1. 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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3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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 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

11. 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

12. 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

13. 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

14. 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

15. 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