1. R ESOURCES L AW I NTERNATIONAL APEC LNG Trade Current Situation and Future Prospects March 2005 Robert Pritchard

2. R ESOURCES L AW I NTERNATIONAL Energy in APEC One of 11 Working Groups APEC Energy Ministers Meeting (EMM) Held every year or second year APEC Energy Working Group (EWG) Government officials meet every 6 months APEC EWG Business Network (EBN) Representatives meet the day prior to the EWG

3. R ESOURCES L AW I NTERNATIONAL Acceleration in World Gas Consumption 1975: 1.1 tcm Natural Gas 10% Other energy Natural Gas 21% Other energy Other energy Natural Gas 28% 2000: 2.3 tcm2025: 5.1 tcm

4. R ESOURCES L AW I NTERNATIONAL APEC Gas Reserves Source: BP 2004 Statistical Review of World Energy Iran, Qatar and Saudi Arabia hold another 34% of world reserves

5. R ESOURCES L AW I NTERNATIONAL APEC Gas Imbalance APEC Gas Trade 2000 - bcm (includes gas by pipeline)

6. R ESOURCES L AW I NTERNATIONAL A View from the USA Conference assesses global energy security – Apr 27,2004 The conference was jointly sponsored by the Center for Strategic and International Studies (CSIS) and US-Saudi Business Council. Greenspan said that the sharp increase in both crude and gas prices reflected "fears of long-term supply disruptions in the Middle East that have resulted in an increase in risk premiums being added to the cost of capital." The Federal Reserve Board chairman said natural gas markets have been a long way coming. Little more than 50 years ago, he recalled, "drillers seeking valuable crude oil bemoaned the discovery of natural gas." By 1970, however, gas consumption on a heat-equivalent basis had risen to three-fourths that of oil, Greenspan said. Greenspan also sees significant global trade developing in natural gas markets because of cost reductions in liquefaction and transportation. "High natural gas prices projected by distant futures prices have made imported gas a more attractive option," he said.

7. R ESOURCES L AW I NTERNATIONAL Major Natural Gas Trade Movements

8. R ESOURCES L AW I NTERNATIONAL Global Gas Trade Breakdown 2003 Source: BP Statistical Review 2003

9. R ESOURCES L AW I NTERNATIONAL Future Prospects Global gas trade will overtake oil by 2025 Global LNG trade will increase 5 times between 2003 and 2030 (Shell) APEC LNG trade currently US$20 billion p.a. APEC LNG trade likely to be US$40 billion p.a. by 2015 APEC LNG trade could increase to US$100 billion p.a. by 2025

10. R ESOURCES L AW I NTERNATIONAL Bottlenecks to Future Trade There is a crucial link between gas trade and investment There are impossible trade bottlenecks unless there is massive investment and market restructuring Governments expect the private sector to argue the case for the necessary reforms - gas is not a commodity like oil

11. R ESOURCES L AW I NTERNATIONAL APEC Study 1.Greater use of natural gas is supported by APEC at the highest political level One of the solutions to the problem of heightened energy insecurity.

12. R ESOURCES L AW I NTERNATIONAL 2.Within APEC an abundance of stranded gas resources is waiting to be taken to markets By 2025, the trade value to APEC could exceed $100 billion per annum. APEC Study (contd)

13. R ESOURCES L AW I NTERNATIONAL APEC Study (contd) 3.There are great expectations of natural gas as the preferred “swing fuel” for the energy industry These expectations may be unrealistic due to trade and investment bottlenecks

14. R ESOURCES L AW I NTERNATIONAL 4.Domestic gas markets in most APEC importing economies are immature and require to be created This is a major trade bottleneck An “industry vision” is required to guide each economy’s transition to a mature market APEC Study (contd)

15. R ESOURCES L AW I NTERNATIONAL 5.There is a paucity of gas transportation infrastructure in APEC economies This is a major investment bottleneck - US$10-15 billion per annum must be invested within APEC APEC Study (contd)

16. R ESOURCES L AW I NTERNATIONAL APEC Study (contd) 6.Some communities and NGOs are expressing exaggerated safety fears about the siting of additional LNG import terminals There is a need to educate and inform communities of the outstanding 40 year safety record of LNG import terminals

17. R ESOURCES L AW I NTERNATIONAL APEC Study (contd) 7.There must be a unifying theme for the pursuit of APEC’s cross-border natural gas strategy The unifying theme is the goal of energy sustainability

18. R ESOURCES L AW I NTERNATIONAL APEC Study (contd) 8.A collaborative mechanism is recommended amongst governments, investors and communities. This should be part of a three-level best practice regime

19. R ESOURCES L AW I NTERNATIONAL Best Practice (1) INTERNATIONAL LEVEL Institutionalized collaboration on sustainability goals, environmental standards, natural gas supply chains, cross-border trade and investment facilitation, transparency, international trade, investment and environmental regimes and other elements of “soft infrastructure” ASIA-PACIFIC GAS (APGAS) FORUM An initiative for the APEC EBN

20. R ESOURCES L AW I NTERNATIONAL Best Practice (2) INDIVIDUAL ECONOMY LEVEL Trade and investment facilitation, industry vision, market creation, policy and regulatory harmonization, environmental enforcement and transparency MAIN APEC GAS EXPORTING ECONOMIES MAIN APEC GAS IMPORTING ECONOMIES Australia Brunei Canada Indonesia Russia Malaysia Japan Thailand China Chinese Taipei Mexico Korea Singapore United States

21. R ESOURCES L AW I NTERNATIONAL Best Practice (3) INDIVIDUAL PROJECT LEVEL “Total package project management”, environmental, commercial and financing issues, alignment of interests, transparency and contractual best practice Project 1 Project 2 Project 3

22. R ESOURCES L AW I NTERNATIONAL 3 Complementary Levels (1) INTERNATIONAL LEVEL Collaboration on sustainability goals, environmental standards, natural gas supply chains, cross-border trade and investment facilitation, transparency, international trade, investment and environmental regimes and other elements of “soft infrastructure” (3) INDIVIDUAL PROJECT LEVEL “Total package project management”, environmental, commercial and financing issues, alignment of interests, transparency and contractual best practice (2) INDIVIDUAL ECONOMY LEVEL Trade and investment facilitation, industry vision, market creation, policy and regulatory harmonization, environmental enforcement and transparency + +

23. R ESOURCES L AW I NTERNATIONAL APGAS Asia-Pacific Gas Forum proposed by EBN will facilitate international best practice may be held in Perth in September 2005