Emerging Tightness in LNG for India

8/6/2019 Emerging Tightness in LNG for India

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Strategic Advisors in Global Energy



Welcome

Seminar on

'Emerging Tightness in LNG Market:Implications for India

May 4, 2010, New Delhi


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The New Dynamics in the Middle East

Prepared for Petrofed

By Fareed Mohamedi, Partner

Shangri-La Hotel, New Delhi, 4 May 2011


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Emerging Tightness in LNG Markets | PFC Energy-Petrofed Seminar May 2011 | Page 3

The Restless Wave of Middle East Protests

Regime change in Tunisia and Egypt raised risks in the oil industry,but the first actual disruptions to operations came in Libya

When will normalcy be restored in Libya? Will unrest spread to

other producers? Will there be significant changes in the operatingenvironment?


4/67Emerging Tightness in LNG Markets | PFC Energy-Petrofed Seminar May 2011 | Page 4

Middle East: Patronage Patterns in Soft States

State

Mass

Local Elites

The ruling class often has a distinctive

identity and the bureaucracy isoften little more than a publicemployment program.

Local elites mediate

between rulers & ruled,using complexsystems ofpatronage.

Fragmented by

multipleidentities.

Tribe Ethnic Sect

Religious tiesoccupy aspecial position since

they transcend tribal& ethnic links.



1. Broad-Based Elite: Egypt, Tunisia andMorocco

The state is representative of the rural andurban notables

More political choices for head of stateare available no zero sum game

2. Narrow Elite: Algeria, Syria, Bahrain,Jordan, Iraq, Libya

The state represents the interests of oneprimary group

There are no alternatives for this group zero sum game approach

3. The Gulf Monarchies: GCC minusBahrain

Clearly defined identities and hierarchies

Elites comprised of ruling families withvery close relations through marriage,tribal affiliations or economic ties

Middle East: Three Types of States



What is Next For Egypts Democratization?

1. Managed Elections Real power of the traditional elite is preserved in new democratic system,

with participation from other groups

2. No Real Elections An electoral veneer, with presidential elections for pre-screened candidates

prone to co-optation

3. Developmental Democracy

Divisions among the ruling classes lead to competition for support from themasses through elections

4. Relapse from Democratization

Capture of power through elections by one group (inter alia, the MuslimBrotherhood) either leads to no willingness to cede power, or fear amongother groups of economic crisis and political marginalization; support forcoups

It is unlikely that the existing system of ruling elites will beoverturned in Egypt or other Middle Eastern states

MostLikely

LeastLikely


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Libya: Descent into the Abyss

Qadhafis initial, violent crackdown failed

Benghazi protestors encouraged by the

examples of Tunisia and Egypt

The resilience Benghazi protestors encouraged

other groups

But the oppositiona series of groups

seeking regime changeis similarly

incapable of dislodging Qadhafi from

western Libya Outside the oil sector, Libya has almost no

institutional state capacity

A post-Qadhafi Libya would mean a

wholesale rebuilding of the state,hampering efforts to return oil operations

to normalcy

A cautionary tale for other narrowly-based

regimes?


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Yemen: Salih Era is Ending

The question is not whether there will beregime change, but when and how thatchange will occur

Salih and Yemens myriad interest groups

are negotiating the terms of Salihs exit,under a Gulf Cooperation Council (GCC)plan

If Salih hands over power peacefully, he

may be replaced by a consensus figurewith the support of Yemens mainopposition groups: tribal sheikhs(especially in the north), religious leadersand the Joint Meeting Partiesa coalition

of opposition groups

However, it is possible that Salih willrefuse to step down or will be replaced bya divisive figure, which could open a path

to conflict among tribes and regionalleaders

President Ali Abdallah Salih


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Is the Gulf Next?Happy Gulf a reaction to the 1990s economics challenges

Economic Changes Higher oil prices and stabilization

Strategic economic plan

Public-Private partnerships

Globalization of services

Using energy for development

Political Changes

Improved governance Faux democratic institutions

Opposition mistakes and opportunitiesfor divide and rule

Continuing Challenges Income distribution

Unemployment

Greater political inclusion

Growing government capacity

Strengthening rule of law


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Trajectories for Middle East Protest Movements

