

6

Sabine Pass Liquefaction Project Trains 1-4 substantial completion achieved

Train 5 is under construction

Train 6 is fully permitted, ready to commercialize

Land secured for further expansion

Corpus Christi LNG Terminal Trains 1 and 2 are under construction

First LNG expected in late 2018

Train 3 is fully permitted and being commercialized

Trains 4-5 (or mid-scale equivalent) : Initiated

development

Land secured for further expansion

• First operational lower-48 export

facility (Sabine Pass)

• First greenfield export project under

construction (Corpus Christi)

• 7 train platform (operating / under

construction) = 31.5 mtpa

• Cheniere now the largest gas

consumer in the U.S.


Sabine Pass Liquefaction Project

7


8

Sabine Pass Liquefaction – 2Q 2017


Corpus Christi Liquefaction – 2Q 2017

9


Cheniere LNG Projects: Attractive Features

Cheniere LNG SPAs: LNG price tied to Henry Hub, offer destination flexibility, upstream gas procurement

services, no lifting requirements

SPAs with investment grade off-takers featuring parent as counterparty or guarantor & pricing with HH +

fixed fee (no price reopeners)

EPC contractor: proven track record of execution; proven liquefaction technology

10

PT Pertamina

(Persero) Endesa S.A. Iberdrola S.A. Gas Natural

Fenosa

Woodside Energy

Trading

Électricité de

France

EDP Energias de

Portugal S.A.

BG Gulf Coast LNG Gas Natural Fenosa GAIL (India) Limited Korea Gas Corporation Total Gas & Power N.A. Centrica plc

Corpus Christi Customers

Sabine Pass Customers


https://mercadotecnia.portada-online.com/files/2013/06/logo-endesa.jpg

https://mercadotecnia.portada-online.com/files/2013/06/logo-endesa.jpg

U.S. LNG Capacity Under Construction

Source: Cheniere Research estimates for first export.

Actual start dates may differ depending on construction schedules

Cove Point

Sabine Pass T1-4

Elba Island Phase 2

Elba Island Phase 1

Cameron

LNG T3

Freeport LNG T1

Corpus Christi T1

Freeport LNG T2

Corpus Christi T2

Cameron LNG T2

Sabine Pass T5

Freeport LNG T3 Cheniere Export Project

Non-Cheniere Export Project

11

Cameron LNG T1

-

10

20

30

40

50

60

70

Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

MTP

A

Sabine Pass T1-4

Elba Island Phase 2

Cove Point

Elba Island Phase 1

Freeport LNG T1

Cameron LNG T1

Corpus Christi T1-2

Cameron

LNG T3

Cameron LNG T2

Sabine Pass T5

Freeport LNG T3

Freeport LNG T2


9%

15%

26% 17%

33%

US LNG - A Wide Range of Customers

US FOB off-takers

by type

~50% sold to Asian entities

~42% sold to end-users

Of 58 % sold to resellers;

at least 57% resold /

allocated

e.g. Chubu

e.g. Shell

e.g. GNF

e.g. Iberdrola

e.g. Mitsui

Asian

end-user

Asian

reseller

Portfolio

player

European

buyer;

domestic /

portfolio

European

end-user

MTPA Share of US

supply

in net portfolio

Source. Cheniere interpretation of Wood Mackenzie Data (2017). Top 15 portfolios shown. Volumes are net of re-sales.

Portfolio Composition

of Major Buyers (2020)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-

5

10

15

20

25

30

35

Non-US Supply US Supply % US supply

12


67

391

106

33

129

56

0

50

100

150

200

250

300

350

400

Total No FERC filing Pre-filed Formal filing Approved FID

mtp

a

Current Status of US LNG Projects

13

Gulf LNG

Venture Global (Calcasieu)

Texas LNG Brownsville

Rio Grande LNG

Annova LNG

Port Arthur LNG

Eagle LNG

Venture Global

(Plaquemines)

