Aspen Institute
June 2009
2
This presentation contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical facts, included herein are “forward-looking statements.”Included among “forward-looking statements” are, among other things:
statements that we expect to commence or complete construction of each or any of our proposed liquefied natural gas, or LNG, receiving terminals by certain dates, or at all;statements that we expect to receive authorization from the Federal Energy Regulatory Commission, or FERC, to construct and operate proposed LNG receiving terminals by a certain date, or at all;statements regarding future levels of domestic natural gas production and consumption, or the future level of LNG imports into North America, or regarding projected future capacity of liquefaction or regasification facilities worldwide regardless of the source of such information;statements regarding any financing transactions or arrangements, whether on the part of Cheniere or at the project level;statements relating to the construction of our proposed LNG receiving terminals, including statements concerning estimated costs, and the engagement of any EPC contractor; statements regarding any Terminal Use Agreement, or TUA, or other commercial arrangements presently contracted, optioned, marketed or potential arrangements to be performed substantially in the future, including any cash distributions and revenues anticipated to be received; statements regarding the commercial terms and potential revenues from activities described in this presentation;statements regarding the commercial terms or potential revenue from any arrangements which may arise from the marketing of uncommitted capacity from any of the terminals, including the Creole Trail and Corpus Christi terminals which do not currently have contractual commitments;statements regarding the commercial terms or potential revenue from any arrangement relating to the proposed contracting for excess or expansion capacity for the Sabine Pass LNG Terminal described in this presentation;statements that our proposed LNG receiving terminals, when completed, will have certain characteristics, including amounts of regasification and storage capacities, a number of storage tanks and docks and pipeline interconnections;statements regarding Cheniere, Cheniere Energy Partners and Cheniere Marketing forecasts, and any potential revenues, cash flows and capital expenditures which may be derived from any of Cheniere business groups; statements regarding Cheniere Pipeline Company, and the capital expenditures and potential revenues related to this business group; statements regarding our proposed LNG receiving terminals’ access to existing pipelines, and their ability to obtain transportation capacity on existing pipelines;statements regarding possible expansions of the currently projected size of any of our proposed LNG receiving terminals;statements regarding the payment by Cheniere Energy Partners, L.P. of cash distributions;statements regarding our business strategy, our business plan or any other plans, forecasts, examples, models, forecasts or objectives; any or all of which are subject to change; statements regarding estimated corporate overhead expenses; andany other statements that relate to non-historical information.
These forward-looking statements are often identified by the use of terms and phrases such as “achieve,” “anticipate,” “believe,” “estimate,” “example,” “expect,” “forecast,” “opportunities,”“plan,” “potential,” “project,” “propose,” “subject to,” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” in the Cheniere Energy, Inc. Annual Report on Form 10-K for the year ended December 31, 2007, which are incorporated by reference into this presentation. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these ”Risk Factors”. These forward-looking statements are made as of the date of this presentation, and we undertake no obligation to publicly update or revise any forward-looking statements.
