The Effects of Increasing Demand on the Dynamics of the Gas Business - - PowerPoint PPT Presentation

BHP Petroleum

The Effects of Increasing Demand on the Dynamics of the Gas Business

Seapex Presentation Singapore February 1997

BHP Petroleum

GAS RESERVES (Asia & Australia)

Strong demand for energy has focussed governments and world lending institutions on optimal utilisation of energy resources, particularly gas.

Source: Wood MacKenzie, *modified, **uncommitted gas reserves

Country Remaining Gas Reserves P+P (TCF) 1994 Production (mmcfd) R/P Ratio Australia 29.4 2632 30 Bangladesh 9 720* 35 Brunei 18.6 1097 50 China 32 1759 50 India 26.3 2000 35 Indonesia 43 6005 20 Malaysia 44.5 3720 30 Myanmar* 7.0 102 190 New Zealand 2.5 537 13 Pakistan 21 1627 35 Papua New Guinea 15 15.5 2660 Philippines 3 Thailand 8.1 1057 20 Vietnam 3.4 77 120

1994 TOTAL REMAINING GAS RESERVES (Asia & Australasia)

Total Gas Reserves: 483.2 TCF Others include New Zealand, Philippines and Vietnam

Asian Opportunities (undeveloped gas reserves)

Pacific Ocean

Bangladesh 9.0 TCF Myanmar 7.0 TCF Thailand 8.1 TCF PNG 15 TCF E Malaysia 21 TCF* W Malaysia 8 TCF* Philippines 3.0 TCF Brunei 18.6 TCF Vietnam 3.4 TCF Natuna Sea Indonesia 2 TCF (W) 25 TCF (E) Kutei Indonesia 2 TCF** NW Australia TCF China 32.0 TCF India 26.0 TCF Pakistan 21.0 TCF

17.3% 11.0% 17.1% 12.2% 8.0% 9.9% 7.2% 5.7% 3.0% 3.4% 2.7% 3.4% Indonesia Australia Malaysia China Pakistan India Brunei Papua New Guinea Thailand Bangladesh Myanmar Others

BHP Petroleum GAS PRICING

Strong demand, and high value and prices for gas in power generation, means that regional pricing depends primarily on proximity to power demand markets.

Pacific Ocean

Undeveloped resources without markets Gas demand centres Indicative market price * (US$/GJ)

$3.80 $3.80 $3.80 $3.00 $3.00 $1.30 $1.50

$3.00 $2.50 $2.20 $3.80 $1.50 $2.50

* for end user

$1.50 $3.10 $2.60 $2.00 $0.50

* For the Middle East:

Strong rates of economic growth Developing countries on the threshold of industrialisation Fast rising demand for electrical power (i.e. widening capacity shortfalls) Environmental constraints Gas fired power generation capacity expansion (i.e. GTCC technology) short construction lead time higher generation efficiency lower emissions (i.e. as against coal) Co-generation Strong demand for gas into power generation Relatively high gas price ~ US$2.00/Mcf upwards cf urea feedstock High intrinsic value as a result of competing fuel prices

BHP Petroleum

INDONESIA

Gas in Indonesia has been primarily developed for the export market to East

• Asia. The large gas resource base will continue to permit an export focus.

INDONESIA GAS MARKET

(Supply/Demand Balance)

TIMOR BUTON Alor Tali Abu Jambi Bandung Bandar Lampung

JAKARTA

Lhok Seumawe Medan Padang Bengkulu

Palembang

Pontianak Banjarmasin Semarang Yogyakarta Banda Aceh

Manado

Palu Kendari Denpasar Kupang Mataram

BRUNEI PHILIPPINES MALAYSIA SINGAPORE MALAYSIA THAILAND

Flores Sumba Bangka SOUTH CHINA SEA INDIAN OCEAN CELEBES SEA JAVA SEA FLORES SEA Simeulue Nias Siberut Togian Ujungpandang Sumbawa Belitung JAVA KALIMANTAN Palangkaraya SULAWESI Samarinda

