Title

(Speaker)

Council WorkshopYogyakarta, 10 October 2029

A Sustainable Future – Powered by Gas

Programme (10:30-13:00)

Welcome address

Panel discussion 1

“Current Status and updates on the Natural Gas Industry”

Panel discussion 2

“The Role of Gas in Fueling Sustainable Growth in Asia”

Role of Gas in Ensuring Energy Sustainability

in South East Asia10 October 2019

James Ooi

Prepared for:

Introduction to TLG

We are Asia Pacific’s premier energy-focused strategy and economic consulting group

1

Decisions Support Analysis

Asset Valuation

Strategy and Advanced Analytics

Competition, Markets, Regulation, Policy

Disputes

Market Analysis

Consultants to the Energy Sector

Offerings:

• Strategic, commercial, and regulatory support

• Ability to connect the dots between fuel markets and power

• Analysis-based recommendations

• Highly relevant international experience

• Accessible experts focussed on the region

• Pricing, trends, drivers, risks

Our work is related to the profound commercial, regulatory, and policy factors shaping the energy sector

Office/Presence

Senior Advisors

Languages:

Arabic*

Cantonese

Mandarin

English

Bahasa Indonesia

Bahasa Malaysia

Bengali

French

German

Hindi

Japanese

Korean

Swedish

Tagalog*

Thai*

Vietnamese*

Washington DC

Affiliates

Staff

London

*External Advisors

Singapore • Hong Kong • Bangkok • Seoul • Perth

Introduction to TLG

Recent projects undertaken by TLG on LNG in the South Asia / South East Asia Region

Key Offerings:

• Regulatory

• Strategy

• Commercial arrangements

• SPA and contract negotiation

• Market Analysis

• Assets valuation

• Entry / Exit advisory

• Gas advocacy

2

Active in the region since 1990’s, our Natural Gas and LNG Market practice has worked on hundreds of engagements, helping both

companies and governments unlock hidden potentials, and even reshaping the gas and LNG sector itself

ASCOPE LNG Advocacy White Paper

The Gas Advocacy Taskforce (GATF) of the ASEAN Council on Petroleum

(ASCOPE) is mandated to promote sustainable utilization of gas resources and

infrastructure in ASEAN, with the ultimate goal to develop a common gas market

in ASEAN for the benefit of ASEAN and ASCOPE members.

3

GA Workshop (Feb) • GA Workshop (March)• ASCOPE Mid-year TF

Meeting 36th SOME • 44th ASCOPE ACM • 36th AMEM

• Gas market development to sustain much required infrastructure

• Support capital market and financing to the sector

• Actions by stakeholders

• Talent, capability development, and innovation

Role of Gas in ASEAN Energy Future

Three emerging strategic focus areas of conflict and opportunity

Vanishing Assets? Race to the Bottom?Intricate Commercial

Dilemmas

RE!

DIFFERENT OPPORTUNITY DRIVERS ARE CHANGING PROJECT DEVELOPMENT APPROACH

Premia Paid for

Existing Coal

Assets

ISS

UE

S

GIP buys Equis for 5 billion

dollars

KEPCO buys into Solar

Philippines

Macquarie offers to buy EDL

Premia Paid for

Established RE Assets /

Portfolios

LNG will be a complex multi-party value proposition, requiring clear allocation

of risks and a robust evaluation framework

3

Money

Constraints

Functions

LNG Supplier

(1) Pricing (HH vs Oil-linked); (2)

Economies of Scale; (3) Onshore vs

Offshore (capex vs opex)

(1) Flexibility / off-take obligations (ToP);

(2) Indivisibilities (mins); (3) Supply

availability

Regasification Terminal

Operational Considerations

(1) Contracted capacity; (2) Throughput

(1) Capacity (sizing); (2) Throughput

(utilization); (3) Storage; (4) Reliability

(FSRU); Regulatory requirements (TPA)

(1) Flexibility / off-take obligations (ToP);

(2) Indivisibilities (constraints)

Players

(1) Pricing (variable / fixed); (2)

Profitability

(1) International suppliers; (2) SPEX

(Malampaya); PNOC (banked gas and

LNG)

(1) FirstGen; (2) Meralco; (3) MPIC; (4)

PNOC; (5) Multinational gas players(1) FirstGen; (2) San Miguel; (3) EWC

(4) ????

(1) Meralco; (2) other DUs / ECs; (3)

RES; (4) WESM (5) ????

(1) Contracted capacity; (2) contractual

terms; (3) storage (on-site)

(1) Load requirement and timing

(baseload & mid-merit & peaking); (2)

flexibility / minimums

(1) Flexibility (ramping); (2) indivisibilities

(pmin)

(1) CSP design (how to do it?)

