Financing Vietnams LNG projects March 2019 Agenda Overview of - PowerPoint PPT Presentation

Financing Vietnam’s LNG projects March 2019

Agenda  Overview of South East Asia gas markets  Overview of Vietnam gas market  Financing Structure  Environmental and Social Due Diligence  Case Study 2

Overview of South East Asia gas markets 3

4 South East Asia Country snapshots Countries classified by gas market maturity Vietnam Indonesia Malaysia Thailand Brunei Myanmar 10,048 bcf 25,241 bcf 26,276 bcf 7,126 bcf 547 bcf 6,707 bcf 2P reserves [Ranking] (1,2) [#3] [#2] [#1] [#4] [#6] [#5] 5,712 bcf 92,343 bcf 30,114 bcf 2,485 bcf 1,964 bcf 10,012 bcf 2C resources [Ranking] (1,2) [#4] [#1] [#2] [#5] [#6] [#3] Current gas prod. 0.7 bcf/d 6.4 bcf/d 6.5 bcf/d 3.0 bcf/d 1.0 bcf/d 1.7 bcf/d [Ranking] (2) [#6] [#1] [#2] [#3] [#5] [#4] 21 mmtpa (3) / 9 mmtpa Liquefaction / regas capacity NA / NA 31 mmtpa / 10 mmtpa NA / 15 mmtpa 7 mmtpa / NA NA / NA 2019 consumption [5-yr 346 bcf 1,296 bcf 1,275 bcf 1,829 bcf 138 bcf 155 bcf [+12.0%] [+2.7%] [+2.1%] [+1.2%] [+1.3%] [+24.9%] CAGR growth] Net exporter (piped + Net exporter (piped + Net importer (piped + Net importer / exporter Neutral Net exporter (LNG) Net exporter (piped) LNG) LNG) LNG) Piped domestic: Case by Piped domestic: Fixed or Piped domestic: Indexed Piped domestic: Indexed Piped domestic: Case by Piped domestic: Case by case basis w/ inflation factor to MFSO to MFSO, inflation and FX case basis case basis with no linkage LNG domestic: Netback LNG export: LNG netback indices LNG export: Typically 50% to any price index on realised price (FOB of export price Piped export: Indexed to Upstream gas price policy Indo) 2% Sulphur Fuel Oil Price LNG export: Netback with and inflation link to JCC Piped export: Linked to MFSO 1 1 1 1 Market concentration NOC influence Key: Sources: BMI, Wood Mackenzie, Giignl Notes: * denotes operator (1) Includes only gas and gas/condensate fields Concentrated market Fragmented market Weak to no influence Strong influence (2) Ranking method: From largest to smallest with the largest value assigned a #1 ranking (3) Only includes active capacity

5 South East Asia Overview of gas markets, policies and regulations South East Asia is a collection of fragmented gas markets at various stages of developments, featuring distinctly different supply-demand dynamics and properties Overview of South East Asia gas markets Gas consumption 2019 vs 2023 (1) bcf 1,921 Current gas 1,829 2,000 production (bcf/d) 1,444 1,388 2P reserves 1,296 1,275 8 1,500 1,000 2P + 2C resources 544 378 7 346 500 145 155 138 0 6 Indonesia Malaysia Thailand Brunei Myanmar Vietnam 5 2019 2023 4 Net export/(import) of gas 2019 vs. 2023 3 bcf 1,031 1,257 1,200 790 2 1,186 800 346 219 455 960 400 11 470 452 1 335 335 300 332 0 71 71 (230) (226) (233) (21) (400) (332) (431) 0 (561) (657) Maturity of gas market (Most mature  Least mature) 9 8 7 6 5 4 3 2 1 0 (800) 2019 - Pipeline 2019 - LNG 2023 - Pipeline 2023 - LNG Indonesia Malaysia Brunei Myanmar Vietnam Thailand Current LNG capacity Snapshot of gas supply – demand dynamics mmtpa 40 31 (2) 21 Large market Large mature Large mature Mature export Export Market with 15 20 with high export market with oriented oriented high growth 10 9 7 growth oriented supply deficit market with market with potential. NA NA NA NA NA NA potential market with and an sufficient high growth Mostly self 0 facing near sufficient increasing domestic potential sufficient for Indonesia Malaysia Thailand Brunei Myanmar Vietnam term supply domestic reliance on supply now deficit supply LNG imports Liquefaction Regas Source: BMI, Wood Mackenzie Note: 1. Total volumes of dry natural gas consumed in total per calendar year in the domestic market. The amount is expressed in terms of production during a 12-month period 2. Only includes active capacity

