IEEJ © March 2024

27 March 2024 JST (26 March 2024 EST)LNG Market Outlook in Light of Recent
Developments including the Pause

The 14th IEEJ Webinar for the WorldThe Institute of Energy Economics, JapanHiroshi Hashimoto
Senior Fellow, Energy Security Unit
Presentation Disclaimer: This presentation is given for general informational
purposes only and is not intended to influence any specific actions.
Views expressed in this presentation are the author’s own and do not represent
hiroshi.hashimoto@tky.ieej.or.jp
any official positions of the organisation that the author belongs to.

Outline of the PresentationIEEJ © 2024

✓ Current topics and implications - security is in front• LNG supply security is the headline issue✓ The impact of the “pause” and how to cope with them• Significant volumes and projects are impacted✓ Investment is required to ensure stable supply• LNG supply sources have respective advantages and challenges• LNG investment and deals are on the rise - with uncertainty✓ LNG production project costs follow upward trends✓ Longer transportation distances and bottlenecks✓ Challenges call for innovative approaches

1Current Topics and Implications in the LNG Industry - Security is in Front•IEEJ © 2024•

The big 3 LNG exporting countries hold the key to LNG market stability
Management of methane emissions in the LNG value chain gain momentum for the industry’s sustainable future

Current topics
Relaxing market balance and lower prices
USA becomes the top LNG exporter
LNG projects advance in USA (FIDs / SPAs)
EU continues attracting volumes with FSRUs
China returns to LNG import growth
Emerging Asia expands LNG markets
Qatar expansion: deals and partners
Smaller-scale offshore LNG projects increase
New risks emerge in Australian LNG
Initiatives to manage methane emissions
Bottlenecks emerge in LNG transportation
Stronger presence of portfolio players
Progresses of proposals of e-methane projects

Implications and issues to watch
Will stability continue for how long?
Production expected to increase“Pause” and additional FIDs
How long EU continues high volume imports
How far growth continues
How fast growth accelerates
More sales activities and NFW
How much smaller-scale LNG proliferates
Measures to keep stable LNG exports
International standards: GHG (methane)
Streamlining/optimizations of transportation
Portfolio players’ contribution to development
How fast and far e-methane projects advance2

The “Pause” Does Not Look Great••Certain LNG projects suffer delays and uncertainty
Credibility as a long-term stable supplier in the global market is in limbo

Issue
Direct impact of the “pause”“48 bcf/d (365 mt/y) authorised; 26 bcf/d (200mt/y) to be realised”
Disagreements between commercial andregulatory progress
License extensions are said to be unaffected
Uncertain when the review process will resume
Public comment period
Other LNG projects may benefit from the pause
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Possible outcomes of the studies

What is known
30 mt out of 150 mt/y LT deals in 2022/2023

22 bcf/d without FIDs, no assurance
Regulators do not directly take account of commercial
arrangements, but something should be done
Extension reviews are closely watched
Timelines should be specified (the study and commentperiod)
Parties should start preparing impactful comments
immediately (today)
Some projects within and outside of the United States
Upper and/or time (adjustable) limits of LNG exports
Tougher (adjustable) standards for license extensions
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Investment - to Meet Demand, to Replace Existing Capacity - Is Required⚫Investment isneeded in 8 - 18
mtpa LNG
production capacity
per year until 2050

LNG Supply: capacity requiring investment
700
600

Existing capacity (reflecting depletion and degradation)

New projects (with FIDs)

LNG demand (REF)

LNG demand (ATS)

unit: million tonnes per year

REF: 18 mtpa LNG
production capacity peryear until 2050

⚫ Required additional capacity500
investment means the gap
between projected LNG demand400and (depleting) existingproduction capacity

ATS: 8 mtpa LNG
production capacity
per year until 2050

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300

✓ *Those projects
already greenlighted 200(included in the100yellow stacks) entail
uncertainty withpossible delays

2022

2030

2040

2050
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LNG Supply Sources Have Advantages and Challenges✓Projects advance aroundthe world to increase
LNG supply,
accompanied with risks✓Expansion at existingsites (brownfield) andfeedgas supply
replacement projects(backfill) are consideredadvantageous
Qatar•••

CanadaRussia

Uncertainty in both existing andnew projects with hugeresources bases••

A major source ofpipeline gas andLNG to Europe•

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United States•

More supply is expected
Uncertainty of “Pause”
Longer shipping•••

East Mediterranean

A potential sourceIran•Without sanctions, huge gas resources, export options

21 mt / y of 48 (NFE/NFS) sold to partners
Remaining volumes and additional partners
North Field West emerging•

Recent renewals of deals

Chance to restart?