(2) Merchant risk

(3) RCOA risks?

(4) Malampaya availability?

(1) Profitability (PPAs; WESM)(1) Pricing (fixed / variable); (2) Pass

through vs RCOA? (3) Separation of

payments (terminal, gas, optionality)

Gas Generation

Off-taker

Source: TLG Analysis

COAL??BEHIND THE METER

• “Service as Commodity?” • FLEXIBILITYEASY WINS?

LONG TERM PPAs?

Aboitiz buys

into GN Power

SMC buys AES

Masinloc

Peabody Coal Share

Price

Critical to

security(but…)

High value

New Value

Arrangements

Needs clear regulatory support

AR

EA

S

Falling costs / dynamic supply chain

A lot of capital chasing (still) few projects

Must be agile – strong execution focus

Value linked to future growth/optionality

Entry is getting more difficult

Cost of alternatives is higher

Established positions hard to replicate

HIG

HL

IGH

TS

• STORAGE

GRID-SIDEGASPartnership?

Advocacy

LNG value chain

development in the

Philippines and Vietnam

Environment

IMO

Resulting in increasing debate in ASEAN energy policy

convergence towards security and sustainability

5

• Emphasis placed on securing

supplies of fuel, diversifying

sources, stocking requirements

• Emphasis placed on

environmental sustainability /

impact

• Emphasis placed on low cost fuel supply,

sensitivity of political process to populist

concerns over cost, etc

Energy

Affordability

Green

EnergyEnergy

Security

1

8

7

2,4

5

6

3

9

10

1. Brunei

2. Cambodia

3. Indonesia

4. Laos

5. Malaysia

6. Myanmar

7. Philippines

8. Singapore

9. Thailand

10. Vietnam

Policy shifts from 2015

ASEAN member countries need to

harmonize the demanding

objectives of a reliable, high-

quality supply against

requirements for cost-

effectiveness and environmental

sustainability at the individual and

collective level to bring about

maximum benefits

Source: TLG

ASEAN is home to the world’s highest electricity growth region, and the fourth largest economy by 2030

6

0

100

200

300

400

500

600

700

800

900

201

2

201

3

201

4

201

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201

6

201

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201

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201

9

202

0

202

1

202

2

202

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202

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9

203

0

203

1

203

2

203

3

203

4

203

5

Philippines ThailandVietnam IndonesiaMalaysia MyanmarOther ASEAN BangladeshSri Lanka Pakistan

TWh

Power Demand (reference case)

Vietnam

Indonesia

CAGR

2018-2030

Vietnam 8.9%

Myanmar 6.3%

Indonesia 5.9%

Philippines 4.5%

Malaysia 2.4%

Thailand 2.2%

Other ASEAN 3.1%

Total ASEAN 5.3%

Bangladesh 7.3%

Sri Lanka 5.4%

Pakistan 4.4%

• ASEAN’s electricity demand is forecasted to almost

double from ~1,000 TWh in 2018/19 to ~2,000 TWh in

2030, lead by Vietnam and Indonesia.

• Peak demand in ASEAN will reach 305 GW by 2035.

This implies an average new power capacity

requirement of 13 GW per annum from 2020-2030.

Source: TLG

But, energy security landscape across emerging markets in Asia is changing

Indigenous gas production and resource declining…

7

Singapore: Regional LNG trading hub initiatives.

Energy security focus. International LNG & gas market.

reliance on gas, oversupply of capacity in the medium

term. Energy security concerns for the long-term

Malaysia: Depleting domestic gas

production; fuel diversification need;

price formation & subsidy issues

Philippines: Gas Constrained;

urgency to create LNG value chain to

defend gas position, and a balanced

technology mix for the power sector

Bangladesh: Solving domestic gas

supply constraints, low tariffs and high

dependency on liquid fuels. Technology

diversification towards energy security

Thailand: Depleting domestic gas

production; Fuel diversification policy

favoring gas/LNG; pricing and subsidy;

focus on renewable & coal policies

Indonesia: domestic gas optimisation

(domestic fuel obligations vs. export

commitments, etc). Portfolio issues:

significant gas/LNG tradeoffs and

options

Pakistan: Critical domestic gas

supply constraints; high growth

market with urgent need to solve

domestic gas and power shortages

Source: TLG

Vietnam: High demand growth;

existing gas depleting, new fields in

development vs. LNG; pricing and

subsidy issues. Uncertain opportunities

for infrastructure projects

South Korea: Role of gas to expand with the need

for flexible capacity and policy-driven reduced

reliance on coal and nuclear. Major KOGAS gas

contracts to expire in 2020s; new pricing formation

to enter to impact both gas and power markets

Energy security along

with fuel mix

diversification have

provided the main

impetus

As a consequence of the “Destructive” energy cycle

without policy mitigation, dependence on coal will have to increase

8

Source: TLG

Over dependence

on coal

Environmental

Impact

Start

0

50

100

150

200

250

300

Batt

ery

Co

st

(US

$/k

Wh

)