km 600

Bali SUMATRA Natuna Lombok Kangean Madura Surabaya 120 100 5 5 120° 100°

• C. Sumatra

0.5 Bt proven Brown coal

• S. Sumatra

1.8 Bt proven Brown coal Arun soon to decline

Natuna potential LNG High CO2

• E. Kalimantan

6 trains plus 2 2 TCF uncommitted

Indonesia has significant gas reserves located primarily in remote areas. Largest reserves are located in North Sumatra and East Kalimantan with gas used mostly for LNG plants. Natuna will be developed initially as an LNG project. Currently over half the gas produced in Indonesia is liquefied into LNG, and further investments in gas export infrastructure at East Kalimantan and Natuna are planned. Java's industrialisation and energy demand growth is generating strong domestic gas demand

Demand projection as per Pertamina forecast Supply projecction as per Wood MacKenzie East Kalimantan North Sumatra South Sumatra Java Other Fields 2000 4000 6000 8000 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 YEAR Gas Requirements (mmcfd) LNG Capacity Feedstock Power Generation City Gas & CNG Industry

BHP Petroleum INDONESIA

Gas pricing for the fertiliser industry in Indonesia is dictated by ministerial

• decree. The low pricing is a result of providing cheap fertiliser products to

the rural constituencies. Gas prices have risen rapidly, in response to intense demand

GAS PRICING

East Kalimantan Fertiliser plant 1.00 Gas Pricing into LNG plants Generally based on an index to the Indonesia Crude Price Average net price (1994): US$2.06/Mcf East Java US$/MCF (Delivered to the user) Power generation (PLN Gresik) 2.53-3.00 (ARCO-Kodeco) State gas company 2.16 Fertiliser plant 2.00 West Java Power generation (?) 3.00 Power generation (PLN Maura Karang) 2.45 (ARCO) *Cement (Indocement & Semen Cibinong) 3.00 *Cement (Tri Manunggal Pesaka Cement) 2.70 Steel Industry 3.00 Steel Industry (as fuel) 2.00 State gas company (Jakarta & Bogor) 1.50 State gas company (Cirebon) 1.25 Fertiliser industry 1.00 South Sumatra Power generation (minor volume) 3.00 Fertiliser industry (large volume) 1.00 North Sumatra Power generation (minor volume) 3.00 Fertiliser plant (Aceh) 1.00 Paper Mill 1.50 Gas prices for urea (as dictated by Ministerial decree) 1991 Ministerial decree East Kalimantan fertiliser co 1.00 North Sumatra PIM & AAF 1.00 South Sumatra 4 units 1.00 West Java Kujang 1.00 Post-1991 Ministerial decrees (ie new or modified plants) South Sumatra remodelled unit 1.50 Gresik 2.00

Trend to higher price

BHP Petroleum

THAILAND

Thailand's gas supply is heavily committed to power generation expansion

• plans. Domestic ammonia/urea production is not likely to occur.

Gas reserves are mainly concentrated offshore in the Gulf of Thailand (i.e. 7 TCF) Expanding infrastructure capacity debottlenecking. links with Myanmar and Malaysia PTT has a contract for 525 mmcfd of gas from the Yadana

• ffshore gasfield starting from 1998

The power generation sector will continue to dominate gas demand

(i.e. EGAT plans to double gas-fired capacity over the next 10 years).

Industrialisation in the country is driving a high growth rate in electricity consumption. Gas use in the residential and industrial sectors will grow as the pipeline network is expanded (i.e. Bangkok ring). Local gas supply is constrained. Pipeline imports from Myanmar and Malaysia represents the best

• ption for incremental gas supply.

Potential LNG buyer.

