Winds of Change in Shipping Conference Langley Meek February 19, - - PowerPoint PPT Presentation

The Changing Role of LNG

Winds of Change in Shipping Conference Langley Meek February 19, 2014

GDF SUEZ Gas NA LLC

Disclaimer

TUG ROUNDTABLE

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GDF SUEZ

A World Leader in LNG

n About GDF SUEZ

• Founded in 1822; predecessor company constructed the Suez Canal in 1858
• No. 1 independent power producer (IPP) in the world
• 219,300 employees in nearly 70 countries

n Global LNG Activities

• 3rd Largest LNG Portfolio in the World
• 18 LNG carriers in operation including 16 tankers and 2 shuttle regasification vessels
• A supply portfolio of 16.5 million metric tons per year from 6 countries
• Largest supplier in the Atlantic Basin

n In North America

• Everett, MA facility has delivered over 3 TCF of LNG since 1971
• Selling LNG for transportation applications since 2011
• Ongoing development projects for bunkering and LNG infrastructure at ports

Why are we talking about LNG?

n But really: The desire to use LNG as fuel is driven by PRICE

• The spread between oil and natural gas has widened. North American

natural gas prices are forecasted to be significantly cheaper than global

• il and domestic diesel prices.
• US produced LNG prices are forecasted to be much less expensive

compared to Ultra Low Sulfur Diesel. High demand for ULSD and constrained refining capacity puts upward pressure on its cost.

n Natural gas is an abundant, domestically produced fuel

• We have significant reserves of natural gas due to our ability to

extract from shale; US will be a net exporter

n LNG is a cleaner fuel

• Lower SOx, NOx, CO2 and particulate emissions
• Meets current and future emissions requirements both in Emissions in

in ECAs and for global trade

U.S. Imports of LNG – Changing Market

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n With large shale gas production and increased global demand, U.S.

imports of LNG have declined significantly

• Except for New England, LNG imports into the U.S. have stopped

n The U.S. LNG fuels market must compete with global demand to

entice imports

The Export Situation

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n Enormous liquefaction capacity is coming online, but it is dedicated

to global exports, not the domestic market

• Export projects financed and built on the basis of 20 year commitments
• Very low probability that these plants will make LNG available outside of long term

contracts and significant volume commitments

• They are not optimized to allow for bunkering or loading small vessels with LNG

n Hierarchy of flows pulls LNG away from the domestic fuels market

Planned Liquefaction for the Domestic LNG Fuels Market

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n Domestic liquefaction plants can be better suited to serve the emerging

fuels market because they don’t have to compete with global prices which can often draw LNG away from the U.S.

n There is significant interest in providing a domestic solution

• 250 BCF/year planned by various parties

n Existing plants are being expanded to satisfy the growing needs of the

transportation market

• Applied (AZ), Clean Energy (CA) are adding capacity to serve growing trucking demand

n New plants are being built to serve new LNG fuels markets

• Shell’s Sarnia and Geismer plants are purpose-built for the marine market growing on the

Great Lakes and Gulf Coast

• Stabilis’ plants are serving the E&P business growing along shale plays

30 12 44 36 5 13 110

New Domestic Liquefaction Announced

Bcf/year of Production Capacity Western (CO, CA, AZ, WA, AB, BC) FL Midwest Northeast OK ON (CAN) TX Gulf Coast (TX, LA)

Existing Liquefaction

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n 3 Main Categories 1) Utility Peak-shavers that are

dedicated to serving utility customers

• They do not have the ability to do

anything with their LNG other than serve their commitments 2) Utility Peak-shavers that

have some excess capacity that they can sell on an interruptible basis

• Not reliable supply because their

first priority is to serve their utility customer’s needs – not other contracts 3) Purpose-built LNG facilities

for new markets

• Represent reliable supply when

they have excess capacity

LNG Peak shaving plants store natural

gas (and many also liquefy gas) that can be used when gas demand is high (peak). When this occurs, LNG can be vaporized and sent to a gas grid.

