15 July 2015

Perspective on Gas Market Integration ASEAN Gas Market situation | 1 ASCOPE Introduction

Perspective on Gas Market Integration ASEAN Gas Market situation | 2 ASCOPE Introduction

| 3  The ASEAN Council on Petroleum (ASCOPE) is an ASEAN Specialised Energy Body, representing by their National Oil Companies.  ASCOPE was originally proposed by Pertamina, and established in 1975, executed by the five founding ASEAN member states, Indonesia, Malaysia, Philippines, Singapore and Thailand.  Main objective: is to support member countries increase their capabilities, through mutual assistance, in all aspects and phases of the petroleum industry.  The ASCOPE Secretariat has been hosted by PTT since 27 November 2014.

Perspective on Gas Market Integration ASEAN Gas Market situation | 4 ASCOPE Introduction

 Why ASEAN? | 5 Source : (1)Institute of ASEAN Studies (ISEAS), (2) ASEAN, IMF, (3)IEA-The Asian Quest for LNG in a Globalising Market, ASEAN Economic Community (AEC) (1) ASEAN will announce the attainment of AEC on 31 st December 2015 to have an integrated production space with free movement of goods, services, and skilled labour. ASEAN GDP (2) ASEAN GDP in year 2013 was 2.4 Trillion USD which increased dramatically from 1.5 Trillion USD in Year GDP growth rate is expected to be around 4.6% ASEAN Energy Demand (3) “ASEAN’s energy demand is foreseen to increase by over 80% between 2011 and Gas demand in particular will increase from 150 bcm to 250 bcm by 2035”

 Why ASEAN? | 6 Source : Institute of ASEAN Studies (ISEAS), US-ASEAN Business Council, East-West Center ASEAN’s geostrategic importance stems from many factors, including the strategic location of member countries the large shares of global trade that pass through regional waters ASEAN is at the center of a dynamic Asia- Pacific region. Japan $5t China $8.9t India $1.8t AUS $1.5t ASEAN $2.4t $1.2t $485b

 Why ASEAN? | 7 Source : Institute of ASEAN Studies (ISEAS), US-ASEAN Business Council, East-West Center

 Why ASEAN? | 8 Source : 2012 World Bank Data ASEAN 700,000 M (2030) ASEAN 600,000 M

 Gas consumption increasing while gas production declining after 2020 | 9 Source : WoodMackenzie

 ASEAN Gas Reserves (Tcf), Production and Consumption (MMSCFD) | 10 Source : (1) EIA Natural gas production and consumption in ASEAN countries (as of end 2012) (2) EIA, 2014 Myanmar Net Export Reserves 10 Singapore Net Import Reserves N.A. Thailand Net Import Reserves 9.04 Malaysia Net Export Reserves 83 Indonesia Net Export Reserves Vietnam Self Producer Reserves 24.7 Brunei Net Export Reserves 13.8 Laos No production No consumption Reserves N.A. Cambodia No production No consumption Reserves N.A. Philippines Self Producer Reserves 3.5 Total ASEAN Production = 20,357 (1) Consumption = 14,187 (1) Net Export= 6,170 (1) Reserves = 249 (2)

 Need infrastructure to support energy deficit countries | 11 Energy Deficit Energy Surplus North ASEAN South ASEAN

 ASEAN Diversification | 12 Thailand Heavily rely on gas for power producing. Need to import more gas/LNG. Cambodia Currently, no gas demand. Potential gas production from OCA. Singapore Depend on gas/LNG import. Possibility to be gas hub. Indonesia Hugh natural gas reserves. Major LNG exporter. Domestic obligation Myanmar Low access to domestic gas supply. Most of gas exported. Lao PDR Currently, no gas demand. Vietnam Gas demand increasing. Plan to import LNG Philippines Domestic production declining. Plan to import LNG. Malaysia World 2 nd largest LNG exporter but the domestic production is maturing. Brunei Exporter of LNG since ASEAN requires gas market integration

Perspective on Gas Market Integration ASEAN Gas Market situation | 13 ASCOPE Introduction

| 14  Foundation for ASEAN Gas Market Integration Infrastructure Regulation Gas Price Gas Quality Trading hub/ ASEAN LNG Gas Market Integration

| 15  Foundation for ASEAN Gas Market Integration: Infrastructure  One of major infrastructure project conceived as part of the ASEAN Vision 2020 is the Trans-ASEAN Gas Pipeline (TAGP).  The TAGP project aims to interconnect existing and planned gas pipeline infrastructure of ASEAN Member States, to transport gas across borders to ensure greater security of gas supply.  The TAGP Memorandum of Understanding (MoU), which originally entered into force on 21 May 2004 for the period of 10 (ten) years was extended for another 10 years, i.e.,  A total of 13 bilateral gas pipeline interconnection projects connecting 6 countries bilaterally and with a total length of approximately 3,673 km.  In addition, LNG initiative introduced to be a compliment to TAGP to include ASEAN gas connectivity via the regasification terminals that can serve as ‘virtual pipelines’.  Currently, there are 4 LNG regasification terminal in ASEAN namely; Map Ta Phut – Thailand (2011), West Java FSRU – Indonesia (2012), SLNG – Singapore (2013) and Sungai Udang – Malaysia (2013).

| 16 Source : ASCOPE 13 Pipelines-3,673 km 4 Regas Teminals 13 Pipelines-3,673 km 4 Regas Teminals

| 17  Foundation for ASEAN Gas Market Integration: Regulation  Different law and Regulation in ASEAN countries.  ASEAN Economic Community is expected to be established by 31 Dec 15. However, the gas market will not fully opened market.  Concerns on gas market access, tariff/taxation, transit rights for infrastructure.  Currently, only Thailand has Third Party Access for natural gas system.  Requires harmonization of law and regulation.

| 18 Source : ASCOPE  Foundation for ASEAN Gas Market Integration: Gas price USD/MMBTU Country Different price structure/policy

| 19 Source : ASCOPE  Foundation for ASEAN Gas Market Integration: Gas Quality 1,100 1,200 1,300 1,400 1,500 1,600 WI 1,143 1,367 1,396 1,213 1,357 1,436 1,260 1,400 Analytical on LNG specification Malaysia ThailandVietnamSingapore Requires quality adjustment

| 20  New initiatives to create gas market integration: LNG Hub/ASEAN as LNG destination  LNG can serves as “virtual pipeline”  LNG Hub –Increase LNG supply security in the region –Share infrastructure –Break bulk for small demand countries  ASEAN as LNG destination –ASEAN Buyers can form a consortium to do a joint LNG procurement. –Increase negotiation power –Increase Buyers’ flexibility to adjust quantity among joint procurement members LNG

| 21  Challenge of ASEAN gas market integration Financial: - Huge investment Technical: - Compatibility Market Access: - Third Party Access - Harmonization Policy: - Subsidy Diversity: - Diverse countries in ASEAN

| 22 Possibility and Opportunity

| 23 Contact : Mr. Paramate Hoisungwan