IEEJ：October 2017 © IEEJ2017

CHENIERE ENERGY, INC.
LNG Market Outlook and US LNG’s Function The Perspective from Cheniere
IEEJ – 20 October 2017

Andrew Walker
VP Strategy and Communication

IEEJ：October 2017 © IEEJ2017

Today’s Presentation
 Update on US LNG
projects
 U.S. Gas Market
Overview

 Impact of U.S. LNG on
Global LNG Dynamics

Sabine Pass First Cargo: 24th Feb 2016

2

IEEJ：October 2017 © IEEJ2017

Safe Harbor Statements
Forward-Looking Statements
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 of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of historical or present facts or conditions, included or incorporated by reference herein are “forward-looking statements.” Included among“forward-looking statements” are, among other things:•

statements regarding the ability of Cheniere Energy Partners, L.P. to pay distributions to its unitholders or Cheniere Energy Partners LP Holdings, LLC or Cheniere Energy, Inc. to pay dividends to its
shareholders or participate in share or unit buybacks;•

statements regarding Cheniere Energy, Inc.’s, Cheniere Energy Partners LP Holdings, LLC’s or Cheniere Energy Partners, L.P.’s expected receipt of cash distributions from their respective subsidiaries;•

statements that Cheniere Energy Partners, L.P. expects to commence or complete construction of its proposed liquefied natural gas (“LNG”) terminals, liquefaction facilities, pipeline facilities or other projects,
or any expansions or portions thereof, by certain dates or at all;•statements that Cheniere Energy, Inc. expects to commence or complete construction of its proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thenof, by certain dates or at all;•statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide,or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure, or demand for and prices related to natural gas, LNG or other hydrocarbon products;•

statements regarding any financing transactions or arrangements, or ability to enter into such transactions;•statements relating to the construction of our proposed liquefaction facilities and natural gas liquefaction trains (“Trains”) and the construction of the Corpus Christi Pipeline, including statements concerning theengagement of any engineering, procurement and construction ("EPC") contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, andanticipated costs related thereto;•statements regarding any agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding
the amounts of total LNG regasification, natural gas, liquefaction or storage capacities that are, or may become, subject to contracts;•

statements regarding counterparties to our commercial contracts, construction contracts and other contracts;•

statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines;•

statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;•

statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections or objectives, including anticipated revenues, capital expenditures,
maintenance and operating costs, run-rate SG&A estimates, cash flows, EBITDA, Adjusted EBITDA, run-rate EBITDA, distributable cash flow, and distributable cash flow per share and unit, any or all of which
are subject to change;•

statements regarding projections of revenues, expenses, earnings or losses, working capital or other financial items;•

statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;•statements regarding our anticipated LNG and natural gas marketing activities; and•any other statements that relate to non-historical or future information.

These forward-looking statements are often identified by the use of terms and phrases such as “achieve,” “anticipate,” “believe,” “contemplate,” “develop,” “estimate,” “example,” “expect,” “forecast,” “goals,” ”guidance,”“opportunities,” “plan,” “potential,” “project,” “propose,” “subject to,” “strategy,” “target,” and similar terms and phrases, or by use of future tense. 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., Cheniere Energy Partners, L.P. and Cheniere Energy Partners LP Holdings, LLC Annual Reports on Form 10-K filed with the SEC on February 24, 2017, which are incorporated by reference into thispresentation. 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 ofthis presentation, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information,
future events or otherwise.
Reconciliation to U.S. GAAP Financial Information
The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, as amended. Schedules are included in the appendix hereto that reconcile
the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

IEEJ：October 2017 © IEEJ2017

LNG Trade Today – A Snapshot
 53 years old 264 mt (35 bcf/d) in 2016 19 exporting countries
 40 importing countries*
 ~435 trading ships**
 ~10% of all gas consumed worldwide
 ~30% of internationally traded gas*including small scale importers; Norway, Sweden, Finland**excludes FSRUs, small vessels, laid-up vessels
Source: GIIGNL Annual Report 2016, BP Statistical Review of World Energy June 2017, Affinity LNG

4IEEJ：October 2017 © IEEJ2017

Today’s Presentation
 Update on US LNG
projects
 U.S. Gas Market
Overview

 Impact of U.S. LNG on
Global LNG Dynamics

Sabine Pass First Cargo: 24th Feb 2016

5

IEEJ：October 2017 © IEEJ2017

Cheniere LNG Platform Along United States Gulf Coast

Sabine Pass Liquefaction ProjectTrains 1-4 substantial completion achieved
Train 5 is under construction
Train 6 is fully permitted, ready to commercialize
Land secured for further expansion

Corpus Christi LNG Terminal





•

First operational lower-48 export
facility (Sabine Pass)•

First greenfield export project underconstruction (Corpus Christi)•

7 train platform (operating / underconstruction) = 31.5 mtpa•

Cheniere now the largest gas
consumer in the U.S.

