LNG in Australia and the emerging roll of CSM

The Australian petroleum industry is dominated by gas Location and relative size of Australian petroleum reserves CSM Potential CSM current 2P reserves Oil Condensate Gas Legend

What is LNG? Liquefied Natural Gas (LNG) is not in itself a product but rather a transport system for natural gas. By cooling natural gas to minus 163 degrees Celsius it is turned into a liquid that takes only 1/600th the volume that can be transported in specially designed ships. At the destination the LNG is heated and turned back into natural gas and used for electricity generation or domestic gas supply.

Source: Gas Strategies LNG MARKET - Demand Source: Gas Strategies The GFC in 2008 lead to the first year on year reduction in LNG demand in history. The large number of proposed projects suggest that LNG market may be entering a period of potential over supply. LNG supply is a long term relationship and buyer and sellers need to see through current market conditions to secure long term supplies. LNG demand growth is forecast to resume it long term growth trajectory with the re-emergence of global economic growth.

LNG MARKET - Supply Projects face stiff competition from other LNG projects in the region & globally There is only a finite amount of capital available & the majors will not want to flood the market to create an imbalance.

LNG MARKET – Potential LNG projects in Australian

LNG MARKET – Potential LNG projects in Australian

Proposed Qld LNG Projects Project / Sponsors Estimated Cost Size 1st LNG Status / Detail Queensland Curtis LNG $12B 7.4Mt/p.a (2 train) 2014 In FEED; EIS released; Final Investment Decision expected in 2010. GLNG (Santos / Petronas) $7-8B 3.5Mt/p.a (1 train – initially) In FEED; EIS released; Final Investment Decision expected Q2 2010. Gladstone LNG (LNG Ltd, Golar LNG, Arrow Energy) US$500M 1.5Mt/p.a. 2012 In FEED; Site works commenced; will use Korea technology; CB&I appointed Project Manager; BNP Paribas Financial Advisor. Gas supply agreement in place with Arrow for 1.5mt p.a. Australia Pacific LNG $35B 14Mt/p.a. (4 trains by 2020) 2014 - 2020 Estimates Final Investment Decision to be reached by end 2010. Shell Gladstone LNG ? Well behind the other projects. No FEED commenced. Declared significant project in June 2009

Specifics of the LNG cycle from Coal Seam Gas fields UPSTREAM DOWNSTREAM

Gladstone LNG projects Development potential and local impact It is unlikely all the proposed project will proceed. However, it is realistic to anticipate the development of a ~28 mtpa LNG industry in Gladstone over the next 10 years. This assumes the sanction of a 3.5mtpa train each year from 2010 with first production commencing in 2014. The construction of a 28 mtpa LNG industry in Gladstone will have significant economic benefits to Queensland and the Gladstone region in particular. An economic study for the Queensland government Studies suggest that a mid size 28 mtpa LNG industries located at Gladstone would: Increase the Gross State Product by $3.056 billion (or 1 per cent) and create over 18,000 jobs for Queensland. Generate a royalty return of $850 million per annum to Queensland Create 18,100 jobs, 10,300 jobs during its 10-year construction phase at Gladstone and 7400 in regional Queensland associated with wells and pipelines.

Appendices

Appendix: Gladstone LNG Projects National Economic Impact The Queensland Premier Anna Bligh has said: “This is a once in a lifetime opportunity. The LNG industry can do for Queensland what coal did to the Bowen Basin and the rest of the state in the 1970s and 1980s, and beyond.” “They could be part of a new industry with a potential worth of more than $40 billion to the Queensland economy.”

Appendix: LNG Market - LNG prices are recovering after the recession Source: Gas Strategies

Appendix: Price relationships trending to oil parity since 2005 Recent price deals in long-term contracts with buyers in Asia have been within a relatively narrow range, from 10% below crude oil parity to 5% above crude oil parity at an oil price of $60/Bbl. Price review clauses have also been introduced into many recent contracts. They typically call for a review after a fixed number of years but do not provide clear guidance on what factors should be taken into account in the renegotiations.

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