Guy Dayvault, Commercial Director Houston, Texas April 30, 2014 Jordan Cove LNG LNG Export USA 2014: Global Buyer Congress
Guy Dayvault, Commercial Director Houston, Texas
April 30, 2014
Jordan Cove LNG LNG Export USA 2014: Global Buyer Congress
Forward Looking Information
Certain information contained in this presentation constitutes forward-looking information under applicable
Canadian securities laws. All information, other than statements of historical fact, which addresses activities,
events or developments that we expect or anticipate may or will occur in the future, is forward-looking information.
Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate",
"believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or
outlook. Forward-looking statements in this presentation include, but are not limited to, statements with respect to
the receipt of regulatory approvals, securing customers, securing financing and the in-service date of the Jordan
Cove Energy Project and the Pacific Connector Gas Pipeline. The risks and uncertainties that may affect the
operations, performance, development and results of our businesses include, but are not limited to, the following
factors: our ability to successfully implement our strategic initiatives and achieve expected benefits; levels of oil
and gas exploration and development activity; the status, credit risk and continued existence of contracted
customers; the availability and price of capital; the availability and price of energy commodities; the availability of
construction services and materials; fluctuations in foreign exchange and interest rates; our ability to successfully
obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations;
competitive factors in the pipeline, NGL and power industries; operational breakdowns, failures, or other
disruptions; and the prevailing economic conditions in North America. Additional information on these and other
risks, uncertainties and factors that could affect our operations or financial results are included in our filings with
the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from
time to time. Although we believe the expectations conveyed by the forward-looking information are reasonable
based on information available to us on the date of preparation, we can give no assurances as to future results,
levels of activity and achievements. Readers should not place undue reliance on the information contained in this
presentation, as actual results achieved will vary from the information provided herein and the variations may be
material. We make no representation that actual results achieved will be the same in whole or in part as those set
out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as
of the date hereof, and, except as required by law, we do not undertake any obligation to update publicly or to
revise any forward-looking information, whether as a result of new information, future events or otherwise. We
expressly qualify any forward-looking information contained in this presentation by this cautionary statement.
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Jordan Cove will serve Asian Gas Markets with US
West Coast LNG Supply from Multiple Gas Regions
Outline today
Discuss tolling model for exporters of LNG produced in USA
Tolling commercial model
Gas supply strategies
Personal views of the presenter and not reflection of the
project company (JCEP) nor the owner, Veresen Inc.
Overview of the Jordan Cove LNG Export project
Insight into my perspectives on the broad questions
3
Jordan Cove LNG Export Site – Facility Renderings
4
500 acres of land, outlined in red are fully owned in title
The power plant and liquefaction facility are co-located as an integrated facility
Traditional LNG Value Chain
LNG SPA
(Sale & Purchase Agreement)
Seller Responsibility:
E&P
Pipeline Transportation
Gas processing
Liquefaction
Buyer Responsibility:
Shipping (for FOB SPA)
Regas
Distribution to Customers
Revolutionary LNG Value Chain Liquefaction Tolling Agreement
Buyer Responsibility:
E&P
Pipeline Transportation
Gas processing
Operator Responsibility
Liquefaction
Buyer Responsibility:
Shipping
Regas
Distribution to Customers
Tolling Commercial Model: Vertical Integration to
Further Disaggregate the LNG Value Chain
5
Benefit to Asian LNG Buyer from Vertical Integration is
lower commodity cost volatility
$0
$5
$10
$15
$20
$25
$30
$35
1 2 3 4
shipping
liquefaction
Gas Price
HH indexed;
gas price
$4.50
Oil indexed;
JCC price
$110
HH indexed;
gasx2 price
$9.00
Oil indexed;
JCCx2 price
$220
Base Commodity Cost Double Commodity Cost
DES =
$11.00
DES =
$16.00 DES =
$15.50
DES = $32.00
Chart 6
DES LNG slope set
= 0.1455
(“crude-oil-parity
discount factor”)
DES Price = 0.1455 x JCC
Example of LNG Cost Resulting from Doubling Commodity Index
Tolling
Tolling Traditional
SPA
Traditional
SPA
The Risks
1. Source, secure, nominate, &
schedule gas into pipeline and
LNG plant
2. Contract pipeline capacity from
sufficient liquid market points to
the export liquefaction plant to
assure competitive gas supply
3. Managing a new business
model with value-chain-
segments upstream of
liquefaction to control
The Rewards
1. Long-term control of your destiny and gas supply needs (up to 45 years through optional term extensions)
2. Not competing with the plant owner in marketing LNG
3. Avoid power price variation exposure thru dedicated power plant
4. HH – JCC arbitrage value
5. Vertical integration beyond DES, beyond FOB, beyond ex-plant, back to wellhead; possible with or without owning gas reserves in the ground
Risks and rewards associated with the US LNG tolling
models
7
Jordan Cove Reduces Delivered Gas Cost Volatility
Source: Bloomberg, ARC Financial Corp (with JCEP additions)
Illustrative: Shows DES “Delivered Ex-Ship”, to a Japan LNG port
8
Jordan Cove – DES cost
into Japan
0
2
4
6
8
10
12
14
16
18
20
2009 2010 2011 2012 2013
$U
S/M
MB
tu
Average Japanese
LNG Import Price
Henry Hub Natural
Gas Price
Malin Hub Natural
Gas Price
Includes all-in cost
estimates for:
1.Pacific Connector
2.Jordan Cove liquefaction
3.Trans-ocean shipping
Jordan Cove will serve Asian Gas Markets with US
West Coast LNG Supply from Multiple Gas Regions
Outline today
Discuss tolling model for exporters of LNG produced in USA
Tolling commercial model
Gas supply strategies
Personal views of the presenter and not reflection of the
project company (JCEP) nor the owner, Veresen Inc.