Driftwood LNG

Freeport 4

Lake Charles

CC T3

SP T6

Cameron T4/5

Magnolia

Golden Pass SP T1-5

Cameron T1-3

Freeport T1-3

Cove Point

CC T1-2

Elba

Corpus Christi 4-5

G2 LNG

Jordan Cove *

Fourchon

Commonwealth

Source: US FERC, US DOE, and press reports

FERC Status (as of September 2017) Note: Excludes Alaska

*Previously denied by FERC and had to re-file

13.5 mtpa online

53.5 mtpa under construction

over 300 mtpa proposed


Projected Company Ranking by LNG Sales in 2020

0

10

20

30

40

50

60

mtp

a

Projected Top LNG Suppliers by Company - 2020

Source: Cheniere Research, Wood Mackenzie

Note: volumes include ‘equity’ LNG, third-party offtake and own project offtake. Tolling facility production reflected in offtaker volumes.

Volumes for Projects Existing and Under Construction

On Track to Be a Top-5 Seller Less Than 5 Years After First Cargo

14



Update on US LNG

projects

U.S. Gas Market

Overview


Global LNG Dynamics

15



Shale Gas has Doubled U.S. Natural Gas Resources Since 2006 …

16

1532

2080 2202

2691

2884

3141

0

500

1000

1500

2000

2500

3000

3500

2006 2008 2010 2012 2014 2016

Tcf

Non-shale Shale EIA Proved Reserves

Total U.S. future gas supply (reserves + resources) stands at record 3,141 Tcf

Represents 100+ years of current domestic needs

Source: Potential Gas Committee, 2017; EIA (Proved Reserves)

Shale accounts

for 64% of U.S.

Gas Resources

U.S. future supply of natural gas

Date of outlook


… And Has Fundamentally Reset Price Expectations

17

800 Tcf @ <$3.00/mmBtu

= 25 years supply at 2015

production levels

Break-even price at Henry Hub for

North American natural gas resources

Ave

rag

e b

rea

k-e

ve

n H

en

ry H

ub

pri

ce

($

/MM

Btu

)

12

9

6

3

0

-3

-12

-9

-6

0 500 1,000 1,500 2,000

Tcf

Henry Hub Natural Gas Price

0

2

4

6

8

10

12

14

$/M

MB

tu

Actuals

Futures

Source: EIA Historical Henry Hub to Oct. 2017, NYMEX Henry Hub Futures as of Oct.11, 2017


0

10

20

30

40

50

60

70

80

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Bc

f/d

Total U.S. Natural Gas Marketed Production

U.S. Natural Gas Production

18

Source: EIA Natural Gas Monthly Sept. 2017

Shale Wells

Supplied

51% of US

Gas in 2016

1972:

62 Bcf/d

2005:

52 Bcf/d

2016:

78 Bcf/d

-10 Bcf/d

+26 Bcf/d

Non-Shale

Shale


Supply and Demand since 2005

19

Supply Consumption

Source: EIA

0

5

10

15

20

25

30

35

40

45

Shale

Gas P

roduction

(B

cf/

d)

Other Shale

Marcellus+Utica

Haynesville (LA & TX)

Eagle Ford (TX)

Fayetteville (AR)

Barnett (TX)

Woodford (OK)

Bakken (ND & MT)

-1.3

3.1

11.3

4.1

0.3

-3

-1

1

3

5

7

9

11

13

15

Residential Industrial Power PipelineExports

LNGExports

Bcf/

d

37

-11

26

-20

-10

0

10

20

30

40

Unconventional Conventional Net

Bcf/

d

Marketed Production Growth 2005 to 2016

*Base Year 2005

Shale Gas Production

(3.4 pa) (-1.0 pa)

(2.4 pa)

(annual average

growth 2005-2016)

Incremental natural gas consumption 2005 - 2016


20

Source: Spring Rock; Cheniere Research

(3)

(1)

1

3

5

7

9

11

Jul-2017 Nov-2017 Mar-2018 Jul-2018 Nov-2018 Mar-2019 Jul-2019 Nov-2019

Bc

f/d

Haynesville

Permian

Marcellus,Utica

all other

Nearly 9 Bcf/d net growth expected

through year-end 2019

Dry Gas Growth Will Be Driven By Marcellus/Utica, Permian & Haynesville

Cumulative Production Growth from mid-2017


300

350

400

450

500

550

600

650

700

750

800

30

35

40

45

50

55

60

65

Jan-16 Jul-16 Jan-17 Jul-17

Rig

Co

un

t

WT

I (U

SD

/Bb

l)

