Summer 2019
Fundamentals Summer 2019 Cautionary statements Forward-looking - - PowerPoint PPT Presentation
Fundamentals Summer 2019 Cautionary statements Forward-looking - - PowerPoint PPT Presentation
Fundamentals Summer 2019 Cautionary statements Forward-looking statements The information in this presentation includes forward-looking statements within the meaning of The forward-looking statements made in or in connection with this
Cautionary statements
The information in this presentation includes “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 fact are forward-looking
- statements. The words “anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,”
“forecast,” “initial,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will,” “would,” and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this presentation relate to, among other things, gas resources, production and costs, infrastructure needs and costs, LNG export and pipeline capacity, LNG bunkering, LNG prices, future demand and supply affecting LNG, and general energy markets and other aspects of our business and our prospects and those of other industry participants. Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. These statements are subject to numerous known and unknown risks and uncertainties, which may cause actual results to be materially different from any future results or performance expressed or implied by the forward-looking statements. These risks and uncertainties include those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and
- ur other filings with the Securities and Exchange Commission, which are incorporated by reference
in this presentation. Many of the forward-looking statements in this presentation relate to events or developments anticipated to occur numerous years in the future, which increases the likelihood that actual results will differ materially from those indicated in such forward-looking statements. The forward-looking statements made in or in connection with this presentation speak only as of the date hereof. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by securities laws.
Reserves and resources
Estimates of non-proved reserves and resources are based on more limited information, and are subject to significantly greater risk of not being produced, than are estimates of proved reserves.
Forward-looking statements
Disclaimer
Contents
3
- Short-term fundamentals – updated monthly
- U.S. natural gas – plentiful, low-cost U.S. natural gas supply
- Global LNG – global gas market is growing and becoming commoditized
2019 U.S. dry gas production (bcf/d)
4
9.3 9.7 Jan Jul 9.7 10.0 Jan Jul 9.4 9.9 Jan Jul 4.8 4.8 Jan Jul 10.4 10.5 Jan Jul Midcontinent(1) Permian Eagle Ford Haynesville 30.0 31.3 Jan Jul Appalachia 88.1 90.0 Jan Jul
U.S. Lower-48(2)
Source: IHS Markit. Notes: (1) Includes Anadarko, Fayetteville, Cherokee, Mississippian, Ardmore Woodford, Arkoma Woodford, Cana Woodford, and Granite Wash. (2) Due to relative magnitude of production, production axis not at scale with other basins. The use of this content was authorized in advance. Any further use or redistribution of this content is strictly prohibited without written permission by IHS Markit.Rockies/Williston
25 27 29 31 33 35 37 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
MT per month
LNG demand is growing 13.6% y/y in 2019
Sources: IHS Markit, Tellurian analysis. The use of this content was authorized in advance. Any further use or redistribution of this content is strictly prohibited without written permission by IHS Markit.