ANDAMAN SEA MYANMAR THAILAND LAOS CAMBODIA VIETNAM MALAYSIA INDONESIA

Natural gas field Natural gas demand location Existing pipeline Future pipeline

THAILAND NATURAL GAS MARKET

(Supply/Demand Balance) * Assumes all IPP generating capacity to be gas fired (ie LNG) IPP to build a total at 10600 MW by 2006 Demand projections as per PTT forecast and EGAT generation energy plan Supply projections as per Wood MacKenzie 1st Contract (Unocal) 2nd Contract (Unocal) 3rd Contract (Unocal) Pailin (Unocal) Sikirit (Shell) Nam Phong (Esso) Bongkot (Total) Yadana (Total) Yetagun (Texaco) JDA 1000 2000 3000 4000 90 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 YEAR Gas Requirements (mmcfd) Feedstock Industry Bangkok Ring EGAT (Energy Plan) IPP

BHP Petroleum

THAILAND

Thailand is willing to pay fairly high prices for gas supply. Current gas prices are too expensive for viable domestic ammonia/urea production.

Retail Market Segment PTT Price US$/MMBTU EGAT (Power Generation) $2.80 NPC (Petrochemical) $3.10 Cement $3.25 Industry $4.95 Gulf of Thailand production is relatively expensive due to the geology being complex and highly faulted. Gas is found in small fractured pockets necessitating the drilling of many deviated wells to develop sizeable production rates. Gas prices have contractually been linked to the thermal equivalent price of high sulphur fuel oil (HSFO)

* delivered gas price to the Thai border

Sources: Wood MacKenzie, Thailand (1994) PTIT Focus Special Annual Issue 1993 Reuters

WELLHEAD GAS PRICES US$/MMBTU (1994)

Sirikit Nam Phong 1st Contract (Unocal) Yetagun 2nd Contract (Unocal) Bongkot 3rd Contract (Unocal) Yadana $1.18 $1.50 $1.65 $1.70 $1.76

$1.91

$2.03 $2.52*

BHP Petroleum

VIETNAM

Vietnam's gas industry is still in the greenfield development stage.

VIETNAM GAS MARKET

(Supply/Demand Balance) Source: BHP 1994 Gas Requirements (mmcfd)

Total estimated reserves: 3.7 TCF Limited number of fields have been discovered offshore the southern coast of Vietnam (i.e associated gas) Largest gas field is Block 6 (BP operated) which is estimated to contain 2.0 TCF Gas separation facilites and pipeline to Ho Chi Minh City to be built for gas supply from Bach Ho and Block 6 (i.e. initially to supply gas to the Ba Ria power station) Potential gas demand and supply will be small scale by regional standards Demand will be largely driven by supply Initial gas demand will be for power generation (i.e. critical role as a major user to establish gas infrastrucutre) Follow on development of industry usage along pipeline

• LAOS

THAILAND CAMBODIA CHINA HAINAN

VIETNAM

Hanoi Danang Qui Nhon Ho Chi Minh city

• 22 N

HONG KONG Vung Tau

Tien Hai Estimated recoverable reserves 30 BCF, 2 MMSCFD Bach Ho Estimated recoverable reserves 0.5 TCF Was flaring at 100-150 mmscfd Being piped to shore Block 6 Estimated recoverable reserves 2.0 TCF Block 15/2 250 BCF Rong 250 BCF

Bach Ho Block 6 100 200 300 400 500 95 96 97 98 99 2000 1 2 3 4 5 6 7 8 9 10 YEAR Gas Requirements (mmcfd) Power Generation Industry Fertiliser

BHP Petroleum

VIETNAM

Gas from offshore Vietnam is relatively expensive.

Urea production will be on import replacement basis and will require government subsidies to be viable. Likely delivered gas prices: 2.00-3.00 (US$/MMBTU) Power generation provides the highest value end use End use Max gas netback price US$/MMBTU Power - CCGT 4.25 Urea - Greenfield 1.70 Delivered gas prices US$/MMBTU

Estimates only

Bach Ho Block 6

$1.85 $3.00

$1.90 $1.20

Producer margin Production cost

BHP Petroleum

MYAMNAR

A large proportion of the newly discovered offshore gas has been allocated for export to Thailand.

Total reserves: 7 TCF. Gas reserve distribution: 98% offshore 2% onshore. Declining onshore gas production due to depleting reserves and loss

• f reservoir pressures.