US oil rigs vs. NYMEX cal-2018 WTI strip

WTI 2018 Calendar Strip

US Oil Directed Rig Count

21

70

90

110

130

150

170

190

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

3.40

Jan-16 Jul-16 Jan-17 Jul-17

Rig

Co

un

t

Hen

ry H

ub

(U

SD

/MM

Btu

)

US Gas Rigs vs. NYMEX cal-2018 Henry Hub strip

Henry Hub 2018 Calendar Strip

US Gas Directed Rig Count

Permian oil rig

deployments

support associated

gas production

Source: NYMEX, Baker Hughes

Current Production Growth Supported By Prices Below $3.50 Henry, $60 Oil


22

0

5

10

15

20

25

30

35

40

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Bc

f/d

Production Pipeline Capacity

Northeast US Dry Natural Gas Production vs. Pipeline Takeaway Capacity Marcellus/Utica production in New York, Ohio, Pennsylvania, West Virginia

Production temporarily constrained

Incremental pipeline projects will provide up to 7 Bcf/d of additional market access by early 2018

Additional 6 Bcf/d takeaway capacity is expected to enter service from mid-2018 through year-end 2019

5.7 Bcf/d growth projected from

mid-2018 to year-end 2019

Source: Spring Rock; Cheniere Research

Northeast Output Will Soon Be Unconstrained By Pipeline Infrastructure


0

20

40

60

80

100

120

2005 2010 2015 2020 2025 2030 2035 2040

Bcf/

d

Forecasted U.S. Dry Gas Marketed Production

Shale

Non-Shale

EIA U.S. Outlook to 2040

23

EIA base case sees dry gas growing 31 Bcf/d from 2016

Shale gas will be 67% of total dry gas production

Gas production grows at 1.5% CAGR through 2040

U.S. Gas demand grows at 1.5% CAGR

0.3

4.8

2.6

6.5

11.8

-

2

4

6

8

10

12

14

Residential Industrial Power PipelineExports

LNGExports

Bcf/

d

Incremental Natural Gas Consumption by 2040

Source: EIA AEO 2017 *Base Year 2016

EIA Forecast

• Residential demand has peaked;

population shift to warmer climates

& efficiency gains

• Industrial; low prices stimulate

0.9% demand CAGR

• Power at forecast prices; gas

displaces coal in power gen. driving

0.4% CAGR.

Gas consumption outlook Gas production outlook


EIA Price Outlook for Henry Hub and WTI

24

0

5

10

15

20

25

30

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

$/M

MB

tu (

no

min

al)

Source: EIA Annual Energy Outlook 2016,2017; Note: Actuals to 2016 from EIA

EIA Forecast

WTI

HH

AEO 2016

AEO 2017

AEO 2016

AEO 2017


U.S. Natural Gas Production Continues to Evolve

Recent evolution

• Larger wells: average initial production (IP) rates have

more than tripled since 2009

• Longer laterals: average horizontal feet drilled in

Marcellus have doubled since 2009

• Multi-stage fracking: producers have increased number

of stages used in hydraulic fracturing process

• Innovation: operational efficiencies improving drill times

Future evolution - continued technological

advances to reduce costs and increase

efficiencies

• Data processing, better software modelling and real time

monitoring to help with well spacing, space staging,

completion engineering…

• Enhanced recovery factors by experimenting with pump

fluids and recovery methods

• Targeted and steered drilling to make more precise cuts

into deep terrain

• Extracting from multiple benches of production within

same play

• Non-intrusive technologies such as micro-seismic

geophones and electromagnetics.