5
2019 expected capacity 2018 LNG demand 2019 LNG demand +13.6% y/y LNG demand H1 LNG capacity H1 +13% y/y Utilization rate +600 bps y/y 2019
Firm LNG capacity forecast
Source: Tellurian Research, Wood Mackenzie.6 292 318 347 377 408 412 412 412 412 406 401 4 24 35 48 51 67 93 248 264 298 324 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global LNG capacity and output (mtpa)
Under construction capacity Capacity LNG output
Firm LNG capacity schedule
mtpa
Source: Tellurian Research, Wood Mackenzie.7
Project Country Capacity
- Est. start
date 2019 2020 2021 2022 2023 2024 2025 Elba Island LNG Export T1-6 US East 1.5 8/1/2019 0.6 1.5 1.5 1.5 1.5 1.5 1.5 Ichthys T2 Australia 4.5 10/1/2019 1.1 4.5 4.5 4.5 4.5 4.5 4.5 Vysotsk LNG Russia West 0.7 9/1/2019 0.2 0.7 0.7 0.7 0.7 0.7 0.7 Sengkang LNG Indonesia 0.5 10/1/2020 – 0.1 0.5 0.5 0.5 0.5 0.5 Freeport Train 1 US East 5.1 9/1/2019 1.7 5.1 5.1 5.1 5.1 5.1 5.1 Portovaya LNG Russia West 1.5 9/1/2019 0.5 1.5 1.5 1.5 1.5 1.5 1.5 Elba Island LNG Export T7-10 US East 1.0 1/1/2020 – 1.0 1.0 1.0 1.0 1.0 1.0 Cameron LNG Export T2 US East 4.0 2/1/2020 – 3.7 4.0 4.0 4.0 4.0 4.0 Freeport Train 2 US East 5.1 5/1/2020 – 3.4 5.1 5.1 5.1 5.1 5.1 Freeport Train 3 US East 5.1 10/30/2020 – 1.3 5.1 5.1 5.1 5.1 5.1 Cameron LNG Export T3 US East 4.0 9/1/2020 – 1.3 4.0 4.0 4.0 4.0 4.0 PETRONAS FLNG 2 Malaysia 1.5 1/1/2021 – – 1.5 1.5 1.5 1.5 1.5 Tangguh Phase 2 Indonesia 3.8 10/1/2021 – – 1.0 3.8 3.8 3.8 3.8 Coral FLNG Mozambique 3.4 1/1/2022 – – – 3.4 3.4 3.4 3.4 Corpus Christi LNG Train 3 US East 4.5 1/1/2022 – – – 4.5 4.5 4.5 4.5 Tortue FLNG Senegal 2.4 3/1/2022 – – – 2.0 2.4 2.4 2.4 Sabine Pass LNG T6 US East 4.7 6/1/2023 – – – – 2.7 4.7 4.7 LNG Canada T1 Canada West 7.0 4/1/2024 – – – – – 5.3 7.0 Golden Pass LNG T1 US East 5.2 5/1/2024 – – – – – 3.5 5.2 Golden Pass LNG T2 US East 5.2 10/30/2024 – – – – – 1.3 5.2 LNG Canada T2 Canada West 7.0 1/1/2025 – – – – – – 7.0 Golden Pass LNG T3 US East 5.2 7/2/2025 – – – – – – 2.6 Mozambique Area 1 T1 Mozambique 6.4 6/1/2024 – – – – – 3.8 6.4 Mozambique Area 1 T2 Mozambique 6.4 1/1/2025 – – – – – – 6.4 4.2 24.0 35.4 48.1 51.3 67.0 93.1
– 20 40 60 80 100 2019 2020 2021 2022 2023 2024 2025
Cumulative new LNG capacity by country (mtpa)
US East Mozambique Canada West Indonesia Malaysia Russia West Australia Senegal
LNG capacity growth should peak in 2019
Incremental LNG capacity (mtpa)
Sources: Wood Mackenzie, Tellurian analysis. Notes: (1) Percentage change of incremental volumes compared to previous year’s total capacity expected to be online.8 26 37 18 9 4 (2) (1) (8) (8) (2) (5) (2) (3) – 3 12 8 8 14 26 3 – – – –
9% 12% 8% 4% 3% (0%) 3% 4% (1%) (0%) (1%) (0%) (1%) (2.0%) – 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% (20.0) (10.0) – 10.0 20.0 30.0 40.0 50.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Existing Under construction Y/Y change 26 40 30 17 12 (2) 13 18 5 (2) (5) (2) (3)
(1)
Contents
9
- Short-term fundamentals – updated monthly
- U.S. natural gas – plentiful, low-cost U.S. natural gas supply
- Global LNG – global gas market is growing and becoming commoditized
82 99 135 17 53
Plentiful, low-cost U.S. natural gas
10
Production growth and resource base from selected U.S. unconventional basins
Source: EIA 2019 Annual Energy Outlook, DrillingInfo, RBN, Tellurian analysis. Note: (1) RBN high case – extrapolated from 2024 to 2025 by Tellurian.