Philippines (baseline) Philippines (early)

Philippines (lagged)

ASEAN is also seeing strong penetration of RE due to costs

9

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

So

lar

Co

st

(US

$/W

(A

C)

Analysts' Min ATB Low

Philippines (baseline) Philippines (early)

Philippines (lagged)

Projected evolution of solar costs (real 2019 US$) Projected evolution of battery storage costs (real 2019 US$)

• Solar costs in the Philippines are lower than the range of

forecasts globally based on recent CSP solar deals.

• Costs are expected to decline further over the long-term, and

we expect solar costs to trend towards PhP 2.3-2.5/kWh by

2030-2035, which is in line with the lower range of other

forecasts

CSP

• Battery costs, similar to solar, are also expected to decline from

current levels of ~US$250/kWh to level out at ~US$90/kWh by

the early 2030s.

BNEF

Source: BNEF; NREL; TLG analysis

ConstantConstant

In the Philippines, shift to RE is strengthening, and reaching coal parity

10 Source: TLG analysis

0

10

20

30

40

50

60

70

80

90

100

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Geothermal Coal Natural Gas Hydro

Oil Biofuel Solar Distributed Solar

Wind Battery LWAP

MWReal USD/MWh

Luzon Prices and Capacity

Additions

!!!

Strong solar pipelines

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1/1

/20

15

5/1

/20

15

9/1

/20

15

1/1

/20

16

5/1

/20

16

9/1

/20

16

1/1

/20

17

5/1

/20

17

9/1

/20

17

1/1

/20

18

5/1

/20

18

9/1

/20

18

Peak (LUZ) Offpeak (LUZ)

Peak (VIS) Offpeak (VIS)

Ph

P/k

Wh

Range of

CSP solar

outcomes

0

50

100

150

200

250

300

350

4000

%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%

52%

54%

56%

58%

60%

62%

64%

66%

68%

70%

72%

74%

76%

78%

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100

%

Lo

ng

Ru

n M

arg

ina

l C

os

t (U

SD

/MW

h)

Solar (Future) Coal CCGT (LNG/New Gas) Onshore Wind FiT Offshore Wind FiT Solar FiT

11

Note: Coal and CCGT capex of USD 1,200 and 1000/kW respectively; Coal and CCGT heat rate of 9.00 and 6.8 GJ/MWh respectively; Coal and CCGT auxiliary

consumption of 8% and 3% respectively; Coal and CCGT FOM of USD 50 and 23/kW/year; Coal and CCGT VOM of USD 3.00 and 0.66/MWh respectively; Coal and

CCGT lifetime assumed to be 25 and 20 years respectively; Brent oil price of USD 60/bbl; Solar is based on draft FIT range; Wind is based on current FIT.

Source: TLG analysis, government decisions and circulars (including draft)

LCOE Screening Curves for New Power Generation in Vietnam

In Vietnam, previous FIT scheme alone had driven 5GW of solar entries (March – June 2019)

Gas-fired power plants become

more cost competitive versus

coal-fired projects when operating

at lower capacity factors

Generation capacity additions projected in official plans had opted for diversification strategy

towards defending the share of gas (unwilling to increase reliance on coal) and increasing RE

penetration (to leverage technology benefits)

12

Installed Capacity: Existing vs. 2025Total Capacity Addition (Existing-2025)

Source: Country Report from Ministry of Energy and Mineral Resources, RUPTL 2018 (Indonesia), Ministry of Energy, EPPO, PDP 2015 and TLG analysis (Thailand), PDP VII March

2016 (Vietnam), SEB, MEIH, TNB (Malaysia), DOE and TLG analysis of 2017 Q4 and 2025 Q4 (Philippines), EMA and TLG analysis (Singapore), Ministry of Electricity and Energy and

TLG analysis (Myanmar), EDL 2016 Statistics Yearbook, PDP 2016 by Ministry of Energy and Mines and TLG analysis (Laos), EDC Annual Report 2015 (2016 edition) and TLG

analysis (Cambodia), PUSCL (Sri Lanka), NEPRA (Pakistan), Ministry of Power,Energy and Mineral Resources, Japan International Cooperation Agency (Bangladesh)

Note: Brunei is not included as its power development plan is not public

4580

69

13481

100

15

10

4

12

1

5

11

24

0

50

100

150

200

250

300

350

400

Existing Capacity(2018)

