[PPT] - Natural Gas Supply/Demand Outlook Presentation to: The Fertilizer PowerPoint Presentation

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Natural Gas Supply/Demand Outlook

By: John Harpole

November 14, 2018

Presentation to: The Fertilizer Outlook and Technology Conference Jacksonville, Florida

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Fertilizer Industry vs. Natural Gas Industry

Source: http://www.search.com/reference/Lucy_van_Pelt

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$0 $1 $2 $3 $4 $5 $6 $7 11/1/2010 2/1/2011 5/1/2011 8/1/2011 11/1/2011 2/1/2012 5/1/2012 8/1/2012 11/1/2012 2/1/2013 5/1/2013 8/1/2013 11/1/2013 2/1/2014 5/1/2014 8/1/2014 11/1/2014 2/1/2015 5/1/2015 8/1/2015 11/1/2015 $/MMBtu BENTEK Est.

*Forecast from my 2010 speech:

BENTEK Expects The Forward Curve To Fall Further

NYMEX

Source: BENTEK

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What will impact natural gas prices during the next 5 years?

Shale gas/productivity gains (We aren’t exploring,

we are manufacturing gas.)

Lower EPA Air Standards (demand increase)
Renewable Portfolio Standards (in an inexpensive

gas environment?)

Coal to gas conversion (demand increase)
Demand in Mexico (potential demand increase)
LNG exports from North America (China is waiting)

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Circa 2010

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Natural Gas Outlook

By: John Harpole Presentation to:

2013 Fertilizer Outlook & Technology Conference Tampa, Florida November 20, 2013

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Conclusions from November 20, 2013

U.S. continues to produce more gas, shale gas

revolution was too successful, end-users will benefit

During the next 3 years, supply will likely exceed

demand

Prices will remain in the $3.50 to $4.75 range, with short

period above and below that band during adjustments

Long term prices depend on demand growth. Without

demand growth, supply will continue to be long and prices relatively low.

A significant demand response can’t occur for at least 3-

5 years

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The End of Scarcity? Natural Gas Outlook

By: John Harpole Presentation to: The Fertilizer Outlook and Technology Conference Jacksonville, FL

November 11, 2015

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The Big Three Issues to Watch

1. Global Oil Price Recovery
2. Marcellus and Utica Shale Production
3. U.S. LNG Exports

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Circa 2015

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Source: Kinder Morgan, 2015 Business Meeting: West Region Gas Pipelines, November 2, 2015

1990-2013: Wellhead total data from DI Desktop 2014-2025: Kinder Morgan forecast

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Source: Kinder Morgan, 2015 Business Meeting: West Region Gas Pipelines, November 2, 2015

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NYMEX Historical and Future Forecast

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Per MMBtu

NYMEX – 1996- Nov 2018 - Average last 3 days of close as reported in Platts Gas Daily Report, Publication 2019-2021 Future Forecast as

f 11/07/2018 reported by MarketView Software

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It is not a scarce resource anymore

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US RIG COUNTS: Aug 2018 vs Aug 2016

5/+1 61/+34 15/+9 32/+24 2/-2 2/+1 6/+2 12/+5 19/+17 122/+68 35/+21 1/+1 96/+57 5/+2 4/+4 25/+7 10/+0 2/+0

Active rig count: Aug 3, 2018 / Change in rig count from Aug 5, 2016

Rig Increases Dry Gas Focused Areas Rig Increases Liquids-Rich/Oil Focused Areas Rig Declines Source: S&P Global, Aug 2018

1/-1 45/+3 23/+12 18/+9 15/-1 1/+0 46/+11 471/+290 33/+21 8/+5

PICEANCE CALIFORNIA MICHIGAN POWDER RIVER GREEN RIVER WIND RIVER OTHER ROCKIES WILLISTON SAN JUAN UINTA OTHER APPALACHIAN D-J MARCELLUS WET MARCELLUS DRY UTICA ILLINOIS ARK FAYETTEVILLE ARK WOODFORD OFFSHORE TX GULF EAGLE FORD PERMIAN ANADARKO FT WORTH AL-MS-FL LA GULF ARKLA OTHER MIDCONTINENT TX GULF EAST TX

25/+1

RATON

0/+0

TOTAL

1144 CHANGE +610

10/+8

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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60 65 70 75 80 85 Bcf/d

U.S. Dry Gas Production

2013 2014 2015 2016 2017 2018 Forecast

US supply growing again; largest year-over-year gain in history

Source: S&P Global Platts Analytics

Y-O-Y 2013/2014 +4.0 Bcf/d Y-O-Y 2014/2015 +3.4 Bcf/d

Y-O-Y (Forecast) 2017/2018 +7.0 Bcf/d Y-O-Y (YTD) 2017/2018 +5.0 Bcf/d

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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Source: www.eia.gov/dnav/ng/hist/n9132mx2m.thm accessed 08/20/2018