411 112 74 23 52
Resource size, Tcf Marcellus-Utica < $1.00 Haynesville < $1.50 Eagle Ford $0 - $1.50 Permian < $1.00 Anadarko $0-$1.00
29.2 36.0 2018 2025 3.6 7.4 2018 2025 4.9 7.9 2018 2025 8.6 9.4 2018 2025
Total U.S. lower-48 dry natural gas production Bcf/d EIA RBN(1) 2018 2025 Production growth
9.6 16.9 2018 2025
Basin
Wellhead cost, $/mmBtu
6 10 14 18 22 26 2018 2019 2020 2021 2022 2023 2024 2025
Permian gas outlook – range of forecasts
Sources: Rystad, Wood Mackenzie, RSEG, IHS, DrillingInfo, BP, EIA, Tellurian Research. Notes: (1) Estimates based on guidance from Pioneer Energy. See https://www.spglobal.com/marketintelligence/en/news-insights/trending/ymld4hxz_zriyxkwqxdgmg2. (2) Assumes 20% initial production (“IP”) improvement per year and flat completion activity levels. (3) Assumes flat seasonally adjusted rig drilling and completion activity, and 2% upward shift in basin wide type curve per quarter. (4) Current type curves (no improvement over time) and flat rig count based on current levels.
11
2025 YE production
(Bcf/d)
Pioneer(1) Rystad/BP/EIA Wood Mackenzie/IHS(2) RSEG(3) Scenario – $70/bblWTI(4)
Permian dry gas production
- Permian gas supply
driven by oil production economics
- Gas-to-oil ratios in
the Basin are increasing, meaning wells are getting “gassier”
- Consolidation and
more investment from the majors underpins resilient production outlook
2018 2019 2020 2021 2022 2023 2024 2025
Permian by the numbers
Sources: Rystad, EIA, World Bank, Platts via Marketview, and BTU Analytics.12
2.5-4.0
Gas-to-oil ratio (“GOR”)
~1
bcf/d
4.1
million bpd
Average GOR in the Permian with higher GORs in the Delaware, the recipient
- f most investment
One of the most prolific oil basins in the world with extremely low oil breakevens and negative breakevens for gas production Estimated natural gas flared in the Permian Basin every day in Q2 2019 The United States is among the top 4 flaring countries, behind Russia, Iran, and Iraq
- $0.90
$/mmBtu 3-year avg. basis
3-year average basis for gas prices in West Texas compared to Henry Hub; as of August 2019, forward curve averaging -$0.55 mmBtu for 2023
#4
ranking
+7 +4 +7 +1 +3
Looming challenge of U.S. gas oversupply
13
U.S. natural gas must be exported
Sources: DrillingInfo, EIA, Tellurian analysis. Note: (1) Assumes $70/bbl oil price and $3/mmBtu Henry Hub price; incremental supply comes from Permian, Scoop/Stack, Haynesville, Eagle Ford, and Appalachia. (2) Assumes U.S. natural gas demand grows 0.6% p.a. and that the 7.4 bcf/d of LNG terminals under construction produce at a 90% utilization rate. (3) Assumes new LNG terminals produce at a 90% utilization rate. (4) Assumes new liquefaction capacity costs $1,000 per tonne plus an additional $70 billion of pipeline infrastructure to transport gas supply to the terminal.Bcf/d total gas supply growth(1) Bcf/d excess gas supply(2) mtpa LNG capacity required(3)
+100
~$150 - $225 billion(4) of investment required to build 100-150 mtpa of LNG and supportive pipeline infrastructure to export excess U.S. gas supply
+12 +22
2018-2025:
Legend Operating/under construction LNG Future infrastructure required Incremental gas supply by 2025 (bcf/d) +X
Contents
14
- Short-term fundamentals – updated monthly
- U.S. natural gas – plentiful, low-cost U.S. natural gas supply
- Global LNG – global gas market is growing and becoming commoditized
100 200 300 400 500 600 700 800 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global LNG demand pull