Existing Liquefaction Plants

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AGL Trussville Applied Topak Clean Energy Boron Prometheus Bowerman Linde Livermore AGL Cherokee AGL Macon AGL Riverdale Philly Gas Works Spectrum Ehrenberg GDF SUEZ Everett Import Terminal Transco Carlsdat UGI Temple AGL Chattanooga Clean Energy Pickens Exxon Shute Creek Merit Energy Pioneer Ulysses MUD Omaha Centerpoint Burnsville MidAmerican Garner NW Natural Newport NW Natural Portland Kinetrix Indianapolis

* Not representative of the entire market

Planned Liquefaction Plants

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Applied Topak II (Expansion) Applied Midlothian Spectrum Ehrenberg CLNE Boron II (Expansion) Noble Energy Keota Shell Geismer Shell Sarnia Waller Marine Port Allen Eagle LNG CO Eagle LNG ND Eagle LNG OH Eagle LNG WA HEYCO Lavaca Stabilis Eagleford Stabilis OK Stabilis Bakken Stabilis W. TX Stabilis Haynesville Floridian Announcements by:

• Eagle (Clean Energy)
• - Sempra and JEA
• - Pivotal and WesPac

* Does not represent all announcements made this year

Historical Natural Gas & ULSD Prices

11 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Annual Average U.S. Natural Gas Prices

($/MMBtu)

Henry Hub Algonquin Tetco M-3 SoCal Border $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 $3.25 $3.50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Annual Average U.S. Natural Gas Prices

($/Diesel Gallon Equivalent) Henry Hub Algonquin Tetco M-3 SoCal Border $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 2006 2007 2008 2009 2010 2011 2012 2013

Annual Average U.S. ULSD Spot Prices

($/MMBtu) New York Harbor U.S. Gulf Coast Los Angeles $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 $3.25 $3.50 2006 2007 2008 2009 2010 2011 2012 2013

Annual Average U.S. ULSD Spot Prices

($/Gallon) New York Harbor U.S. Gulf Coast Los Angeles

Source: SNL Financial

ULSD & LNG Price Build Up

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$2.23 $0.58 $0.14

$0.00 $1.00 $2.00 $3.00 $4.00 ULSD Price Build Up

($/Gallon)

Distribution Refining Crude Oil

Source: U.S. EIA, New York Harbor ULSD, November 2013 average

$0.52 $0.80 $0.29

$0.00 $1.00 $2.00 $3.00 $4.00 LNG Price Build Up

($/Diesel Gallon Equivalent)

Distribution Liquefaction Natural Gas

Source: U.S. EIA; TETCO M3 November 2013 average gas price; GDF SUEZ estimates of liquefaction and distribution costs

$1.61/DGE $2.95/DGE

Forecasted USLD & LNG Prices

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$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 2014 2016 2018 2020 2022 2024 2026 2028 2030

LNG Delivered Price Buildup

($/Diesel Gallon Equivalent) Natural Gas Liquefaction Distribution $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2014 2016 2018 2020 2022 2024 2026 2028 2030

ULSD vs. LNG Prices

($/Diesel Gallon Equivalent) LNG Delivered ULSD Source: U.S. EIA 2014 Forecast; GDF SUEZ estimates of liquefaction and distribution costs

Market Activity by Location

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n Modest movement towards LNG for Jones Act, ECA-bound players

TOTE Containerships Crowley ConRos Matson Containerships Horizon Containerships Interlake Steamship Lakers TOTE Containerships Washington State Ferries Harvey Gulf OSVs American Petroleum Tankers Crowley Tankers Seacor Tankers Staten Island Ferry

Market Activity for Bunkering

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n Limited opportunity to construct bunkering vessels because demand

currently is small and cost to construct extremely high

n Various ports considering how they will serve the growing demand

for LNG

n Private companies starting to make infrastructure investments n Harvey Gulf in Port Fouchon, LA

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