Financial strength and generally better governance yields a betterpolitical outlook for the major oil producing states

Financial strength and generally better governance yields a betterpolitical outlook for the major oil producing states

Regime Capacity for SurvivalRegime Capacity for Survival

Oppositio

nCapacityfor

Regime

Change

Oppositio

nCapacityfor

Regime

Change

Oppositionprevails

Regimeprevails

Compromise

Prolongedviolence

Oman

Kuwait

Jordan

Qatar

Algeria

UAE

Bahrain

Saudi Arabia

Libya

Syria

Tunisia

Egypt

Yemen

Legend

Oil Net Exporter

Iraq


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Risk of Disruptions to LNG Exports

The war in Libya could persist for months to come, and the mostlikely scenario is a sustained disruption to all LNG exports. Theliquefaction facility at Marsa el-Brega lies within the active zone ofconflict.

Yemen presents the next-greatest risk. If Salihs departure leads toa breakdown of government and regional conflict, gas installationsand pipelines could be targeted by local tribes.

The key risk in Egypt is not a disruption to LNG exports, but ratherpipeline exports to Israel. This is already a hotly debated topic, anda new government will review and possibly revise the contracts.

Algeria presents limited risks to LNG exports. Even during the

upheaval of the 1990s, there were no supply disruptions.

Low High


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OPEC Spare Capacity Can Meet Second Disruption

Sweet SourHeavy

Light

OPEC has enough spare capacity to meet the loss of most otherMiddle East producers, though with relatively sour barrels

OPEC has enough spare capacity to meet the loss of most otherMiddle East producers, though with relatively sour barrels

Saudi Arabia: Production 9,100 mb/dSpare capacity 3,400 mb/d

Saudi Arabia: Production 9,100 mb/dSpare capacity 3,400 mb/d

Kuwait: Production 2,430 mb/dSpare capacity 200 mb/d

Kuwait: Production 2,430 mb/dSpare capacity 200 mb/d

Qatar: Production 820 mb/dSpare capacity 150 mb/d

Qatar: Production 820 mb/d

Spare capacity 150 mb/d

UAE: Production 2,500mb/d


UAE: Production 2,500mb/d


Algeria: Production 1,460 mb/dAlgeria: Production 1,460 mb/d

Libya: Lostproduction1,350 mb/d

Yemen: Production 220 mb/dYemen: Production 220 mb/d

Oman: Production 800 mb/dOman: Production 800 mb/d

Iran: Production 3,690 mb/dIran: Production 3,690 mb/d

Syria: Production 340 mb/dSyria: Production 340 mb/d

Solid bubbles = Available spare capacityCircles = Production


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Mideast Liquids Capacity Growth Continues2011 onward: Iraqi crude, more gas liquids growth from across region

Crude oil gains for only a few producers:

The largest expansion has already occurred: SaudiArabias 4 oil field projects that added 2.0 mmb/d in2009/2010

Iraq gains already underway, but large increasesdependent on infrastructure developments

UAE may see gains aggregating 0.8 mmb/d by2017 assuming concession extensions are resolved

But gas liquids a big positive:

Qatars six major LNG projects have seen thecountrys gas liquids production climb by 400 mb/dsince 2008; output should gain another 500-600

mb/d by 2015 Domestic gas utilization projects to support

power/desalination growth and petrochemicalinvestments will drive associated gas liquids gainsin Saudi Arabia and UAE

But potential Iraq gains difficult to quantify and a

thorny investment environment will make increasesin Iran and Kuwait problematic

North Field moratorium limits furtherincreases (unless gas found in otherblocks) in Qatar and new refineries in

Saudi Arabia and Abu Dhabi will cutpotential crude availability to exportcustomers


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Price Requirements Rising for All OPEC States

2011 Forecast Brent Price------------------------------------------------------------------


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Thank You!

Question & Answer Session

S i Ad i i Gl b l E

S i Ad i i Gl b l E

S i Ad i i Gl b l E


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Strategic Advisors in Global EnergyStrategic Advisors in Global EnergyStrategic Advisors in Global Energy

Drivers Behind a Tightening GasMarket

Prepared for Petrofed

By Natalie Bravo, Senior Analyst

Shangri-La Hotel, New Delhi, 4 May 2011


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What Gas World Do We Live In?

