Global LNG dynamics are changing as new suppliers, markets, and flexibility emerge. While new supply projects will take longer than expected to come online, LNG demand from Asia is projected to continue strong growth. This will tighten the LNG market in the near-term before additional supply comes online later this decade. For Europe, LNG imports may decrease in the short-run as the market tightens but are expected to increase again by 2021 as new global supply comes available, with US exports potentially helping to supply Europe as a balancing market.

1. Global LNG: are the dynamics changing?
International Petroleum Week ● 17 February 2014
Betsy Spomer, SVP Global Business Development, BG Group
Methane Shirley Elisabeth LNG vessel

2. Legal notice
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No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by BG Group plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it.
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3. •A world leader in natural gas
•UK FTSE 15 company
•Circa $60 billion market cap
•Operates in over 20 countries
•Leading LNG position
•Long heritage in the LNG industry
A world leader in natural gas
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BG Group snapshot

4. LNG: trade outlook to 2025
4
Global LNG supply (mtpa)
0
100
200
300
400
500
2000
2005
2010
2015
2020
2025
External LNG trade forecasts*
Supply gap: ~150 mtpa
Supply: existing and under construction
Existing
Under construction
2013 to 2025
CAGR(%) = 4.6 to 5.6
Sources: Supply: BG Group interpretation of Wood Mackenzie data (Q4 2013); as of Q4 2013 Yamal LNG not included in under-construction
* Trade: various research house views; (2014): Wood Mackenzie, PFC Energy, IHS CERA, Poten & Partners, FACTS Global Energy, (2013): PIRA, Gas Strategies

5. QCLNG Terminal, Curtis Island, Australia
LNG: near-term outlook

6. LNG today
•2013 trade = ~240 mt* (~176 bcma)
•~10% of all gas consumed
•A global trade:
–17 exporters
–27 importers
–~382 ships
•An increasing dynamism:
–3 new markets added in 2013
–2012 short-term trade** = 25% of total, 2013 likely to be similar.
–2013 AB to PB = 22.7 mt* (16.7 bcma)
But still far from commoditized
6
Near-term outlook – supply hiatus and market tightness
*Source: BG Group interpretation of IHS Waterborne data (Jan 2014).
**Source GIIGNL – contracts of less than 5 years
Note: AB = Atlantic Basin, PB = Pacific Basin

7. LNG market has tightened
7
Source: 2008-2012: BG Group interpretation of IHS Waterborne data (Jan 2014). *Forecast – BG Group outlook 2013
LNG imports by region 2008-15 (mtpa)
0
50
100
150
200
250
300
2008
2009
2010
2011
2012
2013
2014
2015
Total supply
Asia Pacific
Europe
North America
Supply outpacing Asia demand growth
Asia demand growth outpacing supply
Market loosening
Market tightening
M. East
FORECAST
S.America

8. 0
5
10
15
20
25
2008
2009
2010
2011
2012
2013
2014
2015
$/mmbtu
Asia spot LNG price trades between NBP and oil
8 Asian spot prices have varied between European prices (NBP) and oil parity Trend expected to continue
Oil parity
NBP
HH
Asia long- term proxy
Asia spot
Global
recession
Asia
recovery
Fukushima earthquake
Note: Asia long-term proxy = 14.85% JCC + 0.50
Oil parity = JCC = Japanese average crude price
Source: Platts, Heren, Petroleum Association of Japan and Bloomberg (as of Jan 30, 2014)

9. 0
10
20
30
40
50
60
70
80
90
Australia
Qatar
Malaysia
US East
Nigeria
Indonesia
Trinidad and T
Algeria
Russia East
Oman
Brunei
Yemen
PNG
UAE
Angola
Peru
Norway
E.Guinea
Egypt
Colombia
mtpa
2018
2013
9
Source: BG Group interpretation of Wood Mackenzie data (Q4 2013 data)
Exporters by rank: 2018
LNG supply - next wave is under construction

10. Global LNG imports by region
0
50
100
150
200
250
300
350
2005
2010
2015
2020
2025
Middle East
Other Asia
China
India
JKT
mtpa
Source: BG Group outlook 2013 – delivered volumes
JKT
China
India
Other
Asia
0
50
100
150
200
250
300
350
2005
2010
2015
2020
2025
Bunkers
Europe
N. America
S. America
S. America
Europe
Pacific Basin
Atlantic Basin
10

