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By: ,

By: ,

17th INTERNATIONAL CONFERENCE & EXHIBITION

ON LIQUEFIED NATURAL GAS (LNG 17)

Access to Gas – Revisiting the LNG Industry’s

Big Challenge

By: Frank Harris,Head of Global LNG Consulting

Wood Mackenzie

17th April 2013

17th INTERNATIONAL CONFERENCE & EXHIBITION ON

LIQUEFIED NATURAL GAS (LNG 17)


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Strategy with substance

Strictly Private & Confidential – Wood Mackenzie Disclaimer

This presentation has been prepared by Wood Mackenzie Limited for delivery on

April 17th, 2013 at the LNG17 Conference. It has not been prepared for the

benefit of any particular attendee and may not be relied upon by any attendee or

other third party. If, notwithstanding the foregoing, this presentation is relied

upon by any person, Wood Mackenzie Limited does not accept, and disclaims,

all liability for loss and damage suffered as a result.

These slides and the contents of this presentation may not be disclosed to any

other person or published by any means without Wood Mackenzie Limited's prior

written permission.

© Wood Mackenzie 2


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Accessing gas feedstock for LNG projects has been a consistent

challenge for the industry

© Wood Mackenzie 3

At LNG 15 we considered the challenges associated with accessing NOC

controlled gas resources, and forecast a shift towards exploration by the IOCs

At LNG 16 we looked at the challenges of using unconventional gas to feed LNG

plants as players began to develop projects utilising gas from coal-seams or coal-beds (CSG/CBM) and from shale

Today, at LNG 17, we revisit those challenges and consider where the industry

goes from here


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The industry needs a lot of extra gas to support LNG production

© Wood Mackenzie 4

Demand is set to nearly double by

2025

Need to factor in loss of production

from existing plants (which tends to be

under-estimated)

Gap in 2025 of ~160 mtpa equates to

~180 tcf of gas feedstock to support

20 year production

Additional LNG Requirement (2025)

Demand

0

50

100

150

200

250

300

350

400

450

2012 2025

m

p a

Operational Under Construction

Gap of ~160 mtpa,~8.5 tcf per year

Demand

Source: Wood Mackenzie

Gap of ~160 mtpa,

~8.5 tcf per year


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That gas is expected to come from a combination of three types

of resource

© Wood Mackenzie 5

Already discovered

conventional gas- NOC and/or IOC

controlled

Exploration foradditional

conventional gas

Unconventional gas:

from shale and/orcoal


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~7800 tcf

The gas resource base has grown massively since LNG 15…

© Wood Mackenzie 6

Unconventional gas in North

America has been huge

Exploration has also been amajor focus and opened up

East Africa to the LNG industry

(2007) (2012)

Global Gas Resource

~4900 tcf

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 1H

t c f

Discovery year

Rest of World Australia East Africa East MediterraneanSource: Wood Mackenzie

Conventional Unconventional

Conventional Gas Resource Additions via Exploration (2007 – 2012)

~4900 tcf ~7800 tcf


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…and IOCs now have access to more resource opportunities,

without the need for NOCs

© Wood Mackenzie 7

IOCs have discovered a lot

more gas via exploration

NOCs have upgraded reserves

But most unconventional gas is

controlled by the IOCs

So, critically, IOCs now have

more gas to play with therefore

a greatly reduced need to

focus on NOC opportunities

65%~3120 tcf

35%~1660 tcf

65%~3860 tcf

35%~2100 tcf

(2007) (2012)

Conventional Gas Resource – NOC vs. IOC


NOC IOC


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We expect IOCs to pursue a mix of unconventional gas,

discovered conventional gas and exploration

© Wood Mackenzie 8

While the volume of unconventional gas potentially available has increasedmassively, there are limits on its use as LNG feedstock

So in addition, IOCs will focus on the conventional resources that they control,

with East Africa increasingly supplementing Australia

Players will continue to explore, but careful focus will be required to ensure that

gas can be commercialised


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This mix is reflected in the evolving portfolios of selected IOCs

that are big players in LNG

© Wood Mackenzie 9

Focus has broadened in the last six years, to encompass less NOC

opportunities, exploitation of discovered gas, exploration plus unconventional

Gas Resource for LNG Supply – Focus Countries Early

2013

Gas Resource for LNG Supply – Focus Countries Early

2007


Important to several

of the selected IOCs

Important to nearly all of

the selected IOCs


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LNG Project Developers also have to take buyers’ preferences

and requirements into account

© Wood Mackenzie 10

US

Canada

East Africa

Australia

Russia

Traditional Asia

Supply

Diversity

HH Pricing

Exposure

Unconventional

UpstreamRicher

LNG

In aggregate, these suggest that the current focus on North America is

appropriate, and that East Africa could prove to be a harder saleSource: Wood Mackenzie


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Conclusions


C o n c l u

s i o n s

Lots of gas needed to meet demand growth and to replace lost capacity

Good news is that the resource base has grown massively

Challenge now is less about how to access gas, more how to combine options

It appears that this will comprise a mix of unconventional, IOC controlled conventionalgas and more exploration, as reflected in IOC gas portfolios

NOC controlled gas is the big loser

Developing LNG projects will never be easy, but perhaps we should all now feel a littlemore comfortable


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Contacts


Name: Noel Tomnay

Position: Head of Global Gas, Gas Research

T: +44 131 243 4511

E: [email protected]

Name: Giles Farrer

Position: Senior Analyst – LNG & Global Gas Research

T: +44 203 060 0461


Name: Frank Harris

Position: Head of Global LNG Consulting

T: +44 (0)131 243 4249



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Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries.

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03 01 frank harris presentation

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