2025

GW

ASEAN Power Capacity Outlook

Other RE/Import

Wind

Solar

Oil

Natural Gas

Coal

Nuclear

Hydro

0

20

40

60

80

100

120

GW

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

GW

Hour of the day

Aggressive Solar Entry Case in Luzon (2040)

Geothermal Coal Gas LNG Hydro Biofuel Oil Wind Solar

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

GW

Hour of the day

Reference Case in Luzon (2040)

Geothermal Coal Gas LNG Hydro Biofuel Oil Wind Solar

Gas and RE partnership. Gas increases system flexibility and is complementary to intermittent Solar

generation

13

CoalCoal

Gas

Gas

Gas could be squeezed if only a

moderate amount of solar is built

Solar

If solar capacity is increased to create a duck curve, gas

becomes more economical as the flexible fuel.

High solar penetration also presents long-term risk for coal as

no base-load power is required.

Solar

Source: TLG

0

200

400

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Coal (@ 80/MT)

LNG-fired (2014 JP DES LNG @ 16/mmbtu)

LNG fired (2016 JP DES LNG @ 7.0/mmbtu)

0

20

40

60

80

100

120

140

160

New Coal (@80/MT) New CCGT (@ 16/mmbtu) New CCGT (@ 7/mmbtu)

Fixed Cost (CAPEX + FOM) LNG terminal cost Operating Cost (Fuel Cost + VOM)

Gas-fired capacity is also the most economic in the mid-merit as long as gas is available flexibly

14

• Basic characteristics of coal vs gas

o Coal – high CAPEX, low fuel price

o CCGT – low CAPEX, high fuel price

New coal vs new gas in ASEAN @ 75% capacity factor

Pri

ce

, U

SD

/MW

h

Screening Curves of coal vs gas

Pri

ce

, U

SD

/MW

h

Note: Key assumption: LNG regas and associated pipeline tariff to the power plants is US$1.5/mmbtu and coal transportation cost is US$ 7/metric

tonnes; capital cost coal US$1,800/kW gas CCGT US$800/kW; HHV net heat-rate coal 9.5 GJ/MWh, gas CCGT 7.2 GJ/MWh, FOM is USD 40/kw-year

for coal and USD 23/kW-year for gas, VOM of coal is 2.5/MWh for coal and USD 1.0/MWh for gas. WACC is 12 percent.

Coal capacity value is vulnerable at

lower utilisation due to higher capital

costs relative to gas.

Gas capacity value is robust at lower

utilisation unless committed to take too

much gas

The amount of gas that is optimal

swings wildly with changes in fuel

costs.

Capacity factor

0

5

10

15

20

25

30

35

mm

tpa

In Operation Under Construction Planned

MALAYSIA BRUNEI

INDONESIA

RGT-2 (Pengerang LNG)

Pekan, Pahang LNG

Pengerang LNG (Dialog)

Eastern Singapore LNG

Thi Vai LNG*

Thi Vai LNG (Onshore)

Son My Ph. 1, 2, & 3

Mariveles

Bataan LNG

Pagbilao LNG Hub Phase 1Pagbilao

LNG Hub Phase 2

Limay

Mindanao

Batangas*

First Gen LNG

PHILIPPINES

Luzon LNGSual LNG

Vires FRD* Batangas

Map Ta Phut Phase 1Map Ta Phut Phase 2

Dawei LNG

PTT Rayong

Chana*

THAILAND

CAMBODIA

Map Ta Phut Phase 2 (Expansion)

Gulf of Thailand LNG**

Myanmar FSRU**

Nong Fab LNG Phase 1 & 2

Lekas LNG (Malacca)

SLNG Phase 1 & 2

Lumut

SLNG Phase 3

Pulau Jarak LNG Lahad Datu LNG

Gorontalo Mini-LNG

Arun LNG

Lampung LNG*

Cilamaya *

Cilacap *

Nusantara*

Banten (Bojonegara) LNG

Tanjung Benoa LNGonshore and offshore

Kalimantan Mini-LNG

South Sulawesi Mini-LNG

Atimonan

LNG infrastructure developments had enabled flexible and secured gas sourcing

15

* Offshore proposal/facility.

Legend

Existing

Under construction

Planned

Stalled

Cancelled/Rejected

Trans ASEAN Gas Pipeline

Gas Pipeline

ASEAN currently has seven operational LNG importation facilities,

comprising of two FSRUs (both in Indonesia), one small-scale FSU

and FRU (in Bali, Indonesia), and four onshore regasification

terminals across Indonesia, Singapore, Malaysia and Thailand.