11. Europe LNG imports 2010 to 2013
0
2
4
6
8
10
12
Jan-10
Jan-11
Jan-12
Jan-13
bcfd
Netherlands
UK
Belgium
Turkey
Spain
Portugal
Italy
Greece
France
11
3-month moving average
Main Europe -21.1
North Europe -9.9
Spain
France
Italy
Turkey
Portugal
Greece
United Kingdom
Belgium
-35
-30
-25
-20
-15
-10
-5
0
5
mt
2013 vs. 2010
Source: BG Group interpretation of IHS Waterborne data (Jan 2014)
Netherlands

12. UK as a global balancing market
0
1
2
3
4
5
6
7
8
9
10
2008
2009
2010
2011
2012
2013
bcfd
12
Japanese earthquake/tsunami
Qatari supply to Middle East and Asia
UK LNG imports (total)
Qatari supply to UK
Qatar
Other
Source: BG Group interpretation of IHS Waterborne data (Jan 2014).

13. Global balance outlook
0
50
100
150
200
250
300
350
400
450
2011
2013
2015
2017
2019
2021
2023
2025
0
10
20
30
40
50
60
70
80
2011
2013
2015
2017
2019
2021
2023
2025
U/C
13
Volumes available for Europe (mtpa)
Supply (mtpa)
Existing
Under construction
Global market tight
Supply
Note: European import volumes (residual) resulting from supply tranches
2012 import level
2011 import level
Europe minimum (estimated)
Source: BG Group outlook 2013
Note: Yamal LNG added to under-construction

14. European gas market observations
•2012 gas demand below 2001 level
•Triple ‘whammy’ at present;
–Low economic growth
–US coal exports
–Renewables targets
•Russian exports to Europe at record high in 2013
•Europe acting as balancing market for global LNG
•LNG flexibility helping Europe to balance
14

15. LNG: longer term outlook

16. Gas demand growth driven by Asia/Middle East
16
Source: BG Group outlook 2013
Global gas demand (bcma)
2.4% CAGR

17. 0
1000
2000
3000
4000
5000
2012 consumption Production decline Consumption
increase
New supply required
by 2025
(bcma)
~9% pa
2.4% pa
17
Global gas supply challenge (2012-25)
Sources: BG Group (2013), BG Group interpretation of Wood Mackenzie

18. 0
50
100
150
200
250
300
350
2000
2005
2010
2015
2020
2025
mtpa
Strong Asian LNG demand growth
JKT
India
China
Other
CAGR
2000 – 2010
6.2% pa
CAGR
2010 – 2025
6.1% pa
Source: BG Group outlook 2013
Asia represents 75% of global trade in 2025
18

19. 19
In operation
Under construction
Under Development
* Refers to Floating Storage Unit (FSU)
STL Buoy
Brazil
Indonesia
US
Dubai, UAE
Kuwait
Chile
Argentina
Lithuania
UK
Puerto Rico
Israel
Italy
China
Malaysia
Source: BG Group
FSRU
locations
16 Existing
4 U/C
7+ U/D
*
Uruguay
Colombia
India
Lithuania FSRU. Source: www.HöeghLNG.com
*
Jordan
FSRUs – reducing market lead-time

20. 0
20
40
60
80
100
120
140
2010
2011
2012
Mozambique Reserves announced* (tcf)
* Recoverable – Anadarko, Reserves in place – ENI
1st discovery
1st appraisal well
2nd discovery
3rd discovery
4th discovery
A rapidly changing supply perspective
20
0
50
100
150
200
250
300
2010
2011
2012
2013
8
1
2
3
5
6
14
No. of filings
Lake Charles filed
BG Group - SP deal
16
12
23
Source: DOE, Press / ENI + Anadarko websites
Note: Excludes applications for under 0.1 bcf/d, and duplicate applications for same project (Lake Charles, Main Pass, EOS)
25
29
US LNG exports Cumulative DOE filings (mtpa)

21. Key new supplies for Asia
US Gulf Coast
Source
Market
Distance
Qatar
Japan
6,314
Australia
Japan
3,683
Egypt
Japan
7,573
Other trades (n miles)
W. Canada
Japan
9,282
n miles
Japan
3,940
n miles
21
Japan
6,747
n miles
Asia Pac.
E. Africa
Source: Dataloy (2013)