Gas glut will last a decade saysthe IEA

US shale gas changed everything

Now Europe and Asia will developshale gas and their LNG needswill fall

Australia will be huge and themarket will struggle to absorbthese volumes

Uncertain demand: efficiency andrenewables will lower gas use, aswill nuclear or carbon capture andsequestration

Gas is the transition fuel it is thedefault power gen source in theOECD and the development fuelfor the non-OECD

LNG markets are emerging in SEAsia, the Middle East, Latin

America and Europe Established LNG producers will

struggle to meet future demand

New LNG plants face problems

some may never happen

Spot prices strong; and contractsjust below oil parity

Too much supply Too much demand


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The New Landscape for Global Gas

Supply Shock: Lost output from Libya risk of more losses fromother producers.

Demand Shock: Existing reactors are offline and new reactors willstruggle to move forward.

Nuclear capacity (~10 GW) offline in Japan.

Existing nuclear plants are being shut down for inspections. Debates about whether to extend the life of nuclear reactors are re-starting.

New problems for new nuclear plants.

MENA + Fukushima = Supply Glut view has disappeared.MENA + Fukushima = Supply Glut view has disappeared.

Supply Shock: Middle East Output Loss Low So


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Supply Shock: Middle East Output Loss Low SoFar, But There is Downside Risk

Libyan LNG inconsequentialloss.

Libyan pipeline loss tolerable in

off season; Russia can fill gas. Yemeni LNG loss would equal

volume of Fukushima shock.

Losing Algerian & Egyptian gaswould have serious rippleeffects.

Qatar has 15-20 mmtpa of spare

capacity to offset losses.

Long-term story unchanged sofar: Little growth forecasted for

Middle East anyway.

MENA: 2010 LNG Exports (13 bcf/d)

0.6

0.0

1.9

1.20.9

7.6

0.8

0

1

2

3

4

5

6

7

8

9

Yemen

Libya

Alg

eria

O

man

Egypt

Q

atar

UAE

bcf/d

High Medium Low


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Demand Shock: Existing Nuclear Plants

The nuclear industry has suffered from three shocks after the FukushimaDaiichi disaster: a call to re-inspect existing reactors; new opposition toextending the life of older reactors; and increased scrutiny of new projects

The impact for natural gas comes from three sources:

1. Plants being shut down for inspections

The EC is recommending countries inspect every operating power plant in 2011.

Assuming every nuclear power plant in Europe is offline for just 1 month, and that 75%

of the lost power is made up by gas, demand in Europe could increase by 1.1 bcf/d in aEuropean market of ~54.5 bcf/d.

2. Plants not been granted extensions

Nuclear reactors are typically granted an initial operating license period of 30 years, but

many facilities have operated or been granted extensions for up to 60 years. Extensions, however, have not been smooth, and given that ~24% of the worlds

capacity is over 30 years old, whether governments approve extensions to operatinglife will be critical.

This is especially relevant in countries where extensions have been hugely contentious.

Germany, Spain and Belgium stand out in this category.


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Demand Shock: Proposed Nuclear Plants

Proposed Nuclear Capacity by Country

0 10 20 30 40 50

Other

Iran

Egypt

Turkey

India

France

Bulgaria

UAE

UK

S. Korea

Japan

China (PRC)

USA

GW

Existing Nuclear Capacity by Region

and Commissioning Date

Europe

115

Europe

134

N. America

107

N. America

113

Asia

42

Asia

84

Other

41

Other

33

0

50

100

150

200

250

300

350

400

1990 2010

GW

25%

8%

56%

11%

% of growth

3. New plants not being built

Longer term, the absence of a nuclear renaissance would boost gas consumption.

At this stage it is too early to assess how big that shock may be. But the loss of 1 GWof planned nuclear output could trigger a gas demand increase of up to 160 mmcf/d.

Demand Shock: Lost Nuclear Output Has Created a


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pSevere Shock that will Boost Natural Gas Demand

Range of Possible Gas Demand Boost From Different Nuclear Shocks

0

2

4

6

8

10

12

14

Japan Plants Offline

(2011+)

EU Reactor

Inspections (2011-2012)

BE & GER Plant

Closures (2015-2025)

Plants Cancelled

Globally (2018+)

bcf/d

Lower nuclear output has delivered a short-, medium- and long-term

shock that will benefit natural gas demand.