LNG Terminals Capacity Additions in ASEAN

Source: TLG Analysis, various media outlets and policy plans

• 36 mmtpa in operation

• 16 mmtpa under construction

• 59 mmtpa in various stages of prospective development

Source: TLG

San Miguel FSRU*

Progress in TPA in the SEA region is also creating more liquidity for LNG trading

16

Indonesia

▪ Owners control access to FSRUs and

onshore terminals, with no indication of any

TPA.

▪ Tariff regulation is by various Ministries and

subject to business-to-business negotiation.

▪ MEMR regulation 58/2017 sets a maximum

IRR on gas infrastructure of 11% in local

currency terms, which may place hurdles to

the build out of future terminals and LNG

delivery systems.

Malaysia

▪ The TPA codes for LNG terminals, gas

transmission and gas distribution were

finalised, approved, and came into force on

16 January 2017. The implementation of TPA

will be under the oversight of the Energy

Commission.

▪ The Gas Supply Act Amendment 2016 puts

the responsibility for approval of tariffs under

TPA with the Energy Commission.

Singapore

▪ Open Access terminal. Its third tank is leased

to third party on short term basis with

offloading reloading capability.

▪ In the current regulatory period (FY 2014-

2018), for domestic use, reservation charge

is set at S$1/mmBtu and utilization charge

(S$ 0.45-0.65/mmBtu) is set according to

peak, shoulder and off-peak periods.

Utilization charge is revised every six months

to reflect changes in OPEX cost.

Thailand

▪ The TPA that currently applies to the LNG

terminal and onshore pipelines is based on

negotiated access.

▪ As part of NEPC’s resolution to assess

market liberalization with TPA, EGAT has

been given the green light to import 1.5

mmtpa via LNG terminal at Map Ta Phut in

Rayong Province.

▪ Tariff for the PTT terminal and gas

transmission line will be changed from using

life cycle to five-year periods of allowed

revenues based on a regulated asset base.

This will enable resets every five years to

reflect changing interest rates in the WACC

calculation.

Third-party Access (TPA) Regime

Tariff Regulation on Gas Infrastructure

Gas and its associated infrastructure can offer considerable benefits to ASEAN member countries by

addressing all elements of the energy trilemma

17 Source: TLG

Cost effective Increase in Energy Security

• Economically robust to meet the

mid-merit load.

• It is economical to replace diesel in

both power and non-power sector if

infrastructure and associated

logistics can be worked out

More Environmentally

Sustainable

Increase security of gas supply

Compatible values with increasing

RE penetration

7

Valuable hedge against coal delay

2

Increase strategic and dispatch

Flexibility

3

Economical for mid-merit and

peaking option

1

4

Provide an effective medium for energy

transmission

5

Less carbon and non-carbon

emission

6

Note: there are other values of gas, such as lower regret cost in the energy transition as gas is less capital intensive than coal.

The end goal is a balanced, sustainable fuel mix that delivers total system least costs

18

-

100

200

300

400

500

600

GW

Installed Capacity by Fuel (ASEAN)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Installed Capacity by Fuel (ASEAN)

Others

Renewables(Solar/Wind/Geothermal)

Hydro

Nuclear

Gas

Oil

Coal

18-30

CAGR

+5.4%

+4.3%

+3.5

-1.9%

+12.7%

Coal

Oil

Gas

Hydro

Renewables

0

10

20

30

40

50

60

70

80

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

mm

tpa

LNG import demand in ASEAN

Other ASEAN

Myanmar

Malaysia

Indonesia

Vietnam

Thailand

Philippines

Singapore

0

20

40

60

80

100

120

140

160

180

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

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20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

mm

tpa

Natural gas demand in ASEAN

Other ASEAN

Myanmar

Malaysia

Indonesia

Vietnam

Thailand

Philippines

Singapore

ASEAN’s gas future depends on the adoption of LNG imports

19

• Growing ssLNG and

LNG bunkering

activities

• Continued growth in

gas-fired capacity

• Robust energy policy

support and

investments to

sustain economic

growth as reflected in

Power Development

Plans and Gas Master

Plans in ASEAN

LNG as an

effective

bridging fuel

to encourage

and support

domestic

indigenous

gas resource

development

infrastructure will be needed for the LNG import value chain

+2.4%

18-30 CAGR

+15.1%

18-30 CAGR

Note: 2010-2017 Actual, 2018 Preliminary, forecast thereafter

Source: GIIGNL, Country Statistics, TLG Analysis

• TLG base case: total gas consumption in ASEAN will be 15,800 mmcfd by 2025 (20% LNG),20,000 mmcfd by 2030 (29% LNG)

• Gas power generation share is projected to achieve 27% in 2025 (about 9,000 mmscfd), and 24% in 2030 (about 10,000 mmscfd).