6

Trains 1 and 2 are under construction
First LNG expected in late 2018
Train 3 is fully permitted and being commercialized
Trains 4-5 (or mid-scale equivalent) : Initiateddevelopment

 Land secured for further expansion

IEEJ：October 2017 © IEEJ2017

Sabine Pass Liquefaction Project7

IEEJ：October 2017 © IEEJ2017

Sabine Pass Liquefaction – 2Q 20178

IEEJ：October 2017 © IEEJ2017

Corpus Christi Liquefaction – 2Q 20179

IEEJ：October 2017 © IEEJ2017

Cheniere LNG Projects: Attractive Features
 Cheniere LNG SPAs: LNG price tied to Henry Hub, offer destination flexibility, upstream gas procurement
services, no lifting requirements
 SPAs with investment grade off-takers featuring parent as counterparty or guarantor & pricing with HH +fixed fee (no price reopeners)
 EPC contractor: proven track record of execution; proven liquefaction technology
Sabine Pass Customers

BG Gulf Coast LNG

Gas Natural Fenosa

Korea Gas Corporation

GAIL (India) Limited

Total Gas & Power N.A.

Centrica plc

Corpus Christi Customers

PT Pertamina(Persero)

10

Endesa S.A.

Iberdrola S.A.

Gas Natural
FenosaWoodside Energy
Trading

Électricité deFranceEDP Energias dePortugal S.A.

IEEJ：October 2017 © IEEJ2017

U.S. LNG Capacity Under Construction
70
CameronCameron
LNG T3
LNG T360

Cameron LNG T2
Cameron LNG T2
Cheniere Export Project

Freeport
LNG T3
Freeport
LNG T3

Non-Cheniere Export Project

50

SabineSabine
Pass T5
Pass T5
Freeport
LNG T2
Freeport
LNG T2
CameronCameron
LNG T1LNG T1

40
MTPA

Corpus Christi T2
Corpus Christi T1-2
Corpus Christi T1

30

Elba Island Phase 2

Elba Island Phase 2
FreeportFreeport
LNG T1LNG T1

Elba Island Phase 1

Elba Island Phase 1
Cove Point
Cove Point

20

10

Sabine Pass T1-4
Sabine Pass T1-4

Jan-16

Jan-17

Source: Cheniere Research estimates for first export.
Actual start dates may differ depending on construction schedules

11

Jan-18Jan-19Jan-20IEEJ：October 2017 © IEEJ2017

US LNG - A Wide Range of Customers
MTPA

Portfolio Compositionof Major Buyers (2020)

Share of US
supplyin net portfolio

35

25
20

US Supply% US supply

90%

Asian
end-user80%

e.g. Chubu

70%

10

e.g. Iberdrola

9%
33%

15%

40%
30%

Europeanbuyer;
domestic /portfolioe.g. GNF

60%
50%

15

European
end-user100%

Non-US Supply
30

US FOB off-takers
by type

17%

26%

Asian
reseller

Portfolio
playere.g. Mitsuie.g. Shell

20%
5
-

10%
0%

Source. Cheniere interpretation of Wood Mackenzie Data (2017). Top 15 portfolios shown. Volumes are net of re-sales.

12 ~50% sold to Asian entities ~42% sold to end-users
 Of 58 % sold to resellers;
at least 57% resold /allocated

IEEJ：October 2017 © IEEJ2017

Current Status of US LNG Projects
Note: Excludes Alaska

FERC Status (as of September 2017)
 13.5 mtpa online

400
350

106

300

Corpus Christi 4-5
G2 LNG
Jordan Cove *FourchonCommonwealth

33

mtpa

250
200

391

Gulf LNG
Venture Global (Calcasieu)
Texas LNG Brownsville
Rio Grande LNG
Annova LNG
Port Arthur LNG
Eagle LNG
Venture Global(Plaquemines)
Driftwood LNG
Freeport 4