Lower nuclear output has delivered a short-, medium- and long-term

shock that will benefit natural gas demand.

+10% JapaneseLNG Demand

+2-6% EuropeanGas Demand

+2-4% EuropeanGas Demand

Equal to AustralianLNG capacity in 2018

The Expected Tightness in the LNG Market Comes


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p gSooner and is Greater than Anticipated

Global LNG Supply vs Demand

Demand ex. US

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

mmtpa Global LNG Supply/Demand Balance:

View in January 2011

More demand fromlower nuclear output

Less supplyfrom MENA?

PFC Energy has long argued that the gas market will tighten by 2013;

these events accelerate the transition to a tighter market and alsodeepen that tightness

PFC Energy has long argued that the gas market will tighten by 2013;

these events accelerate the transition to a tighter market and alsodeepen that tightness


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Is the Current LNG Supply Sustainable?

Utilization Rates by LNG Exporter (2010)

0%

10%

20%

30%

40%

50%

60%70%

80%

90%

100%

Eq.

Guine

a

Russ

ia

UA

E

Malays

ia

Trinida

d

Australia

Qatar

Brunei

Nigeria

Oma

n

Norwa

y

Yeme

n

Algeria

Indonesia

Egypt

Per

u

U

S

Liby

a

Several cannot maintain full utilization either due to resource maturity (US, Indonesia), technicalchallenges (Algeria, Nigeria) or domestic demand which is curbing exports (Egypt, Oman). Others(Malaysia, Equatorial Guinea) may have trouble maintaining export levels within the decade.

Several cannot maintain full utilization either due to resource maturity (US, Indonesia), technicalchallenges (Algeria, Nigeria) or domestic demand which is curbing exports (Egypt, Oman). Others(Malaysia, Equatorial Guinea) may have trouble maintaining export levels within the decade.

PFC's Methodology For Analyzing the Outlook for


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Proposed Projects: Variable Codification

Parameter Low Risk / Enabler Medium Risk / SomeBarriers High Risk / Potential DealBreakers

Feedstock AvailabilityEnough proven reserves for20-year project life

Need to prove or to secureadditional gas

Insufficient identified /secured supply sources

Politics and GeopoliticsPolitical support for theproject

Some domestic orinternational barriers

Politics are prohibitive forinvestment

Environmental RegulationNo foreseeableenvironmental barriers

Some hurdles and/oruncertain regulation

Major environmentalbarriers to be overcome

Domestic Gas NeedsDomestic market does notthreaten exports

Concern about balancingexport and domestic needs

Government priority is tofeed the domestic market

Partner Priorities High priority for all partners Some partners are notprioritizing the project

Very low priority for one ormore partners

Project EconomicsBreak-even is much belowsales price

High price needed to makeeconomic

Break-even is close to orabove estimated sales price

Ability to ExecuteHigh operator experience

and low technology risk

Some operator and/or

technical obstacles

Little / no expertise on LNG

/ technical barriers

MarketSecured contracts foralmost all of the output

Some or no contracts, butpotential market outlets

No contracts and targetingunattractive markets

OverallProject to come online moreor less based on schedule

Some delays expectedProject faces major hurdlesand will not happen unlesschallenges are addressed


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PFC Energy Has a More Pessimistic Supply


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Forecast than the Operators

PFC Energy Liquefaction Capacity Forecast

Atlantic-

Mediterranean

Middle East

Pacific

0

100

200

300

400

500

600

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

mmtpa

Capacity if all projects materialized

according to operator plans

PFC Energy expects liquefaction capacity will rise to ~400 mmtpa by2010 which is much below the 550+ mmtpa that operators expect.

PFC Energy expects liquefaction capacity will rise to ~400 mmtpa by2010 which is much below the 550+ mmtpa that operators expect.

Emerging Markets Plan 200+ mmtpa of RegasC i E l W ld LNG E i 2009


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Capacity Equal to World LNG Exports in 2009

China and India account for 20% of global proposed capacity; otherAsia and Latin America account for another 20%.