25



Update on US LNG

projects

U.S. Gas Market

Overview


Global LNG Dynamics

26



LNG: A High Growth Industry

0

50

100

150

200

250

300

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

mtp

a

Other

North America

Europe

Asia Pacific

Source: IHS Markit (2017)

CAGR 9% / 16 mtpa

CAGR 8% / 4 mtpa

CAGR 7% / 9 mtpa

27

LNG trade growth – by importing region


Commercial Evolution Underway in Contract Length

28

0

50

100

150

200

250

300

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

mtp

a

* Contract duration of 4 years or less (GIIGNL) ** Prompt = delivered within 3 months of transaction date

Source: CEDIGAZ World Outlook for 1965 – 1985 (assumes no spot volume), Poten and Partners 1985 – 2000 (2001), GIIGNL 2000 - 2016 (2016)

LNG trade by contract length

Spot &

short-term

trade*

Mid &

long-term

contract

trade

28%

72%

Bilateral deals Slow evolution Growing flexibility

Prompt **

(15% - 18%)


0

50

100

150

200

250

300

2008 2009 2010 2011 2012 2013 2014 2015 2016

mtpa

29

Europe’s Balancing Role in the LNG market

Asia Pacific

Europe

US/Canada

MENA

Supply outpacing Asia demand growth

LNG volumes flow in Europe

Asia demand growth outpacing supply

Europe decants volumes

Market loosening Market tightening

242 241

Latin America

Source: Cheniere interpretation of IHS Waterborne data (Apr 2016), delivered volumes

266

Market Stable


LNG Supply vs. Demand to 2030

0

100

200

300

400

500

2000 2005 2010 2015 2020 2025 2030

mtp

a

30

Qatar

LNG trade

forecast

Australia

New

supply

Supply:

existing and

under

construction

Source: Cheniere Research estimates; Woodmac for historical figures

USA

2015 to 2030

CAGR(%) = 4.4

0

20

40

60

80

100m

tpa

Production capacity 2015/

2020 [1]

2015

2020


LNG Import Outlook by Region

31

Source: Cheniere Research, Cheniere interpretation of Wood Mackenzie data (Q4 2016)

0

50

100

150

200

250

300

350

400

2005 2010 2015 2020 2025 2030

Bunkers Atlantic

Africa

Europe

N. America

S. America

0

50

100

150

200

250

300

350

400

2005 2010 2015 2020 2025 2030

Bunkers Asia

Middle East

Other Asia

China

India

JKT

mtpa

JKT

China

India

Other

Asia

S. America

Asia and Middle East Atlantic Basin mtpa

Europe


32

Opportunities

Demand for gas in Asia set to nearly triple over coming decades

New markets, new buyers and new demand segments for LNG emerging in the region

A more liquid and more responsive global LNG trade will make gas more attractive

But gas growth in Asia should not be taken for granted …..

Challenges

Demand uncertainty a common theme across Asia as energy transition and market liberalisations gather pace

Some new markets will require help with the commercial or technical aspects of LNG

Coal likely to remain cheap – and tempting

Opportunities and Challenges for Gas and LNG in Asia

Gas needs to prove it is affordable, reliable and secure

* Source WEC Energy Scenarios 2016

WEC Energy Outlook (‘Modern Jazz’ Scenario)

6000

5000

4000

3000

2000

1000

0

2014 2020 2030 2040 2050 2060

Rest of World

Europe, Latin

America. MENA,

N. America, Sub-

Saharan Africa

Asia

~160%

~40%

Growth

vs. 2014

Gas Demand*

Bcm


Market Context

33

Market context for LNG buyers has been evolving in recent years …

Growing Supply

Availability

• Increasing market length through 2019 (+)

• Some portfolio players looking to reduce own length

• Expectations of growing liquidity / spot availability

• Healthy slate of potential new supply projects

Growing Price

Uncertainty

• Reducing Oil Indexation Levels; 0.16 at peak falling to ~0.115 now

• Oil price uncertainty

• Inversion of Spot, Oil-indexed and HH-indexed prices;

Growing Demand

Uncertainty

• Liberalising markets: new players, increasing market competition

• Changing fuel mix outlook: ‘fall’ of nuclear and coal, rise of renewables

• Domestic gas balance; maturing fields, unconventional gas uncertainty

Buyers looking to rebalance their purchase portfolios to include greater spot / ST volumes