National oil company lacks the expertise and funds to develop the gas reserves. Gas potential lies offshore in the Gulf of Martaban where two discoveries (Yadana and Yetagun) have been made. Total reserves 6.9 TCF. The option of exporting gas to Thailand has been taken in order to earn vital foreign exchange. Alteration of domestic supply constraint dependent upon further exploration success. Only incremental production from the offshore gas fields will be available for domestic use. Power generation to dominate gas demand. Proposed ammonia urea plant in Yangon is dependent upon increasing domestic gas supply.

PIPELINES Existing Planned

MYANMAR NATURAL GAS MARKET (Supply/Demand Balance) Demand profile based on gas users maximum production capacities: I. Power generation: As per MEPE power development plan with capacity

• perated @80% cf

II. Methanol capacity: 450 tonnes/day III. Urea capacity: (Existing) 1470 tonnes/day (New additional Yr 2000) 1750 tonnes/day IV. Cement capacity: 3000 tonnes/day V. Allowance for paper mill and general industrial use

Onshore (MOGE) Yadana 100 200 300 400 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 YEAR Gas Requirements (mmcfd) Power Gen Urea Cement Methanol Industrial Paper Mill Supply shortfall

BHP Petroleum

Summary

In summary, intense pressure on gas demand in Asia is fuelling substantial gas price increases and restricting use in low value end uses.

Sources: The outlook for Urea, December 1993 (Fertecon) BHPP Analysis

Iran 315,000 T/a capacity On-line 1995 Iran 570,000 T/a capacity On-line 2000 Iraq 570,000 T/a capacity On-line 2000 Saudi Arabia 570,000 T/a capacity On-line 2000 Bahrain 570,000 T/a capacity On-line 1997 Qatar 660,000 T/a capacity On-line 1997 Bangladesh 560,000 T/a capacity On-line 1995 Bangladesh 330,000 T/a capacity On-line 1997 Myanmar 570,000 T/a capacity On-line 2000 Malaysia 495,000 T/a capacity On-line 1997 Indonesia 462,000 T/a capacity On-line 1994 Indonesia 572,000 T/a capacity On-line 1997

* Note: Plant capacities are for total urea output at tonnes/annum

* Urea gas feedstock prices (likely); US$/GJ $1.50-$2.00 $1.50 plus $1.80 $0.30-$0.80 $0.50-$0.80 $1.10 - $1.50

Location of proposed urea projects and likely gas feedstock prices

$1.50

BHP Petroleum

Asia dominates world urea demand and is responsible for approximately 50% of total world production. Significant regional supply shortfall is made up from imports from the Middle East and the former Soviet Union.

Regional Surplus/Deficit

(1992)

ASIA & OCEANIA UREA MARKET

(Supply/Demand Balance)

Total demand growth (post 93): 4.5% pa. Demand growth is driven by increasing fertiliser usage rates due to agricultural expansion in developing countries with large populations. A demand shortfall of at least 8 million tonnes per annum is expected to exist in the region throughout the decade. China and India dominate demand in the region and represent the largest import market segments in the region. Local urea production in the region is constrained by the availability of low cost indigenous gas supply. Urea is the most widely used and tested nitrogen fertiliser, particularly in the developing countries.

Imports are mainly from the former Soviet Union & Middle East

China Production India Production SE Asia Production West Asia Production East Asia Production Oceania Production Imports 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000

88 89 90 91 92 93 94 95 96 97 98 YEAR Urea Volume (Tonnes) Millions China Demand India Demand SE Asia Demand West Asia Demand East Asia Demand Oceania Demand

• 8.0E+6
• 6.0E+6
• 4.0E+6
• 2.0E+6

Indonesia Malaysia Bangladesh New Zealand North Korea Pakistan Taiwan Myanmar Japan South Korea Australia Thailand Vietnam Philippines India China

BHP Petroleum

Major international urea trade flows in Asia

The former Soviet Union is the largest exporter of Urea to the Asian region, with

• verwhelming trade to China.

The Middle East is the second biggest exporter where trade is diversified throughout the smaller Asian markets such as Thailand, Sri Lanka, Myanmar and the Philippines. China is the largest importer in the region. Inter-regional trade is dominated by

• Indonesia. More than half of Indonesia's

export volume is traded with Vietnam. Other small inter-regional traders are Malaysia and Bangladesh.

