North Amercian LNG Exports
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North Amercian LNG Exports

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Asian Market *Hawaii's LNG*LNG pricing*US export*LNG export*North American prices

Asian Market *Hawaii's LNG*LNG pricing*US export*LNG export*North American prices

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North Amercian LNG Exports North Amercian LNG Exports Presentation Transcript

  • ©2012 Navigant Consulting, Inc. 0Confidential and proprietary. Do not distribute or copy. ENERGY
  • North American LNG ExportsAlaska LNG Summit 2012Valdez, AlaskaBob Gibb, Associate DirectorSeptember 13-14, 2012©2012 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • Important NoticeThis presentation was prepared by Navigant Consulting, Inc. exclusively for the benefit and internal useof the Alaska LNG Summit 2012 and its attendees . No part of it may be circulated, quoted, orreproduced for distribution without prior written approval from Navigant. This presentation isincomplete without reference to, and should be viewed solely in conjunction with the presentationprovided by Navigant.September 13-14, 2012©2012 Navigant Consulting, Inc. All rights reserved. Navigant is not a certified public accounting firm and does not provide audit, attest, or public accountingservices. See www.navigantconsulting.com/licensing for a complete listing of private investigator licenses. Investment banking, private placement, merger,acquisition and divestiture services offered through Navigant Capital Advisors, LLC., Member FINRA/SIPC.©2012 Navigant Consulting, Inc. 2Confidential and proprietary. Do not distribute or copy. ENERGY
  • Company OverviewNavigant is a specialized consulting firm: » Publicly traded since 1996 (NYSE: NCI) » Combination of technical skills and deep industry knowledge » Large engagement capability – more than 1,800 consultants in 40 offices globally » 2011 revenues of $785 million; EBITDA: $98 million » Nationwide platform, international presence » Independent – rigorously objective; no audit opinions to defendNorth American Dispute North American International Economic Consulting Consulting& Investigative Services & North American Dispute Business Consulting Fraud, Forensic & Antitrust Accounting Construction Disputes Securities Energy Investigations Financial Services Labor Healthcare Commercial Litigation Public Services Valuation and M&A Financial Services International Arbitration International Arbitration Forensic & Accounting Restructuring Electronic Discovery Commercial Litigation Investigations Government Contracting Valuations Commercial Litigation / Energy Construction Disputes Intellectual Property©2012 Navigant Consulting, Inc. 3Confidential and proprietary. Do not distribute or copy. ENERGY
  • About Navigant » Energy PracticeNavigant’s Energy PracticeOur Energy Practice includes more than 330 staff and works with companies andagencies in the natural gas and electric industries to create, deliver, and protectvalue in the face of uncertainty and change. We bring deep, industry-focusedexpertise to the development and implementation of innovative strategies … » Natural gas market » Energy technology and assessment and modeling technology management » LNG services and market » Business planning and support strategy » Fuel services » Renewables » Regulatory processes and » Energy efficiency and litigation support sustainability » Customer strategies » Greenhouse gas/climate » Resource procurement change » Operations and » Clean energy performance » All aspects of generation improvement and transmission » Asset transaction support©2012 Navigant Consulting, Inc. 4Confidential and proprietary. Do not distribute or copy. ENERGY
  • Table of Contents 1 North American Gas Supply and Demand 2 Role of LNG Exports 3 The Road Ahead©2012 Navigant Consulting, Inc. 5Confidential and proprietary. Do not distribute or copy. ENERGY
  • Section 1 – North American Gas Supply and Demand 1 North American Gas Supply and Demand 2 Role of LNG Exports 3 The Road Ahead©2012 Navigant Consulting, Inc. 6Confidential and proprietary. Do not distribute or copy. ENERGY
  • World Recoverable Shale Gas Resources Top 20 Countries Technically Recoverable Shale Gas Resources (trillion cubic feet) China 1,275 Poland 187 United States 862 France 180 Argentina 774 Norway 83 Mexico 681 Chile 64 South Africa 485 India 63 Australia 396 Paraguay 62 Canada 388 Pakistan 51 Libya 290 Bolivia 48 Algeria 231 Ukraine 42 Brazil 226 Sweden 41 Total 6,429 Source: U.S. Energy Information Administration©2012 Navigant Consulting, Inc. 7Confidential and proprietary. Do not distribute or copy. ENERGY
  • U.S. Historical Annual Average Dry Gas ProductionAccording to the EIA, U.S. annual average natural gas production at the end of2011 was at its all time high, exceeding the previous high of 21.7 in 1973 by 1.3Tcf. 24,000 23.0 Tcf 23,000 21.7 Tcf 22,000 21,000 20,000 Bcf 19,000 18,000 17,000 16,000 15,000 14,000 1973 1975 1979 1981 1983 1987 1989 1991 1995 1997 1999 2003 2005 2011 1977 1985 1993 2001 2007 2009©2012 Navigant Consulting, Inc. 8Confidential and proprietary. Do not distribute or copy. ENERGY
  • North American Shale MapShales cover much of North America.©2012 Navigant Consulting, Inc. 9Confidential and proprietary. Do not distribute or copy. ENERGY
