This document summarizes opportunities in Asia's oil and gas sector amid low oil prices. It finds that while exploration and production will face challenges, opportunities exist in growing energy consumption driven by urbanization, manufacturing, and transportation sector growth. Rising vehicle ownership will increase gasoline trade between countries. Strong natural gas demand and a lack of pipelines means liquefied natural gas trade and imports will increase, supported by new exports from Australia and Papua New Guinea as major projects come online.

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Opportunities In Asia’s O&G Sector
Amid A Weak Oil Price Environment
Umang Parikh
Senior Oil & Gas Analyst
June 2015

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Key Themes
 Bright Spots In Asia’s E&P Amid Low Oil Prices
 Positive Consumption Story Will Drive Energy Demand
 Transportation Sector Growth Positive For Gasoline Trade
 LNG Trade Will Open New Opportunities

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Oil Prices: Short-Term Weakness Ahead
We expect renewed weakness in prices
over the course of H215 as ample supply
interacts with stable demand.
• Supply: OPEC remains committed to its
output target of 30mn bbl/day amid a well-
supplied global market.
• Iran wildcard: A breakthrough in Iranian
nuclear sanctions will bring additional
crude supplies into the market — Q116 at
the earliest.
• Demand: Global demand will remain stable
over the next six months, supported by
China’s stockpiling activities.
40
60
80
Jan-15
Jan-15
Jan-15
Feb-15
Feb-15
Mar-15
Mar-15
Apr-15
Apr-15
May-15
May-15
Jun-15
Weekly Front-Month Brent (USD/bbl)
Source: Bloomberg, BMI

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Oil Prices: Sub-$100/bbl Ahead
Subdued long-term outlook: Prices to trade
below USD75/bbl through to 2019.
• Shale oil will become the new global
swing production as US producers
improve efficiency to tide over period of
lower oil prices.
• Producers under fiscal pressure will
continue to pump more oil.
• Production growth will exceed
consumption increase up to 2019.
• Output growth to be driven by countries in
the Middle East, Atlantic Margin and the
US Gulf of Mexico.
20
40
60
80
100
120
2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Brent Price Forecast
Brent, USD/bbl
80
82
84
86
88
90
92
94
96
2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Global Crude Oil Balance
World oil production, mnb/d World oil consumption, mnb/d
f = BMI forecast. Source: Bloomberg, National statistical agencies, EIA, BMI

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Risk: Long-Term Blow To Asia Upstream
Lower oil prices will undercut short-term
investment and long-term production
potential in certain countries.
• Companies will see lower revenues, a
more challenging borrowing
environment and therefore cut capex.
• The exploration and development of
deepwater and LNG will be affected.
• The countries most at risk are Vietnam,
Australia and Thailand.
(5.0)
5.0
15.0
25.0
35.0
45.0
2014
2015 target
Changes In Capex (USDbn)
0
200
400
600
800
1,000
1,200
1,400
2011
2012
2013
2014e
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Crude Oil & Liquids Production ('000b/d)
Vietnam Australia Thailand
e/f = BMI estimate/forecast. Source: *Company data, National statistical agencies, EIA, BMI

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Asia Upstream Bright Spots
There will still be bright spots, especially
in China’s tight gas production and
certain South East Asian producers.
• More sophisticated techniques will
allow China to commercialise its vast
unconventional sources.
• Improvement in regulatory environment
will benefit Indonesia’s E&P.
• Upside to oil prices will reverse
Malaysia’s crude oil production decline.
• Australia and Papua New Guinea will
see rising natural gas production over
the coming years as projects from
previous capex cycle come online.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
0.0
50.0
100.0
150.0
200.0
250.0
2011
2012
2013
2014
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
China - Natural Gas Production, bcm
China Natural Gas Production (LHS) % chg y-o-y (RHS)
0.0
20.0
40.0
60.0
80.0
100.0
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
2011
2012
2013
2014e
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Malaysia & Indonesia – Crude Oil & Natural Gas
Production
Malaysia Crude Oil & Liquids Production, '000b/d (LHS)
Indonesia Gas Production, bcm (RHS)
e/f = BMI estimate/forecast. Source: National statistical agencies, EIA, BMI

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Focus On Cost Efficiency
Renewed focus on brownfield projects
with lower cost and greater efficiency.
• Asia has one of the highest production
costs in the world.
• Companies will focus on developing
competitive brownfield projects and
avoid exploration risk where possible.
• Renewed focus on innovation and
R&D, Petronas says it will focus
investment in enhanced oil recovery
(EOR) techniques to increase output.
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Africa and
Middle East
Canada Asia Europe South and
Central
America
US
Production Costs As A Percentage Of Revenues
2012 2013 2013 Global Average
This data takes the ratio of production costs to revenues in a particular region
of the 75 largest O&G companies during the year. Production costs of these
companies include production taxes, transportation cost and production-
related general and administrative expenses. Source: EY Global oil and gas
reserves study, BMI
Sources: EY Global oil and gas reserves study, BMI