Sources: Wood Mackenzie, Tellurian Research. Notes: (1) Assumes 86.5% utilization rate. (2) Assuming sustained 2015-2018 demand growth rate of ~9.3% p.a. post-2019. (3) Assumes estimate of 5.0% p.a. demand growth rate post-2020.15
Under construction In operation Capacity required(1)
9.3%(2) 5%(3)
~100 mtpa ~250 mtpa
9.3% p.a. growth rate
Key drivers
China India Europe New markets
170 97 208 885 Liquid maritime fuels (HFO) Oil burned for power generation (ex-North America) Coal burned for power generation (EU + JKT) Coal burned for power generation (China + India)
2018 fuel consumption (mtpa LNG equivalent)
$ 0 $ 2 $ 4 $ 6 $ 8 $ 10 $ 12 $ 14 $ 16 Jan 2016 Apr 2016 Jul 2016 Oct 2016 Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019 Jul 2019 JKM Brent Newcastle
Latent LNG demand from fuel substitution
There is substantial latent demand for LNG, which is competitive with oil prices and cleaner than coal
Source: ICE via Marketview, BP Statistical Review, Oxford Energy Institute Tellurian analysis. Notes: (1) Newcastle coal includes a $15 per tonne shipping fee and is heat rate adjusted. (2) Assumes a 7,800 average heat rate for global gas-fired power plants. (3) Includes Central America, Europe, Middle East, and Asian markets.16
LNG prices trade between oil and coal prices
~1,359 mtpa LNG equivalent latent LNG demand
Gas is cheaper than oil Gas is cleaner than coal Coal-to-gas switching point
(1) (2) (3)
Natural gas demand linked to renewables
Source: UK Department for Business, Energy, and Industrial Strategy (2019), Lazard.17
Natural gas share in UK’s power mix grew to ~50% as higher CO2 prices incentivized dispatch of cleaner fuels
10 20 30 40 50 60 70 80 90 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 mtoe
UK power generation by fuel
Coal Oil Gas Nuclear Hydro (natural flow) Wind Solar
100 200 Gas CCGT Nuclear Coal PV Rooftop PV Utility scale Wind Levelized cost ($/MWh) Unsubsidized levelized cost of energy (LCOE)
Gas-fired power generation is a cleaner, more affordable, and reliable backup to renewables
LNG required to offset Groningen declines
Global LNG
Netherlands capping production from the Groningen field requires ~10 mtpa of LNG
Source: NAM, Energy Aspects.18 Gas fields Earthquakes
54 42 28 28 24 22 15 12 12 12 8 4 3 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 bcm
Groningen yearly production
Netherlands
Mandated production cap Forecast
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000
- 500
1,000 1,500 2,000 GDP/capita
Emerging consumption: China and India
Population and economic growth imply significant upside to gas consumption in China and India
Sources: IHS Markit, SIA Energy, EIA, CIA World Factbook, BP Energy Outlook.19
China 7 mcf/capita India 2 mmcf/capita United States 87 mcf/capita Size indicates relative volume of gas consumed per capita in 2018 (mcf/capita) Argentina 38 mcf/capita Natural gas’ share of 2018 energy mix 6% 7% 23% 31% 49% India China EU U.S. Argentina European Union 38 mcf/capita Population (millions)
203 330 391 74 108 120 2018 2025 2030
Growing demand in China
Economic growth and emerging environmental policy drives demand growth
Source: SIA.20
277 438 510 LNG Domestic production & pipeline imports Chinese gas demand billion cubic meters per year
6.1% CAGR (2018-2030) 4.5% CAGR (2018-2030)
668 721 751 777 830 850 868 26 29 30 34 39 40 42 2012 2013 2014 2015 2016 2017 2018 Number of importing countries Global regas capacity (mtpa)
Growing number of importers accessing LNG
