LNG Investment Conference 2014 - LNG - The Update by Keith Schaefer

1. LNG—The Update
Good News and Bad News
GOOD: Still big LNG gains in Canada
BAD: Waiting for catalysts—everything
in limbo now

2. PROFIT FROM LNG?
TODAY’S TALK
 The US experience
 LNG Economics
 The BC Opportunity

3. LNG—THE OPPORTUNITY

4. LNG—THE OPPORTUNITY

5. US LNG
SEXY, BUT EXPENSIVE!!
Valuations now ultra high
Cash flows 2 years away
4-6% yield baked in, lots of debt
Positives?
-Asia desperate for supplier competition
-Panama Canal

6. CANADIAN LNG STOCKS—
IT’S HAPPENING NOW

7. CANADIAN LNG STOCKS—
IT’S HAPPENING NOW

8. CANADIAN LNG STOCKS—
IT’S HAPPENING NOW

9. LNG PRICING
Source:
Kootenay
Capital,
Calgary AB

10. LNG PRICING/SUPPLY COST

11. LNG PRICING/SUPPLY COST

12.  Liquefaction Plant Capital Costs $2.00 per Mcf
Based on $1,200 mln per mtpa construction costs at 8% cost of capital
 Natural Gas $4.00 per Mcf
 Pipeline Transportation $ .75 per Mcf
 Liquefaction and Refrigeration Costs $ .80 per Mcf
 Plant Maintenance Costs $ .50 per Mcf
 Operational Costs $ .20 per Mcf
 LNG Shipping Costs $1.12 per Mcf
 Total Delivered LNG Cost to Asia from BC $9.37 per Mcf

13. N. AMERICA LNG BUILD OUT
USA
 6 Proposals Approved to ship LNG
8.5 bcf/d=13% current US production
1st export Sabine Pass late 2015
Brownfield—changing import to export—16 bcf capacity
idle ($100 billion white elephant)
CANADA
 14 Proposals; none approved—total 13 bcf/d
 1st export Q4 15—but very small; #2 not until 2018
 Greenfield—from scratch—higher risk

14. 14
Ambitious plans – consortiums ahead
Source: Transport Canada, Kootenay
Terminal Capacity by Project (bcf/d)
Prince Rupert
Initial Full
XOM 1.6 4.0
BG 1.8 2.8
Petronas 1.6 2.4
Total 5.0 9.2
Kitimat
KLNG 1.3 1.3
LNGCan 1.6 3.2
DCEP 0.2 0.2
Total 3.1 4.7
Total 8.1 13.9

15. BC LNG
 Potential Multi-Year Run for service companies
 Huge spending to develop reserves
 $7.5 billion in construction per bcf export
 13 bcf=$97.5 billion
 13 bcf=all the natgas Canada produces today
 Like to see 3-5 bcf by 2020

16. Where’s the BIG Money Going?
 New gas pipelines = $4 billion in
GDP/45,000 job years
 Terminal facilities (Rupert/Kitimat) 8350 job
years
 Production profits from upstream gas
extraction=$134 billion to 2035

17. Where’s the BIG Money Going?

18. SMALL Technology
Could Win Big in BC LNG
 BC LNG Cooperative / Golar LNG
 New Technology—Small Scale Floating Export
Terminals by Golar--FSRU
 1st to production—2015/2016
 Golar—GLNG-NASD—LNG shipper—make BIG
money
 They capture most of the “arb”—price difference

19. Leading Edge Technology
 2nd FSRU in the world
 I think BC could have multiple small scale
FSRUs
 $300 million capex vs. $10 billion
 18 months to build vs 5 years
 I expect FID very quickly—big catalyst

20. Who Will Be First in BC?
1. Petronas—Malaysia—FID late 2014
(Pacific Northwest LNG)
2. Golar/Haisla—small scale floating barge
(BC LNG)
3. Woodfibre north of Vancouver

21. Conclusion
 Easy Money already made in US LNG
 Canadian LNG needs catalyst for next leg
GOLAR Makes FID should be that catalyst
 But $100 billion spending will happen soon
Multi year run for services stocks

22. Questions?