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Opportunities: A Consumption Story
We see greater opportunities in energy
consumption, rather than exploration
and production (E&P).
• Rising urbanisation rates in emerging
Asia from 55% to 63% over the coming
decade. Lower energy subsidies will
increase infrastructure spending.
• Energy-intensive manufacturing sector
will average 10.0% growth annually
over the next decade.
• Soaring car ownership will create
upward pressure on energy
consumption.
• Slight shift in opportunities away from
China towards South and South East
Asia.
2014 2015f 2016f 2017f 2018f 2019f
China 6.9 5.7 5.9 6.2 5.3 5.4
India** 2.5 5.9 6.1 6.0 5.9 5.7
Indonesia -1.8 -6.6 9.7 9.1 8.5 7.8
Philippines 29.5 13.2 8.2 7.8 7.4 7.0
Table: New Vehicle Sales, %
Car Ownership To Soar*
0
100
200
300
400
500
600
Australia
Japan
Malaysia
Taiwan
Thailand
China
Indonesia
Vietnam
India
Philippines
Car Density
(Per 1,000)
3.2bn People
f = BMI forecast, *Includes used cars. **Refers to Fiscal Year (April-March). Source: National automotive associations, BMI

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Opportunities: Gasoline Trade
Strong growth in transportation sector will
provide another opportunity of increased
gasoline trade in the region.
• The build-up of refining capacity in
emerging markets (EMs) is focused on
diesel fuels.
• However, rising car sales will drive
regional gasoline demand into deficit and
open the door for increased trade.
• Developed markets facing demand
stagnation could look to export surplus
gasoline production to EMs.
e/f = BMI estimate/forecast. Sources: National statistical agencies, EIA, BMI
0
5,000
10,000
15,000
20,000
25,000
2012
2013
2014e
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Asia Refined Fuels Production, '000 b/d
Developed Economies Emerging Economies
-1800.0
-1600.0
-1400.0
-1200.0
-1000.0
-800.0
-600.0
-400.0
-200.0
0.0
200.0
400.0
2012
2013
2014
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Gasoline Supply And Demand Gap, ‘000 b/d
Indonesia India China

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Strong natural gas demand and a lack
of regional pipelines will encourage
greater LNG trade over the decade.
• Power sectors of countries to switch
from other energy sources to gas to
reduce pollution.
• Lack of cross-border pipelines will
keep LNG dominant in regional gas
trade over the next decade.
• LNG demand growth in South and
South East Asia from 2018 will be
supported by import capacity build-
up.
• The fall in prices of oil-indexed LNG
contracts will make long-term deals
more viable.
Opportunities: LNG Demand
-50
0
50
100
150
200
2012
2013
2014e
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Net LNG Imports, bcm
Asia Europe Latin America
0
20
40
60
80
100
120
2015f 2016f 2017f 2018f 2019f
South & South East Asia - LNG Import &
Regasification Capacity (bcm)
India Pakistan Singapore Thailand Malaysia
Indonesia Taiwan Philippines Vietnam
e/f = BMI estimate/forecast. Sources: National statistical agencies, EIA, BMI

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Shifting LNG Export Landscape
Regional LNG demand will be
supported by exports from Australia
and Papua New Guinea (PNG).
• Investments made during 2010-
2014 will see Australia and PNG
become significant regional LNG
exporters.
• Australia will overtake Malaysia (the
current export leader) to become the
regional LNG export juggernaut.
• Australian exports will reach
countries such as Japan, China,
India, South Korea and Taiwan.
• The abundance of LNG supplies will
mean that bargaining power still lies
with the consumers.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2013
2014e
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
Net LNG Exports, bcm
Papua New Guinea Malaysia Australia
Table: Net LNG Exports, bcm
2014 2015f 2016f 2017f 2018f 2019f
Australia 16.3 26.3 44.0 59.7 63.9 64.7
Malaysia 30.1 28 27.2 27.9 26.9 27.1
PNG 4.6 9.0 9.0 9.0 9.0 10.9
f = BMI forecast. Source: National statistical agencies, EIA, BMI

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Summary
 Low Oil Prices Will Shift E&P Focus In Asia
 Transportation Sector Demand Will Drive Regional Gasoline Trade
 Australia and PNG LNG Exports To Create Opportunities