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Global LNG market dynamics and the implications for Australia’sLNG industry

Matt Howell

14th September 2016


2

Australia has become a world leader in LNG supply

0

10

20

30

40

50

60

70

80

90

2000 2004 2008 2012 2016 2020

mm

tpa

Prelude

Ichthys

Wheatstone

Gorgon

Pluto

CSG LNG

NWS and Darwin

Qatar

Recent wave of projects position Australia to overtake Qatar as the largest LNG exporter

Australian LNG supply

Source: Wood Mackenzie

US$214

billion

US$60

billion

US$41

billion

* Valued at US$44/bbl in 2016 rising to a long term Brent price of US$70/bbl

(real, 2016 terms) from 2019

Look-forward value to

industry (NPV10)

Look-forward

value to

government

(NPV10)

2020 revenue


3

0%

20%

40%

60%

80%

100%

2000 2005 2010 2015 2020

Japan Utilities China NOGC South Korea Utilities IOC Majors Other NOGC Other Utilities Other Uncontracted/Spot

Where Australia will deliver this LNG to has changed considerably from even five years ago

Japanese utilities’ contracted production share will fall around 35% between 2010 and 2025

Australian LNG supply by buyer company group

Source: Wood Mackenzie LNG Tool


4

How long will the current buyers’ market last?

2001

2015

Weak demand following Asian financial crisis

Rapid growth in supply with development of mega-trains

2006

2009

2011

Buyers’ Market

Sellers’ Market

Japanese LNG demand increases post-Fukushima

LNG prices in Pacific increase while prices in Atlantic basin remain weak

LNG Re-exports from Spain to Pacific Basin begin

Global financial crisis

US shale gas revolution

Market gas prices in Europe and US disconnect from oil

Oil price drop and economic slowdown hits LNG Supply

Demand falls in Japan, South Korea and China

Ramp-up of new Australian Projects and US Projects


High US gas prices of >$12/mmbtucreated rush for US LNG imports

Oil and coal prices increase

LNG development costs increase

Oil parity deals introduced


5

Supply from sanctioned facilities is expected to peak in 2024

0

100

200

300

400

500

600

700

2000 2004 2008 2012 2016 2020 2024 2028 2032

LN

G O

utp

ut

(mm

tpa)

Australia Qatar RoW North America Africa Asia-Pacific Russia Middle East

Uncertainty surrounds a number of the pre-FID projects

Global LNG output


Patterned areas represent pre-FID projects


6

The new LNG infrastructure provides leverage for the future

Australia

Qatar

USA

Malaysia

Russia

Nigeria

Indonesia

Trinidad andTobago

Other

Australia will have 22% of global LNG capacity by 2020

Global LNG Capacity (2020)

Additional nameplate

capacity

Spread across

10 facilities

30”+ diameter gas

pipeline installed

since 2009

62 mmtpa

21 trains

2,840 kms



7

Developed Undeveloped (>3tcf)

Undeveloped (1-3 tcf) Undeveloped (<1tcf)

Developed Undeveloped

Gorgon

NWSPluto

Wheatstone LNG

MACEDON

ANGELJANSZ-IO

PLUTO

GORGON

JOHN BROOKES

REINDEER

WHEATSTONE

AUSTRALIAWestern Australia

HALYARDSPAR

Scarborough

IAGO

JULIMARBRUNELLOXENA

GOODWYN

TIDEPOLE

PERSEUS

NORTH RANKIN

PERSEPHONE

ATHENA

0 100 200

km


Gas field

LNG

Domestic gas only

Undeveloped

North Carnarvon Basin has the full range of options

But the resource position, size and availability could dictate decisions

North Carnarvon Basin reserves (114tcf)


8

Developed Undeveloped (>3tcf)

Undeveloped (1-3 tcf) Undeveloped (<1tcf)

Developed Undeveloped

AUSTRALIAWestern Australia

INDONESIA

TIMOR-LESTE

JPDA

Northern Territory

Abadi

Barossa

Sunrise

Troubadour

BAYU-UNDAN

Petrel

Ascalon

Tern

BLACKTIP

CalditaBlackwood

HeronChuditch Evans Shoal South

Argus

Burnside

Bassett WestCrown

KronosPoseidon

Torosa

Brecknock

Calliance

ICHTHYS

Echuca ShoalsPRELUDE

Crux

CashMaple

Evans Shoal

Darwin

Ichthys

Prelude FLNG

NT Ashmore &Cartier Is

0 100 200

km


Gas Field Operators

ConocoPhillips

Engie E&P

Eni

INPEX Corporation

PTTEP

Santos

Shell

Woodside Petroleum

Other operator

Backfill of Darwin should go ahead, but from where and what next?

And what is the future for Ichthys and Prelude?

Browse/Bonaparte Basin reserves (62 tcf)


9

Positive signs for the future of the Australian LNG industry

Australia is well positioned for when the next positive

cycle occurs

Large amount of infrastructure in place, globally

competitive options

Creative solutions and co-operation are required to fully

exploit the opportunities


10

Matt Howell

Matt Howell joined Wood Mackenzie’s Australasian Upstream research team in August 2011.

Over the last five years he has provided analysis of field economics, strategies and industry trends across the

region from the exploration phase right through to development and beyond. He has also worked on a wide range

of consulting projects, including country entry studies and evaluations of the domestic gas markets. Prior to joining

Wood Mackenzie, Matt worked for Baker Hughes, an oilfield service company. He was a wireline Field Engineer for

four years before spending three years working in Baker Hughes' Geoscience arm.

Matt holds a Bachelor of Engineering (Hons) degree in Oil and Gas Engineering and a Bachelor of Commerce, both

from the University of Western Australia.

Upstream Research Analyst

E [email protected]

T +61 (8) 6216 7521


11

Disclaimer

This report has been prepared for SEAOCC by Wood Mackenzie Limited. The report is intended

solely for the benefit of attendees and its contents and conclusions are confidential and may not

be disclosed to any other persons or companies without Wood Mackenzie’s prior written

permission.

The information upon which this report is based comes from our own experience, knowledge and

databases. The opinions expressed in this report are those of Wood Mackenzie. They have been

arrived at following careful consideration and enquiry but we do not guarantee their fairness,

completeness or accuracy. The opinions, as of this date, are subject to change. We do not

accept any liability for your reliance upon them.

Strictly Private & Confidential


12

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