Global lng are the dynamicschanging

Global LNG: are the

dynamics changing?

International Petroleum Week ● 17 February 2014

Betsy Spomer, SVP Global Business

Development, BG Group

Methane Shirley Elisabeth LNG vessel

Legal notice

The following presentation contains forward-looking statements concerning BG Group plc’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group plc operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which can be controlled or predicted. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from the guidance given in this presentation for a number of reasons. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the “Principal risks and uncertainties” included in the BG Group plc Annual Report & Accounts 2012. Nothing in this presentation should be construed as a profit forecast and no part of this presentation constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group plc undertakes no obligation to update any forward-looking statements.

No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by BG Group plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it.

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• A world leader in natural gas

• UK FTSE 15 company

• Circa $60 billion market cap

• Operates in over 20 countries

• Leading LNG position

• Long heritage in the LNG

industry

A world leader in natural gas 3

BG Group snapshot

LNG: trade outlook to 2025

4

Global LNG supply (mtpa)

0

100

200

300

400

500

2000 2005 2010 2015 2020 2025

External

LNG trade

forecasts* Supply gap:

~150 mtpa

Supply:

existing

and under

construction Existing

Under construction

2013 to 2025

CAGR(%) = 4.6 to 5.6

Sources: Supply: BG Group interpretation of Wood Mackenzie data (Q4 2013); as of Q4 2013 Yamal LNG not included in under-construction

* Trade: various research house views; (2014): Wood Mackenzie, PFC Energy, IHS CERA, Poten & Partners, FACTS Global Energy,

(2013): PIRA, Gas Strategies

QCLNG Terminal, Curtis Island, Australia

LNG: near-term outlook

LNG today

• 2013 trade = ~240 mt* (~176 bcma)

• ~10% of all gas consumed

• A global trade:

– 17 exporters

– 27 importers

– ~382 ships

• An increasing dynamism:

– 3 new markets added in 2013

– 2012 short-term trade** = 25% of total,

2013 likely to be similar.

– 2013 AB to PB = 22.7 mt* (16.7 bcma)

But still far from commoditized

6 Near-term outlook – supply hiatus and market tightness

*Source: BG Group interpretation of IHS Waterborne data (Jan 2014).

**Source GIIGNL – contracts of less than 5 years

Note: AB = Atlantic Basin, PB = Pacific Basin

LNG market has tightened

7

Source: 2008-2012: BG Group interpretation of IHS Waterborne data (Jan 2014). *Forecast – BG Group outlook 2013

LNG imports by region 2008-15 (mtpa)

0

50

100

150

200

250

300

2008 2009 2010 2011 2012 2013 2014 2015

Total supply

Asia Pacific

Europe

North America

Supply outpacing Asia demand growth Asia demand growth outpacing supply

Market loosening Market tightening

M. East

FORECAST

S.America

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014 2015

$/m

mb

tu

Asia spot LNG price trades

between NBP and oil

8

Asian spot prices have

varied between

European prices (NBP)

and oil parity

Trend expected to

continue

Oil parity

NBP

HH

Asia long-

term proxy Asia spot

Global

recession

Asia

recovery

Fukushima

earthquake

Note: Asia long-term proxy = 14.85% JCC + 0.50

Oil parity = JCC = Japanese average crude price

Source: Platts, Heren, Petroleum Association of Japan and Bloomberg (as of Jan 30, 2014)

