1. AGA 7th Annual Energy Market Regulation Conference Value Proposition for U.S. LNG Exports: Market Study
October 2014

2. What is the value proposition for US LNG exports and how much LNG might the US export?

3. Motivation behind US LNG Exports
Source: FERC

4. Value of US LNG to Foreign Buyers
Low prices
Supply diversification for greater reliability
Geographic
Political
Pricing diversification
Competitively set prices indexed to a liquid and transparent trading hub instead of oil-indexed prices.
Likely to apply competitive pressures on other sellers.

5. How Much Will be Economic to Export?
Depends…
US supply and demand
Global LNG export capacities and pricing
New supplies from Canada, Australia, East Africa
When will Qatar lift its moratorium?
Will major export countries continue to maintain oil-indexed pricing?
Global demand
How long can China continue double digit demand growth?
Will India continue its rapid demand growth?
Global supply
How much shale gas will China be able to develop?
Will Russia export gas to China by pipeline?

6. Deloitte MarketPoint World Gas Model
MarketBuilder models provide a fundamental understanding of future commodity markets and have been used by leading energy companies around the world over the past three decades.
MarketBuilder uses an iterative algorithm to simultaneously solve for market clearing prices and quantities for every region and time point in the model.
Each market agent seeks to maximize its own value, just like in the real market – this is the key differentiator from other solutions.
Price
Quantity
Supply Curves
Demand Curves
World Gas Model
Equilibrium prices and quantities are computed for every market location.

7. Concerns Raised about US LNG Exports
Unfettered volumes of exports
Markets will likely limit the volume of exports
Terminals are expected to be built only if backed by long-term contracts
US natural gas prices rise to global levels
High cost of LNG liquefaction and shipping will prevent this from happening
Our analysis projected only a slight price increase with 6 Bcfd of US LNG exports
Competitiveness of US businesses competing in global markets could be harmed
Unlikely given the range of gas price impact projections

8. Projected Economic Volume of US LNG Exports
Export volumes are not projected to be huge, even if unbounded.
Many factors affect how much will be exported.
High China Demand Case
Moderate Case
Source: Deloitte Reference Case (June 2013)

9. Global Markets Will Ultimately Determine How Much LNG is Economic
Source: World Gas Model Projections, September 2012

10. Closing Comments
Competitively priced US LNG exports hold strong attraction to Asian and other foreign buyers who wish to decouple from oil-linked prices.
Volumes could exceed what might be economic purely based on prices.
How much LNG US exports really depends upon a number of factors, but fears of massive volumes seem unfounded.
With proper anticipation of LNG exports, North American production can make supply available when needed and thereby mitigate the price impact.
More detailed results are available in our Reference Case.

11. This publication is solely for informational purposes
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