FACTS Global Energy's Chairman, Fereidun Fesharaki, presents his insights on the short term natural gas outlook and what he predicted would determine the short term price outlook at the 2012 Oil & Money Conference. He discussed the Pacific Region prices structures, Hub Pricing vs. Oil Indexation and Hybrid Pricing. If you are interested in what Mr Fesharaki said would directly determine the short term price outlook on natural gas in 2012, please view his presentation. Fereidun Fesharaki will once again share his expert insights into natural gas at the Oil & Money Conference 2013, when he joins an expert tackling the pivotal question 'Will Regional Natural Gas Markets Ever Converge?' in a panel which also comprises of Marcel Kramer, Chief Executive Officer, South Stream Transport Services Jonathan Stern, Chairman and Senior Research Fellow, Natural Gas Research Programme, Oxford Institute for Energy Studies and is chaired by Sarah Miller, Editor, Energy Compass, Energy Intelligence. To benefit from their experiences and to share your own insights into this and other high level discussions and debates on the crucial issues facing the international energy sector, then join us at Oil & Money Conference 2013 this October at the InterContinental London Park Lane. For more information visit http://www.oilandmoney.com

1. Natural Gas Outlook: What will Determine the Mid and Long Term
Price Outlook?
The Short Term Natural Gas Outlook
By Dr. Fereidun Fesharaki, Chairman
Oil & Money 2012
London
November 14, 2012

2. 2
Pacific Region Price Structure
2
*Supplies targeting East of Suez, up to Speculative Projects
100
200
300
400
500
2012 2015 2016 2017 2018 2019 2020 2025 2030 and beyond
Incremental supplies*
(mmtpa)
Oil-Indexation Hub-Indexation
Incremental volumes sold mainly on oil-indexation are driven
by new Australia projects
Incremental volumes will be driven by new
USGC/Canada/East Africa projects.
While,
Most USGC volumes = Hub-Indexation
Canada/East African projects
=> Small % Hub-Indexation; Majority % Oil-Linked
=> Due to high development costs.Existing

3. 3
Hub Pricing vs. Oil Indexation
• There is no cheap LNG from whichever source we look at.
• As such, there is a cost-based floor on the price of LNG. Lower oil prices at the
US$80/bbl range might well mean that the cost of the Hub-based projects and
oil-indexed prices are not that different.
• US$10-11/mmBtu or around US$70-80/bbl oil price is the minimum breakeven
price for most new LNG projects, whether they are from the US, East Africa, or
Australia, whether they are conventional or non-conventional.
• Hub pricing in one way or the other will enter new LNG contracts. We expect
many suppliers of US LNG will end up selling at Hub-related prices plus a
margin.
• There are blessings in Hub-related pricing for both sellers and buyers. It is not
possible to insist that buyers should ignore Hub pricing and only use
conventional oil indexation. Buyers simply will not accept this argument.
• There is no cheap LNG from whichever source we look at.
• As such, there is a cost-based floor on the price of LNG. Lower oil prices at the
US$80/bbl range might well mean that the cost of the Hub-based projects and
oil-indexed prices are not that different.
• US$10-11/mmBtu or around US$70-80/bbl oil price is the minimum breakeven
price for most new LNG projects, whether they are from the US, East Africa, or
Australia, whether they are conventional or non-conventional.
• Hub pricing in one way or the other will enter new LNG contracts. We expect
many suppliers of US LNG will end up selling at Hub-related prices plus a
margin.
• There are blessings in Hub-related pricing for both sellers and buyers. It is not
possible to insist that buyers should ignore Hub pricing and only use
conventional oil indexation. Buyers simply will not accept this argument.
There is a reasonable middle ground for both sides and deals can be construed to
benefit both sides by sharing the risk.
Asian buyers and governments need to design policies to accommodate this floor.
There is a reasonable middle ground for both sides and deals can be construed to
benefit both sides by sharing the risk.
Asian buyers and governments need to design policies to accommodate this floor.

4. 4
Hybrid Pricing—What Buyers Want?
(%*HH) (%*JCC)
LNG
Price
Minor %
Majority %
• Majority of supplies locked-in for security
of supplies + traditional oil indexation.
• Minority of supplies are Hub-related;
subjected to price volatility but preferred
with term flexibilities?
• Same tranche of volumes but at a basket of
oil-indexed and Hub-related pricing?
Contract
Volumes
(mmtpa)

5. Thank You
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