0

10

20

30

40

50

60

70

80

90

Austr

alia

Qata

r

Ma

laysia

US

Ea

st

Nig

eria

Ind

one

sia

Tri

nid

ad a

nd

T

Alg

eri

a

Ru

ssia

Ea

st

Om

an

Bru

ne

i

Yem

en

PN

G

UA

E

Ang

ola

Peru

Norw

ay

E.G

uin

ea

Egyp

t

Colo

mb

ia

mtp

a

2018

2013

9 Source: BG Group interpretation of Wood Mackenzie data (Q4 2013 data)

Exporters by rank: 2018

LNG supply - next wave is under

construction

Global LNG imports by region

0

50

100

150

200

250

300

350

2005 2010 2015 2020 2025

Middle East

Other Asia

China

India

JKT

mtp

a

Source: BG Group outlook 2013 – delivered volumes

JKT

China

India

Other

Asia

0

50

100

150

200

250

300

350

2005 2010 2015 2020 2025

Bunkers

Europe

N. America

S. America

S. America

Europe

Pacific Basin Atlantic Basin

10

Europe LNG imports 2010 to 2013

0

2

4

6

8

10

12

Ja

n-1

0

Ja

n-1

1

Ja

n-1

2

Ja

n-1

3

bc

fd

Netherlands

UK

Belgium

Turkey

Spain

Portugal

Italy

Greece

France

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3-month moving average

Main Europe -21.1

North Europe

-9.9

Spain

France

Italy

Turkey Portugal Greece

United Kingdom

Belgium

-35

-30

-25

-20

-15

-10

-5

0

5

mt

2013 vs. 2010

Source: BG Group interpretation of IHS Waterborne data (Jan 2014)

Netherlands

UK as a global balancing market

0

1

2

3

4

5

6

7

8

9

10

2008 2009 2010 2011 2012 2013

bc

fd

12

Japanese

earthquake/tsunami

Qatari

supply to

Middle

East and

Asia

UK LNG

imports

(total)

Qatari

supply to

UK Qatar

Other

Source: BG Group interpretation of IHS Waterborne data (Jan 2014).

Global balance outlook

0

50

100

150

200

250

300

350

400

450

2011 2013 2015 2017 2019 2021 2023 2025

0

10

20

30

40

50

60

70

80

2011 2013 2015 2017 2019 2021 2023 2025

U/C

13

Volumes available for Europe (mtpa) Supply (mtpa)

Existing

Under construction

Global market tight

Supply

Note: European import volumes (residual) resulting

from supply tranches

2012 import level

2011 import level

Europe minimum

(estimated)

Source: BG Group outlook 2013

Note: Yamal LNG added to under-construction

European gas market observations

• 2012 gas demand below 2001 level

• Triple ‘whammy’ at present;

– Low economic growth

– US coal exports

– Renewables targets

• Russian exports to Europe at

record high in 2013

• Europe acting as balancing market

for global LNG

• LNG flexibility helping Europe to

balance

14

LNG: longer term outlook

Gas demand growth driven

by Asia/Middle East

16 Source: BG Group outlook 2013

Global gas demand (bcma)

2.4%

CAGR

0

1000

2000

3000

4000

5000

2012 consumption Production decline Consumptionincrease

New supply requiredby 2025

(bcma)

~9% pa

2.4% pa

17

Global gas supply challenge (2012-25)

Sources: BG Group (2013), BG Group interpretation of Wood Mackenzie

0

50

100

150

200

250

300

350

2000 2005 2010 2015 2020 2025

mtp

a

Strong Asian LNG demand growth

JKT

India

China

Other

CAGR

2000 – 2010

6.2% pa

CAGR

2010 – 2025

6.1% pa


Asia represents 75% of global trade in 2025

18

19

In operation

Under construction

Under Development * Refers to Floating Storage Unit (FSU)

STL Buoy

Brazil

Indonesia

US

Dubai, UAE

Kuwait

Chile

Argentina

Lithuania UK

Puerto Rico

Israel

Italy China

Malaysia

Source: BG Group

FSRU

locations

16 Existing

4 U/C

7+ U/D

* Uruguay

Colombia

India

Lithuania FSRU. Source: www.HöeghLNG.com

*

Jordan

FSRUs – reducing market lead-time

http://www.höeghlng.com/

0

20

40

60

80

100

120

140

2010 2011 2012

Mozambique Reserves announced* (tcf)

* Recoverable – Anadarko, Reserves in place – ENI

1st d

iscovery

1st a

ppra

isal w

ell

2nd d

iscovery

3

rd dis

covery

4th d

iscovery

A rapidly changing supply perspective

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0

50

100

150

200

250

300

2010 2011 2012 2013

8

1 2

3

5 6

14

No. of

filings

Lake Charles filed

BG Group - SP deal

16

12

23

Source: DOE, Press / ENI + Anadarko websites

Note: Excludes applications for under 0.1 bcf/d, and duplicate

applications for same project (Lake Charles, Main Pass, EOS)

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29

US LNG exports Cumulative DOE filings (mtpa)

Key new supplies for Asia

US Gulf Coast

Source Market Distance

Qatar Japan 6,314

Australia Japan 3,683

Egypt Japan 7,573

Other trades (n miles)

W. Canada

Japan

9,282

n miles

Japan

3,940

n miles

21

Japan

6,747

n miles

Asia Pac.

