LNG Outlook in Asia An Overview Toshi Yoshida Growing LNG Demand - PowerPoint PPT Presentation

LNG Outlook in Asia An Overview Toshi Yoshida Growing LNG Demand in Asia and the Role of US LNG Export Terminals Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP both limited liability partnerships May 2013 established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

Overview of Asian Market 8 th Annual Global Energy Conference The World Turned Upside Down  Traditionally major LNG buyers since the inception of international LNG business in the 1960’s.  Japan, Korea, Taiwan  Two significant emerging economies in the world began importing LNG in the 2000’s. the 2000’s.  China, India  New LNG buyers  Singapore (Jurong Island, 2Q 2013), Malaysia* (Melaka, 2012) Indonesia* (West Java, 2012), Thailand (Map Ta Phut, 2011) Vietnam (planned), Philippines (planned) *Malaysia and Indonesia have been major LNG suppliers in Asia in the past 2

Japan 8 th Annual Global Energy Conference The World Turned Upside Down  The largest LNG importer in the World  Fukushima nuclear power accident and consequences to energy supply sources for power generation  Immediate solution – fuel oil, LNG  LNG import (Source: BP statistical review of world energy; Economist intelligence unit): million tons • 2010 2011 2012 2013 2014 69 79 87 90 93  Mid-term – shifting interest to renewables and coal but LNG is expected to remain a significant supply source  Nuclear power resumption – when and to what extent? 3

Japan - continued 8 th Annual Global Energy Conference The World Turned Upside Down  Changing environment in LNG procurement  Diversification of LNG sources and optimization of price formula  Participation to US LNG export terminals  Participation to US LNG export terminals 4

Korea 8 th Annual Global Energy Conference The World Turned Upside Down  Second largest LNG importer in the world  Constant natural gas demand growth toward 2024 (10 th long term natural gas supply/demand plan)  25.92mmt in 2009 to 34.12mmt in 2024  LNG import demand forecast surpassed the plan (by Ministry of Trade, Industry and Energy)  37mmt in 2013, 39mmt in 2015, 38mmt in 2027  Substitution by coal and nuclear  Staying away from expensive Australian LNG, looking for new supply sources 5

China 8 th Annual Global Energy Conference The World Turned Upside Down  LNG demand expected to grow but to what Level? (BP statistical review of world energy; other sources): million tons 2012 2014 2018 2020 14 17 19 ?  Uncertainties over:  overall energy policy  coal, nuclear  construction of LNG receiving terminals  shale gas development  pipeline gas from Russia 6

Supply Sources 8 th Annual Global Energy Conference The World Turned Upside Down  Australia – many new projects; capacity expected near triple in five years (30 mmt in 2012 to 85mmt in 2017) but prices are expensive linked to crude oil prices  Middle East – Qatar stays the world’s largest supplier but no further plans of expansion beyond 77 mmt further plans of expansion beyond 77 mmt  East Africa – new mega projects in Mozambique and Tanzania  Canada – Kitimat, LNG Canada, BC LNG Export Co-operative.  Shorter distance to Asia. Export licenses are already granted.  High cost elements for building infrastructure/long distance pipeline construction needed to loading ports 7

US LNG Export Terminals 8 th Annual Global Energy Conference The World Turned Upside Down  Abundant shale gas supply, commercial flexibility and availability of finance, 20+ export terminals planned  Export license to non-FTA countries; pending review by DOE – when and to what extent and with conditions?  Many terminals are structured as tolling facilities, some others are selling  Many terminals are structured as tolling facilities, some others are selling LNG FOB terminals.  FOB buyers from Sabine Pass: Kogas, BG, Gail, Gas Natural Fenosa  Tolling facility users: Japanese utilities/trading companies, Koreans, Majors, LNG traders  China – more interested in shale gas development and learning fracing technologies?  JCC link 8

LNG Price Formula 8 th Annual Global Energy Conference The World Turned Upside Down  Hybrid (JCC plus Henry Hub)  Tolling arrangement (locked into Henry Hub pricing)  Cost optimization by acquiring upstream gas assets in the US 9