Role of Gas in Ensuring Energy Sustainability for ASEAN

20

• Average annual electricity demand growth: 5.7%, from ~380 TWh in 2000 to 970+ TWh in 2017

• Likely average sustainable rate from 2020 to 2030: 5.6%. An average annual power capacity addition of 13 GW from 2020-2030,

increasing to 15 GW for the next decade

Strong economic growth potential → investments in the power and fuel sectors

• Strong appetite to achieve a balanced, reliable, secure and cost-effective energy supplies

• This is reflected in Power Development Plans and Gas Master Plans in all ASEAN nations, which promote increased diversification

in its fuel and technology mix.

Require robust energy policy support and investments to sustain the strong economic growth

• TLG projects coal usage in the power sector as reaching 50% in 2030. However, overly depending on coal also increase the risks of

unmet demand arising from project slippage rates due to siting constraints and stricter environmental regulations.

Coal remains dominant for its low cost but faces high project slippage risks and environmental and health impacts

• Gas is the most economic option for mid-merit and peaking application

• Gas is complimentary to intermittent renewable generation resource for reliability.

• Extending the economic life of existing gas-fired power plants provides cost-competitive generation supply

Gas will continue to play an increasingly important role in ASEAN’s energy future

Sustainable energy (gas) policy will be important

21

Power Sector

• Power sector must

evolve into

functioning

wholesale market in

alignment with gas

market

Gas Sector

• Encourage private

sector participation/

ownership of some

critical energy

infrastructure including

LNG terminals

• Wholesale gas market

be developed.

• Phased plan for third

party access,

functional separation

and unbundling

Legal and Regulatory

Framework

Persistent economic growth results in rising power

demand, and gas requirements

Functional gas market / sector

Geological, Geopolitics

Upstream investments not keeping up

Investment

outflow

Fall in domestic

production

depletion

Import LNG

Improve security

of supply and

through

diversification

Enable LNG to deliver total

system least cost by

contracting flexibly

Select robust business

model for LNG value

chain

Increase foreign

participation and

investments

Sustainable gas price

formation mechanisms

and tariffs

Reduce dependency on coal Complement RE

yes

No

Source: TLG

Encourage upstream investments

ASEAN Gas Market Development Pathway

22

• Not all ASEAN markets can support market-based pricing for gas (LNG).

• Gas market (pricing) reforms will be needed to promote a wider range of gas import sources, as well as development of newer fields with

higher wellhead costs. It can promote a more economically efficient use of gas (i.e. moving from base-load to mid-merit)

• Gas sector infrastructure (pipelines, and new supplies) and power capacity and transmission augmentation programs are complex

• Difficult commercial and regulatory challenges, especially on gas contracting and access arrangements needs

• LNG projects have shorter development cycles and lower regret costs and can address immediate gas resource depletions, promote

market-based price formation, and signals to support sustainable economic developments in both upstream and downstream

LNG is an effective bridging fuel to encourage and support domestic indigenous gas resource development

However, gas pricing reform progress is slow

Many challenges in developing gas infrastructure projects

Anatomy of Gas-to-Power Development

Role of Gas and LNG

Fuel and technology Competition

Market Structure, Policy &

Regulatory Framework

Business Model

Commercial Framework

23

Tolling/integrated/hybrid value chain structure

, Role of SOE – Public, Private or Public

Private Partnership

Fuel cost passed through, Sovereign

Guarantee, Financing

Security, Diversity, RE Partnership

Baseload or Mid-merit or Peaking

Price or quantity based driven, PPA or

merchant, Centralized or Decentralized, Fuel

Cost Passed Through, Tariff Formation, TPA

and Access Arrangements

Development Landscape Characteristics

World Bank LNG Regulatory Assistance (September 2018)

• The Lantau Group (TLG) is appointed by

the World Bank to provide technical

assistance for the facilitation of LNG-to-

power developments in Vietnam (‘the

Project’).

• Phase one of the project entailed

reviewing and recommending a legal and

regulatory framework for LNG-to-Power

developments in Vietnam, whilst Phase

two involved designing an LNG

procurement and risk mitigation strategy

that fits with the Vietnamese context and

requirements.

• A workshop was held in Hanoi on 26th of

June 2018 to present the findings of the

project to the key gas stakeholders in

Vietnam comprising of the Ministry of

Industry and Trade (MOIT), state-owned

enterprises (SOE) such as PetroVietnam

(PVN), PetroVietNam Gas (PVGas),

Vietnam Electricity Corporation (EVN) as

well as private sector participants.

