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rom o unconven ona s: e or mer can s oryand global potential

Platts LNG ConferenceFebruary 24, 2011Amber McCullagh

Delivering commercial insight



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Expectations about the role of LNG in the US market have changed rapidly,

—

US LNG importsUS production

60

70

80

12

14

16

30

40

50

bcfd

8

10

b

cfd

0

10

20

2

4

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

Conventional Tight CBM

Shale 2007 forecast

0

2008

2010

2012

2014

2016

2018

2020

2022

2024

2010 forecast 2007 forecast


1

Source: Wood Mackenzie NAGSSource: Wood Mackenzie NAGS



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Production costs in highly productive shales fell rapidly, as operators gained

20 80

Marcellus drilling and completion costs Haynesville rig and well productivity

16 70

8

10

1000

1200

Pad

Drilling

Multi

a a

acquisition

Facilities

8

12

mmcfd

50

60

D

ays

4

6

Costs ($MM)

600

800

rizon

tal WellsCompletion

techniques

Woodford

4 402

D&

200

400 Ho

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Average 30-day IP rate Spud-to-spud drilling time

02007 2008 2009 2010*

0

Average D&C Costs Horizontal Wells

Source : Pennsylvania DEP, Operato r Reports*Based on data from 9 operato rs


2

Source: Wood Mackenzie NAGS



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But just as important, oil prices rose significantly, pushing up global oil-

Gas forward curves Oil forward curves

7

8

14

16

18

20

4

5

$/mmbtu

8

10

12

$/mmbtu

Woodford

0

1

2

2

4

6

Mar-1

1

May-11

Jul-1

1

Sep-11

Nov-11

Jan-12

Mar-1

2

May-12

Jul-1

2

Sep-12

Nov-12

Jan-13

Feb. 2007 Feb. 2011

Mar-1

1

May-11

Jul-1

1

Sep-11

Nov-11

Jan-12

Mar-1

2

May-12

Jul-1

2

Sep-12

Nov-12

Jan-13

Feb. 2007 Feb. 2011


3

Source: NymexSource: Nymex



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Now, North American shale gas production is set to grow steeply, and LNG is

North American shale production

30

35

20

25

b

cfd

Woodford

5

10

0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Barnett Fayetteville Woodford Haynesville Marcellus Eagle Ford Horn River Montney & Duverney


4

Source: Wood Mackenzie NAGS



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And US prices may even be low enough to support LNG exports from the

Global gas price outlook

12

14

6

8

0$/m

mbtu

2

4

20

0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Henr Hub AECO NBP Oil-indexed Euro ean


5

Source: Wood Mackenzie NAGS, EGAPS, Global Gas



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With brownfield economics favoring Gulf Coast exports relative to Kitimat

LNG exports from Gulf Coast to Europe LNG Exports from Gulf Coast to Asia

11% Brent; $100/bbl

15% Brent; $75/bbl

15% Brent; $75/bbl; Panama Canal exp.

/mmbtu

$/mm

btu

Regasified (Europe): HH + 4/mmbtu

Regasified (Asia): HH + $5.50/mmbtu

Regasified (Asia; Panama Canal):

Feedgas

rice

Capital

cost

Commodity

char e

Plant

losses

Shipping Regas Feedgas

price

Capital

cost

Commodity

charge

Plant

losses

Shipping Regas

+ . mm u


6

Source: Wood Mackenzie Source: Wood Mackenzie



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Beyond exports, could US upstream success be replicated globally?

Europe

Production: 0.0 bcfd

Asia

Resource: 192 tcfProduction: 1.3 bcfd


October 2010 Global Unconventional Gas Production

5.5 bcfd 16.1 bcfd


12.1 bcfd

Tight Gas Shale Gas CBM

AustraliaResource: 71 tcfProduction: 0.7 bcfd

Latin AmericaResource: 21 tcfProduction: 0.04 bcfd

Middle EastResource: 25 tcfProduction: 0.0 bcfd

Delivering commercial insight7

Source: Wood Mackenzie Unconventional Gas Service – 2010 resource figures represent only those plays covered



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But infrastructure, labor, and service sector challenges suggest a more

Investment environment

Unconventional commercialization index

CountryResourcePotential

SupplyChain

LandAccess

Regulatory andEnvironmental

NorthAmerica

Favorable

Moderate or TBD

AustraliaChallenging

China

India

Source: Wood Mackenzie Global Gas Service




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And even in North America unconventional gas development took many

—

US shale production ramp-up Unconventional gas breakevens

5

6

Ha nesville 8

10

12

3

4

b

cfd

Fayetteville

Barnett4

6

$/mmbt

1

2

0

2

tevil

le

cellu

ssv

illesh

ale

shale

shale

-0 24 48 72 96 12

014

416

819

221

624

026

428

831

2

Months since first production

Faye Ma Hayn Chin

Polan

Vienn

North America Global

$75/bbl; 11% indexation $75/bbl; 15% indexation


Source: Wood Mackenzie (Unconventional Gas Tool)

ources: oo ac enz e, s a e a a



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Key takeaways

The shift in expectations about the role of LNG in the North American market reflects not justc anges n omes c gas pro uc on cos s, u a so e su s an a s upwar n g o a o

pricesLand access, infrastructure, and permitting are less supportive of unconventional gasdevelopment globally than in North America, likely meaning a slower pace of developmentand higher costs

These constraints are more easily bridged in Asia, and as a result, unconventional gas

production is likely to be much higher in Asia than in Europe, potentially meaning a limited—

Gulf Coast




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Wood Mackenzie Disclaimer

This presentation has been prepared by Wood Mackenzie Limited for delivery at the 2011a s on erence – ous on – e ruary , . as no een prepare or e

benefit of any particular attendee and may not be relied upon by any attendee or other thirdparty. If, notwithstanding the foregoing, this presentation is relied upon by any person, WoodMackenzie Limited does not accept, and disclaims, all liability for loss and damage sufferedas a resu .

The information contained in these slides may be retained by attendees. However, these

published by any means without Wood Mackenzie Limited's prior written permission.




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Wood Mackenzie Global Contact Details

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