-5%

5%

15%

25%

35%

45%

0

5

10

15

20

2008 2009 2010 2011 2012 2013 2014 2015 2016 H12017

Sh

are

of

tota

l (%

)

AC

Q (

mm

tpa)

Henry Hub Share of total

8

9

10

11

12

13

14

0

10

20

30

40

50

2008 2009 2010 2011 2012 2013 2014 2015 2016 H12017

Av

era

ge l

en

gth

(yrs

)

AC

Q (

mm

tpa)

< 5 years 5-10 years ≥ 20 years Mov. Av. (RHS)

Contracting behaviour reacting to changing market environment

34 34

Lower Overall Sales Market Length

Lower HH Sales Price Uncertainty

Shorter Duration Contracts Market Uncertainty

0

10

20

30

40

50

2008 2009 2010 2011 2012 2013 2014 2015 2016 H12017

AC

Q (

mm

tpa)

0.6

0.7

0.8

0.9

1.0

1.1

1.2

0

10

20

30

40

50

2008 2009 2010 2011 2012 2013 2014 2015 2016 H12017

Av

era

ge v

olu

me (

mm

tpa)

AC

Q (

mm

tpa)

<1 mmtpa 1 to <2 mmtpa ≥ 2 years Mov. Av. (RHS)

Market Uncertainty Smaller Volume Contracts

Source: Cheniere interpretation of Wood Mackenzie data (2017)

Are these changes structural or cyclical ?

43

15

-65%

Full

year?

Reaction to Reaction to

Reaction to Reaction to


LNG trade is diversifying and fragmenting

35

BG Group interpretation of Wood MacKenzie and IHS data (2015)

*each country considered a single supplier / buyer. Market categories for HHI: US Department of Justice

Supply Markets


U.S. LNG Exports Driving Change in the Industry

Destination-free, flexible volumes

Growing liquidity

FOB and DES hub formation

New markets facilitated by abundant,

competitively priced gas

36

A more responsive, more competitive

more diverse and more resilient LNG

trade system


37

70+ flexible U.S. cargoes per month by 2020 -

underpinning growing industry liquidity

Benefits of U.S. LNG exports

Largescale resource base with strong

Government support for exports

Inter-project competition driving innovation Diversification from oil indexation

1532

2080 2202

2691 2884

3141

0

1000

2000

3000

2006 2008 2010 2012 2014 2016

Non-shale Shale EIA Proved Reserves

U.S. Future Supply of Natural Gas (1)

Source: (1) Potential Gas Committee, 2017; EIA (Proved Reserves), (2) Cheniere Research, Primary FOB Customers Only, 100% UF, 170,000 cm vessel

(3) Cheniere interpretation of Wood Mackenzie data (Q1 2017)

U.S. LNG driving change in the industry

Tcf

Visualization of possible mid-scale trains at Corpus Christi - Source: Cheniere

Mid-scale

trains

0

5

10

15

20

25

30

0

20

40

60

80

2016 2017 2019 2020

US Cargoes /

month (Left Axis)

No of companies

lifting US LNG

(Right Axis)

J A J O J A J O J A J O J A J O J A J O

2018

U.S. Supply & FOB Customers (2)

Carg

oes / M

onth

No. of F

OB

Custo

mers

LNG Contracts by Price Index (3)

0

100

200

300

400

2000 2005 2010 2015 2020 2025

mtp

a

Henry Hub

Europe gas

Hybrid

Oil

LNG demand

Oil index

HH index

LNG trade

forecast


Destination of Sabine Pass Cargoes

Cheniere Office

Cheniere LNG Facility

Portugal,

Kuwait,

UAE,

Pakistan India,

Thailand

Brazil

Argentina

Houston, TX

Santiago, Chile

Washington, DC

London, U.K.

Singapore

Cargo Delivery Destination

China,

Taiwan

Spain

Mexico

Dominican

Republic

Italy, Malta,

Egypt, Turkey,

Jordan

Japan,

South Korea

Since Start Up, More than 190 Cargoes Loaded and Delivered to 25 Countries

Chile

Tokyo, Japan

Sources: Cheniere Research, Kpler

MENA – Middle East – North Africa

Sabine Pass Exports By

Destination Region (Since Startup(1))

(1)Date reflects cargo loading date until September 28 , 2017, representing all cargoes that have loaded and discharged.

