CORP 15506 1

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Information about CORP 15506 1

Published on March 16, 2008

Author: Dora


New Frontiers in Gas Supply and Demand The Role of LNG:  New Frontiers in Gas Supply and Demand The Role of LNG Day of the Trader 2001 Las Vegas December 6, 2001 15506v1 07 Dec 01 POTEN & PARTNERS 885 Third Avenue New York, NY 10022 Ph: 212-230-2035 Fax: 212-355-0295 Email: The emergence of commercialization:  The emergence of commercialization LNG supply project formation is now mature, competitive:  LNG supply project formation is now mature, competitive Facility costs -- down 30% - 50% through the chain Production — 3D seismic, horizontal drilling, subsea completion Liquefaction — train scale from 2+ MMtpa to 4+ MMtpa Shipping — cost down from $250+ MM to $160 MM today Project management and process engineering -- competitive At least 5 prime EPC contractors – competitive, fixed price bids (KBR, Bechtel, Chiyoda, Technip, Foster Wheeler) At least 4 liquefaction processes (APCI, Phillips, Prico, Shell) Strong sponsors majors“gas-focused”—ExxonMobil, BP, Shell, TotalFinaElf, Chevron-Texaco, Conoco-Phillips all have developing projects Strong NOCs — Petronas, Pertamina, Qatar Petroleum, Sonatrach Financing by third-parties — broader and deeper Banks, Export Credit Agency credit-enhancement, bond financing LNG business structure is changing:  LNG business structure is changing Proliferation of supply (14) & demand (40) locations supports multilateral trading Inland energy markets are maturing and liberalizing Gas and electricity markets — opened to competition “Privatized” buyers — become more competitive, cost-conscious Asian buyers reluctant to commit early, long-term, full project volume LNG project business model changing Supply projects commit without full sales — Oman LNG, RasGas, MLNG Tiga, Australia NWS expansion Sponsors take bigger equity risks for market Spanish buyer, Union Fenosa, forming a project in Egypt LNG markets are becoming more “commoditized” Short-term trading growing on surplus capacity in liquefaction plants Sudden boom in spec-built shipping — 19 new orders + 8 options USA becomes reliable “market of last resort” – liquidity and hedging LNG market commercial structure is changing:  LNG market commercial structure is changing Traditional Model Full capacity commiment Take-or-pay contracts anchored financing Pricing oil-indexed in isolated markets Limited volume flexibility for buyer Destination restrictions eliminated “merchant” activities by buyers “Emerging” Model “Partial sale commitment” – Qatar RasGas, Oman LNG, Australia NWS, MLNG Tiga Meets key buyer timing Advanced timing, lower credit needs for new sales Shorter term, flexible lifting Pricing gas market based in US emerging in Europe fixed price in developing countries Flexible destinations let buyers manage volume risk exploit “optionality” Development of LNG trade – Atlantic Basin:  Development of LNG trade – Atlantic Basin Atlantic Basin LNG History/Outlook:  Atlantic Basin LNG History/Outlook Algeria main supplier historically But US projects collapsed and Europe sales cut back post-1981 LNG trade growing 1997 — 21 MMtpa, including Algeria refurbishments 1999 — 9 MMtpa new supplies from Atlantic LNG (Trinidad), Nigeria LNG Recent sales – 20 MMtpa from ALNG and NLNG expansions, new projects from Egypt and Norway, Qatargas and RasGas exp’ns Developing projects in Nigeria (3 more), Egypt (2 more), Venezuela, Angola For Europe, USA, Turkey (?) LNG must be competitive with pipeline gas New markets in Mexico, Caribbean, northern Brazil Atlantic Basin LNG supply/demand:  Atlantic Basin LNG supply/demand Atlantic Basin LNG export and import projects:  Atlantic Basin LNG export and import projects Trinidad LNG Angola Algeria (2) Libya Boston Cove Pt. Elba Is. Lake Chas. Puerto Rico Turkey 1+1 Belgium 1 France 2 +1 Spain 3 +3 Italy 1 +1/2 Nigeria LNG + 3 Norway Venezuela LNG Egypt U/F +2 France 2 +1 Import Export New import New Export Qatar (2) USA – LNG import terminals:  USA – LNG import terminals New US import terminals under discussion (East coast/Gulf coast of North America):  New US import terminals under discussion (East coast/Gulf coast of North America) Irving St Johns, N. Scotia Conoco Norfolk, VA El Paso Radio Island, NC El Paso Bahamas/FL Enron Bahamas/FL AES Bahamas/FL BP Tampa, FL CMS Gulf of Mexico, offshore Texaco Gulf of Mexico, offshore Dynegy Hackberry, LA Cheniere Freeport, TX Cheniere Corpus Christi, TX El Paso/Shell Altamira, Mexico Sempra/CMS Ensenada, Baja CA, Mexico Drivers for short-term LNG trading:  Drivers for short-term LNG trading Short term LNG sales with no or little destination restrictions Australia wedge, ME spare to west of Suez Emergence of “toll processing” liquefaction plants – upstream owners take LNG to market Trinidad expansions, Norway LNG “Branded” LNG sales BP sales to Dominican Republic Potential surplus of LNG tankers by 2004 Hedging markets available in US markets LNG is only means to arbitrage values across geographically disparate markets Obstacles to short-term LNG trading:  Obstacles to short-term LNG trading Not yet real open access in European LNG terminals Terminal owner controls capacity subject to “third-party” access Tariffs and access under development unclear US terminal capacity Current capacity is tied up under long term contracts In new terminals, FERC open season winners may fully commit to new long-term supplies Regulatory delays in adding US capacity -- likely given security concerns And here come the ships……….:  And here come the ships………. LNG Shipyard contract price history:  LNG Shipyard contract price history 1996-1997 – Korean yards building for domestic orders (13 vessels) Domestic orders underpinned yard capital investments 1997-98 – Won devaluation from 800 to1300 per US$ cut production costs 1999 – Aggressive marketing secured 1st LNG export orders Japanese yards under pressure to compete Here comes China LNG ship deliveries and options:  LNG ship deliveries and options World LNG Fleet – Existing and Newbuilds:  World LNG Fleet – Existing and Newbuilds Of the 53 new ships, about 20 are built for trading or speculation Summary -- commercial LNG trading:  Summary -- commercial LNG trading Driven by available capacity through the chain Spare export capacity East of Suez Opening inland markets and import terminal access Shipping fleet expansion Enabled by evolving business structures Flexible supply and long-term sales Competitive markets for buyers Flexible destinations, merchant trading fleets Emerging as important component of total LNG trade Thank you for your attention !:  Thank you for your attention !

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