Advantageous location
Onshore stalled for a few years

Papua New Guinea•

PNG LNG expansion / Papua LNG expected
MexicoUAE•

Tanzania••

A second - Ruwais
LNG is advancingMozambique••

Opening up the West Coast of North
America as major LNG sources

Algeria

OmanYemen•

A potential source

U.S. gas supply holds keyAustralia••

Diversified supply sources
Labour issues, policy changes(reforms) could discourage
investors
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LNG Investment and Deals Are on the Rise - with Uncertainty
Capacity of LNG production FIDs after 2009 and contracted volumes in 2022 and 2023

Breakdown of2022-2023
term deals

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✓LNG FIDs and80
million tonnes per yearin USA(capacity)
construction
Oman Gas producers
OmanGas producers inUSA
70
Qatar
Nigeria LNG Train 7
activities are on the
Portfolio
Sellers
Australia
Mexico60
Qatarrise after thePortfolio Buyers
Portfolio Buyers
Arctic LNG 2
Ukraine war
Abu Dhabi
50
Potential
Portfolio Sellers
Scarborough - Pluto Train 2 FIDs
Indonesia✓The United States
Australia
Ust-Luga
40
Venture Global Calcasieu Pass
Mexicoas supply sources,
Corpus Christi Stage 3
European Customers
CanadaEuropean Customers
Rio GrandeUnited States
China, other Asia, 30
Mozambique LNG1
Cove Point
Venture Global Plaquemines
Other Asia
Other Asia
Wheatstone
Europe, andCameroon Kribi FLNGTortue FLNG
20 PNG LNG
Japan
Sabine Pass 1-2
Sabine Pass 6
Freeport LNG 1-2Japan
Korea
United States
Qatar
NFE
Yamal
LNG
APLNG
T1
Sabine
Pass5
Port Arthur
NFE
Fast Mexico
Korea
portfolio players as
APLNG
T2
PreludeLNG Canada
10Petronas
FLNG 1Corpus
Christi
1-2
Donngi
SenoroGolden Costa
Pass Azul 1 Venture Global Plaquemines
buyers represent
GorgonChina
Cameron LNG
ChinaCongo LNG
ElbaIslandSabine
Pass
3-4Ichthys
QCLNG GLNG
2Corpus Christi 3
Freeport LNGCoral
3South FLNG
Malaysia
Nearshore
majority of term- 0
Petronas FLNG 2 Tangguh
3Delfin 1
contract parties in2022 and 2023
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LNG Production Projects Costs Follow Upward Trends
20102014
20152020

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20212023

Major trends
Factors to promote projects• Northeast Asian LNG demand surge• Cost escalations in Australia stimulated• Australian LNG production projects
activities elsewhereproliferated• Activities shifted to the United States with• Conversion of receiving infrastructure intomoderated cost escalations in upstream andexport facilities
liquefaction sectors• Separated gas production and transportation• Feedgas supply for the U.S. LNG is notsectors
necessarily cheap but is expected to be stable • FLNG as a competitive option
on the long-term basis• Logistical constraints caused by the pandemic • Small and mid-scale liquefaction applications
and the war have delayed construction• Modular and design-one-and-build-many
activities
strategy• Instability in some countries has caused• The phasing out from Russian gas - activitiesdelayselsewhere• Prices of materials are on the rise
• Developers competing for market windows in• CCS and electrification add costs
the late 2020s pursue cost reductions
7│Securing Greener LNG Production Projects is the Key

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Electrification and greener
power sources
General • Electrification of processes
Trends • Higher reliability and lower
maintenance costs• Better GHG management, and lessgas consumption
Challen- • Securing greener power
ges• Securing backup power• Installing renewable power within
vicinity of the LNG site
• Securing flexibility in loadmanagement with neighbouringindustrial facilities• Larger initial investment amount

CCS• Capturing CO2 native to feedgas andgenerated from processes• Integrating CO2 captured inneighbouring industrial facilities
could enhance economics• Securing suitable carbon storage sites• Creating sizable CO2 demand sources• Larger initial investment amount• Required time for integrating existing
LNG facilities• Greater technical challenges tocapture CO2 from the process thanfrom feedgas
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Longer Transportation Distances and Bottlenecks Present Chances of Optimization
14,000✓Along with supply
LNG from thekmUnited States travels
sources,longer distancestransportation routes 12,000
and distances are(Source) based on data from GIIGNL LNG Industry 2023 and distances calculated by maps
diversified
10,000✓Long-distancetransportation has
increased notably from 8,000
the U.S. Gulf Coast to6,000
LNG was transported to Japan
Northeast Asiawith longer distances when its✓The West Coast ofnuclear power was reduced
4,000
North America andGlobal combined average
Japan combined average
East Africa are
Asian buyer combined average
expected to contribute
2,000 Korea combined average
Pacific seller combined average
Qatar
to optimization of LNG
transportation
Middle East seller combined average
USA mainland

2000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

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Challenges for LNG Projects Call for Innovative Approaches

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Notable issues to be considered
Supply✓ Ensuring sufficient supply over decades - notably from the United States✓ Taking care of supply disruption risks, feedgas shortages and troubles✓ Coping with increasing costs of development
Demand ✓ Realising and meeting LNG demand in emerging markets✓ Balancing with nuclear and renewables developments✓ Living with EU gas demand reduction (demand reduction efforts and demand destruction)✓ Accommodating demand aggregation, portfolio players, and joint procurement✓ Connecting producers and consumers directly and closer
Pricing✓ Measures to mitigate volatility✓ Appropriate balances between oil-linked and gas-hub linked pricing
Climate✓ Clarification of LNG project standards (methane and GHG emission mitigation)✓ Promoting CC(U)S and green electricity in LNG liquefaction
Financing ✓ Securing financing arrangements that can accommodate shorter LNG sale contracts✓ Ensuring creditworthiness of new buyers entering the market✓ Presenting economic and environmental advantages of LNG as an area of investment
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