E. Africa

Source: Dataloy (2013)

US LNG exports (2025)

• What will shape the US LNG export profile?

• Initially: license process Later: market appetite, financing, developer capability

• Only circa 10% of proposed US import terminals were finally built

• 60 – 70 mtpa will still make the US the third largest exporter worldwide

22

0

50

100

150

200

250

300

Total applied Local opposition Developercapability

Asian availabledemand*

Other projects** US exportoutlook

Supply

constraints

Market

constraints

Notes

*total un-contracted Asian demand – assuming some contract renewals – 2025

**estimated Asian demand for non-US projects (equity positions, supply diversification)

US exports – cost stacks

23

0

2

4

6

8

10

12

14

16

18

20

$/m

mB

tu (

20

15

)

Regas

Shipping

Toll & Fuel

HH

LT price (Asia)

LT Price (EU)

$70 $100 $130 $70 $100 $130

Asia Europe

0.1485*JCC+0.50

0.11*crude oil

Crude oil price ($/bbl)

DES =

~$11.30 DES =

$9.70

At Bloomberg HH consensus price (August 5, 2013), $4.60 /mmbtu in 2016

Assumptions : Liquefaction Toll = $3.00 + 15% Fuel, Shipping to Asia = $3.00 /mmBtu, to Europe = $1.50 /mmBtu, Regas = BG estimate


0

50

100

150

200

250

300

350

400

450

2011 2013 2015 2017 2019 2021 2023 2025

0

10

20

30

40

50

60

70

80

2011 2013 2015 2017 2019 2021 2023 2025

U/C

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Existing

Under construction

New U.S.

Global market tight Loosening

Supply



US

2012 import level

2011 import level




0

50

100

150

200

250

300

350

400

450

2011 2013 2015 2017 2019 2021 2023 2025

0

10

20

30

40

50

60

70

80

2011 2013 2015 2017 2019 2021 2023 2025

U/C New supply

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Existing

Under construction

New U.S.

BG trade outlook Global market tight Loosening

Supply



US

Additional

supply

2012 import level

2011 import level



LNG costs

• EPC and project costs have

increased rapidly since 2006

• Cost spread is wide post-2006

– By geography

– Within Australia

• Brownfield project - US:

– 9 mtpa = US$5.6* Bn

• Gorgon LNG – Australia

– 15 mtpa = US$54* Bn**

• LNG projects remain capital

intensive

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GRASSROOTS

EXPANSION

FLNG

AUSTRALASIA

US PROJECTS

CANADA PROJECTS

Liquefaction plant EPC costs

*source: public reports

**includes upstream

Source: Poten & Partners

Are the dynamics changing?

But …

• US LNG not a universal solution

• Pricing will remain regional

• Oil indexation will remain important in Asia

• Increasing liquidity is not a given

27 Near-term outlook – supply hiatus and market tightness

Yes

• New suppliers, markets and players

• Increasing flexibility

• New pricing constructs

• LNG as a transport fuel

BG Group LNG market outlook

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‘Illusion’ of a

coming buyer’s

market

New supply will

take longer than

envisaged

Non-US LNG

projects will also

be required

Prices will remain

regionally

differentiated

Majority of volumes

remain inflexible

Substantial demand

upside can absorb

additional supply

Implications for Europe

• Near-term

– Reducing LNG volumes as market tightens

– How low can European LNG imports go?

– LNG imports into the UK will depend upon Qatari behaviour

– Pipeline volumes replacing LNG

• Longer-term

– LNG eventually flows back to Europe as new supply emerges

– But only reaches above 2011 levels by 2021

– LNG import terminals give Europe the option to compete for LNG if required

– Some US exports will end up in Europe – as backstop / balancing market

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Global lng are the dynamicschanging

Investor Relations

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