ASIA INTERNATIONAL UREA TRADE (Suppliers Market Shares 1992)

North America North America

42.2% 17.0% 16.9% 10.8% 6.6% 5.6% FSU Asia Middle East Europe North America Other

BHP Petroleum Proposed ammonia/urea export-oriented projects

Source: The outlook for Urea, December 1993 (Fertecon) The outlook for Ammonia, December 1993 (Fertecon) Hydrocarbon processing (June 1995)

Facility Capacity Country Location Company NH3 Urea Production Possible urea export surplus Middle East Iran Bojnurd Khorosan Petrochemical Co 330,000 T/a 315,000 T/a 1995 200,000 T/a Bharain Sitah Gulf Petrochemical Industries 495,000 T/a 570,000 T/a 1997 570,000 T/a Qatar Umm Said QAFCO 495,000 T/a 660,000 T/a 1997 660,000 T/a Iran Queshm Island IFFCO/Kribhco 495,000 T/a 660,000 T/a 2000 660,000 T/a Iraq Khor Al Zubair SEF 330,000 T/a 570,000 T/a 2000 570,000 T/a Saudi Arabia Al-Jubail Saudi Binladen Group 330,000 T/a 570,000 T/a 2000 570,000 T/a West Asia Bangladesh Chittagong Karnafuli Fertiliser Co 495,000 T/a 570,000 T/a 1995 100,000 T/a Bangladesh Fenchuganj Jalalabad Fertiliser Co 190,000 T/a 330,000 T/a 1997 100,000 T/a Pakistan Port Quesim Farigi Fertilisers 429,000 T/a 462,000 T/a 1998 200,000 T/a South-East Asia Indonesia Gresik PT Petrokimia Gresik 445,000 T/a 462,000 T/a 1994 300,000 T/a Indonesia Bontang PT Pupuk Kalimantan 495,000 T/a 572,000 T/a 1997 250,000 T/a Malaysia Gunan Kedah Petronas 330,000 T/a 495,000 T/a 1998 495,000 T/a Myanmar Yangon Myanma Petrochemical Enterprise 330,000 T/a 570,000 T/a 2000 570,000 T/a

BHP Petroleum

INDONESIA

Urea Outlook

120° 100°

Government policy of urea self-sufficiency (i.e. agriculture efficiency) Export advantage to Indochina via small shipments to minor ports Further capacity additions to be limited by increased gas costs due to: higher value from domestic use (i) power generation (ii) industry (i.e. gas supply to java is critical) alternative export potential for gas as LNG

TIMOR BUTON Alor Tali Abu

Jambi Bandung Bandar Lampung

JAKARTA

Lhok Seumawe Medan Padang Bengkulu

Palembang

Pontianak Banjarmasin Semarang Yogyakarta Banda Aceh

Manado

Palu Kendari Denpasar Kupang Mataram

BRUNEI PHILIPPINES MALAYSIA SINGAPORE MALAYSIA THAILAND

Flores Sumba Bangka SOUTH CHINA SEA INDIAN OCEAN CELEBES SEA JAVA SEA FLORES SEA Simeulue Nias Siberut Togian Ujungpandang Sumbawa Belitung JAVA KALIMANTAN Palangkaraya SULAWESI Samarinda

km 600

Bali SUMATRA Natuna Lombok Kangean Madura Surabaya 120 100 5 5

Proposed projects

INDONESIA UREA MARKET (Production Profile) INDONESIA UREA MARKET (Exports)

Source: Urea Outlook 1994 (Fertecon)

2,000,000 4,000,000 6,000,000 8,000,000

88 89 90 91 92 93 94 95 96 97 98 99 2000 YEAR Urea Volume Millions

2,000,000 4,000,000 6,000,000 8,000,000

88 89 90 91 92 93 94 95 96 97 98 99 2000 YEAR Urea Volume Millions

BHP Petroleum

MALAYSIA

Urea Outlook

Government has a industry development priority programme (i.e. launching of Malaysia into the Vision 2020 Industrialisation Era) Petronas' greenfield urea plant an integral part of the Peninsular Gas Utilisation Scheme expansion (Phase III) Export target market of Thailand Further urea capacity additions not likely for higher value alternate gas uses (i.e. power generation) LNG export potential