LAST

UPDATED:

10/02/2017

Poland, Lithuania,

Netherlands,

United Kingdom

Beijing, China

ASIA 30%

LATIN AMERICA

41%

EUROPE 14%

MENA 15%


7.08

5.59

1.55 1.43 0.67

-0.02 -0.06 -0.60 -0.80 -0.86

-2

0

2

4

6

8

Austr

alia US

Ango

la

Nig

eri

a

Ma

laysia

Om

an

UA

E

No

rwa

y

Trin

ida

d

Indon

esia

mtp

a

39

16.0

13.1

0.5 -0.7 0.1

4.9

-1.8

-4

-2

0

2

4

6

8

10

12

14

16

18

Su

pp

ly

As

ia

ME

NA

Lat

Am

N.A

meri

ca

M.E

uro

pe

N.E

uro

pe

mtp

a

Regional imports balance H1 2017

(Year-over-year)

Source: Waterborne IHS data, delivered volumes

Top 5 growth Bottom 5 growth

LNG Trade Figures H1 2017

Growth by Supply Country H1-2017 (YoY)

4.2

3.1 3.0

-0.3 -0.4 -0.6

-2.1

-4

-2

0

2

4

6

Ch

ina

Japa

n

S.K

ore

a

M.E

uro

pe

Arg

entina

Lithu

ania

Bra

zil

UK

mtp

a

Growth by Import Country H1-2017 (YoY)

3.3

France

Portugal

Italy Spain

Top 4 growth Bottom 4 growth


0

5

10

15

20

25

2014 2015 2016 2017 2018 2019

$/M

MB

tu

Note: Asia L-T Contract Proxy = 14.85% Japan Crude Cocktail (3-month average)+ $0.50/MMBtu; same formula is used with Brent crude oil prices for forward curves

Global Gas Prices (as of 10/10/2017)

40

Oil parity

Asia L-T

Contract

Proxy

Asia

Spot

LNG

TTF

Henry Hub

Forward Curves

Q4 ‘17 Q1 ‘18 Cal. ‘18

Brent $56 /bbl $56 /bbl $56 / bbl

JKM $7.72 $8.60 $6.95

TTF $6.21 $6.36 $5.97

HH $2.99 $3.19 $3.02

5

10

15

Source: Bloomberg, CME, ICE, Platts, Japan Ministry of Finance, Cheniere Research


Global LNG balance – 2015 to Aug 2017

41

0

1

2

3

4

5

6

7

8

2014 2015 2016 2017

MT

/mo

nth

Supply:

Australia + US

Imports:

UK + Netherlands

+ Belgium

Where did

the

incremental

global supply

go?

~60 MT

Note: countries with less than +/-3 mt increment

were aggregated

Rising supply not yet

overflowing into N. Europe

-20 -10 0 10 20

Japan

Brazil

South Korea

Mexico

Others -ve

France

Italy

UAE

Taiwan

Thailand

Spain

Pakistan

Jordan

India

Egypt

China

Others +ve

MT imported Jan 2015 to Aug 2017 above 2014 levels

Incremental imports since 2014

Source: Waterborne Data, Graph based on Akos Losz/ Teddy Kott – CGEP (2017)

+100

MT

-40

MT

Net

~60

MT


10 Ways U.S. LNG is Changing the Global Market

1. Significant new supply source reduces the market power of incumbents

2. Competitive cost sets price marker for new LNG supplies

3. Transparent pricing improves price discovery

4. Destination flexible supply reduces the rigidity of current trade

5. Growth in liquidity will result in development of trading and risk management tools …

6. … and aid the formation of LNG trade hubs in Asia

7. Volume flexibility provides buyers a ‘safety valve’ on supply commitments

8. HH indexed pricing weakens the influence of oil price on the global gas market

9. HH pricing construct reduces pricing volatility

10. Increasing influence of US energy diplomacy

42

Flexibility Liquidity Transparency A more competitive

and resilient trade

system


Drivers

Significant supply at ‘open market’ location

(USGC)

