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17th INTERNATIONAL CONFERENCE & EXHIBITION ON

17th INTERNATIONAL CONFERENCE & EXHIBITION


LIQUEFIED NATURAL GAS (LNG 17)
ON LIQUEFIED NATURAL GAS (LNG 17)

Access to Gas Revisiting the LNG Industrys


Big Challenge
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Wood Mackenzie
17th April 2013

www.woodmac.com

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April 17th, 2013 at the LNG17 Conference. It has not been prepared for the
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Accessing gas feedstock for LNG projects has been a consistent


challenge for the industry
At LNG 15 we considered the challenges associated with accessing NOC
controlled gas resources, and forecast a shift towards exploration by the IOCs
At LNG 16 we looked at the challenges of using unconventional gas to feed LNG
plants as players began to develop projects utilising gas from coal-seams or coalbeds (CSG/CBM) and from shale
Today, at LNG 17, we revisit those challenges and consider where the industry
goes from here

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The industry needs a lot of extra gas to support LNG production


Additional LNG Requirement (2025)

450

Demand is set to nearly double by


2025

Gap in 2025 of ~160 mtpa equates to


~180 tcf of gas feedstock to support
20 year production

Gap
of ~160 mtpa,
Gap of ~160 mtpa,
~8.5
per
year
~8.5 tcf
tcf per
year

350
300

mtpa

Need to factor in loss of production


from existing plants (which tends to be
under-estimated)

400

250
200
150

100
50
0
2012
Operational

2025

Under Construction Demand


Demand

Source: Wood Mackenzie


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That gas is expected to come from a combination of three types


of resource
Unconventional gas:
from shale and/or
coal

Already discovered
conventional gas
- NOC and/or IOC
controlled

Exploration for
additional
conventional gas

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The gas resource base has grown massively since LNG 15


Global Gas Resource
(2007)

(2012)

Unconventional gas in North


America has been huge
Exploration has also been a
major focus and opened up
East Africa to the LNG industry

~4900 tcf
~4900
tcf
Conventional Conventional
Unconventional

~7800 tcf
~7800
tcf
Conventional
Unconventional
Unconventional

Conventional Gas Resource Additions via Exploration (2007 2012)


120
100

tcf

80

60
40
20

0
2007

2008

2009

2010

2011

2012 1H

Discovery year

Source: Wood Mackenzie

Rest of World

Australia

East Africa

East Mediterranean

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and IOCs now have access to more resource opportunities,


without the need for NOCs
Conventional Gas Resource NOC vs. IOC

IOCs have discovered a lot


more gas via exploration

(2007)

(2012)

NOCs have upgraded reserves


But most unconventional gas is
controlled by the IOCs

35%
~2100 tcf

35%
~1660 tcf
65%
~3120 tcf

So, critically, IOCs now have


more gas to play with therefore
a greatly reduced need to
focus on NOC opportunities
NOC

NOC
IOC

65%
~3860 tcf

IOC
NOC

IOC

Source: Wood Mackenzie


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We expect IOCs to pursue a mix of unconventional gas,


discovered conventional gas and exploration
While the volume of unconventional gas potentially available has increased
massively, there are limits on its use as LNG feedstock
So in addition, IOCs will focus on the conventional resources that they control,
with East Africa increasingly supplementing Australia
Players will continue to explore, but careful focus will be required to ensure that
gas can be commercialised

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This mix is reflected in the evolving portfolios of selected IOCs


that are big players in LNG
Gas Resource for LNG Supply Focus Countries Early Gas Resource for LNG Supply Focus Countries Early
2007
2013

Important to several
of the selected IOCs

Important to nearly all of


the selected IOCs

Focus has broadened in the last six years, to encompass less NOC
opportunities, exploitation of discovered gas, exploration plus unconventional
Source: Wood Mackenzie
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LNG Project Developers also have to take buyers preferences


and requirements into account
Supply
Diversity

HH Pricing
Exposure

Unconventional
Upstream

Richer
LNG

US
Canada
East Africa
Australia
Russia

Traditional Asia

In aggregate, these suggest that the current focus on North America is


appropriate, and that East Africa could prove to be a harder sale
Source: Wood Mackenzie
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Conclusions

Conclusions

Lots of gas needed to meet demand growth and to replace lost capacity

Good news is that the resource base has grown massively

Challenge now is less about how to access gas, more how to combine options

It appears that this will comprise a mix of unconventional, IOC controlled conventional
gas and more exploration, as reflected in IOC gas portfolios
NOC
is is
thethe
bigbig
loser
NOCcontrolled
controlledgas
gas
loser
Developing LNG projects will never be easy, but perhaps we should all now feel a little
more comfortable

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Contacts
Name: Frank Harris
Position: Head of Global LNG Consulting
T: +44 (0)131 243 4249

E: frank.harris@woodmac.com
Name: Noel Tomnay

Position: Head of Global Gas, Gas Research


T: +44 131 243 4511
E: noel.tomnay@woodmac.com
Name: Giles Farrer
Position: Senior Analyst LNG & Global Gas Research
T: +44 203 060 0461

E: giles.farrer@woodmac.com

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