Safe Harbor Act
1
3
LNG’s Role in the Global Gas Market
LNG & the globalization of natural gas
Unconventional gas development in the US & world
Disruption of the oil-indexed price model
Implication for oil & gas price link
4
Global Prices & LinkageImplications
$0
$5
$10
$15
$20
$25
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09
US$/MMBtu
$0
$30
$60
$90
$120
$150
US$/Barrel
US Henry Hub
UK NBP
Asia Spot LNG Avg
JCC
Brent Crude
Source: PIRA Energy Group, Petroleum Association of Japan (JCC)
Note: 6 MMBtu per 1 Oil BarrelJCC = Japanese Crude Cocktail
• Convergence of spot prices• Disconnect from crude
5
Global Oil Production & Spare Capacity
50
55
60
65
70
75
80
85
90
95
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Million b/d
Global Oil ProductionSpare Capacity
’79 OPEC shock creates
’80s supply bubble
’08 price spike starts new bubble
Source: EIA April ’09 International Petroleum Monthly (Global Production)EIA March ‘09 Short-Term Energy Outlook, IMF, Cheniere Research (Spare Capacity)
6
Global Natural Gas Supply & Demand Rapid reserve and demand growth
Global Proved Gas Reserves Trillion Cubic Feet
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1980 1985 1990 1995 2000 2005
OECD
Non-OECD Europe & EurAsia
Other Non-OECD
TCF
World Gas Demand
281145
0
100
200
300
1980 2007
Bcf/d
Since 1980World Gas Demand: +94%
World Gas Reserves:+140%
Source: EIA 2009 (Historical World Reserves & Demand)
Bcf/dBcf/d
7
World-wide Robust LNG Supply Potential
6,263 Tcf- world PROVED gas reservesR/P Ratio: 61 YearsUSGS estimates additional 6,000+ Tcf undiscovered conventional gas reserves
Source: BP Statistical Review - 2008
Worldwide Proved Natural Gas Reserves (Tcf)(Countries exceeding 20 Tcf)
1,576
982904
253 215 211 187 182112 94106 105 6687 6573 5863 53 44 3637
Rus
sia
Iran
Qat
ar
Saud
i Ara
bia
UA
E
US
Nig
eria
160
Alg
eria
Vene
zuel
a
Iraq
67
Kaz
akhs
tan
Turk
men
ista
n
Indo
nesi
a
Nor
way
Chi
na
Mal
aysi
a
Uzb
ekis
tan
Egyp
t
Can
ada
Kuw
ait
Liby
a
Net
herla
nds
Ukr
aine
Indi
a
89
Aus
tral
ia
24
Om
an
30
Paki
stan
26
Bol
ivia
Current LNG Exporters
Other Countries w/ Significant Reserves
45
Aze
rbai
jan
8
Liquefaction Capacity Growing SharplyLNG is not a commodity, it is a means of delivery
Liquefaction Capacity
0
5
10
15
20
25
30
35
40
45
2001
H
2002
H
2003
H
2004
H
2005
H
2006
H
2007
H
2008
H
2009
F
2010
F
2011
F
2012
F
2013
F
2014
F
Bcf/d
Source: Cheniere Research
9
Global Potential for UnconventionalGas Production is Huge
“[Ultimately recoverable remaining resources of] Non-conventional gas resources – including coalbed methane, tight gas sands and gas shales – are much larger, amounting perhaps to over 900 tcm (31,000 Tcf), with 25% in the US and Canada combined.”IEA World Energy Outlook 2008
Coalbed and Shale-Gas Reservoirs, Jenkins et al, Society of Petroleum Engineers paper 103514
Comparison of Global CBM Resources (IHS)
Global Distribution of Tight Gas Resources (Wood McKenzie)
10
Asia Natural Gas Picture
High prices have encouraged:
Demand control in Japan, Korea & Taiwan (mature LNG markets tied to Japanese Crude Cocktail)Pipeline alternatives in China & India, including unconventional gas (emerging LNG markets)Beginning of disconnect from oil pricing
11
Asia Pacific* Natural Gas Demand Projection
Pipeline
Bcf/d
Source: Historical: Cedigaz (2007);Forecast: Cheniere Research
30
25
20
15
10
5
02007 2010
Oil Indexed
Pipeline LNG
Japan9
Japan9
15 Bcf/d
Korea3
Korea3
China7
China7
Australia3
Australia3
India4
India4 Taiwan
1Taiwan
1
16Bcf/d
LNG56%
LNG50%
Incremental LNG Need
2010 = ~1 Bcf/d
Consumption 2007 = 27 Bcf/d2010 = 32 Bcf/d
* OECD Asia plus India & China
LNG Import Capacity2007 = 34 Bcf/d2010 = 37 Bcf/d
Pipeline ImportCapacity
Eventually Large
Bcf/d
Oil Indexed
Regional Demand by Country (2007)Regional Demand by Country (2007)
12
KrishnaGodavari
Basin
New Asia PipesThroughput Capacity
0
2
4
6
8
YE 2009 2012
Bcf/d
ChinaIndia+1.9
Bcf/d
+5.7Bcf/d
Turkmenistan-China Pipeline
+3 Bcf/d
CBM
India KJV Pipeline
+2.8 Bcf/d
China West-East #2 Pipeline
+2.9 Bcf/d
CBM
CBM
Central Asia400 TcfProved*
Russia1,600 TcfProved
Source: Cheniere Research, BP Statistical Review 2008 (Reserve data)*Based on updated Turkmenistan reserves from Oct. 2008 Gaffney, Cline & Associates survey of South Yolotan-Osman field
New Asia PipelinesMajor projects boost access to indigenous reserves
Siberia1,500+ Tcf
Unexplored Potential
13
European Natural Gas Picture
Demand contractionIncreased LNG importsIncreased pipeline capacityPotential for unconventional resourcesLimited storageBrent indexation – oil & gas price divergence threatens business model for long-term buyers– What happens to established players if spot prices are below
contract prices?
