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Energy and commodity price benchmarking and market insights

European gas and global LNG

5 June 2013

IFIEC Europe — Brussels

US shale — coal now

US shale — coal now, LNG later?

Copyright © 2013 Argus Media Ltd. All rights reserved.

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

1,8

1,9

2,0

bn m

³/d

Shale drives record US gas production

US marketed gas production



1,3

1,4

1,5

1,6

1,7

1,8

1,9

2,0

bn m

³/d





1,3

1,4

1,5

1,6

1,7

1,8

1,9

2,0

bn m

³/d



2009

Gustav/Ike

2005

Katrina/Rita



1,3

1,4

1,5

1,6

1,7

1,8

1,9

2,0

bn m

³/d



2009

Gustav/Ike

2005

Katrina/Rita

+628mn m³/d



or + 2.6 times

UK demand

each day

1,3

1,4

1,5

1,6

1,7

1,8

1,9

2,0

bn m

³/d



2009

Gustav/Ike

2005

Katrina/Rita



or + 1.6 times

Chinese demand

each day

1,3

1,4

1,5

1,6

1,7

1,8

1,9

2,0

bn m

³/d



2009

Gustav/Ike

2005

Katrina/Rita



0,0

0,5

1,0

1,5

2,0

2,5

3,0

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

bn m

³/d


Dry onshore Associated Coalbed Dry offshore Alaska Tight Shale

US production

35pc shale in

2012

0,0

0,5

1,0

1,5

2,0

2,5

3,0

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

bn m

³/d


Dry onshore Associated Coalbed Dry offshore Alaska Tight Shale



US production

35pc shale in

2012

US production

50pc shale in

2040



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US electricity turns away from coal

Coal Gas Nuclear Renewable Other



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US electricity turns away from coal

Coal Gas Nuclear Renewable Other

2001

Coal Gas Nuclear renewable other

2012

Coal Gas Nuclear renewable other

16pc gas

30pc gas



0

5

10

15

20

25

30

35

40

45

50

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

Ste

am

coal export

s (

mn t/y

r)

Net exports 2005 AEO



0

10

20

30

40

50

60

70

80

90

100

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

Ste

am

coal export

s (

mn t/y

r)

Net imports 2005 AEO 2013 AEO

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q102

Q302

Q103

Q303

Q104

Q304

Q105

Q305

Q106

Q306

Q107

Q307

Q108

Q308

Q109

Q309

Q110

Q310

Q111

Q311

Q112

EU27 coal import balance – SA/US/AUS

Australia South Africa US



US shale — LNG later?

US once on course for vast imports


-20

0

20

40

60

80

100

120

140

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

LN

G im

port

s (

mn t)

Net imports 2005 AEO



New England

Downeast LNG

Quoddy Bay

Calais

Weaver’s Cove

Keyspan

NY/NJ

Crown Landing

Blue Ocean

Broadwater

Liberty

Safe Harbor

Florida/Georgia

Port Dolphin

Calypso

Elba Island III

Alabama/Mississippi

Bienville

Compas Point

Casotte Landing

Gulf LNG

Texas

Vista del Sol

Ingelside

Port Arthur

Port Lavaca

Corpus Christi

Beacon Point

Louisiana

Creole Train

Cameron II

Main Pass

Gulf Landing

Pearl Crossing

Port Pelican

Maryland

Cove Point II

Sparrows Point

California

Sound Energy

Port Esperanza

Ocean Way

Cabrillo Port

Clearwater Port

Oregon

Bradwood

Oregon LNG

Portwestward

Jordan Cove

1.4bn m³/d of

sendout capacity

Planned or proposed import projects



-20

0

20

40

60

80

100

120

140

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

LN

G im

port

s (

mn t)

Net imports 2005 AEO 2008 AEO

US poised for exports


-40

-20

0

20

40

60

80

100

120

140

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

LN

G im

port

s (

mn t)

Net imports 2005 AEO 2012 AEO 2013 AEO

US poised for exports


Georgia

Elba Island

Mississippi

Gulf LNG

Texas

Gulf Coast

Freeport

Golden Pass

Corpus Christie

Lavaca Bay

Louisiana

Main Pass

Sabine Pass

Lake Charles

Cameron

Maryland

Cove Point

Oregon

Oregon LNG

Jordan Cove

725.3mn m³/d of

liquefaction capacity

Planned or proposed export projects

US LNG — exports, but at what price?

