LNG Market Trends & Price Transparency Tokyo Fiona Poynter April 2015 London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Market Reporting Consulting Events
Argus & the Asia Pacific LNG & gas markets Building transparency in the Asian LNG spot market Pacific price formation How is global spot liquidity developing and where do reloads fit in? Inter-basin price spreads and what these mean for 2015 trade Australian east coast LNG supply
Argus is a leading energy price reporting agency World s largest independently held energy price reporting agency Price indexation, news, data and analysis for energy and commodity markets Founded 1970, nearly 700 full-time staff in 23 countries In Asia and ME since 1986: Singapore, Tokyo, Beijing, Sydney, Dubai 10,000 price assessments a day across 100 energy publications Covering LNG markets for 10 years
Global supply outlook: US hot on Australia s heels Country Project under construction/fid Capacity (mn t/yr) Start-up Indonesia Donggi Senoro 2 2015 Malaysia Petronas FLNG 1&2 2.7 2015 Australia Australia Pacific LNG (APLNG) 9 2H15 Australia Gladstone LNG (GLNG) 7.8 Mid 2015 Australia Gorgon 15.6 2015/16 US Sabine Pass, Louisiana 16 Q116 Australia Wheatstone 8.9 Late 2016 Australia Prelude FLNG 3.6 2016 Australia Ichthys 8.4 Q416 Russia Yamal 16.5 2017 US Cove Point, Maryland 5.75 Late 2017 US Cameron, Louisiana 12 2018 US Freeport, Texas 13.2 2018 Worldwide Total 121.45 Australia Total 53.3 US Total 46.95
ANEA posts losses on fundamentals in 2014 ANEA/Ice Brent front-month $/mn Btu 20 18 16 14 12 10 8 6 PNG starts ahead of schedule Supply tenders from NWS, Bintulu, Bontang Korea arranging time swaps stock Traders buy cargoes to store and sell in ANEA Ice Brent front-month
Consumer demand too weak to absorb supply glut Supply tenders from PNG LNG, Australia s Northwest Shelf & Russia s Sakhalin, Malaysia s Bintulu, Indonesia s Bontang Buyer demand weak on high storage inventories heading into last winter Floating storage cargoes added to supply glut Some Atlantic sellers opting to regasify excess LNG volumes to sell at European hubs, rather than market reloads in absence of firm demand Limited demand from South America in 2014, compared to previous year
NE Asia no longer guaranteed premium market 25 20 15 10 5 0 ANEA/NBP ($/mn Btu) ANEA Argus NBP month-ahead
ANEA forward curve remains below oil index 11 10 9 8 7 6 5 4 3 2 ANEA forward curve vs Argus Japan oil index ($/mn Btu) May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 ANEA Argus Japan oil index
Pacific LNG price formation Market Reporting Consulting Events
Japanese LNG price formation 25 Spot and long-term delivered prices by exporting country - Japan 20 15 $/mn Btu 10 5 0 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Term Spot Term: Abu Dhabi, Australia, Brunei, Indonesia, Malaysia, Oman, Qatar, Russia, US Spot: Algeria, Belgium, Egypt, Equatorial Guinea, France, Norway, Nigeria, Peru, Papua New Guinea, Spain, Trinidad, Yemen
Japanese LNG price formation 22 Spot and long-term delivered prices by exporting country - Japan 20 18 $/mn Btu 16 14 12 10 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Spot Spot average Modern oil index Term: Abu Dhabi, Australia, Brunei, Indonesia, Malaysia, Oman, Qatar, Russia, US Spot: Algeria, Belgium, Egypt, Equatorial Guinea, France, Norway, Nigeria, Peru, Papua New Guinea, Spain, Trinidad, Yemen
Japanese LNG price formation 22 Spot and long-term delivered prices by exporting country - Japan 20 18 $/mn Btu 16 14 12 10 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Spot Spot average Modern oil index ANEA Term: Abu Dhabi, Australia, Brunei, Indonesia, Malaysia, Oman, Qatar, Russia, US Spot: Algeria, Belgium, Egypt, Equatorial Guinea, France, Norway, Nigeria, Peru, Papua New Guinea, Spain, Trinidad, Yemen
ANEA, Meti Japan price closely correlated 22 Spot and long-term delivered prices by exporting country - Japan 20 18 16 $/mn Btu 14 12 10 8 6 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Spot Spot average Modern oil index ANEA METI Term: Abu Dhabi, Australia, Brunei, Indonesia, Malaysia, Oman, Qatar, Russia, US Spot: Algeria, Belgium, Egypt, Equatorial Guinea, France, Norway, Nigeria, Peru, Papua New Guinea, Spain, Trinidad, Yemen
How is global spot liquidity developing? Market Reporting Consulting Events
PNG, Australia dominate spot supply 35 30 25 20 15 10 5 0 2014 indicative spot supply (cargo numbers)
Spain continues strong reloads 70 60 50 40 30 20 10 0 2014 reload supply (cargo numbers)
Spanish reloads key to supply 60 50 40 30 20 10 0 2013 reload supply (cargo numbers)
PNG accounts for almost half of Japanese spot 60 50 40 30 20 10 0 2014 indicative spot demand (cargo numbers)
Spot supply outweighs demand in 2014 25 2014 indicative spot supply & demand (mn t) 20 15 10 5 0 Spot supply (including reloads) Spot demand