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European* Natural Gas Demand Projections
Bcf/d
Source: Historical: Cedigaz (2007), GIIGNL;Forecast: Cheniere Research
Regional Demand by Country (2007)Regional Demand by Country (2007)
Europe-Med15
Europe-Med15
W. Europe18
W. Europe18
U.K.9
U.K.9
LNG
Pipeline
70
60
5040
3020
100
2007 2010E
Pipeline LNG
89%90%
6 Bcf/d 5 Bcf/d
Domestic Production2007 = 28 Bcf/d2010 = 29 Bcf/d
NBP Indexed Oil Indexed
LNG Import Capacity2007 = 10 Bcf/d 2010 = 19 Bcf/d
Consumption 2007 = 50 Bcf/d 2010 = 53 Bcf/d
Incremental LNG Need2010 = ~1 Bcf/d
*Europe includes EU 27, Norway, Switzerland and Turkey
Bcf/d
Rest8
Rest8
Pipeline Import Capacity2007 = 29 Bcf/d2010 = 32 Bcf/d
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European Suppliers are Undertaking a Significant Expansion of Pipeline Capacity
New Pipeline
Existing Pipeline
Expansion
Source: BP Statistical Review; GIIGNL; Cheniere Research
20070.3Turkey-Greece Intercon.
20110.8Italy-Greece Interconnect.
TBD2.9NabuccoIran/Caspian20060.3Maghreb-Europe (Exp.)20120.8 – 1.0Galsi20090.6Transmed (Expansion)20090.8MedgazAlgeria20080.6TAG Expansion20070.4TAG Loop II20122.6 - 5.3Nord Stream (NEGP)Russia20061.5BBLNetherlands20071.9LangeledNorway
DateBcf/dPipelineSupplier
Incremental Pipeline Supplies in Europe
Total Incremental Capacity13.5 – 16.7 Bcf/d
Large and Growing Piped Gas Supply
Europe = EU 27, plus Switzerland and Turkey
Unconventional Gas Potential=
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Projected LNG Flows in 2010Global LNG Supply of ~30 Bcf/d
Existing LiquefactionUnder ConstructionProposed Liquefaction
Atlantic Basin~11 Bcf/d
Atlantic Basin~11 Bcf/d
ME Gulf13 Bcf/dME Gulf13 Bcf/d
Asia Pacific13 Bcf/d
Asia Pacific13 Bcf/d
2010 Europe6 Bcf/d
2010 Europe6 Bcf/d
2010 Asia Pacific16 Bcf/d
2010 Asia Pacific16 Bcf/d
2010 Liquefaction Capacity
2010 Consumption
Source: Cheniere Research
MEG LNG to Atlantic Basin*: 6-8 Bcf/dLNG Available for Americas: 10-12 Bcf/dMEG LNG to Atlantic Basin*: 6MEG LNG to Atlantic Basin*: 6--8 Bcf/d8 Bcf/dLNG Available for Americas: 10LNG Available for Americas: 10--12 Bcf/d12 Bcf/d
* Assumes 85%-92% LNG plant utilization rate.
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North America
Critical role of US in global gas market
Questions:Can the US absorb the LNG?Will LNG become a part of the US energy mix?What are the implications for oil & gas linkage in the US & globally?
