Trends in LNG Business Models in the APEC Region - Presentation to Conference on APEC Regional LNG Trade Facilitation Alistair Smith Head of LNG Origination, Asia & Middle East BP Taipei, 16 July 2015

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Today’s Presentation Introduction Development of LNG trade in and with Asia Key Asian supply and demand patterns in past 10 years Asia’s increased linkage to Atlantic Basin Growth of spot and mid-term contracts Portfolio supply options Asian LNG outlook Summary of developments in business models and implications for Asia

Long-term contracts enabled modern LNG industry: LNG trade flows in 1970 LNG export 5 Mtpa (0.65 bcf/d) LNG import 10 Mtpa (1.3 bcf/d) Source: BP Internal

SE Asia to Japan and Algeria to Europe trades dominant by mid 1980s LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

Source: BP Statistical Review of World Energy Little change in the nature of global LNG trade by mid 1990s but still scaling up LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

Source: BP Statistical Review of World Energy By 2005, broader Atlantic Basin market evolving and Middle East suppliers beginning to play balancing role LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

LNG has now evolved into a global business: LNG trade flows in 2014 LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

Impact of Qatari and other expansion in last ten years Qatar becomes the dominant supplier, adding more than half of 100 mtpa net supply increase and cementing its strategic position straddling the Atlantic and Pacific Multiple new supply sources emerge: Russia, Yemen, Peru, Norway, Equatorial Guinea, Angola and Papua New Guinea New projects in Australia: Darwin, Pluto Exports decline in Egypt, Algeria and Indonesia as upstream production fails to keep pace with rapid growth in domestic demand, helping to tighten the market LNG trade becomes much more flexible as a more liquid market emerges Source: BP Statistical Review of World Energy

Source: BP Statistical Review of World Energy These ten years have also seen Asia able to call on flexible Atlantic LNG supply Japan/Korea/Taiwan (JKT) demand continues to grow strongly Major new demand centres emerge in China, India, Latin America, the United Kingdom, Mexico, South East Asia and the Middle East Emergence of smaller LNG markets is facilitated by maturing Floating Storage & Regasification (FRSU) technology Market tightens considerably following March 2011 Fukushima nuclear accident in Japan Emergence of shale gas in US releases LNG supply and promotes LNG export Asian market tightness exerts strong pull on Atlantic Basin supply, incentivising diversions and reloads from the US and Europe Source: BP Statistical Review of World Energy

Wide Pacific-Atlantic price arbitrage enabled inter-basin trade flows in recent years Japan average LNG import price US LNG to Asia US LNG to Europe UK NBP US Henry Hub Source: ICE, NYMEX, BP analysis

Spot & short term LNG sales Spot & short term LNG sales* now account for almost 30% of the global market * Spot sales and sales under contracts < 4 years in length Source: GIIGNL

BP’s global LNG portfolio makes it better able to meet buyers’ growing demand for flexibility Isle of Grain GATE Alaska LNG Rovigo Cove Point Bilbao Korean Terminals Japanese Terminals Reloads Kuwait Costa Azul Freeport LNG SEGAS Taiwan Terminals 3rd party DES Asia Dominican Republic Trinidad ADGAS Fujian IGS Tangguh Bontang Angola Existing Supply Resource Future Supply resource Existing Market Access Marketing Joint Venture Trading Hub Gorgon Browse NWS Argentina 4 x GEM 3 x Trader 1x Time Charter LNG Source: BP Internal

Outlook for strong future growth of LNG, with Asia’s share of global trade set to remain above 70% Source: BP Energy Outlook 2035 © BP plc 2015

Changes in LNG business models in Asia have occurred alongside these new trade flows Regional markets now highly connected, even with new Asian supply Availability of spot and flexible volumes Long-term contracts taking a smaller share of global trade, though still >70% Long-term contracts are themselves exhibiting new types of flexibility Equity LNG lifting and marketing playing a greater role in Asian trade flows Portfolio sales increasingly used by Buyers Emergence of new players Strong growth expected across established and new Asian LNG markets Buyers looking for greater reliability and flexibility from LNG business models