129

150
100

 53.5 mtpa underconstruction
 over 300 mtpa
proposed

Lake Charles
CC T3
SP T6
Cameron T4/5
Magnolia
Golden Pass

56

SP T1-5
Cameron T1-3
Freeport T1-3
Cove Point
CC T1-2
Elba

50
67
0
Total

Source: US FERC, US DOE, and press reports

13

No FERC filingPre-filed*Previously denied by FERC and had to re-file

Formal filing

ApprovedFID

IEEJ：October 2017 © IEEJ2017

Projected Company Ranking by LNG Sales in 2020
On Track to Be a Top-5 Seller Less Than 5 Years After First Cargo
Projected Top LNG Suppliers by Company - 2020
Volumes for Projects Existing and Under Construction
60

50

mtpa

40

30

20

10

0

Source: Cheniere Research, Wood Mackenzie
Note: volumes include ‘equity’ LNG, third-party offtake and own project offtake. Tolling facility production reflected in offtaker volumes.

14

IEEJ：October 2017 © IEEJ2017

Today’s Presentation
 Update on US LNG
projects
 U.S. Gas Market
Overview

 Impact of U.S. LNG on
Global LNG Dynamics

Sabine Pass First Cargo: 24th Feb 2016

1
5

IEEJ：October 2017 © IEEJ2017

Shale Gas has Doubled U.S. Natural Gas Resources Since 2006 …
 Total U.S. future gas supply (reserves + resources) stands at record 3,141 Tcf
 Represents 100+ years of current domestic needs
U.S. future supply of natural gas
3500

3141
2884

3000

2691

2500

2202

Tcf

2080

Shale accounts
for 64% of U.S.
Gas Resources

2000
1532
1500

1000

500

0
2006

2008

2010

2012

Date of outlook
Non-shale
Source: Potential Gas Committee, 2017; EIA (Proved Reserves)

16

Shale

EIA Proved Reserves

2014

2016

IEEJ：October 2017 © IEEJ2017… And Has Fundamentally Reset Price Expectations
Break-even price at Henry Hub for
North American natural gas resources

Henry Hub Natural Gas Price
14

800 Tcf @ <$3.00/mmBtu= 25 years supply at 2015
production levels

9

6

12

10

3
$/MMBtu

Average break-even Henry Hub price ($/MMBtu)

12

0

8

6

-3

Futures
4

-6

-9

2

-12

0

Actuals
0

500

1,000

1,500

2,000

Tcf
Source: EIA Historical Henry Hub to Oct. 2017, NYMEX Henry Hub Futures as of Oct.11, 201717

IEEJ：October 2017 © IEEJ2017

U.S. Natural Gas Production
2016:
78 Bcf/d

Total U.S. Natural Gas Marketed Production
80

1972:
62 Bcf/d

70+26 Bcf/d-10 Bcf/d

Shale Wells
Supplied
51% of US
Gas in 20162005:
52 Bcf/d

60

Shale
Bcf/d

50

40

30

Non-Shale

20

10

0
1900

1910

1920

Source: EIA Natural Gas Monthly Sept. 2017

18

1930

1940

1950

1960

1970

1980

1990

2000

2010

IEEJ：October 2017 © IEEJ2017

Supply and Demand since 2005
SupplyConsumption

Bcf/dMarketed Production Growth 2005 to 2016
40
30
20
10
0
-10
-20

37

(annual average
growth 2005-2016)

Incremental natural gas consumption 2005 - 201615

26

(3.4 pa)

13(2.4 pa)(-1.0 pa)

11.3

11

-11
Unconventional

ConventionalNet
9

Shale Gas Production
45

35

30
25
20
15

10

Other Shale
Marcellus+Utica
Haynesville (LA & TX)
Eagle Ford (TX)
Fayetteville (AR)Barnett (TX)
Woodford (OK)Bakken (ND & MT)

7
Bcf/d

Shale Gas Production(Bcf/d)

40

5
3.1
3

1

0.3

-1

5
0

4.1

-1.3

-3
Residential Industrial*Base Year 2005

Source: EIA

19

Power

Pipeline
Exports

LNG
Exports

IEEJ：October 2017 © IEEJ2017

Dry Gas Growth Will Be Driven By Marcellus/Utica, Permian & Haynesville
Cumulative Production Growth from mid-2017
11
Nearly 9 Bcf/d net growth expected
through year-end 20199