22. US LNG exports (2025)
•What will shape the US LNG export profile?
•Initially: license process Later: market appetite, financing, developer capability
•Only circa 10% of proposed US import terminals were finally built
•60 – 70 mtpa will still make the US the third largest exporter worldwide
22
0
50
100
150
200
250
300
Total applied
Local opposition
Developer
capability
Asian available
demand*
Other projects**
US export
outlook
Supply constraints
Market constraints
Notes
*total un-contracted Asian demand – assuming some contract renewals – 2025
**estimated Asian demand for non-US projects (equity positions, supply diversification)

23. US exports – cost stacks
23
0
2
4
6
8
10
12
14
16
18
20
$/mmBtu (2015)
Regas
Shipping
Toll & Fuel
HH
LT price (Asia)
LT Price (EU)
$70
$100
$130
$70
$100
$130
Asia
Europe
0.1485*JCC+0.50
0.11*crude oil
Crude oil price ($/bbl)
DES = ~$11.30
DES = $9.70
At Bloomberg HH consensus price (August 5, 2013), $4.60 /mmbtu in 2016
Assumptions : Liquefaction Toll = $3.00 + 15% Fuel, Shipping to Asia = $3.00 /mmBtu, to Europe = $1.50 /mmBtu, Regas = BG estimate

24. Global balance outlook
0
50
100
150
200
250
300
350
400
450
2011
2013
2015
2017
2019
2021
2023
2025
0
10
20
30
40
50
60
70
80
2011
2013
2015
2017
2019
2021
2023
2025
U/C
24
Volumes available for Europe (mtpa)
Supply (mtpa)
Existing
Under construction
New U.S.
Global market tight
Loosening
Supply
Note: European import volumes (residual) resulting from supply tranches
US
2012 import level
2011 import level
Source: BG Group outlook 2013
Note: Yamal LNG added to under-construction

25. Global balance outlook
0
50
100
150
200
250
300
350
400
450
2011
2013
2015
2017
2019
2021
2023
2025
0
10
20
30
40
50
60
70
80
2011
2013
2015
2017
2019
2021
2023
2025
U/C
New supply
25
Volumes available for Europe (mtpa)
Supply (mtpa)
Existing
Under construction
New U.S.
BG trade outlook
Global market tight
Loosening
Supply
Note: European import volumes (residual) resulting from supply tranches
US
Additional supply
2012 import level
2011 import level
Source: BG Group outlook 2013
Note: Yamal LNG added to under-construction

26. LNG costs
•EPC and project costs have increased rapidly since 2006
•Cost spread is wide post-2006
–By geography
–Within Australia
•Brownfield project - US:
–9 mtpa = US$5.6* Bn
•Gorgon LNG – Australia
–15 mtpa = US$54* Bn**
•LNG projects remain capital intensive
26
GRASSROOTS
EXPANSION
FLNG
AUSTRALASIA
US PROJECTS
CANADA PROJECTS
Liquefaction plant EPC costs
*source: public reports **includes upstream
Source: Poten & Partners

27. Are the dynamics changing?
But …
•US LNG not a universal solution
•Pricing will remain regional
•Oil indexation will remain important in Asia
•Increasing liquidity is not a given
27
Near-term outlook – supply hiatus and market tightness
Yes
•New suppliers, markets and players
•Increasing flexibility
•New pricing constructs
•LNG as a transport fuel

28. BG Group LNG market outlook
28
‘Illusion’ of a coming buyer’s market
New supply will take longer than envisaged
Non-US LNG projects will also be required
Prices will remain regionally differentiated
Majority of volumes remain inflexible
Substantial demand upside can absorb additional supply

29. Implications for Europe
•Near-term
–Reducing LNG volumes as market tightens
–How low can European LNG imports go?
–LNG imports into the UK will depend upon Qatari behaviour
–Pipeline volumes replacing LNG
•Longer-term
–LNG eventually flows back to Europe as new supply emerges
–But only reaches above 2011 levels by 2021
–LNG import terminals give Europe the option to compete for LNG if required
–Some US exports will end up in Europe – as backstop / balancing market
29