Overview of the Jordan Cove LNG Export project
Insight into my perspectives on the broad questions
9
Tolling model and integration with western U.S. infrastructure
provides long-term gas supply sourcing strength
Ruby Pipeline
Canadian
Supply
US Rockies Supply
Jordan Cove
Pacific Connector
Tolling business model:
Access to North American gas
pricing
Gas supply via Malin Hub
provides:
Optimize gas purchases via
Diverse gas supplies from
Canada and U.S. Rockies &
Market liquidity / gas storage
infrastructure of California
10
GAS SUPPLY:
LNG Liquefaction Tolling Customers begin to Resemble
Industrial, IPP and LDC Gas Buyers
Various Alternative strategies for gas supply:
Own E&P risk:
• Purchase gas reserves in the ground or access existing proprietary reserves
• Joint venture with gas producers
Contract directly with E&P companies:
• Contract directly with gas producers in Western Canada and U.S. Rockies under various terms (i.e., 1, 5, 10, 20 years)
Outsource Gas Supply & Pipeline management functions:
Gas supply via established gas market and trading desk
AMA or similar structure for 3rd Party to schedule and balance gas on pipelines and manage transport capacity
11
Jordan Cove will serve Asian Gas Markets with US
West Coast LNG Supply from Multiple Gas Regions
Outline today
Discuss solutions for US LNG Exporters and International
LNG Buyers
Personal views of the presenter and not reflection of the
project company (JCEP) nor the owner, Veresen Inc.
Overview of the Jordan Cove LNG Export project
Insight into my perspectives on the broad questions
12
Established owner, developer, and operator of large
scale energy infrastructure assets
Focused on high-quality, strategic, natural gas infrastructure assets which
play a key role in meeting North America’s energy needs
Strategically advantaged assets located in new growth areas
Pipeline access to premium markets
Track record of creating shareholder value
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Jordan Cove LNG: Essential characteristics for an optimal
export facility
Close to Asia Pacific markets
Diversified gas supply thru
existing gathering networks,
pipelines and midstream
facilities
Connected to physical gas
trading hub
Strong political and community
support
Advanced regulatory position
with FERC
DOE non-FTA approval
14
Growing LNG Demand, East of Suez
15
“We welcome LNG exports from the U.S. as an extremely effective method to ensure
both a stable supply of energy and a reduction in import costs…”,
--- Mr. Toshimitsu Motegi, Minister of Economy, Trade and Industry
58.5
China
46.3
Korea
95.8
Japan
38.7
India
8.1
Indonesia 8.0
Singapore
Thailand
6.0
Malaysia
4.5
38.7
Taiwan
Philippines
3.0 Pakistan
2.0
Source: Poten & Partners
Projected LNG Demand
in 2025 (mtpa) Source: Poten & Partners
Diversity of supply and use of existing pipelines systems
provides competitive advantages
16
USGC LNG
~9 shipping days
to Europe Source: Terminal websites, DOE
Japan as comparative market
Approvals for long-term Canadian natural gas supplies to flow
through Jordan Cove LNG
17
Jordan Cove customers also have full access to U.S. Rockies gas supplies
• Export application to allow for exports of natural gas from Canada to the United States.