China and India account for 20% of global proposed capacity; otherAsia and Latin America account for another 20%.

Proposed Regasification Terminals by Region

China13%

North America19%

Middle East

1%Asia ex.

China/India

10%

India

7%

Latin America10%

OECD Asia

2%

Europe

37%

Africa

1%


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Wh t D Th P i T ll U ?


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Contract Prices: Oil-Gas Relationship

2.197

4.637

7.077

9.517

11.957

0

2

4

6

8

10

12

14

16

18

0 20 40 60 80 100 120

$/b

$/MMBtu

Russia (Ave to Europe)

Japan (Ave Import)

Late 2008 (Oil Parity)

What Do The Prices Tell Us?

In late 2008, prices were being signed close to oil parity (0.16 x oil).In late 2008, prices were being signed close to oil parity (0.16 x oil).



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Contract Prices: Oil-Gas Relationship

2.197

4.637

7.077

9.517

11.957

0

2

4

6

8

10

12

14

16

18

0 20 40 60 80 100 120

$/b

$/MMBtu

Russia (Ave to Europe)

Japan (Ave Import)

Late 2008 (Oil Parity)

Late 2010 (0.145x)

In late 2010, buyers were still paying close to 0.145x to secure LNG much above the price that Europe pays to Russia for its gas.

In late 2010, buyers were still paying close to 0.145x to secure LNG much above the price that Europe pays to Russia for its gas.

New LNG Projects Need High Prices


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New LNG Projects Need High Prices

LNG: Supply Curve(Projects Existing and Under Construction)

-4

-2

0

2

4

6

8

10

0 50 100 150 200 250 300

mmtpa

$/MMBtu

New projects on the left side of the graph need $7-$8/MMBtu. So evenwithout oil-indexation, new projects need high prices to take FID.

New projects on the left side of the graph need $7-$8/MMBtu. So evenwithout oil-indexation, new projects need high prices to take FID.

Henry Hub Remains Disconnected from GlobalMarkets; Is this Sufficient to Trigger Exports?


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Markets; Is this Sufficient to Trigger Exports?

Oil and Gas Prices For GOM LNG Exportsto Europe to Be Economic

0

20

40

60

80

100

120

0 1 2 3 4 5 6 7 8 9

Henry Hub $/MMBtu

Brent

($/b)

Jan 2009

March 2011

Exports notEconomic

Exports Economic

Indifference

Curve

At the current oil-gas price environment, exports make sense; however,

investment will hinge on a continuation of the low price environment inthe United States.

At the current oil-gas price environment, exports make sense; however,

investment will hinge on a continuation of the low price environment inthe United States.

Key Messages


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Key Messages

Supply shock is modest but with potential downside.

Demand shock is large and can be larger still.

Transition to tighter market was coming it comes sooner and isbigger.

Exports from North America start looking more compelling butwill Henry Hub remain low?


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Thank You!






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Growth of Unconventional Gas:Enablers and Barriers

Prepared for PetroFed

By David Mullins, Manager, Upstream & Gas Group

4 May 2011

The Shale Gas CocktailWhat countries need for unconventional gas to take off


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What countries need for unconventional gas to take off

Parameter Questions to ask

Resource base How much, how good?

Property rights Is it clear who owns the sub-surface rights?

Do landowners have an incentive to drill in their back yards?

Cooperativegovernment

Does the government favor unconventional gas use? Are there national, regional or local opposition pressures?

Service sector Is there adequate service sector capacity?

What are the bottlenecks; rigs, people, services?

Competition How many companies are operating? Is there experimentation or is there group-think?

Willingness to

spend money

Are companies willing to spend money to drive efficiencies?

What is the growth / return relationship?

Favorable gas

prices

How high are gas prices?

To what are gas prices linked?

Easy to market gas What the infrastructure or market barriers to gas sales?

Incentives for

unconventional

Are there specific fiscal incentives to do unconventionals?