Haynesville

Bcf/d

7

Permian5

3

Marcellus,
Utica

1

(1)

(3)
Jul-2017

all other

Nov-2017

Source: Spring Rock; Cheniere Research20

Mar-2018

Jul-2018

Nov-2018

Mar-2019

Jul-2019

Nov-2019

IEEJ：October 2017 © IEEJ2017

Current Production Growth Supported By Prices Below $3.50 Henry, $60 Oil
US Gas Rigs vs. NYMEX cal-2018 Henry Hub strip

US oil rigs vs. NYMEX cal-2018 WTI strip

3.40

65

3.30

Henry Hub 2018 Calendar Strip

WTI 2018 Calendar Strip

190

US Gas Directed Rig Count

800
750

US Oil Directed Rig Count

60
700
170

150
3.00
130

2.90

650
600

50
550

45
500

2.80

110

450

40

2.70
90

Permian oil rig
deployments
support associatedgas production

35

2.60

2.50

Jan-1670

Jul-16

Source: NYMEX, Baker Hughes
21

Jan-17

Jul-1730
Jan-16

400
350
300

Jul-16

Jan-17

Jul-17

Rig Count

3.10

WTI (USD/Bbl)

55

Rig Count

Henry Hub (USD/MMBtu)

3.20

IEEJ：October 2017 © IEEJ2017

Northeast Output Will Soon Be Unconstrained By Pipeline Infrastructure Incremental pipeline projects will provide up to 7 Bcf/d of additional market access by early 2018
 Additional 6 Bcf/d takeaway capacity is expected to enter service from mid-2018 through year-end 2019

Northeast US Dry Natural Gas Production vs. Pipeline Takeaway Capacity
Marcellus/Utica production in New York, Ohio, Pennsylvania, West Virginia

40
Production

Pipeline Capacity
Production temporarily constrained

35

Bcf/d

30
25
20
15
10
5.7 Bcf/d growth projected frommid-2018 to year-end 2019

5
0
2008

2009

2010

22 Source: Spring Rock; Cheniere Research

2011

2012

2013

2014

2015

2016

2017

2018

2019

IEEJ：October 2017 © IEEJ2017

EIA U.S. Outlook to 2040
Gas production outlook

Gas consumption outlook

EIA base case sees dry gas growing 31 Bcf/d from 2016

U.S. Gas demand grows at 1.5% CAGR

Shale gas will be 67% of total dry gas production

Incremental Natural Gas Consumption by 2040

Gas production grows at 1.5% CAGR through 2040

14•

Residential demand has peaked;
population shift to warmer climates& efficiency gains•

Industrial; low prices stimulate
0.9% demand CAGR•

Power at forecast prices; gas
displaces coal in power gen. driving
0.4% CAGR.

Forecasted U.S. Dry Gas Marketed Production
12

120
Shale
Non-Shale

100

10

80

8
Bcf/d

Bcf/d

EIA Forecast

11.8

6.5
6

60

4.8
4

40

2.6
2

20

0.3
0
2005

2010

2015

2020

2025

2030

2035

2040

Residential Industrial*Base Year 2016

Source: EIA AEO 2017
23

Power

Pipeline
Exports

LNG
Exports

IEEJ：October 2017 © IEEJ2017

EIA Price Outlook for Henry Hub and WTI30

EIA Forecast$/MMBtu (nominal)

25

AEO 2016

WTI

AEO 2017

20

15

10

HH

AEO 2016
AEO 2017

5

0
2010

2012

2014

2016

Source: EIA Annual Energy Outlook 2016,2017; Note: Actuals to 2016 from EIA

24

2018

2020

2022

2024

2026

2028

2030

IEEJ：October 2017 © IEEJ2017

U.S. Natural Gas Production Continues to Evolve Recent evolution• Larger wells: average initial production (IP) rates havemore than tripled since 2009
• Longer laterals: average horizontal feet drilled inMarcellus have doubled since 2009
• Multi-stage fracking: producers have increased numberof stages used in hydraulic fracturing process• Innovation: operational efficiencies improving drill times

 Future evolution - continued technologicaladvances to reduce costs and increase
efficiencies• Data processing, better software modelling and real time
monitoring to help with well spacing, space staging,completion engineering…

• Enhanced recovery factors by experimenting with pump
fluids and recovery methods• Targeted and steered drilling to make more precise cuts
into deep terrain• Extracting from multiple benches of production withinsame play• Non-intrusive technologies such as micro-seismic
geophones and electromagnetics.

