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 2

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 • 3 rd 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 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, CO 2 and particulate emissions • Meets current and future emissions requirements both in Emissions in in ECAs and for global trade 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 oil 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.

U.S. Imports of LNG – Changing Market 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 5

The Export Situation 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 6

Planned Liquefaction for the Domestic LNG Fuels Market 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 New Domestic Liquefaction Announced • Bcf/year of Production Capacity Western (CO, CA, AZ, WA, AB, BC) 30 FL 12 Midwest 110 Northeast 44 OK ON (CAN) 36 TX Gulf Coast (TX, LA) 13 5 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 7

Existing Liquefaction 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 LNG Peak shaving plants store natural customer’s needs – not other gas (and many also liquefy gas) that contracts can be used when gas demand is high 3) Purpose-built LNG facilities (peak). When this occurs, LNG can be for new markets vaporized and sent to a gas grid. Represent reliable supply when • they have excess capacity 8

Existing Liquefaction Plants NW Natural Portland NW Natural Newport GDF SUEZ Everett Import Terminal Merit Energy Centerpoint Burnsville MidAmerican Exxon Shute Creek Garner UGI Temple MUD Omaha Transco Carlsdat Philly Gas Works Kinetrix Linde Livermore Indianapolis Clean Pioneer Energy Ulysses Boron AGL Chattanooga Applied Topak AGL Cherokee Spectrum AGL Prometheus Ehrenberg Trussville Bowerman AGL Macon AGL Riverdale Clean Energy Pickens * Not representative of the entire market 9

Planned Liquefaction Plants Eagle LNG WA Eagle LNG ND Stabilis Bakken Shell Sarnia Noble Energy Keota Eagle LNG OH Eagle LNG CO CLNE Boron II (Expansion) Spectrum Ehrenberg Stabilis OK Applied Topak II (Expansion) Applied Midlothian Announcements by: Waller Marine Port Allen Stabilis W. TX - Eagle (Clean Energy) Stabilis - - Sempra and JEA Haynesville - - Pivotal and WesPac Shell Geismer Floridian HEYCO Lavaca Stabilis Eagleford * Does not represent all announcements made this year 10

Historical Natural Gas & ULSD Prices Annual Average U.S. Natural Gas Prices Annual Average U.S. ULSD Spot Prices ($/MMBtu) ($/MMBtu) $24 $24 $22 $22 $20 $20 $18 $18 $16 $16 $14 $14 $12 $12 $10 $10 $8 $8 $6 $6 $4 $4 $2 $2 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 Henry Hub Algonquin Tetco M-3 SoCal Border New York Harbor U.S. Gulf Coast Los Angeles Annual Average U.S. Natural Gas Prices Annual Average U.S. ULSD Spot Prices ($/Diesel Gallon Equivalent) ($/Gallon) $3.50 $3.50 $3.25 $3.25 $3.00 $3.00 $2.75 $2.75 $2.50 $2.50 $2.25 $2.25 $2.00 $2.00 $1.75 $1.75 $1.50 $1.50 $1.25 $1.25 $1.00 $1.00 $0.75 $0.75 $0.50 $0.50 $0.25 $0.25 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 New York Harbor U.S. Gulf Coast Los Angeles Henry Hub Algonquin Tetco M-3 SoCal Border Source: SNL Financial 11

ULSD & LNG Price Build Up $2.95/DGE $1.61/DGE ULSD Price Build Up LNG Price Build Up ($/Gallon) ($/Diesel Gallon Equivalent) $4.00 $4.00 $0.14 $3.00 $3.00 $0.58 Distribution Distribution $2.00 Refining $2.00 Liquefaction $0.29 Crude Oil Natural Gas $2.23 $1.00 $1.00 $0.80 $0.52 $0.00 $0.00 Source: U.S. EIA, New York Harbor ULSD, November 2013 average Source: U.S. EIA; TETCO M3 November 2013 average gas price; GDF SUEZ estimates of liquefaction and distribution costs 12

Forecasted USLD & LNG Prices ULSD vs. LNG Prices ($/Diesel Gallon Equivalent) $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2014 2016 2018 2020 2022 2024 2026 2028 2030 LNG Delivered ULSD LNG Delivered Price Buildup ($/Diesel Gallon Equivalent) $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 2014 2016 2018 2020 2022 2024 2026 2028 2030 Source: U.S. EIA 2014 Forecast; GDF SUEZ estimates of Natural Gas Liquefaction Distribution liquefaction and distribution costs 13

Market Activity by Location n Modest movement towards LNG for Jones Act, ECA-bound players TOTE Containerships Washington State Ferries Interlake Steamship Lakers Staten Island Ferry Matson Containerships Horizon Containerships TOTE Containerships Crowley ConRos Harvey Gulf OSVs American Petroleum Tankers Crowley Tankers Seacor Tankers 14

Market Activity for Bunkering 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 Used with Permission 15