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PTT Polymer Marketing Company Limited

10 th International PTT Polymer Seminar

Chiang Rai, November 17, 2013Narongchai Pisutpunya

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China Shale GasMarket Outlook

10 th International PTT Polymer Seminar

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Shale Rock likes a SpongeSponge Shale Rock

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Shale Gas Drilling

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Source: Dow Chemical Data book 2011

Now N. America Ethane Has A Significant Advantage

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Global Shale Gas resources

World Shale Gas Reserve = 66 mbpd for 30 years!

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China ranks first in terms of global shale gas reserved

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Its very difficult for China to Develop Shale Gas

China will not be able to replicate the US success because:

(1) Higher production costs, because resources are deeper underground;

(2) China does not have gas piping grid;

(3) China regulated natural gas price;

(4) China does not have technology and

expertise;(5) China does not have sufficient water

resources.

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China production cost cutting

Cost can be reduced by as much as 50% if operators maximize the use of local equipment, technology and engineers.

Chinese Field Engineer is 80% cheaper than the Foreign Engineer

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Its very difficult for China to Develop Shale Gas

China will not be able to replicate the US success because:

(1) Higher production costs, because resources are deeper underground;

(2) China does not have gas piping grid;

(3) China regulated natural gas price;

(4) China does not have technology and

expertise;

(5) China does not have sufficient water

resources.

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Chinas gas pipeline network,

The total length of Chinas natural gas pipeline as of end 2012 was around 50,000 kmand it will be extended to 100,000 Km in the next 5 years!!

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Its very difficult for China to Develop Shale Gas

China will not be able to replicate the US success because:

(1) Higher production costs, because resources are deeper underground;

(2) China does not have gas piping grid;

(3) China regulated natural gas price;

(4) China does not have technology and

expertise;

(5) China does not have sufficient water

resources.

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Chinas gas price reforms Starting in 2011, China has deregulated the pricing of unconventional gases (shale gas,

coal bed methane and coal to gas) to encourage upstream development.

In July 2013, China raised city gate natural gas prices c.15% on average and promised to move prices towards international parity by

end 2015, implying a c.60% rise from current levels.

China started deregulated natural gas price

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Its very difficult for China to Develop Shale Gas

China will not be able to replicate the US success because:

(1) Higher production costs, because resources are deeper underground;

(2) China does not have gas piping grid;

(3) China regulated natural gas price;

(4) China does not have technology and

expertise;

(5) China does not have sufficient water

resources.

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China setup National Energy Shale Gas R&D Centre inAugust 2010

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JV with International Oil Giants to gain Technology

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Its very difficult for China to Develop Shale Gas

China will not be able to replicate the US success because:

(1) Higher production costs, because resources are deeper underground;

(2) China does not have gas piping grid;

(3) China regulated natural gas price;

(4) China does not have technology and

expertise;

(5) China does not have sufficient water

resources.

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Sufficient Water Resource in Shale-Rich Region

Over 50% of water resources are available for use in most shale rich regions

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Its very difficult for China to Develop Shale Gas

China will not be able to replicate the US success because:

(1) Higher production costs, because resources are deeper underground;

(2) China does not have gas piping grid;

(3) China regulated natural gas price; (4) China does not have technology and

expertise;

(5) China does not have sufficient water

resources.

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Nothing is Difficult for the Chinese

China will be able to replicate the US success since:

Production costs

cut

by

50%,

using

local made equipment / local engineers;

China is expanding the gas pipe grid; China has start deregulated natural

gas price; China has several foreign partners

(Shell / Eni / Chevron / ConocoPhillips)

Water is not the issue in Shale Gas

Rich Areas

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Shale gas wells drilled as of end March 2013

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China Shale Gas Production will grow 55-85% pa!

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Sinopec plan 1 MMTPA ethylene cracker from Shale Gas

In June 2013, Sinopec announced its plan to build Chinas first gas based ethylene plant (USD 3bn, with an annual capacity of 1mn tonnes) in Qingdao, Shandong province.

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Conclusion:

China had successfully overcome allthe challenges on Shale GasDevelopment

China Shale Gas Output will grow 55-85% per year and by 2020 China ShaleGas out put will be 60-80 billion cubic

meter (around 20-25% of US shale gasoutput on the same year)

Ethylene cost based on China ShaleGas is also very competitive though theNG price will be double compared to theUSGC NG price.

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