Thailand Cambodia

Malaysia

Vietnam Indonesia

Phnom Penh Vung Tau Kertih Kuala Lumpur Singapore Sarawak Sabah Peninsular Malaysia Bintulu Lotong

Proposed project

MALAYSIA UREA MARKET (Production) MALAYSIA UREA MARKET (Import/Export)

Source: Urea Outlook 1994 (Fertecon)

200,000 400,000 600,000 800,000 1,000,000 1,200,000 88 89 90 91 92 93 94 95 96 97 98 99 2000 YEAR Urea Volume Millions Production 200,000 400,000 600,000 800,000 1,000,000 88 89 90 91 92 93 94 95 96 97 98 99 2000 YEAR Urea Volume Millions Import Export

BHP Petroleum

INDOCHINA

Urea Outlook

Rice economy region Proposed urea production mainly on import replacement basis Urea projects require government assistance for viability (i.e. low cost gas position critical) Export pipeline gas sales to Thailand would provide higher netbacks and foreign currency savings to the potential urea producing countries

India Thailand Myanmar Bangladesh

Cambodia

Malaysia China

Vietnam Laos

Proposed projects

MYANMAR UREA MARKET VIETNAM UREA MARKET THAILAND UREA MARKET

Source: Urea Outlook 1994 (Fertecon)

50 100 150 200 250 300 350 88 89 90 91 92 93 94 95 96 97 98 99 2000 Urea Volume Thousands Production Consumption 100 200 300 400 500 600 700 88 89 90 91 92 93 94 95 96 97 98 99 2000 Urea Volume Thousands Consumption 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 88 89 90 91 92 93 94 95 96 97 98 99 2000 Urea Volume Millions Production Consumption

BHP Petroleum

October 1995

Key element - Gas market

Gas markets can be characterised by size ........

SE Asia

Indochina Myanmar Thailand Vietnam Cambodia Laos Malaysia Indonesia Philippines PNG

N Asia Japan S Korea Taiwan SE China W Asia Pakistan India Bangladesh Sri Lanka

Thailand Philippines PNG Indonesia Japan Taiwan SE China Pakistan India Bangladesh 1000 Sri Lanka 6000 16000 1000 Vietnam Cambodia Laos Myanmar Malaysia S Korea Major importers by 2010 Growth in gas consumption by 2010

Small - require market evolution to be of interest Moderate Large

Gas market 1995  2010

LEGEND

BHP Petroleum

October 1995

Key element - Gas market

Gas markets can be characterised by size ........

SE Asia

Indochina Myanmar Thailand Vietnam Cambodia Laos Malaysia Indonesia Philippines PNG

N Asia Japan S Korea Taiwan SE China W Asia Pakistan India Bangladesh Sri Lanka

Thailand Philippines PNG Indonesia Japan Taiwan SE China Pakistan India Bangladesh 1000 Sri Lanka 6000 16000 1000 Vietnam Cambodia Laos Myanmar Malaysia S Korea Major importers by 2010 Growth in gas consumption by 2010

Small - require market evolution to be of interest Moderate Large

Gas market 1995  2010

LEGEND

BHP Petroleum

October 1995

Key element - Gas market (cont)

........and the degree of regulation.