25

IEEJ：October 2017 © IEEJ2017

Today’s Presentation
 Update on US LNG
projects
 U.S. Gas Market
Overview

 Impact of U.S. LNG on
Global LNG Dynamics

Sabine Pass First Cargo: 24th Feb 2016

2
6

IEEJ：October 2017 © IEEJ2017

LNG: A High Growth Industry
LNG trade growth – by importing region

300

Other
250

North America
Europemtpa

200

Asia Pacific

CAGR 9% / 16 mtpa

150

CAGR 7% / 9 mtpa
100

CAGR 8% / 4 mtpa
50

0
1965

Source: IHS Markit (2017)

27

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

IEEJ：October 2017 © IEEJ2017

Commercial Evolution Underway in Contract Length
LNG trade by contract length
300

Bilateral deals

Slow evolution

Growing flexibility
Spot &
short-term
Prompt **trade*

250(15% - 18%)

28%

mtpa

200

150

Mid &
long-term
contract
trade

100

50

0
1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

* Contract duration of 4 years or less (GIIGNL) ** Prompt = delivered within 3 months of transaction date
Source: CEDIGAZ World Outlook for 1965 – 1985 (assumes no spot volume), Poten and Partners 1985 – 2000 (2001), GIIGNL 2000 - 2016 (2016)

28

2015

72%

IEEJ：October 2017 © IEEJ2017

Europe’s Balancing Role in the LNG market
mtpa
300

Market loosening

Market tightening

Market Stable

Supply outpacing Asia demand growth Asia demand growth outpacing supply
LNG volumes flow in Europe
250

241

Europe decants volumes

266

242

EuropeMENA

200

Latin America

150

Asia Pacific

100

50

US/Canada
0
2008
2009

2010

2011

Source: Cheniere interpretation of IHS Waterborne data (Apr 2016), delivered volumes

29

2012

2013

2014

2015

2016

IEEJ：October 2017 © IEEJ2017

LNG Supply vs. Demand to 2030

100

500

LNG trade
forecast

2020

80
mtpa

400

Production capacity 2015/2020 [1]2015 to 2030
CAGR(%) = 4.4

60
40

2015

New
supply

20
0

mtpa

USA
300
Australia
Supply:existing andunderconstruction

200
Qatar

100

0
2000

2005

2010

Source: Cheniere Research estimates; Woodmac for historical figures

30

2015

2020

2025

2030

IEEJ：October 2017 © IEEJ2017

LNG Import Outlook by Region
mtpa

Asia and Middle East

400

400

Bunkers Asia
Middle East
350

Bunkers Atlantic
Africa350

Other Asia

EuropeChina
300

Atlantic Basin

mtpa

300

India

S. America

Other
Asia

250

200

China

200

150

India

150

JKT
250

N. America

100

100

JKT
50

50

0
2005

0
2005

2010

2015

2020

2025

2030

Source: Cheniere Research, Cheniere interpretation of Wood Mackenzie data (Q4 2016)31

EuropeS. America
2010

2015

2020

2025

2030

IEEJ：October 2017 © IEEJ2017

Opportunities and Challenges for Gas and LNG in Asia
 Opportunities

Gas Demand* Demand for gas in Asia set to nearly triple
over coming decades

6000 New markets, new buyers and new
demand segments for LNG emerging in
the region

5000 But gas growth in Asia should not be taken
for granted …..

 Challenges

~160%

4000

Asia

Bcm

 A more liquid and more responsive global
LNG trade will make gas more attractive

Growthvs. 2014

3000

2000

 Demand uncertainty a common theme
across Asia as energy transition andmarket liberalisations gather pace

 Some new markets will require help withthe commercial or technical aspects of
LNG
 Coal likely to remain cheap – and tempting

Rest of World

1000

0
2014

2020

2030

2040

* Source WEC Energy Scenarios 2016

2050

2060

WEC Energy Outlook (‘Modern Jazz’ Scenario)

Gas needs to prove it is affordable, reliable and secure
32

~40%

Europe, Latin
America. MENA,
N. America, SubSaharan Africa

IEEJ：October 2017 © IEEJ2017

Market Context
Market context for LNG buyers has been evolving in recent years …
• Increasing market length through 2019 (+)
Growing Supply
Availability• Some portfolio players looking to reduce own length• Expectations of growing liquidity / spot availability• Healthy slate of potential new supply projects• Reducing Oil Indexation Levels; 0.16 at peak falling to ~0.115 now
Growing Price
Uncertainty• Oil price uncertainty• Inversion of Spot, Oil-indexed and HH-indexed prices;• Liberalising markets: new players, increasing market competition
Growing Demand
Uncertainty• Changing fuel mix outlook: ‘fall’ of nuclear and coal, rise of renewables• Domestic gas balance; maturing fields, unconventional gas uncertainty

