The Evolving State of Natural Gas Xiuli Wang XGas December 11, 2012

Hydrocarbons remain energy sources From 2010 to 2035: Global Energy: 35% Increase Fossil Fuels: 76-81% of Total Energy Natural Gas Consumption: 57% (60 Tcf) Increase Hydrocarbons remain energy sources Data source: IEA World Energy Outlook 29 May 2012

Future Demand of Natural Gas Bcm 5,666 4,243 2,833 1,416 Gas demand will grow faster than overall world energy demand Data source: IEA World Energy Outlook 29 May 2012

World Natural Gas Reserves vs. Ultimate Recovery Data source: EIA International Energy Outlook, 2010

Where Are the Gas? Data source: BP Statistical Review of World Energy, 2011

Top Ten Countries Natural Gas Production & Consumption Russia uses more NG per capita but less efficient compared with the USA Source: BP Statistical Review of World Energy, June 2012

Why Transport Natural Gas?

Stranded Gas IHS, EIA, and IEA, 2011

World Gas Price Inequality

Natural Gas Transportation Modes Compression Pipeline (~68%): most onland Compressed natural gas (CNG) Convert gas to liquid Liquefied natural gas (LNG) (~32%) Gas-to-liquids (GTL) Key for transportation: reduce gas volume economically

Offshore Pipelines Source: www.nord-stream.com

Offshore Pipeline Examples Data source: ENI, Nord Stream, Gazprom

Liquefied Natural Gas (LNG) Volume reduction ~600:1 By liquefaction @ -260°F (-162°C ), ~1 atm Development since 1960s Capital investments: Liquefaction and regasification terminals (~60%) LNG ships (~40%) Energy-intensive Energy-efficiency improving LNG: loss about 25% of gas.

Recent World Gas Activities Source: aerogel.com

Recent Important Gas Movements Shale in U.S.: export LNG to Japan, China, Spain, and France. Fukushima Nuclear Accident (2 June 2011)

U.S. Natural Gas Production U.S. Natural Gas Production, Tcf Percentage US shale gas - surprising in both size and productivity Data source: EIA. Annual Energy Outlook 2012

Proposed LNG Export Terminals in North America, May/2012

LNG Cost Examples Cost of delivered LNG from Sabine Pass to Europe/Americas & Asia = $8 - $10 / MMBtu. Data source: Cheniere, February 2012

Gas Discoveries in Israel and Cyprus http://online.wsj.com/article/SB10001424053111903374004576580663037431204.html By Woodside's estimates, the Leviathan field contains around 17 trillion cubic feet of recoverable natural gas, making it among the largest recent finds in the world. Read more: http://www.upi.com/Business_News/Energy-Resources/2012/12/04/Aussie-company-takes-stake-in-Israeli-gas/UPI-53111354620669/#ixzz2E97NjrqU (17-20 Tcf)

Gas Discoveries in Mozambique Mozambique: Natural Gas Discoveries Put East Africa on World Energy Map Source: ENI

Compressed Natural Gas (CNG) Volume reduction ~200:1 At 200 atm (3,000 psi), ambient temperature. At 140 atm (2,000 psi), 0 oF (-18 oC ). Capital investment example: For 100 MMscf/d (or 2.8 MMcm/d ), 100 miles, capital cost: $250 million, tariff: $3.2/MMBtu. 16 m 16 m 16 m 16 m

New Generation of CNG with Composite Containment SPE 161583

New Efficient and Scalable Ship Design Roll On/Off Tug & Barge Container Carrier CNG Ship Up to 600 MMscf Up to 25 MMscf Up to 800 MMscf Composite material – 60% lighter than steel and much stronger. Containment - larger diameter. Shrinkage: ~400:1. Higher ship design efficiency.

Containment System Capable of Carrying Raw Gas Liner Wrapping Metal Coating Liner: Anti-corrosion coating – handle raw gas with H2S. Opportunities: Midstream - Monetize stranded gas. Upstream - Enhance oil production through raw gas disposal. Smaller and lighter ships carry more amount of gas with less cost, SPE 161583

Gas-to-Liquids (GTL) Volume reduction: >700:1 Requires large capital investments Qatar: major player Likely to account for small percentage of natural gas consumed GTL: chemical conversion – loss gas during conversion

Options for Monetizing Stranded Gas

Conclusions Gas Demand Projection to 2035: sharply elevated. Monetize stranded gas: transportation optimization is the key. Pipelines and LNG: continue to grow and play a vital role. New generation of CNG: allow the gathering raw gas from offshore location.

Questions?