ESAI Energy Presentation: The LNG Gamble

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A Presentation by Sarah Emerson, President, ESAI Energy. October 2013.

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ESAI Energy Presentation: The LNG Gamble

  1. 1. The LNG Gamble Sarah A. Emerson ESAI Energy October 2013 10/4/2013 1
  2. 2. Energy Security Analysis, Inc o Energy research & advisory firm founded in 1984; focused on global oil, natural gas and alternative fuels and North American power markets. o Grounded in empirical research and practical, analytical innovation, leading to actionable advice and guidance. o Ongoing market analysis, research & forecasting services, regulatory insight and assessment of market dynamics to corporate, financial, end-user, regulatory, and policy clients globally. o Provides strategic planning, asset valuations, market studies, economic and political market analysis, provides expert witness support in litigation and arbitration.
  3. 3. ESAI Energy, LLC, a division of ESAI ESAI Energy provides comprehensive analysis of the global, regional, and national petroleum and alternative fuels markets, developed from a proprietary country- by-country fundamentals database that dates back to 1978. ESAI Energy’s principals and associates are trained in market analysis, economics, political science, finance and industrial policy. Our analysts integrate quantitative analysis of proprietary and public source data with trends in policy and regulation to develop a thoughtful projection of petroleum and alternative fuels markets in every country and region from two weeks to twenty-five years. ESAI Energy also provides customized consulting on topics such as project feasibility and profitability, market access, political and regulatory issues.
  4. 4. U.S. Heading towards Net Exporter 10/4/2013 4 (2.0) - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 80.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 U.S. Natural gas Balance (bcf/d) Net Imports Supply Demand Source: ESAI, EIA
  5. 5. Demand Growth Depends on Sector 10/4/2013 5 22.09 23.45 20.01 22.44 3.85 5.00 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Composition of Demand Growth (bcf/d) Other To NGLS Transport Commercial Residential Industry Electricity Source: ESAI Energy LLC
  6. 6. Chevron Phillips, Cedar Bayou, TX 1500 (2018) Dow Chemicals, Taft, LA 384 (2013) Westlake, Lake Charles, LA 106 (2013), 80 (2014) 106 (2015) Williams, Geismar, LA 272 (2013) Debottlenecks/feedstock conversionsNew facility RestartExpansion INEOS, Chocolate Bayou, TX 115 (2013) LyondellBasell, Channelview, TX 113 (2015) La Porte, TX 362 (2014) Eastman, Longview, TX 90 (2013) BASF, Port Arthur, TX 180 (2014) LyondellBasell, Corpus Christi, TX 362 (2015) Dow, Freeport, TX 1500 (2017) ExxonMobil, Baytown, TX 1500 (2017) OxyChem, Ingleside, TX 550 (2020) Sasol, Lake Charles, LA 1400 (2018) Formosa, Point Comfort, TX 800 (2016) The Marriage of Natural Gas Liquids and Petrochemicals Ethane Supply and Ethylene Capacity from ESAI’s Study: A Perfect Storm Of Liquids: Global NGL Forecast & Analysis 2013 – 2023 Source: ESAI Energy LLC: A Perfect Storm Of Liquids: Global NGL Forecast and Analysis 2013 – 2023
  7. 7. Likely US Natural Gas Exports 7 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 U.S Raises Natural Gas Exports (bcf/d) To Canada by Pipe to Mexico by Pipe LNG outside of region US Import Requirement Net Imports Volumes of Additional Exports LNG Capacity? # of terminals 2012 (3.8) 3.8 - - 2013 (3.6) 3.6 - - 2014 (2.5) 2.5 - - 2015 (2.4) 2.4 0.0 - 2016 (1.8) 2.4 0.6 1.3 2.0 2017 (1.2) 2.4 1.2 3.0 2.0 2018 (0.6) 2.4 1.8 4.1 3.0 2019 0.0 2.4 2.4 5.1 4.0 2020 0.8 2.4 3.2 8.4 5.0 ESAI Energy, Confidential One Scenario for Natural Gas Exports bcf/d Source: ESAI Energy LLC
  8. 8. Global LNG, September 2013 ($/MMBtu) Henry Hub $3.62 Japan $15.75 Korea $15.75 China $15.35 U.K $9.79 India $13.95 Belgium $9.83 Spain $10.25 Rio de Janeiro $14.95 Source: FERC, ESAI
  9. 9. How Much Can Asia Absorb? 10/4/2013 9 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 110 2005 2010 2015 2020 Asia Pacific Natural Gas Balance (bcf/d) Net Regional Import Requirement Asia-Pacific Supply Asia-Pacific Demand Source: ESAI Energy LLC
  10. 10. Global LNG Liquefaction Capacity (bcf/d) Region Existing Capacity Under Construction Planned Asia 12 9.8 14 Middle East 13 0 10.5 Europe 1 0 1 FSU 1 0 10 Africa 8 1.3 13.1 N. America 0 2.4 32 Latin America 3 0 2.4 Total 38 13.5 83 Notes: List Includes coal-bed methane to LNG and floating LNG projects Includes Algeria’s Skikda , commissioned 03/13 Sources include ESAI Energy, GIIGNL and IEA
  11. 11. Angola LNG 0.7 bcf/d 2013 Algeria, Gassi Touil LNG 0.6 bcf/d 2013 Qld Curtis LNG 1.1 bcf/d 2014-2015 Papua New Guinea, PNG LNG 0.9 bcf/d 2014-2015 Indonesia, Donngi Senoro LNG 0.3 bcf/d 2014 Gorgon LNG 2.0 bcf/d 2015-2016 Gladstone LNG 1.0 bcf/d 2015-2016 AP LNG 1.2 bcf/d 2015-2016 Wheatstone LNG 1.2 bcf/d 2016-2017 Prelude LNG 0.5 bcf/d 2017 Ichthys LNG 1.1 bcf/d 2017-2018 Sabine Pass LNG 2.4 bcf/d 2015-2017 Malaysia LNG 0.5 bcf/d 2014 LNG Projects Currently Under Construction Americas: 1 (2.4 bcf/d) Middle East & Africa: 2 (1.3 bcf/d) Asia: 10 (9.8 bcf/d)
  12. 12. View from the Casino • Beginner’s Luck: o First movers in LNG terminal construction benefit • Gambler’s Conceit: o Demand for natural gas will go up forever and there is unlimited demand for LNG • Stacked Deck: o Some LNG terminal investors/companies are better situated than others • House Loses: o Prices at Henry Hub will rise with exports • Count Cards: o There will be a tipping point with these LNG investments, and the economics will justify a volume far below 34 bcf/d. Analysts need to keep track of the impact of each new increment of export capacity 10/4/2013 12
  13. 13. 10/4/2013 13 ESAI Energy, LLC esai@esai.com +1-781-245-2036 www.esai.com Celebrating 28 years of Independent Global Energy Market Analysis and Forecasting: Crude | Petroleum Products | Petrochemicals | E + P | Refining | Natural Gas | NGLs |Alternative Fuels | Vehicle Technology |Geopolitics of Energy Note: ESAI does not endorse any particular trading or business strategy and is not responsible for any outcomes from any decisions made or attributed to this communication. The estimates, forecasts and analyses in this report are our judgment and are subject to change without notice. No warranty is made or implied. Thank You

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