Buyers looking to rebalance their purchase portfolios to include greater spot / ST volumes
33

IEEJ：October 2017 © IEEJ2017

Contracting behaviour reacting to changing market environment Shorter Duration Contracts

Market Length

50

Reaction toMarket Uncertainty

50

14

40

13

40
-65%
30

15

Full
year?

12

30

11

20

10

10

9

10
0

Reaction to

ACQ (mmtpa)

15

40

1.1

-5%

1.0

30

0.9
20

0.8

10

0.7

0

0.6
2008 2009 2010 2011 2012 2013 2014 2015 2016 H1
2017<1 mmtpa

1 to <2 mmtpa

Source: Cheniere interpretation of Wood Mackenzie data (2017)34

Market Uncertainty

35%

5%

Share of total

Reaction to
1.2

15%

2008 2009 2010 2011 2012 2013 2014 2015 2016 H1
2017Mov. Av. (RHS)

50

10

0

≥ 20 years

45%

25%

5

5-10 years

 Smaller Volume Contracts

Price Uncertainty

20

Henry Hub

< 5 years

Share of total (%)

 Lower HH Sales

H1
2017

ACQ (mmtpa)

2008 2009 2010 2011 2012 2013 2014 2015 201682008 2009 2010 2011 2012 2013 2014 2015 2016 H1
20170

Average volume (mmtpa)

20

ACQ (mmtpa)

ACQ (mmtpa)

43

Average length (yrs)

Reaction to Lower Overall Sales

34
Are these changes structuralor cyclical ?

≥ 2 years

Mov. Av. (RHS)IEEJ：October 2017 © IEEJ2017

LNG trade is diversifying and fragmenting
SupplyBG Group interpretation of Wood MacKenzie and IHS data (2015)*each country considered a single supplier / buyer. Market categories for HHI: US Department of Justice35

Markets

IEEJ：October 2017 © IEEJ2017

U.S. LNG Exports Driving Change in the Industry

 Destination-free, flexible volumes
 Growing liquidity
 FOB and DES hub formation
 New markets facilitated by abundant,
competitively priced gas

36

A more responsive, more competitive
more diverse and more resilient LNG
trade system

IEEJ：October 2017 © IEEJ2017

Benefits of U.S. LNG exports
 Largescale resource base with strong
Government support for exports 70+ flexible U.S. cargoes per month by 2020 underpinning growing industry liquidity

Tcf
3000
2000

2691

3141

2202

2080
1532

1000
0

Cargoes / Month

80
2884

30

US Cargoes /month (Left Axis)

60

25

No of companies
lifting US LNG(Right Axis)

40

20
15
10

20

5

0
2006 2008 2010 2012 2014 2016
Non-shale
Shale
EIA Proved Reserves

 Diversification from oil indexation0

No. of FOB Customers

U.S. Supply & FOB Customers (2)U.S. Future Supply of Natural Gas (1)J A J O J A J O J A J O J A J O J A J O

2016

2017

2018

2019

2020

 Inter-project competition driving innovation

LNG Contracts by Price Index (3)
400

mtpa

300

Henry HubEurope gas
HybridOil
LNG demand

LNG trade
forecast
HH index200
Mid-scaletrainsOil index
100
0
2000

2005

2010

2015

2020

2025

Visualization of possible mid-scale trains at Corpus Christi - Source: Cheniere

U.S. LNG driving change in the industry
37

Source: (1) Potential Gas Committee, 2017; EIA (Proved Reserves), (2) Cheniere Research, Primary FOB Customers Only, 100% UF, 170,000 cm vessel(3) Cheniere interpretation of Wood Mackenzie data (Q1 2017)

IEEJ：October 2017 © IEEJ2017

Destination of Sabine Pass Cargoes
Since Start Up, More than 190 Cargoes Loaded and Delivered to 25 Countries