Thailand Bangladesh India

No infrastructure participation Controlled infrastructure participation Open access

Basic

• bligations

ROR Pakistan Australia Japan Korea Taiwan Myanmar Malaysia Indonesia SE China NZ UK US Undeveloped Cambodia Vietnam Philippines PNG Sri Lanka Pricing/service regulation Gas infrastructure regulation

Gas market regulatory regime

Iran

BHP Petroleum

Review - Gas supply business potential

Gas supply business potential can be characterised by a country's prospectivity and fiscal terms. Onerous terms or low prospectivity will preclude BHPP from seeking a gas supply position in an area. Myanmar Vietnam Thailand PNG Pakistan Bangladesh SE China India Sri Lanka Korea Philippines Japan/Taiwan Malaysia Indonesia Iran Prospectivity Fiscal terms High Low Onerous Good cut-off cut-off Cambodia

BHP Petroleum

Key element - Petroleum business environment

Strong competitors and NOCs are high barriers to entry that in extreme cases preclude BHPP participation. In addition many Asian domestic markets carry significant country and credit risk. Korea Taiwan Malaysia SE China Japan Sri Lanka Cambodia Bangladesh PNG Pakistan Myanmar Vietnam India Barriers to entry (primarily strong competitor/NOC position) Country and credit risk Low High High Low cut-off Indonesia Philippines Thailand Iran

BHP Petroleum

Global Gas Production

BHP Petroleum

Global Gas Consumption

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1975 1985 1987 1989 1991 1993 1995 Asia & Australasia Africa Middle East Former Soviet Union Europe

• Sth. & Cen.

America North America

BHP Petroleum

Global Gas Reserves

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1975 1985 1987 1989 1991 1993 1995 Other Asia & Australasia Africa Middle East Former Soviet Union Europe

• Sth. & Cen.

America North America

BHP Petroleum

Asian Gas Reserves

BHP Petroleum Asia imports 77% Global LNG traded and accounts for 59% of global LNG production

China Australia Taiwan India Japan Brunei Middle East Korea

LNG Trade Flows

Indonesia Malaysia USA

Source : BP Review of World Gas 1995

BHP Petroleum

IPP Fuel Costs

Current pricing favours coal on marginal cost basis

1 2 3 4 5 6 7 8 9 Coal Gas

Generation cost c/kWh

$60/ton $40/ton $20/ton $6/MMBtu $4/MMBtu $2/MMBtu

BHP Petroleum

Asian Existing Gas-Fired Power Generating Capacity by Country

10 20 30 40 50

Australia India Indonesia Japan Malaysia New Zealand Pakistan Singapore South Korea Taiwan Hong Kong Thailand

MW (Thousands) Steam Turbine CC GT

BHP Petroleum

Singapore Gas Demand

• Gas demand in the near term will be supply driven
• Malaysia unlikely to supply more gas than its current contract
• Indonesian gas cannot compete with current fuel oil price
• Singapore has ready access to low cost fuel oil supplies

(US$2.40/MMBtu)

• Gas likely to command a slight premium in price - depending,

however, on the country’s commitment to fuel diversity, security

• f supply, environmental issues, etc.
• Fuel oil prices have been depressed, and likely to stay that way,

making competition for gas tougher

BHP Petroleum

Malaysia Gas Demand

• Future gas demand in Peninsular Malaysia wil be for power

generation

• Domestic gas demand onshore Peninsular Malaysia can be met

by domestic production until 2010

• Gas supply for PGU Scheme wil double by 2000, mostly

supplied by Exxon

• Gas prices net to suppliers are relatively low due to Petronas’

captive market - unlikely to change in the short/medium term

• Low domestic gas prices make it hard for external sources of

supply to compete

BHP Petroleum

Thailand Gas Demand

• Power sector will be the driving force behind future expansion
• f Thailand’s gas market
• Gas will dominate the power generation fuel mix in the near

term, but coal’s position will increase in the medium/longer term

• A “gas bubble” could emerge in the short/medium term
• In the longer term, as yet uncontracted sources of gas will

compete to supply the Thai gas market

• LNG will not actually be required until around 2010, although

small volumes are likely to be taken from 2005 as a security of supply measure

BHP Petroleum

Vietnam Gas Demand

• As gas industry is still young, demand is likely to be supply

driven

• Power generation will dominate future gas demand - current

reserve base likely to meet this demand until 2010

• Domestic suppliers still face difficult times in commercialisation
• f existing reserves

– Fundamental legislative decisions need to be made – Gas pricing methodology is still uncertain – Alternative fuels are subsidised