Thank you

25

For more information please contact us:

By email

James OOI – Partner

jooi@lantaugroup.com

By phone

+65 6957 1458 (Singapore office)

By mail

The Lantau Group (Singapore) Pte Ltd

24 Raffles Place, #25-01

Clifford Centre

Singapore 048621

Online

www.lantaugroup.com

Rigour

Value

Insight

EnergyGas Power

Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. DBS Bank accepts no liability whatsoever with respect to the use of this document or its contents.

Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. DBS Bank Ltd. accepts no liability whatsoever with respect to the use of this document or its contents.

Regional Trends in Financing Energy Projects in South East AsiaInternational Gas Union Yogyakarta, Indonesia

10 October 2019

DBS Bank

Financial Powerhouse, Born & Bred in Asia

2

Best Bank in the World –Global Finance (2018)

The Banker (2018)Euromoney (2019)

World’s first bank to hold three global best bank

honors at the same time.

World’s Best Digital Bank –Euromoney (2018, 2016)

Recognition for DBS’ digital leadership not just in Asia

but the world.

Safest Bank in Asia –Global Finance (2009 - 2018)

DBS’ credit ratings of AA-and Aa1 by S&P and Moody’s are among the highest in the

world.

Strong Balance Sheet

Largest bank in South East Asia with market cap of

S$60.6bn* and total assets of S$550.8bn*.

Full Suite of Complementary Services

DBS is a provider of the full range of financial,

commercial and investment banking services.

*As at 31 Dec 2018

… with over 280 branches

at the crossroads of Asia…

across 18 markets

Well positioned

Indonesia

Malaysia

China

Hong KongTaiwan

Philippines

JapanKorea

VietnamThailand

Myanmar

Australia

India

Dubai

United Kingdom

Singapore

United States

DBS is the first bank in the world to hold three of the most prestigious global bank honors at the same time

DBS Project Finance

Strong Track Record in Project Finance

3

In Asia, DBS possesses a strong track record for advising and arranging non/limited-recourse financing for major playersin the Power & Utilities, Oil & Gas, Natural Resources and Infrastructure/PPP sectors.

23Distribution of

Debt Raised

DBS COMMITTED US$1.8Btowards 23 projects that cost US$20.9 BILLION

Financial Advisory Mandates8 Project

FinanceDeals

6

1

1

Power & Utilities

Mining

Infrastructure

Distribution ofFA Mandates

US$30.4bof Project Debt for

Oil & Gas transactions

US$16.6bof Project Debt for ECA

and Multilateral-covered deals

Recently in 2018

Since 2009, as a FA/MLA DBS has helped clients raise:

US$42.9bof Project Debt forPower & Utilities

30,507 MWenough to power Indonesia for 13.7 months*

* Indonesia consumed 234 TWh in 2017 (RUPTL 2017)

19FA MandatesCompleted

US$10.5bProject Debt

raised

47%

16%

31%

6%

Power & Utilities

Oil & Gas

Infrastructure

Metals & Mining

Awarded Asia-Pacific MLA of the Year 2017 by

IJGlobal

Awarded Best Project Finance House in Asia

2018 by FinanceAsia

Awarded PF Advisory House of the Year 2019 for Asia &

PF House of the Year for Singapore 2017-2019 by

The Asset

Awarded New Silk Road

Finance Awards 2019 –

Best Regional Bank for BRI

Southeast Asia 2019 by

Asia Money’s

Source: *IJGlobal – O&G includes upstream & downstream projects; Gas include gas fired power, LNG and midstream projects.

Gas Still Significant – Increasing Investment in Renewables - Energy Investment by Country Varies

Energy Investment Trends from 2010-2018

4

-40%

-20%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015 2016 2017 2018

Annual Investment Growth Rate, 2011-2018 (%)*

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Investment in ASEAN Energy Projects, 2010-2018 (US$’ million)*

Coal Renewables Gas Oil & Gas

- 10 20 30 40 50

Myanmar (Burma)

Cambodia

Laos

Thailand

Philippines

Vietnam

Singapore

Malaysia

Indonesia

Cumulative Investment in Energy Projects by Country, 2008-2018 (US$' billion)

Coal

Renewables

Gas

Oil & Gas

52

39

32

30

24

21

7

1

0.4

Financing Trends for Energy Projects

Over 61% of Investment Funded by Project Finance

5

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Form of Financing for Energy Projects (US$’ million)*

Project Finance Corporate Finance Public Sector Finance

Sources: *IJGlobal – O&G includes upstream & downstream projects; Gas include gas fired power, LNG and midstream projects. Public Sector Finance is defined as government financing that deals with the allocation of resources in accordance with budget constraint of a public sector organization (including SOE)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Gas Projects – By Financing Option (US$’ million)*