  • Shale Abundance ConfirmedIndustry/governmental associations* have confirmed what Navigantfirst identified in 2008.1. The potential supply of natural gas is far greater than thought just a few years ago.2. The potential supply of oil is also far greater than previously thought.3. The US needs the oil and gas resources even as efficiency reduces demand and alternatives become more economically available on a larger scale.4. To gain the benefits of natural gas and oil will require environmentally responsible development.* National Petroleum Council (Sept. 15, 2011)©2012 Navigant Consulting, Inc. 10Confidential and proprietary. Do not distribute or copy. ENERGY
  • U.S. Historical Monthly Average Dry Gas ProductionThroughout 2011 and halfway through 2012, U.S. total gas production wasincreasing, although there is some flattening.©2012 Navigant Consulting, Inc. 11Confidential and proprietary. Do not distribute or copy. ENERGY
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • Coal to Gas Switching of Existing Power Plants Coal to gas switching will continue with abundant gas supply and low prices, contributing to increased demand for natural gas in power generation.©2012 Navigant Consulting, Inc. 15Confidential and proprietary. Do not distribute or copy. ENERGY
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • Section 2 - Role of LNG Exports, Facility Update 1 North American Gas Supply and Demand 2 Role of LNG Exports 3 The Road Ahead©2012 Navigant Consulting, Inc. 17Confidential and proprietary. Do not distribute or copy. ENERGY
  • Role of LNG Exports, Facility UpdateJapanese Market» All 50 reactors in the country idled, with 2 returned» Increased LNG demand by 10-12 mtpa (1.3-1.6 bcfd)» KEPCO warns 15% less power than that needed to meet peak demand» Japanese PM quoted without nuclear power ‚Japanese society cannot survive‛» 2020 demand estimated at 60-90 mtpa (7.9-11.8 bcfd) [currently 79 mtpa (10.3 bcfd)]» At $5-6 in U.S., European exports marginal Source: All – CWC LNG News©2012 Navigant Consulting, Inc. 18Confidential and proprietary. Do not distribute or copy. ENERGY
  • LNG ExportsThe New Paradigm – LNG Exports from North America?» Gas shale potential is situated across North America, including Canada which should experience the first new LNG project to export LNG from North America at Kitimat, BC.» Cheniere Energy’s Sabine Pass announced sale to its 4th major customer Korea Gas in Jan ‘12 following announced sales to BG, GAIL and Gas Natural Fenosa and is likely to be the first LNG export project on-line in 2015/16 in the U.S.» LNG exports should support the oversupplied North American market as coal retirements begin to slow.» Currently 16 U.S. (2 West Coast, 2 East Coast, 11 Gulf, 1 Alaska) and 3 Canadian projects with combined capacity of nearly 29 Bcfd are going through the export and Source: Canadian National Energy Board construction approval process.» Not all projects are likely to go ahead.©2012 Navigant Consulting, Inc. 19Confidential and proprietary. Do not distribute or copy. ENERGY
  • Role of LNG ExportsRecent EIA figures show the U.S. (and by extension, North America)becoming a net natural gas exporter by 2022. Figure 1: U.S. a Net Natural Gas Exporter by 2022 90 85 80 75 Bcfd 70 65 60 55 50 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 U.S. Dry Production U.S. Consumption Source: Navigant/EIA©2012 Navigant Consulting, Inc. 20Confidential and proprietary. Do not distribute or copy. ENERGY
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • Role of LNG ExportsThe Bottom Line – There’s enough supply responsiveness for a lot ofdemand.» Navigant’s view is that if Producers stay on track, there is at least 10 Bcfd of room to increase demand without causing excessive prices.» Can they stay on track?—Yes, likely.» What if demand grows more than the highest case or something happens to slow supply development? o DOE is clearly being careful in its permitting process for non-FTA nations (the real market) for LNG exports. o EIA has been directed to study the same overall supply-demand issues as addressed by Navigant. Early studies from EIA however have been disappointing. o For Cheniere LNG Export project at Sabine, the DOE left room to trim back the authorization if supply/demand became too tight. Recently the DOE have provided clarification on this and suggested they would not re- regulate.©2012 Navigant Consulting, Inc. 22Confidential and proprietary. Do not distribute or copy. ENERGY
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • Section 3 - The Road Ahead 1 North American Gas Supply and Demand 2 Role of LNG Exports 3 The Road Ahead©2012 Navigant Consulting, Inc. 24Confidential and proprietary. Do not distribute or copy. ENERGY
  • ENERGY©2011 Navigant Consulting, Inc.Confidential and proprietary. Do not distribute or copy.D I S P U T E S & I N V E S T I G AT I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O RY • M A N A G E M E N T C O N S U LT I N G
  • Challenges Ahead for North American LNG ExportsImplications of North American LNG Exports» LNG exports appear to be able to offer a ‘solution’ to the current market upset as a result of the ‘success’ of the gas shale.» By assisting the ongoing development of gas shale resources, LNG exports appear at the right time and the right place for a North American gas market in need of sustainable markets offering promise to both domestic consumers and producers.©2012 Navigant Consulting, Inc. 26Confidential and proprietary. Do not distribute or copy. ENERGY
  • KeyCONTACTS Bob Gibb| Associate Director Austin, TX bob.gibb@navigant.com 512.493.5407 Gordon Pickering | Director Rancho Cordova, CA gpickering@navigant.com 916.631.3249 Rick Smead | Director Houston, TX rsmead@navigant.com 713.646.5029©2010 Navigant Consulting, Inc.©2012 27Confidential and proprietary. Do not distribute or copy. ENERGY