Development of global LNG market and recent trend...• 2014 was a turning point in the global LNG market after three years of tightness. • With ample supplies coming from Australia

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Development of global LNG market and recent trend

Takuro Yamamoto

LNG Analyst

International Energy Agency

Brussels, 19 May 2015

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LNG is the only method to deliver gas from continent to continent

(Source: GIIGNL)

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Number of LNG importing countries have tripled only in 15 years

Number of LNG importing countries, 2000 - 2014

This year, Pakistan and Egypt have already joined LNG importer’s club.

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The transition to more flexible market is under way

Spot and short-term LNG trade volumes and share, 2000 - 2014

Traditionally LNG was traded under inflexible long-term contracts, although we see more diversified trades these days.

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Spot contracts

Re-exports

Henry Hub indexed

Take or Pay

As market grows, more opportunities and options as well as competitions

Development of technology and infrastructure also helps expand the market.

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LNG market faced many events only in a decade

LNG import volumes by region, 2005 - 2014 (bcm)

Global LNG trade increased by 70% in past decade, with many countries and regions becoming LNG importer.

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The US shale gas revolution is the biggest game changer

LNG import volumes vs shale gas production in the US, 2007 - 2014 (bcm)

LNG imports to the United States are shrinking yearly, only receiving 1.6 bcm in 2014 against 200 bcm of receiving capacity.

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Low utilization rate with roughly 20% in Europe. Last resort?

LNG import volumes vs import capacity in OECD Europe , 2010 - 2014 (bcm)

In spite of LNG import capacity increases, LNG import volumes are following a downward trend in Europe every year.

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Weak gas demand in Europe is pushing out LNG away

LNG Re-export volumes in Europe, 2008 - 2014 (bcm)

In 2014, roughly 20% of LNG imports to Europe was re-exported to other.

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Nuclear accident has drove Japan to become more powerful LNG importer

Power generation by fuel in Japan, 2005 - 2013 (TWh)

Japanese LNG import volumes increased by 25% after the nuclear accident to cover the loss of nuclear power.

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Asian LNG demand has seen a slowdown

LNG import volumes in major Asian countries, 2010 - 2014 (bcm)

Total import volumes of Japan and Korea have been stabilized, along with slower growth in Chinese demand.

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Second wave of additional LNG supply is coming soon

Additional LNG capacity , 2005 - 2015 (bcm)

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10

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40

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60

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bcm

Russia

Southeast Asia

Qatar

Other ME

Latin America

Norway

Africa

Australia

After four years with few new projects, second wave of large LNG additional capacities are coming from this year.

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Australia is expected to become the world’s largest LNG exporter

Top largest LNG exporters by 2020 (bcm)

17 new projects with total export capacity of 175 bcm are under construction as of today, with Australia and the United States accounting for roughly 80% of total.

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Will Asian and European prices converge?

Global gas price development in key regions, Apr 2009 - Feb 2015

Asian spot prices continued to slide in February and reached parity with European prices for the first time in four years.

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Concluding remarks

• 2014 was a turning point in the global LNG market after three years of tightness.

• With ample supplies coming from Australia and the United States, along with weaker Asian demand, probability of LNG coming to Europe will increase by next five years.

• In Europe, security of supply is achieved through supply diversity and LNG will continuously play an important role.

• Recent low oil prices are favorable for many LNG buyers, although this may trigger delays in new export projects.

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Thank you very much for your attention.