LNG & gas hub initiatives in Asia

New players interested in new instruments

Increase in flexible supply

Any significant disconnect between spot and

term prices

Inhibitors

× Limited buyer-seller alignment

× Current low industry liquidity

× Lack of consensus on location for an Asian LNG

hub

• Market access

• Deregulated Pricing

• Multiple Buyers / Sellers

× Existing long-term contracts

× Established pricing indexes

× Quality constraints

× Storage constraints

× Financing secured through long-term oil indexed

/ HH-plus contracts

43

Will a Liquid Hub for LNG Form Over the Next Decade?

Inhibitors will likely not stop Asian hubs from forming –

but will determine pace and location of hub developments


44

Slowdown in FIDs

0

5

10

15

20

25

30

35

40

45

50

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Other Aus US Qatar

Qatar Hiatus Australia US

FIDs per annum

Source: Cheniere interpretation of Wood Mackenzie data (Q1 2017)

mtpa

Hiatus


U.S. LNG Advantaged by Low Costs

800 Tcf @ <$3.00/mmBtu = 25

years supply at 2015

production levels

Source: IHS Energy : Shale Gas Reloaded (2016)

Break-even price at Henry Hub for

North American natural gas resources

Ave

rag

e b

rea

k-e

ve

n H

en

ry H

ub

pri

ce

($

/MM

Btu

)

Source: Poten & Partners

45

12

9

6

3

0

-3

-12

-9

-6

0 500 1,000 1,500 2,000

Tcf

Liquefaction plant EPC* costs

*Engineering, procurement and construction costs for liquefaction plant.

Does not include upstream development, pipelines or financing and owner’s costs.

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

$3,000

$2,500

$2,000

$1,500

$1,000

$500

Sp

ec

ific

EP

C C

ost

(201

6 $

/tp

a)

FID Date

Grassroots

Expansion

Australia

FLNG

USA

Canada

Reported Planned


Long-Term LNG Price Outlook (EIA)

0

5

10

15

20

25

2010 2015 2020 2025 2030 2035

$/m

mB

tu (

no

min

al)

46

Note: prices are annual averages

HH

Oil

Actual Industry Consultant

Forecasts

Sources: Actuals - Platts, Heren, IPE, Petroleum Association of Japan and Bloomberg (Apr 2016); Forecasts – EIA, Wood Mackenzie, IHS CERA, and PIRA (2016)

JKM Spot Price

2017-18

=

forward

curve

Oil

Lin

ked

LN

G*

US

LN

G

Volatility

Indicator

Range of

prices:

2010 - 16

*mid-

point of

range

JK

M


Benefits of US LNG for Asian Buyers

Price competitiveness

Largescale, low-cost gas resource

HH-plus price structure

De-linked from oil

Price stability

Reduced volatility from fixed-

component

Buyer control

Destination flexible volumes to

manage demand uncertainty

and / or build trading platform

Reliability

Largescale, nationwide resource

base

47



New LNG Market Realities

48

Fragmenting /

Evolving market

place

Globalising /

Commoditising

industry – with

regional nature

New contract

structures:

price index, term,

flexibility

Supplier challenge:

how to lower cost,

innovate &

create new markets

New market

realities …

… will require

new commercial

solutions …

… but will also have

to be financeable


Summing Up

Flexible U.S. LNG ramping up and responding to global market signals

U.S. LNG has already changed the industry. Providing buyers with;

Price diversification and transparency

Destination flexibility

Increased supply availability and market competition

A sustainably low-cost supply over the long-run

And is set to drive further change

Growing liquidity / hub formation / price discovery

Resulting in a more competitive and more resilient trade system

Buyers can enjoy and capitalize on these functions of U.S. LNG in a direct manner

But Buyers and Sellers will have to work together to achieve the commercial bargain

required to bring on new supply under current low-price conditions

Cheniere able to move quickly to expand its platform with two permitted brownfield

trains, plus enough land at both sites to allow for significant further expansion

49


Thank You

50


Contact :[email protected]

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