Exporting US shale, but at what price?


0

2

4

6

8

10

12

Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18

$/m

n B

tu

US LNG exports must compete on price

US futures NBP



0

2

4

6

8

10

12


$/m

n B

tu


US futures +15 pc basis NBP

115pc Nymex – commodity cost



0

2

4

6

8

10

12


$/m

n B

tu


US futures +15 pc basis Fixed NBP


+$2.85 fixed cost (margin)



0

2

4

6

8

10

12


$/m

n B

tu


US futures +15 pc basis Fixed Freight NBP



+Freight



0

2

4

6

8

10

12


$/m

n B

tu


US futures +15 pc basis Fixed Freight NBP Breakeven for DE power, free CO2



+Freight

Gas prices and the power sector

Gas prices and the EU power sector


-20

-10

0

10

20

30

40

50

60

70

80

Real 31 May coal

Real 31 May gas

€/M

Wh

Costs and P/L scenarios 2015

Fuel costs CO2 cost Profit/Loss Power price



-20

-10

0

10

20

30

40

50

60

70

80

Real 31 May coal

Real 31 May gas

CO2 balanced coal

CO2 balanced gas

€/M

Wh



Implies CO2

price at €48.75/t

At least 10x

higher than

current prices



-20

-10

0

10

20

30

40

50

60

70

80

Real 31 May coal

Real 31 May gas

CO2 balanced coal

CO2 balanced gas

Gas balanced coal

Gas balanced gas

€/M

Wh



Implies gas price

at €18.30/MWh Implies CO2

price at €48.75/t

At least 10x

higher than

current prices

Global shale resources



Trillion m³ — EIA – April 2011



0

5

10

15

20

25

30

35

40

Austr

alia

Fra

nce

Germ

any

Neth

erlands

Norw

ay

U.K

.

Denm

ark

Sw

eden

Pola

nd

Turk

ey

Ukra

ine

Lithuania

United S

tate

s

Canada

Mexic

o

Chin

a

India

Pakis

tan

South

Afr

ica

Lib

ya

Tunis

ia

Alg

eria

Moro

cco

Weste

rn S

ahara

Maurita

nia

Venezuela

Colo

mbia

Arg

entina

Bra

zil

Chile

Uru

guay

Para

guay

Boliv

ia

Trilli

on m

³

Chinese resources estimated to be larger than those of the US

Technically recoverable shale gas resources Trillion m³

China will still require imports


-250

-200

-150

-100

-50

0

50

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

bn m

³/yr

Even at target, shale still insufficient to completely close supply gap

Implied import requirement Shale target

Shale oil — more of the same?

US crude production


100

120

140

160

180

200

220

240

260

280

300

mn b

l/d

Shale drives rebound in US oil output

US crude output

US crude stocks


0

50

100

150

200

250

East Coast (Padd 1)

Midwest (Padd 2)

Cushing Gulf Coast (Padd 3)

Rocky Mountain (Padd 4)

West Coast (Padd 5)

mn b

l Crude stocks at or near historic highs

24 May 2013 Observed max

US-North Sea price spreads


-20

-15

-10

-5

0

5

10

15

20

25

30

28-Jun-2007 28-Jun-2008 28-Jun-2009 28-Jun-2010 28-Jun-2011 28-Jun-2012

$/b

l

WTI v Brent

Brent-WTI

Matthew Monteverde VP — Generating Fuels Argus Media London [email protected] +44 207 780 4225

Copyright notice

Copyright © 2013 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence

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Disclaimer

All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any

particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.

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energy and commodity price benchmarking and market insights...5 june 2013 ifiec europe — brussels...

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