The Race to Establish an Asian LNG Hub Arnaud Dubois-Denis - GM BG Singapore Gas Marketing Singapore Electricity Roundtable, St Regis Singapore, 8 July 2015

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• Global LNG market update

• Atlantic Basin: growing flexibility

• Singapore in the race towards a LNG hub

Agenda

3

0

100

200

300

400

500

2000 2005 2010 2015 2020 2025

11

2014 to 2025 CAGR(%) = 4.2 to 5.7

External LNG trade forecasts* New Supply

Supply: existing and under construction

Global LNG supply DES (mtpa)

Sources: Supply (existing and under construction): BG Group interpretation of Wood Mackenzie data (Q2 2015) * Trade: various research house views; Wood Mackenzie, FACTS Global Energy, PFC, PIRA, IHS CERA, Gas Strategies, Poten & Partners

LNG trade outlook to 2025

Existing

Under construction

Demand: still driven by Asia

0

50

100

150

200

250

300

350

2005 2010 2015 2020 2025

Middle East

Other Asia

China

India

JKT

mtp

a

JKT

China

India

Other Asia

0

50

100

150

200

250

300

350

2005 2010 2015 2020 2025

BunkersEuropeN. AmericaS. America

S. America

Europe

Pacific Basin Atlantic Basin

5 Source: BG Group interpretation of Wood Mackenzie data (Q2 2015)

Europe, the balancing LNG market

6 Source: 2008-2014: BG Group interpretation of IHS Waterborne data (Jan 2015), delivered volumes *Forecast – BG Group outlook (2015)

LNG imports by region 2008-16 (mtpa)

0

50

100

150

200

250

300

2008 2009 2010 2011 2012 2013 2014 2015(f) 2016(f)

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

Spot and short-term trade

7

0

5

10

15

20

25

30

35

0

10

20

30

40

50

60

70

2010 2011 2012 2013 2014

% Mt

*Note: Short-term trade denotes trades under contracts of a duration of 4 years or less . Source : GIIGNL

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014 2015

$/m

mbt

u

Gas and LNG prices (2008 – 2015)

8

Oil parity

NBP

HH

Asia LT proxy Asia spot

Global recession

Asia recovery

Fukushima earthquake

Note: Asia long-term proxy = 14.85% JCC(-3) + 0.50 Oil parity = JCC = Japanese average crude price

Source: Platts, Heren, Petroleum Association of Japan and Bloomberg (June 2015)

~ $110/bbl oil price

Gas and LNG prices Jan 2014 to date

Shipping cost is the differential between shipping to Asia versus the UK at current market rates (~$40,000/day charter rate) *JCC = actual to Apr, then calculated from Brent actuals / forward curve

6

8

10

12

14

16

18

20

22

Jan

Feb

Mar Apr

May Jun

Jul

Aug

Sep Oct

Nov

Dec Jan

Feb

Mar Apr

May Jun

2014 2015

$/m

mB

tu

NBP(less regas)+shippingJCCLTC (14.85%*JCC(-3)+0.5)Asia spot price - JKMJapan average import price

Long-term contract price

Asia spot price

Japan Avg

JCC*

NBP + shipping

Source: Platts, Heren, Petroleum Association of Japan, Bloomberg and World Gas Intelligence (Jun 2015)

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US, the next supply wave

0

50

100

150

200

250

300

350

400

450

500

2000 2005 2010 2015 2020 2025

mtp

a

Qatar

LNG trade forecast

Australia

New supply

Supply: existing and under construction

US

10 Source: BG Group interpretation of Wood Mackenzie data (Q2 2015)

US volumes: available to various LNG players

0

10

20

30

40

50

60

70

FOB capacity Net of sales

mtp

a

11

US projects included = those with offtake agreements: Sabine Pass T1-5, Cameron T1-3, Freeport T1-3, Cove Point, Corpus Christi T1-3, Elba. Note: excludes Lake Charles which is fully committed to BG Group

Sold to end-users

Source: Press articles and BG Group internal analysis (as of Mar 2015)