Overview of Vietnam gas market 6

7 Vietnam Key operational metrics Overview of key gas provinces Key gas upstream stats (1) 2P reserves 10,048 bcf 2C resources 5,712 bcf Avg. gas 2P+2C per field 394 bcf/field Avg. 2P opex / boe (2) US$7.6 Avg. 2P capex / boe (3) US$9.2 Gas production (1) 2P + 2C by water depth (1) Song Hong Basin mmcfd 4% Upcoming gas 1% 1,000 835 887 830 760 770 758 727 719 815 874 827 producing region with major gas discoveries 750 such as ExxonMobil’s Onshore Blue Whale, however 500 15,760 Shallow Water the area requires more bcf gas infrastructure to 250 Deepwater facilitate development 0 Ultra-deepwater 95% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Cuu Long Basin Actual Estimated Historically, gas discovered in the Cuu Top 15 gas reserves and resources holders (1) Net export/import neutral country Long Basin has been associated with oil bcf 2,445 8,000 4,663 6,000 4,000 319 c.350 2,534 Nam Con Son Basin Domestic production bcf 579 91 506 42 279 54 35 35 248 30 220 25 110 Mostly gas prone region and 2,000 462 649 193 299 0 212 226 226 Includes the Lan Tay/Lan Do 0 194 0 175 0 project, which supplies 0 100% around 35% of Vietnam's gas 2P Gas 2C Gas Sources: BMI, Wood Mackenzie, Giignl Notes: * denotes operator 1. Includes only gas and gas/condensate fields 2. For the remaining life of the field, and condensate included as it affects the economics 3. Over the entire life of field, and condensate included as it affects the economics

8 Vietnam Market overview Gas supply and demand Market concentration  Production expected to No. of players per segment in gas value chain Market share Commentary bcf increase due to additional 1,000  Reserves and resources are 833 output from new projects 21% 724 concentrated with the top 710 such as Idemitsu Kosan's 696 800 player, PetroVietnam, Blocks 05-1B and 1C (Sao Upstream 544 owning c.45% of 2P + 2C Vang, Dai Nguyet) and 79% 600 424 463 353 reserves (1) , followed by Rosneft’s Lan Do field, before 339 346 0% 0 25% 1 - 2 50% 3 - 5 6 - 10 75% 100% >10 400 Top 5 players Others ExxonMobil owning c.18% the anticipated start-up of the  PetroVietnam through its giant Ca Voi Xanh in 2024 200 0% 0% subsidiary PVGas controls  Despite the above, production all the onshore gas 0 is still insufficient to meet n/a n/a Liquefaction distribution 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 growing demand, with LNG infrastructure (2) imports expected to offset the Consumption Production Import remainder 0 1 - 2 3 - 5 6 - 10 >10 0% 25% 50% 75% 100% Top 5 players Others Key trends Key considerations  Due to historically low gas prices and a lack of infrastructure, a large portion of  Reserves are forecast to contract over the coming years, due to natural declines and Vietnam’s gas reserves remain undeveloped Sizable insuffcient exploration  Gas makes up c.75% of the country’s remaining reserves of c.2.4 bnboe volumes of  The Law on Petroleum (2008) is set to be revised over the course of 2019-2020, as  The anticipated completion of PVN's Nam Con Son 2 pipeline system over 2019 will gas remain Declining Vietnam seeks to boost oil and gas exploration, attract foreign investment and materially expand gas transportation capacity between natural gas fields in the undeveloped proven promote the development of petroleum technology. offshore Nam Con Son basin to onshore processing stations and ease infrastructure reserves  Details of the revision are not yet available, although focus is likely to be given to bottlenecks that had hindered developments to date shortening key approval processes for oil and gas activities, simplifying procedures and boosting incentives for foreign and domestic investors to develop smaller,  Vietnam’s gas demand has historically been capped by domestic gas production due marginal fields, as well as deepwater projects to the lack of any import infrastructure  However, the start-up of the country's first LNG import terminal in 2021 would allow Diver- consumption to surpass production for the first time, enabling greater uptake by sification of Vietnam's more gas-intensive industries (transportation, power, manufacturing and Considerable  Foreign firms must enter into joint-ventures with PetroVietnam in producing assets, gas supply petrochemicals) influence of and the need to appease PetroVietnam in key contract negotiations creates a tricky sources  Growth beyond 2024 will be further boosted by additional gas from ExxonMobil's Ca operating environment for private and international investors NOC across Voi Xanh (Blue Whale) gas project (set to be Vietnam's largest gas project), where  Governmental relations would aid in this regard e.g. Russia G2G relations has helped the O&G annual production could reach c.470mmcfd at peak levels according to Wood Gazprom build a decent position in Vietnam value chain Mackenzie Sources: BMI, Wood Mackenzie, Giignl (1) Includes only gas and gas/condensate fields and excludes direct holdings by the government (2) Offshore transportation includes JVs between IOCs and PetroVietnam