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Major delays on Mexico’s interior gas pipelines

Source: SENER, S&P Global Platts Analytics

4.7 Bcf/d delayed downstream of West

Texas

4.9 Bcf/d delayed downstream of

South Texas

Average delay over 400 days
Most new capacity delayed past 2018
US pipeline exports will remain

capacity constrained until 2019

Pipeline Import Corridor Capacity MMcf/d Original ISD Estimated Start 6/1/2018 Days Delayed El Encino - La Laguna West Texas 1,500 Apr-17 Mar-18 334 El Encino - Topolobampo West Texas 670 Oct-16 Jun-18 608 Nueva Era South Texas 504 Jun-17 Dec-18 548 Tula - Villa de Reyes South Texas 886 Dec-17 Jul-18 212 La Laguna - Aguascalientes West Texas 1,189 Dec-17 Nov-18 335 Villa de Reyes - Aguas. - Guadalajara West Texas 886 Dec-17 Nov-18 335 Samalayuca - Sasabe West Texas 472 Jun-17 Nov-18 518 Sur de Texas - Tuxpan South Texas 2,600 Jun-18 Oct-18 122 Tuxpan - Tula South Texas 886 Mar-17 Dec-19 1,005 Average Delay 460 Mexican Pipeline Construction Tracker Project Details Start Date Tracker

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Downstream constraints alleviated in 2019

5 10 15 2017 2018 2019

MEXICO IMPORT CAPACITY CONSTRAINTS (BCF/D)

Imports Border Capacity Estimated Downstream Constraint

Imports peak at ~4.9 Bcf/d in Oct-18 Imports peak at ~6.2 Bcf/d in Jul-19

Source: S&P Global Platts Analytics

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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High Utilization of US LNG Expected to Persist

2 4 6 8 10 12 Bcf/d

US LNG Feedgas Capacity and Forecast

Elba Island T7-10 Elba Island T1-6 Corpus Christi T2 Corpus Christi T1 Cove Point T1 Cameron LNG T3 Cameron LNG T2 Cameron LNG T1 Freeport LNG T3 Freeport LNG T2 Freeport LNG T1 Sabine Pass T5 Sabine Pass T4 Sabine Pass T3 Sabine Pass T2 Sabine Pass T1 LNG Export Forecast LNG Feedgas Forecast Source: S&P Global Platts Analytics

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Latin America and Asia main markets US LNG

Source: S&P Global Platts Analytics

1,240 BCF US LNG exports shipped to 27 countries

MEXICO 275 Bcf DOMINICAN REPUBLIC 15 Bcf BRAZIL 45 Bcf ARGENTINA 46 Bcf CHILE 68 Bcf PORTUGAL 23 Bcf SPAIN 27 Bcf ITALY 7 Bcf SABINE PASS and COVE POINT LNG TERMINALS TURKEY 29 Bcf JORDAN 65 Bcf MALTA 5 Bcf EGYPT 17 Bcf PAKISTAN 13 Bcf KUWAIT 30 Bcf UAE 17 Bcf CHINA 163 Bcf INDIA 65 Bcf THAILAND 3 Bcf SOUTH KOREA 151 Bcf JAPAN 87 Bcf TAIWAN 12 Bcf UK 9 Bcf POLAND 3 Bcf

36% to Asia 37%

to Americas

17% to India and Middle-East 10%

to Europe

Lithuania 3 Bcf Netherlands 6 Bcf

*Numbers may not add up to 100% due to rounding

Colombia 2 Bcf Israel 3 Bcf

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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10 20 30 40 50 60 Bcf/d

LNG Demand By Region

Asia Demand Europe Demand ME Demand Americas Demand Other Demand

Asia Clearly Driving LNG Demand

LNG Demand in Asia expected to account for roughly 50% of the total LNG demand growth 2023 v 2018

Source: S&P Global Platts Analytics

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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China almost 30% of growth in global LNG demand (2018 to 2023)

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 10 20 30 40 50 60 Bcf/d China All Others China % of Total

Source: S&P Global Platts Analytics

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Source: Greg Ruben, KinderMorgan, Colorado Oil and Gas Association Trade presentation, August 21, 2018

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Source: Greg Ruben, KinderMorgan, Colorado Oil and Gas Association Trade presentation, August 21, 2018

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10 20 30 40 50 60 Bcf/d

LNG Supply By Region

Other Supply Qatar Supply US Supply Australian Supply

Global Supply Concentrate to Three Players

US follows ramp in Australian volumes; +60% of total liquefaction capacity increase 2023 v 2018

Source: S&P Global Platts Analytics

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Source: Rick Allen, S&P Global Platts, The Energy Summit – COGA 2018 presentation, August 22, 2018

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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Source: LNG Allies, The US LNG Association, www.lngallies.com

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