Asian buyers

European buyers

Trading houses

IOCs

Unsold

Resold to Asian buyers

European buyers

Asian buyers

Resold to European/

Lat Am buyers

Trading houses

IOCs

Unsold

Asia

Europe / Lat Am

Capacity holders

Capacity + re-sales

End- market mix

Unsold

IOC / Trading Houses

72%

28%

US LNG: providing new pricing constructs and additional flexibility

• No upstream development required

• Clear and transparent regulatory environment

• Projects developed by utility / infrastructure companies

– Cost-based, HH indexed pricing to cover toll

– Greater flexibility

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Sabine Pass export terminal visualization Source: Cheniere analyst presentation (April 2014)

Atlantic basin: growing flexibility

• Strong supply growth

• US, a supply source providing flexibility

• Europe, a market providing flexibility

• Evolving role of buyers, sellers, portfolio-players, traders and infrastructure developers

• Growing liquidity: more flexible LNG available to more LNG players

13

0

1

2

3

4

Mar

-13

May

-13

Jul-1

3S

ep-1

3N

ov-1

3Ja

n-14

Mar

-14

May

-14

Jul-1

4S

ep-1

4N

ov-1

4Ja

n-15

Mar

-15

May

-15

vess

els

deliv

ered

Middle East Atlantic Basin Australasia

Cargo re-exported in Jan ‘15

0.0

0.4

0.8

1.2

1.6

2.0

Singapore Malaysia Indonesia Thailand

mtp

a

14

Source: BG Group interpretation of IHS Waterborne data (Jun 2015), delivered volumes

Singapore LNG deliveries

Singapore: the largest S.E. Asian importer in 2014 Singapore sources of supply

Terminal commissioned in Mar 2013, started commercial operations from May 2013

LNG supply into Singapore

15

89%

11%

2013

91%

9%

2014 Long-term sales Short-term sales

• BG Group aggregator for first 3 mtpa of long-term LNG demand – Connecting Singapore to the global

LNG market

– Innovative and unique aggregator business model

– 2.63 mtpa already contracted

– Additional short term sales and diversions taking place to optimise buyers’ portfolios

• RFP process for post 3-mtpa imports underway – 4 companies shortlisted for Stage 2,

including BG Group

• LNG demand essentially met by long term contracts

Singapore gas demand-supply balance

16

0

2

4

6

8

10

12

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

mtp

a

Demand-supply gap Supply upside opportunity LNG (Contracted)Pipeline Gas (Contracted) Contractual flexibility Demand (Wood Mackenzie)Terminal capacity Demand (Poten & Partners)

Source: BG Group interpretation of Wood Mackenzie and Poten & Partners data

Singapore LNG terminal

• Asia’s first open-access, multi-user terminal

• World class infrastructure – Current throughput capacity of 6

mtpa

– Expansion to 11 mtpa underway

• Wide range of services:

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– Throughput

– Cool downs

– Storage and reloads

– Potential for LNG bunkering

– Potential for break bulking

– Potential for LNG trucking

Potential of Singapore as a LNG hub

Advantages • Singapore is already a hub of people,

hosting an active LNG community • Excellent geographical location and

potential to offer a wide range of LNG support services

• Strong government ideology for traded market

• Good regulatory framework • Existing physical gas and LNG

infrastructures (except storage) • Pipeline / LNG competition for long term

demand • Material LNG growth post 2022 • Secondary gas market reforms

developing 18

Challenges • Small gas demand in comparison to

overall regional gas/LNG trade • Pipeline gas and LNG demand

essentially met by long term contracts

Conclusions

• LNG trade will continue to show strong growth

• Asia will continue to be a key market for LNG, but the buyers’ needs are evolving

• The Atlantic Basin is further increasing the liquidity and flexibility available to the market

• The market continues to evolve and is meeting the buyers’ needs

• No consensus on the need for a LNG hub, its structure and timing

• Singapore is a good location to host an exchange, a trading community and provide a series of LNG support services…

• …but the underlying index of a LNG financial product will need to be based on a substantial physical spot LNG market to set the price of the global LNG spot market

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