What kind of fiscal regime governs unconventionals


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Competition: Intensity Drives Growth & Innovation


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0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

1,000

2,000

3,000

4,000

5,000

6,000 Wellsmmcfd

pre-2000 Wells 2000 Wells 2001 Wells 2002 Wells

2003 Wells 2004 Wells 2005 Wells 2006 Wells

2007 Wells 2008 Wells 2009 Wells Well Count

PrimarySecondary

7266

61

53

46

36

21

13

0

10

20

30

40

50

60

70

80

90

100

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Over the past 10 years, a dramatic increasein operators as play becomes prospective.

Due to the intense competition from anoperator and service sector perspective, gasproduction increased >2.5 bcf/d since 2004.

Independents were the main driver forgrowth.

Primary Region: Annual Number of Operators

Competition: Intensity Drives Growth & Innovation

Shale Gas Will Continue to Play a Large Role


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27%

8%

37%

21%

5%

2%

Shale Federal GOM

Conventional Onshore & State Offshore Tight Gas

CBM Alaska

Shale Gas Will Continue to Play a Large Role

Unconventional gas primarily shale will continues to be the majorgrowth engine of U.S. supply.

Shale gas production is expected to provide 27% of total U.S. gasproduction by 2020.

Conventional onshore and GOM gas supply will continue to declineshallowly.

13%

12%

49%

18%

6%

2%

Shale Federal GOM

Conventional Onshore & State Offshore Tight Gas

CBM Alaska

2010 U.S. Gas Production by Source 2020 U.S. Gas Production by Source

U.S. Shale Gas Production and Drilling Activity toDouble in Next Decade


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Shale gas production is expected toreach 18 bcf/d by 2020 (~27% of US gasproduction).

The majority of growth will be driven bythe most economic plays: Haynesville,Eagleford, and Marcellus.

Total US production from 2010 to 2020ranges from ~61-67 bcf/d.

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2000 2005 2010 2015 2020

ShaleGasWellsDrilled

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2000 2005 2010 2015 2020

ShaleGasProduction(mmcf/d)


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The Shale Gas CocktailWhat countries need for unconventional gas to take off


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g

Parameter Questions to ask

Resource base How much, how good?

Property rights Is it clear who owns the sub-surface rights?

Do landowners have an incentive to drill in their back yards?


Does the government favor unconventional gas use? Are the national, regional or local opposition pressures?

Service sector Is there adequate service sector capacity?

What are the bottlenecks; rigs, people, services?

Competition How many companies are operating? Is there experimentation or is there group-think?

Willingness to

spend money

Are companies willing to spend money to drive efficiencies?

What is the growth / return relationship?

Favorable gas

prices

How high are gas prices?

To what are gas prices linked?

Easy to market gas What the infrastructure or market barriers to gas sales?

Incentives for

unconventional

Are there specific fiscal incentives to do unconventionals?

What kind of fiscal regime governs unconventionals

Where Might Unconventional Gas Be Developed?Risk assessment of country potential for unconventional gas


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y p g

The countries with the most promise for unconventional gasdevelopment are Australia, China, Argentina and Poland

Near-ideal

conditions

Promising,some barriers

Interest,Major barriers

Risk Profile for Unconventional Gas


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NorthAmerica

Australia China India Indonesia

Resource basequality

Resource basequantity

Property rightsclarity


Service sectorcapacity

Competition thatspurs innovation

Willingness tospend money

Favorable naturalgas prices

Easy to market gas

Incentives forunconventional

Overall Risk Profile

Duplicating the US story will not be easy. Of these countries, Australia, China, Poland, and Argentinaare the most likely to see growth in unconventional gas supply, but only if constraints are overcome.

Poland Ukraine Argentina

Risk Profile for Unconventional Gas: Australia


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NorthAmerica

Australia









Easy to market gas



Australia

Australian operators have extensively studied the CBMplay in Queensland and IOCs have entered to provide thefinancial support for LNG projects. However, the scale ofwhat has been proposed is unlikely to be met due tocapacity constraints in Queensland.

The federal government reeled in fiscal concessions andintends to take a more stringent approach on theenvironmental approval process.

Risk Profile for Unconventional Gas: China


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0

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2020

mmcf/d China CBM / CMM Production and Target

CMM Production CBM Production

?

NorthAmerica

China









Easy to market gas



China

Resource potential and quality is among the highestglobally for CBM, and likely for shale gas.