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North American Demand & Onshore Terminals
Historical: EIA (2007), Cheniere Research
Bcf/d Demand by Country and Region (2007)
Bcf/d Demand by Country and Region (2007)
0.7
1919
Canada9
Canada9
1313 1414
Mexico7
Mexico7
0.7
0.81.0
1.0
1.5
11.7
77
99
Altamira 700Shell, Total
Costa Azul 1,000Shell, Sempra
Canaport 1,000Irving, Repsol
Total 16,800
Golden Pass 2,000EOM, ConocoPhillips, QP
Cameron 1,500Sempra, ENI
Sabine Pass 4,000Total, Chevron, Cheniere
Freeport 1,500ConocoPhillips, Dow
Lake Charles - BG 1,800
Elba Island 800BG, Marathon, Shell
Cove Point 1,800BP, Statoil, Shell
Everett - Suez 700
BaseloadSendout (MMcf/d)
TerminalCapacity Holder
Altamira 700Shell, Total
Costa Azul 1,000Shell, Sempra
Canaport 1,000Irving, Repsol
Total 16,800
Golden Pass 2,000EOM, ConocoPhillips, QP
Cameron 1,500Sempra, ENI
Sabine Pass 4,000Total, Chevron, Cheniere
Freeport 1,500ConocoPhillips, Dow
Lake Charles - BG 1,800
Elba Island 800BG, Marathon, Shell
Cove Point 1,800BP, Statoil, Shell
Everett - Suez 700
BaseloadSendout (MMcf/d)
TerminalCapacity HolderLNG Import Capacity Bcf/d
Existing Facilities 5.0Expansion of existing 0.8
New Terminals 11.0NA Total by 2010 16.8
LNG Import Capacity Bcf/dExisting Facilities 5.0
Expansion of existing 0.8New Terminals 11.0
NA Total by 2010 16.8
Existing TerminalUnder Construction
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US Unconventional Production Basins Proximate to Premium Markets and Major Pipelines
Sources: EIA (US map graphic, pipelines and LNG terminals placed by Cheniere).Advanced Resources Intl (Lower 48 Unconventional Recoverable Reserves) Depicted Pipelines: Rockies Express, Texas Eastern, Trunkline, Transco, FGT, C/P/SESH/Gulf Crossing (as a single route)Depicted LNG terminals: Freeport, Golden Pass, Sabine Pass, Cameron, Trunkline, Elba Island, Cove Point, Everett.
Lower 48 UNC Technically Recoverable Reserves (Tcf)
0
200
400
600
800
1996 2006
ShaleCBMTight Gas
366 Tcf
580 Tcf
US Proved
Reserves
20
US Gas Rig Count, Production & PricesDrilling has Collapsed with Price, Oversupply
Dry Production+ 2.7 Bcf/d YE ’08
Rigs -55%from ’08 Peak
Gas Prices -70%from ’08 Peak
US Gas Rig Count & Henry Hub Price
400
600
800
1000
1200
1400
1600
1800
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Active Rigs
$-
$2
$4
$6
$8
$10
$12
$14
$16
1491
1025
1186
1372
1466
691
872
720
939
$HH Cash
917
44
48
52
56
Annual average
Source: EIA, Baker Hughes, PlattsLower 48 Production (Bcf/d)
21
Lower 48 Wellhead Production & Gas Rig CountProductive Capacity will Fall Sharply as Drilling is Curtailed
32
36
40
44
48
52
56
60
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Bcf/d
300
500
700
900
1100
1300
1500
1700Active Gas Rigs
900 Rig 700 Rig 500 Rig
Lower 48 Wellhead Production
Lower 48 Gas Rig Count
US Prod from YE 08
-3-6.3 -8.6-1.6
-3.2-4.1
-1.6
-3.2
-4.1
-20
-16
-12
-8
-4
0YE 09 YE 10 YE 11
Bcf/d
900 rigs 700 rigs 500 rigs
Source: Lippman Consulting, EIA, Baker Hughes, Cheniere Research
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Conclusions
The world has abundant supplies of cheap, stranded natural gas reserves which can now be monetizedHigh energy prices have created ripple effects which will impact markets for years to come– Diversification of supply sources in America, Europe & Asia– Technological breakthroughs in US unconventional gas will be
applied on a global scale to unlock new reserves– Disruption of oil-gas price linkage– LNG acts as a bridge between continents to normalize price– De-link from crude prices creates tension on business models