The number of LNG importing nations has grown by ~60% in the last 7 years
Source: GIIGNL, IGU (2019), IHS Markit. Notes: Includes Lampung, Nusantara, and Tanjung Benoa (all in Indonesia) and Northeast Gateway (United States).21
33 total floating storage and regasification units (FSRUs) represent ~130 mtpa of global regasification capacity as
- f May 2019
New demand from LNG bunkering
- LNG offers shippers a smart way to meet existing
and upcoming maritime emissions regulations
- LNG bunkering expected to grow substantially
- ver the long term as marine and transport
sectors seek a cleaner fuel alternative ― Unlike conventional marine fuels, LNG emits near-trace levels of SOx, NOx, and PM
- Total addressable market of 170 mtpa, based on
today’s global marine fuel oil consumption
- Over 120 LNG-fueled vessels already in
- peration, with over 130 on order or under
construction Cleaner burning LNG is becoming more popular as a fuel for marine vessels for IMO 2020
Sources: OIES 2018, DNV-GL.22 10 20 30 40 50 60 70 2025 2030 2035 2040 mtpa
Comparison of LNG bunkering forecasts
IEA Sustainable Development IEA New Policies ENGIE/PWC Lloyds Register max Wood Mackenzie
Physical and financial liquidity is growing
Financial derivatives Physical liquidity
Sources: Platts, GIIGNL.23
59.2 65.0 69.6 68.4 74.6 77.6 99.3 2012 2013 2014 2015 2016 2017 2018
Spot and short-term LNG trade
Total trade (mtpa) Share of total trade (%) 25% 28% 28% 29% 28% 27% 32% 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 2012 2013 2014 2015 2016 2017 2018 YTD 2019 JKM futures traded (10,000 mmBtu/lot) Lots 2019 annualized JKM swaps JKM swaps Mtpa LNG equivalent 0.06 0.08 0.35 0.58 2.60 9.62 35.2 41.1
U.S. emerges as the world’s largest LNG exporter
Based on firm capacity
Source: Wood Mackenzie, Tellurian Research. Notes: Includes existing and under construction projects.24
Triangle of low- cost supply 30.6 88.8 77.8 Current capacity (mtpa) (producing and under construction) 92.4
Current LNG buildout has experienced cost overruns
Announced total capex cost increases for selected Australia and Papua New Guinea projects Announced liquefaction EPC cost increases for selected existing and under-construction U.S. projects
Source: IHS Markit, Tellurian Research.25
1000 2000 3000 4000 5000 6000 Queensland Curtis LNG T1-2 Pluto LNG T1 GLNG T1-2 PNG LNG T1-2 APLNG T1-2 Gorgon LNG T1-3 Wheatstone LNG T1-2 Ichthys LNG T1-2
Total capital costs ($ per tonne)
Cost at FID Cost increase – 100 200 300 400 500 600 700 800 900 1,000 Sabine Pass LNG T3-4 Sabine Pass T1-2 Corpus Christi LNG T3 Sabine Pass LNG T5 Corpus Christi LNG T1-2 Freeport LNG T3 Freeport LNG T1-2 Cameron LNG T1-3 Cove Point LNG Golden Pass LNG
Total capital costs ($ per tonne)
Estimated sunk regas costs Cost at FID Cost increase
Natural gas and LNG To: 1 billion cubic meters of natural gas (bcm) 1 billion cubic feet of natural gas (bcf) 1 million metric tonnes LNG (mt) 1 trillion British thermal units (tBtu) 1 million tonnes
- f oil equivalent
(mtoe) From Multiply by 1 billion cubic meters of natural gas (bcm) 1 35.3 0.72 35.7 0.9 1 billion cubic feet of natural gas (bcf) 0.028 1 0.021 1.01 0.025 1 million tonnes LNG (mt) 1.38 48.7* 1 52 1.22 1 trillion British thermal units (mmBtu) 0.028 0.99 0.019 1 0.025 1 million tonnes of oil equivalent (mtoe) 1.11 39.2 0.82 39.7 1
Conversion factors
Conversion factors 26 *includes 6.3% losses in transportation for international LNG trade
1 MWh = 3,412 mmBtu = 3.412 mmcf