Queensland LNG: Past, Present and Future

Queensland LNG: Past, Present and Future Dr Graeme Bethune Rick Wilkinson 15 November 2016

EnergyQuest Founded 2005 Energy strategy and analysis Graeme Bethune: CEO Susan Bethune: data collection and analysis Rick Wilkinson: gas markets, government and strategy Janet Cronin: east coast gas and power Denis Dare: oil and gas reserves and resources Energy analysis and strategy Copyright 2016 EnergyQuest 2

The great Australian LNG boom FID on seven new Australian LNG projects between 2009 and 2012, three in Gladstone, four on west coast (62 Mt) Globally unprecedented Even more were proposed: Arrow, QCLNG T3, APLNG T3-4, Fisherman s Landing, Newcastle, Gorgon T4, Wheatstone T3-4, Browse, Sunrise, Bonaparte High oil and LNG prices, apparently bountiful reserves in free market OECD economy in Asia Pacific, extra boost in 2011 from Fukushima. Underwritten by many of the world s biggest oil and gas companies: BG, ConocoPhillips, Chevron, TOTAL, Shell Energy analysis and strategy Copyright 2016 EnergyQuest 4

Queensland: famine to plenty 1990 s: conventional reserves declining. PNG pipeline proposed (initially around 1996, and finally shelved in 2007) 2000 s: CSG becomes economical with new applications of technology, and at higher prices, to meet domestic demand Even larger reserves at higher prices of Asian markets - the magic pudding of unconventional reserves Santos announced first CSG to LNG project in July 2007 Catches international attention. Majors sanction projects based on untried 2P reserves Unique in developing onshore in populated areas in domestic gas market in federation with State control of land-use Energy analysis and strategy Copyright 2016 EnergyQuest 5

Queensland LNG building boom $60+ Billion in capital expenditure, with an on-going spend of $2+ Billion pa For 2014/15, 3.6% of Gross Regional Product in Queensland 7,331 wells drilled 5,184 land access agreements with 2,188 landholders Workforce peaked at more than 40,000, with an expected ongoing operational workforce of 5,000-10,000. More than 500 fracture stimulated wells $360 million contribution to roads Source: APPEA http://www.appea.com.au/wp-content/uploads/2016/03/q4-2015-total-csg-industry-data_final.pdf; Queensland GasFields Commission http://www.gasfieldscommissionqld.org.au/resources/gasfields/combined-snapshot-report.pdf Energy analysis and strategy Copyright 2016 EnergyQuest 7

Queensland LNG the projects QCLNG (Shell): Two trains operating, 8.5 Mtpa capacity, 5.2 Mtpa contracted to third-parties, produced 8.0 Mt in FY 2016. 11.3 Tcf reserves. Cargoes mainly to Japan, China and Singapore. Continuing active drilling and development. Favourable contract from APLNG finishes end 2016. GLNG (Santos): Two train project, 7.8 Mtpa capacity, 7.2 Mtpa contracted, Train 1 commenced production in October 2015, Train 2 in March 2016. Reserves 5.2 Tcf. Have third party gas contracts but not sufficient to meet contracts. Produced 1.0 Mt in Q2, very slow ramp-up of T2, have 2-3 years to meet contracts. Deliveries widely dispersed. APLNG (ConocoPhillips-Origin Energy): Two train project, 9.0 Mtpa capacity, 8.6 Mtpa contracted, Train 1 commenced production in January 2016, T2 started. Producing ~0.4 Mt per month. Reserves 12.8 Tcf. Deliveries to Japan and China. Energy analysis and strategy Copyright 2016 EnergyQuest 9

Sufficient drilling? 250 CSG development wells drilled by operator 200 150 100 QCLNG APLNG GLNG 50 0 Mar 2012 Sept 2012 Mar 2013 Sept 2013 Mar 2014 Sept 2014 Mar 2015 Sept 2015 Mar 2016 Sept 16 Source: EnergyQuest Energy analysis and strategy Copyright 2016 EnergyQuest 16

Queensland LNG the future Liquefaction Capacity by Country in 2014 and 2020 Note: Liquefaction capacity only takes into account existing and under construction projects expected online by 2020 Source: IGU World LNG Report 2015 Energy analysis and strategy Copyright 2016 EnergyQuest 22

Queensland LNG the future LNG is trending to shorter contracts, with the capability to re-export being developed Non Long-Term Volumes, 1995-2014 Re-Exports by Country, 2005-2014 Source: IGU World LNG Report 2015 Energy analysis and strategy Copyright 2016 EnergyQuest 23

The Headlines: Queensland LNG the future CSG LNG projects have been one of the true innovations in the Australian economy which has had a material impact on regions and the national economy. The reserves and deliverability of CSG have shown remarkable growth, but it is still a work in progress watch Arrow s contribution closely what will GLNG do to build reserves and production? drilling rates will need to increase Queensland LNG is competing in the global marketplace, with the help of good joint venture and off-take partners but the global market place is adapting to new energy demand and investment requirements Stable oil and LNG prices, even at lower levels will enable business plans to be tailored to the new normal Domestic demand has to be met, but in the uncertainty of renewables Energy analysis and strategy Copyright 2016 EnergyQuest 24