Project Finance Corporate Finance Public Sector Finance

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

O&G Projects – By Financing Option (US$’ million)*

Project Finance Corporate Finance Public Sector Finance

0

2,000

4,000

6,000

8,000

10,000

12,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Renewable Projects – By Financing Option (US$’ million)*

Project Finance Corporate Finance Public Sector Finance

Regional Trends in Financing Energy Projects in South East Asia

2018 Snapshot of Financing by Country

6

Indonesia, 4,786

Thailand, 1,895

Laos, 1,024

Malaysia, 1,575

Vietnam, 3,103

Project Finance (US$’m)*

Philippines, 1,900

Singapore, 6,682

Indonesia, 548

Thailand, 54

Malaysia, 225

Vietnam, 85

Corporate Finance (US$’m)*

Indonesia, 1,382

Thailand, 750

Malaysia, 8,000

Myanmar (Burma), 309

Public Sector Finance (US$’m)*

Key Takeaways

▪ From 2010-2018, US$124.2 billion was raised via Project Financing, US$58.8 billion via Corporate Finance and US$20.4 billion via Public Sector Finance.Project Financing has seen an annual average increase of ~4% during this period.

▪ Project Finance: Project Finance in Singapore and Philippines has declined since 2015 levels to negligible in 2018 while there is an opposite trend inIndonesia and Vietnam. Large PF deals in Indonesia were from gas and coal investments – Java 1 FSRU & CCGT Power Plant (US$1.8 billion) & BangkoTengah (US$1.6 billion). Large PF deal in Vietnam from the coal sector – Nghi Son 2 Coal-Fired Power Plant (US$2.3 billion).

▪ Corporate Finance: Indonesia’s use of corporate finance as a proportion of ASEAN financing has declined from ~80% in 2010 to ~5.8% in 2018. As of2018, Singapore’s use of corporate finance as a proportion of ASEAN was ~70.4% (from 0% in 2008), mainly driven by more transactions in renewables(i.e. acquisition of Equis Energy).

▪ Public Sector Finance: Picked up from 2014 onward. Malaysia’s RAPID financing (US$ 8 billion) was the largest public sector financing to date. Recently,Indonesia also raised its Green Sukuk Bond Facility (Renewables) for US$1.25 billion.

Sources: *IJGlobal – O&G includes upstream & downstream projects; Gas include gas fired power, LNG and midstream projects.

Oil & Gas in Southeast Asia

~US$115 bn required by 2040

7

Key Takeaways

▪ According to the World Economic Outlook(IMF), installed power generation increasesfrom ~241GW to ~620GW in 2040.

▪ Renewables will account for the largest shareof installed capacity ~38%, followed by gas(~31%) and Coal (28%).

▪ In terms of generation capacity, coal willcontinue to take the most prominent role bygenerating ~40% of capacity followed by gasat ~28%.

▪ Based on precedent transactions* as shownin the table (left), the average cost/MW forASEAN gas projects is ~US$1.13 million perMW.

▪ To meet the estimated growth of 101GW ingas installed capacity by 2040 (WEO, IMF),~US$114.5 billion of cumulative investmentis required.

Project Country Capacity (MW)

Project Cost(US$’m)

Cost/MW (US$’m)

Year

Riau Indonesia 275 300 1.09 2019

Chonburi Thailand 2,500 1,534 0.61 2018

Java 1 Indonesia 1,760 1,775 1.01 2018

Myingyan Myanmar 225 304 1.35 2017

Avion Philippines 97 150 1.55 2016

Ratchaburi Thailand 250 236 0.94 2016

Thai Binh 2 Thailand 1,200 1,656 1.38 2015

Sources: *IJGlobal1. World Energy Outlook (IMF) 2. International Energy Agency, World Energy Outlook (IMF) – Southeast Asia Energy Outlook

0

100

200

300

400

500

600

700

2016 2025 2030 2035 2040

ASEAN Installed Power Capacity (GW)1

Coal Renewables Gas

Table 1: Precedent Transactions

8

Bankable Gas ProjectsKey Financing Considerations Have Not Changed

Business Model

Merchant Model / Tolling Model / Integrated Model

Project Finance vs. Corporate Finance

Tradeoff between higher due diligence/control and tenure

Currency Mix

Revenue currency vs. Financing Currency – Hedging solutions with appropriate tenure to be considered

Funding Sources / Liquidity

Consideration of potential financiers, ECA cover and Capital Market options

© 2019 Petroliam Nasional Berhad (PETRONAS) |

Open

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© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

© 2019 Petroliam Nasional Berhad (PETRONAS) Open

Supplying Gas to Geographically Challenging Locations

Point of supply/LNG Hub

Power PlantIndustry(mining, smelter, bunkering, etc

Retail(commercial building)

LNG Tangguh

DSLNG

NR

Lampung

Benoa