• 25-year export application for 1.55 Bcf/d approved February 20, 2014
• Supplies Jordan Cove’s full build-out at 9 mtpa
Canada: National Energy Board – APPROVED
• Import application to allow for imports of natural gas to the United States from Canada
• 25-year import application for 1.55 Bcf/d approved March 18, 2014
• Supplies Jordan Cove’s full build-out at 9 mtpa
United States: Department of Energy – APPROVED
• Export application to allow for exports of LNG to consuming nations (FTA and non-FTA)
• 30-year FTA export approval granted for 9 mtpa
• 20-year Non-FTA export application for 6 mtpa approved March 24, 2014
United States: Department of Energy – APPROVED
Jordan Cove LNG, in southwest Oregon, can be achieved
Coos Bay, Oregon, is the best port for exports of
high-value LNG to Asia Pacific markets
Local land use permits for terminal and
pipeline are in hand – Providing significant
evidence of project viability
Development is highly supported by elected
state-legislative representatives and business
leaders
Established 10-year history in Oregon
Veresen has acquired 500 acres of
development land in the Coos Bay area
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Thousands of construction and permanent jobs created; average of $25 million/year
in annual property taxes over life of project
Project Labor Agreement in place
Jordan Cove is foundation for redevelopment and modernization of the International
Port of Coos Bay – Administrative arm of the State of Oregon
Jordan Cove’s location in southwest Oregon will always be highly differentiated
from other U.S. west coast facilities
Southwest Oregon welcomes Jordan Cove!
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Please visit: www.boostsouthwestoregon.com
“This announcement is exactly what Coos Bay,
North Bend and America need: new jobs and new
investment, while factoring in a changed
geopolitical landscape through a case-by-case
process.
I urged DOE to consider this application without
delay, and I am pleased the department decided
that Jordan Cove deserves to move forward.”
Senator Wyden (Oregon)
www.wyden.senate.gov
Boost Southwest Oregon – grassroots program made up
of over 1,000 Community Members, Organizations,
Businesses and Elected Officials in support of Jordan Cove.
Senator Ron Wyden at Town Hall in Coos Bay, Oregon
Audience (yellow shirts) showing significant Jordan Cove community
support. November 2013
II. Opportunity Overview
Jordan Cove LNG, at Coos Bay, Oregon: Best location
on west coast of North America
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International Port of Coos Bay:
Administrative arm of the Government of Oregon
Federally maintained navigation channel;
JCEP berth designed for up to Q-Flex class vessels (nominal 217,000 m3)
Ideal port for short access to open sea
Excellent access by air, rail, sea and interstate highway
Coos Bay area local population of 25,000
1.5 hour tug assisted transit along clear, open
7-mile channel
Proposed Timeline
Dec.
2011 Aug.
2012
May/June
2013
Q3 2014
Q3-Q4
2014
Receive
DOE Export
License to
FTA
countries
Submit NOI to
EFSC (Power
Plant)
FERC
Applications
/ Resource
Reports
FERC Pre-
Filing
PCGP in May
Issue Power
Plant Siting
Certificate
FERC Issues
Order
Project has well established regulatory groundwork
FID
Q1 2015
FERC Notice to
Proceed –
Construction Starts
Feb.
2012
LNG Commissioning
and Operations
Q1 – Q2 2019
Estimated Certification & Development Milestones
Feb.
2014
NEB approves
export
application
21
Mar.
2014
Receive DOE
Export License
to non-FTA
countries
Project components for LNG exports through Coos Bay,
Oregon as filed with FERC
22
Pacific Connector Gas Pipeline
Estimated cost of $1.5 billion
excludes AFUDC and other soft costs
232-mile, 36-inch diameter pipeline (1480 psig
MAOP), from Malin, OR to Coos Bay, OR
Initial design capacity of 1.0 Bcf/d
Pipeline design and rights-of-way previously
approved by FERC (2009)
Owned equally by Veresen and Williams
Jordan Cove LNG Export Terminal
Estimated cost of $5.3 billion
excludes AFUDC and other soft costs
6 mtpa facility expandable to 9 mtpa
Berth design range: 89,000 m3 to 217,000 m3
Marine facilities, LNG tanks and site grading
previously approved by FERC (2009)
Owned 100% by Veresen
Insert map from
Dorreen
Jordan Cove LNG can serve the needs of Asia Pacific gas
consumer
Strong local support and advocacy in Southwest Oregon
DOE non-FTA approval
FERC applications filed mid 2013 – expect approval in 4q 2014
Advanced development process and discussions with
prospective tolling agreement customers
Have a look at
www.BoostSouthwestOregon.com
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www.vereseninc.com
Jordan Cove Contact Information:
Guy Dayvault
Phone: 832 445 6910
Email: [email protected]