Foreign players (IOCs and small independents alike)continue to enter the sector, but only few companieshave seen success, and CBM production remains

negligible.

The government projects CBM production will reach 20-30 bcm by 2020, up from only small volumes today. Butconfusion over property rights, unclear relations withforeign partners, market access, technical know-how, and

service sector capacity are barriers to development.

Risk Profile for Unconventional Gas: Argentina


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Argentina

Argentina is estimated to have large shale or tight gasreserves in the Neuquen Basin, some of which iscurrently under study by a number of gas companiesalready in the country.

Apache has signed promising contracts for gas up to

$5/MMBtu for tight gas this is under the Gas Plusprogram implemented in 2009 that allows companiesto charge between $4-6/MMBtu for supplies from newacreage or the reactivation of mothballed acreage.

Breakeven prices for North America shale plays in

well developed areas (good infrastructure, solidservice sector capacity, easy to market gas) generallyranges from $4-6/MMBtu.

NorthAmerica









Easy to market gas



Argentina

Risk Profile for Unconventional Gas: Poland
http://www.canstockphoto.com/bundles-of-us-five-dollar-bills-2125152.html


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Poland

Poland has the greatest potential to develop shale gas inacreage along the Baltic Sea and CBM in southeasternPoland on the Ukrainian border. Companies involved inthe country have indicated they believe there are multi-tcf resources there.

Development in Poland is frustrated by challenges similarto those in neighboring European countries: multiplelandowners over unconventional acreage will lead to alengthy rights acquisition process. Local farmers competefor the same water required for unconventional plays.

The country is in support of new sources for natural gas,stating that it would prefer increased domestic productionover piped or LNG imports.

NorthAmerica









Easy to market gas



Poland

Prospects for International Unconventional GasConclusions


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Growth in US shale gas has generated extraordinary interest to replicate thesetechnical gains worldwide.

There is a rush by companies to acquire acreage internationally and positionthemselves to develop unconventional gas reserves.

What made the unconventional gas revolution possible in the United States was acombination of many unique factors few of these factors can be replicatedoverseas.

Uncertain price and regulatory environments, together with the lack of sufficientcompetition to spur innovation, stand out amongst the many obstacles to

development.


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Thank You!



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India Supply / Demand Balance:LNG will constitute upto 25% of total supply in the next 15 years


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India: Gas Supply - Demand Balance

0

2

4

6

8

10

12

14

16

18

20

2000 2005 2010 2015 2020 2025 2030

bcf/d

Gap to Demand

Exploration upside

PUDs upside

Other (LNG)Australia (LNG)

Qatar (LNG)

CBM

D6

Base (ex. D6+CBM)

Note: Exploration upsides are conservative estimates, shale gas not included

What does Emerging Tightness in LNG mean forIndian market and players?


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1. Where to Focus?

Traditional suppliers (Australia, Qatar)

Non-traditional suppliers

2. What are the Gaps?

Energy security still executed as a largely oil question

Gas has been a regional fuel

Gas being an industrial fuel is also linked to economic growth

Lack of ownership in Liquefaction plants and value chain (ex regas)

Lack of dedicated vehicle for ownership in Liquefaction plants

Focus on traditional large suppliers:Australia set to overtake Qatar


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Australia vs. Qatar: PFC Estimated Starts

0

20

40

60

80

100

120

140

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

mmtpa

Australia Qatar

Focus outside traditional large suppliers:Rest of the world contributes 43 mmtpa to 2020, 40% of incremental capacity


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Note: Near-term opportunities in Brazil, Equatorial Guinea, Indonesia, Malaysia & Brunei, Papua NewGuinea, Russia; Long-term wild cards are Angola, Mozambique,. Venezuela.


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However, LNG exports are growing faster thanpipeline exports


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Gas Exports via Pipeline vs LNG

0

100

200

300

400

500

600

700

800

900

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

bcm

Pipeline LNG

Energy security still executed as a largely oil question:Most of OVLs assets are linked to OIL security


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Equity Access in Liquefaction is / will be a key factor insecuring long-term supplies


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Partnerships are critical to long-term supply security:Case study of Japan


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Partnerships are critical to long-term supply security


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Thank You!



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Documents

Emerging Tightness in LNG for India