Reload activity continues to increase in 2014 120 110 100 90 80 70 60 50 40 30 Year-on-year reload activity (cargo numbers) 2011 2012 2013 2014
Reload market helps drives spot liquidity 2014 spot market liquidity Reloads Spot supply
South America dominated 2013 reload picture Reload receiving markets 2013 Other Asia South America
But 2014 presents a different picture Reload receiving markets 2014 Other South America Asia
Spot, short term trade accounts for 30%
Spot, short term trade growing in Asia-Pacific
Spot, short term trade will continue to grow Increasing LNG global supply will mean more spot volumes. Over-supply will drive spot liquidity Flexible LNG with no firm contract will reach 42mn t/yr by 2018 IEA Projects like the 5.2mn t/yr Angola plant remain uncontracted Increasing shipping capacity coming online much of this uncontracted Fewer destination clauses US FOB model Cross participation of buyers in upstream projects and sellers in downstream projects will increase flexibility But weaker oil prices could weigh on spot demand
2015 spot supply remains robust
2015 spot demand remains fairly weak
Inter-basin price spreads Market Reporting Consulting Events
2013 sees inter-basin arbitrage opportunities 2013 averages Atlantic Basin fob $13.79 Brazil des $15.11 India des $14.9 6 Northeast Asia (ANEA) $16.71
Atlantic, Pacific spreads tighten in 2014 2014 averages Atlantic Basin fob $12.15 Brazil des $12.87 India des $12.8 6 Northeast Asia (ANEA) $13.90
Cross basin arb mostly closed in 2014 5 4 3 2 1 0-1 02 Jan 2013 Pacific/Atlantic spread v shipping costs ($/mn Btu) 02 Mar 2013 02 May 2013 02 Jul 2013 02 Sep 2013 02 Nov 2013 02 Jan 2014 02 Mar 2014 02 May 2014 02 Jul 2014 02 Sep 2014 02 Nov 2014 02 Jan 2015 02 Mar 2015 ANEA/Argus FOB Atlantic index spread Atlantic-Pacific shipping cost
Emerging Pacific supply could limit arbitrage Pacific/Atlantic pricing ($/mn Btu) 25 20 15 10 5 0 04 Nov 2013 04 Dec 2013 04 Jan 2014 04 Feb 2014 04 Mar 2014 04 Apr 2014 04 May 2014 04 Jun 2014 04 Jul 2014 04 Aug 2014 04 Sep 2014 04 Oct 2014 04 Nov 2014 04 Dec 2014 04 Jan 2015 04 Feb 2015 04 Mar 2015 04 Apr 2015 ANEA Argus Atlantic basin index
NBP provides price floor for Atlantic LNG Atlantic LNG/NBP ($/mn Btu) 18 16 14 12 10 8 6 4 2 0 04 Nov 2013 04 Dec 2013 04 Jan 2014 04 Feb 2014 04 Mar 2014 04 Apr 2014 04 May 2014 04 Jun 2014 04 Jul 2014 04 Aug 2014 04 Sep 2014 04 Oct 2014 04 Nov 2014 04 Dec 2014 04 Jan 2015 04 Feb 2015 04 Mar 2015 04 Apr 2015 Argus Atlantic basin index Argus NBP month-ahead
Henry Hub pricing less attractive amid falling oil 12 10 8 6 4 2 0 Japan oil index/usgc fob/des Japan ($/mn Btu) Argus Japan oil-linked des Argus US Gulf Coast fob Japan des
Australian east coast LNG supply Market Reporting Consulting Events
AEMO forecasts Gladstone projects at full cap by 2019 10 Australian Energy Market Operator (AEMO) LNG projections (mn t/yr) 8 6 4 2 0 Q4 2014 Q4 2015 2016 2017 2019 2034 QCLNG APLNG GLNG
APLNG, GLNG eye 2H15 start up QCLNG spot supply limited to a couple of cargoes so far not expected to produce much spot in coming months GLNG sold 13 cargoes to Kogas on a strip basis for delivery from August onwards APLNG in talks to sell spot before SPAs start plant due online in Q315 Potential for Chinese buyers to reload Australian volumes and sell into NE Asia Shell/BG acquisition means Arrow s CBM reserves could feed QCLNG potential for further expansion, with room for up to 5 trains
Argus LNG Daily Important market tool which the industry relies on Most sound of all LNG publications Ahead-of-the-curve news Accurate, balanced price assessments Incisive market analysis
In summary LNG spot prices have lost almost two thirds of value since last winter Spot market increasingly driven by fundamentals, not just oil Spot/short-term trade will continue to grow; US will play key driving role Liquidity in LNG spot market key to enabling move away from oil indexation Transitional period of HH linked pricing. But HH pricing does not reflect fundamentals in Asia s key demand centres Atlantic/Pacific basins to disconnect more frequently in 2015, as new Pacific supply reduces competitiveness of Atlantic cargoes in Asian demand centres. Australian projects to play key role in this Move to spot indexation in long-term contract pricing remains ultimate goal to ensure a competitive and efficient marketplace
Fiona Poynter VP LNG Asia-Pacific Email: Phone: Office: Web: fiona.poynter@argusmedia.com +61 4115 30 694 Sydney www.argusmedia.com Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, ARGUS MEDIA, the ARGUS logo, DEWITT, FMB, FUNDALYTICS, METAL-PAGES, JIM JORDAN & ASSOCIATES, JJ&A, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Disclaimer All data and other information presented (the Data ) are provided on an as is basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.