London, U.K.
Poland, Lithuania,
Netherlands,
United Kingdom

Washington, DC

Beijing, China
Portugal,Spain

Dominican
Republic

Italy, Malta,
Egypt, Turkey,
JordanTokyo, Japan
China,
TaiwanKuwait,UAE,
Pakistan

MexicoHouston, TX

MENA
15%
BrazilSantiago, Chile

Singapore

ASIA
30%

Argentina

Sabine Pass Exports By
Destination Region

Cheniere Office(Since Startup(1))

Cargo Delivery Destination

Sources: Cheniere Research, Kpler
MENA – Middle East – North Africa

EUROPE
14%

India,
ThailandLATIN
AMERICA
41%

Chile

Cheniere LNG Facility

Japan,South Korea(1)Date reflects cargo loading date until

September 28 , 2017, representing all cargoes that have loaded and discharged.

IEEJ：October 2017 © IEEJ2017

LNG Trade Figures H1 2017
Regional imports balance H1 2017

Growth by Supply Country H1-2017 (YoY)(Year-over-year)

8

7.08

mtpa

16.0
16

4
1.55

2
13.1

1.43
0.67

0
UAE

Oman

Malaysia

Nigeria

AngolaGrowth by Import Country H1-2017 (YoY)
6
4.9

Top 4 growth

Bottom 4 growth

4.2

mtpa

4

4

3.1

3.0

3.3
Spain
Italy
Portugal
France

2

2

0
-1.8

-0.6
-2.1

UK

-4
S.Korea

M.Europe

N.America

-0.4

-2

M.Europe

Source: Waterborne IHS data, delivered volumes

-0.3

Japan

-4

Lat Am

Asia

MENA

-2

Supply0Brazil

0.1

China

-0.7

N.Europe

0.5

Lithuania

639-0.60 -0.80 -0.86

8

Argentina

mtpa

10

US

Australia-2

Norway12Indonesia-0.02 -0.06

Trinidad

14

Bottom 5 growth

5.59

6

18

Top 5 growth

IEEJ：October 2017 © IEEJ2017

Global Gas Prices (as of 10/10/2017)
Q4 ‘17

Q1 ‘18Cal. ‘18

Brent$56 /bbl$56 /bbl$56 / bbl

JKM

$7.72

$8.60

$6.95

TTF

$6.21

$6.36

$5.97

HH

$2.99

$3.19

$3.02

25

Asia
Spot
LNG
20

Asia L-T
Contract
Proxy

Forward Curves
15$/MMBtu15

Oil parity
10

10

TTF
5

5

Henry Hub

0
2014

2015

2016

2017

2018

2019

Note: Asia L-T Contract Proxy = 14.85% Japan Crude Cocktail (3-month average)+ $0.50/MMBtu; same formula is used with Brent crude oil prices for forward curves

40
Source: Bloomberg, CME, ICE, Platts, Japan Ministry of Finance, Cheniere Research

IEEJ：October 2017 © IEEJ2017

Global LNG balance – 2015 to Aug 2017
Rising supply not yet
overflowing into N. Europe

Incremental imports since 2014
Others +ve

8

China
Egypt

7

India

Supply:Australia + US

Jordan

6

Pakistan+100
MT

MT/month

Spain
Thailand

Where didtheincremental
global supply
go?

5

4

TaiwanUAE
Italy
FranceOthers -ve

3~60 MT
Imports:
UK + Netherlands+ Belgium

1

Brazil
Japan
-20

-10

0

10

MT imported Jan 2015 to Aug 2017
above 2014 levels

0
2015

2016

2017

Source: Waterborne Data, Graph based on Akos Losz/ Teddy Kott – CGEP (2017)
41

-40
MT

South Korea

2

2014

MexicoNote: countries with less than +/-3 mt increment
were aggregated

20

Net
~60
MT

IEEJ：October 2017 © IEEJ2017

10 Ways U.S. LNG is Changing the Global Market
1. Significant new supply source reduces the market power of incumbents
2. Competitive cost sets price marker for new LNG supplies

3. Transparent pricing improves price discovery
4. Destination flexible supply reduces the rigidity of current trade
5. Growth in liquidity will result in development of trading and risk management tools …
6. … and aid the formation of LNG trade hubs in Asia

7. Volume flexibility provides buyers a ‘safety valve’ on supply commitments
8. HH indexed pricing weakens the influence of oil price on the global gas market
9. HH pricing construct reduces pricing volatility
10. Increasing influence of US energy diplomacy

Flexibility

42

Liquidity

Transparency

A more competitiveand resilient tradesystemIEEJ：October 2017 © IEEJ2017

Will a Liquid Hub for LNG Form Over the Next Decade?
Drivers

Inhibitors

 Significant supply at ‘open market’ location(USGC)× Limited buyer-seller alignment LNG & gas hub initiatives in Asia
 New players interested in new instruments Increase in flexible supply
 Any significant disconnect between spot andterm prices

× Current low industry liquidity
× Lack of consensus on location for an Asian LNG
hub• Market access• Deregulated Pricing• Multiple Buyers / Sellers
× Existing long-term contracts
× Established pricing indexes
× Quality constraints
× Storage constraints
× Financing secured through long-term oil indexed/ HH-plus contracts

Inhibitors will likely not stop Asian hubs from forming –but will determine pace and location of hub developments
43

IEEJ：October 2017 © IEEJ2017

Slowdown in FIDs
FIDs per annum
mtpa
Qatar

HiatusAustralia

US

Hiatus

50
45
40
35
30
25
20
15
10
5

Other
Source: Cheniere interpretation of Wood Mackenzie data (Q1 2017)

44

Aus

US

Qatar

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

0

IEEJ：October 2017 © IEEJ2017

U.S. LNG Advantaged by Low Costs
Break-even price at Henry Hub for
North American natural gas resources

Liquefaction plant EPC* costs$3,000
Reported

PlannedGrassroots
Expansion

800 Tcf @ <$3.00/mmBtu = 25
years supply at 2015
production levels

9$2,500Specific EPC Cost (2016 $/tpa)

Average break-even Henry Hub price ($/MMBtu)

12

6

3

0

-3

-6

Australia
FLNG
USA$2,000

Canada$1,500$1,000

$500
-9

-12
0

500

1,000

1,500

2,000

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

FID Date

Tcf*Engineering, procurement and construction costs for liquefaction plant.
Does not include upstream development, pipelines or financing and owner’s costs.

Source: IHS Energy : Shale Gas Reloaded (2016)45

Source: Poten & Partners

IEEJ：October 2017 © IEEJ2017

Long-Term LNG Price Outlook (EIA)
Actual25

2017-18=
forwardcurve

Industry Consultant
Forecasts
Oil

Volatility
Indicator

Range ofprices:2010 - 16

JKM Spot Price

HH

5*midpoint of
range

0
2010

2015

2020

2025

2030

Note: prices are annual averages
Sources: Actuals - Platts, Heren, IPE, Petroleum Association of Japan and Bloomberg (Apr 2016); Forecasts – EIA, Wood Mackenzie, IHS CERA, and PIRA (2016)

46

2035

JKM

10

Oil Linked LNG*

15

US
LNG

$/mmBtu (nominal)

20

IEEJ：October 2017 © IEEJ2017

Benefits of US LNG for Asian Buyers
 Price competitiveness Largescale, low-cost gas resource HH-plus price structure De-linked from oil Price stability
 Reduced volatility from fixedcomponent

 Buyer control
 Destination flexible volumes tomanage demand uncertainty
 and / or build trading platform Reliability Largescale, nationwide resource
base

47

Sabine Pass First Cargo: 24th Feb 2016

IEEJ：October 2017 © IEEJ2017

New LNG Market Realities

New market
realities …

Fragmenting /Evolving market
place… will require
new commercial
solutions …

… but will also haveto be financeable
48

Globalising /Commoditisingindustry – with
regional nature

New contract
structures:
price index, term,
flexibility

Supplier challenge:
how to lower cost,
innovate &create new markets

IEEJ：October 2017 © IEEJ2017

Summing Up
 Flexible U.S. LNG ramping up and responding to global market signals
 U.S. LNG has already changed the industry. Providing buyers with;
 Price diversification and transparency
 Destination flexibility
 Increased supply availability and market competition
 A sustainably low-cost supply over the long-run

 And is set to drive further change Growing liquidity / hub formation / price discovery
 Resulting in a more competitive and more resilient trade system

 Buyers can enjoy and capitalize on these functions of U.S. LNG in a direct manner But Buyers and Sellers will have to work together to achieve the commercial bargain
required to bring on new supply under current low-price conditions
 Cheniere able to move quickly to expand its platform with two permitted brownfieldtrains, plus enough land at both sites to allow for significant further expansion
49

IEEJ：October 2017 © IEEJ2017

Thank You50

Contact :report@tky.ieej.or.jp