As the only option for intercontinental gas trade, LNG is the critical link to globalising gas markets, and to the spread of the benefits of gas. But there is no global gas market as there is for oil, mainly due to the capital intensity of its infrastructure. That certainly applies to LNG, and industry will have to mobilize very large investments to maintain supply security. At the same time, gas markets are in flux. Between unconventional gas, questions over nuclear, and varied renewables policies, the entire business model is in transition.

1. Towards an efficient LNG market inTowards an efficient LNG market in
the Asia ‐ Pacific
Maria van der Hoeven
Executive DirectorExecutive Director
10 September, 2013
© OECD/IEA 2013

2. For gas the Asian century is just
startingstarting
3 000
l
Primary energy consumptionMtoe
2 000
2 500 coal gas
1 500
1 000
-
500
WEO 2012
© OECD/IEA 2013
Asia Europe and USA

3. Natural gas is the key to improving
air quality in Asiaair quality in Asia
Osaka 1965 Osaka 2013
© OECD/IEA 2013

4. Economic growth and energy policies will
i th i t f A i i l b lraise the importance of Asia in global gas
30%
Share of the Asia‐Pacific in global gas demand
20%
25%
15%
5%
10%
0%
2 010 2 015 2 020 2 025 2 030 2 035
WEO 2012
© OECD/IEA 2013
Due to geology and geography, LNG will have to play
a dominant role in supplying Asia

5. The old business model is an
increasing competitiveness burdenincreasing competitiveness burden
18
20
12/MBtu
14
16
$201
Japan (LNG import)
8
10
12
Europe
(German import)
4
6
8
US (Henry Hub)
0
2
1991 1994 1997 2000 2003 2006 2009 2012
y
© OECD/IEA 2013

6. Security issues, depletion and domestic demand
growth lead to tight LNG supply
LNG liquefaction plants
i isecurity issues
declining gas output
surging domestic demand
© OECD/IEA 2013
Supply shortfalls double the market impact of
Japanese demand increase

7. New LNG supply is predominantly
backed by long‐term contractsbacked by long term contracts
140
160
bcm
80
100
120
140
20
40
60
80
0
20
2013 2014 2015 2016 2017 2018
Portfolio LNG The rest of the world Other Asia
Portfolio LNG and secondary re‐exports both play an
increasing role
China Japan Capacity
© OECD/IEA 2013
increasing role

8. Are oil and gas still substitute
products?products?
3 000 Oil and gas fired power generation in the Asia Pacific
Twh
2 000
2 500 oil gas
Twh
1 500
2 000
500
1 000
‐
2 010 2 015 2 020 2 025 2 030 2 035
WEO 2012
© OECD/IEA 2013

9. Is a destination clause still essential
for project financing?for project financing?
© OECD/IEA 2013

10. With non‐conventional technology and new
discoveries, resources will compete for marketsdiscoveries, resources will compete for markets
45%
The proportion of proven reserves projected to be
consumed till 2030
35%
40%
20%
25%
30%
10%
15%
20%
0%
5%
WEO 2007 WEO 2012
© OECD/IEA 2013
WEO 2007 WEO 2012
In 5 years discoveries and reserve additions exceeded
production by 175 years worth of Japanese demand

11. The United States continues to lead non‐
conventional developmentp
 Technological
improvements in
CANADA
Bakken
improvements in
seismic, drilling and
fracking
Antrim
New Albany
Uinta (CBM)
Piceance (CBM)
Powder River (CBM)
UNITED STATES OF AMERICA
Niobrara
g
 “Mass
manufacturing”
San Juan (CBM)
Raton (CBM) Marcellus
Devonian
Utica
Fayetteville
Barnett
Haynesville
Eagle
Monterey
Woodford
Barnett/
Woodford
g
methods in oil field
services
Eagle
Ford
Basin
Shale gas production
This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
MEXICO
 Strong financial
boost from liquids
© OECD/IEA 2013
With US markets saturated, Canadian production growth
depends on LNG exports

12. North America is emerging as a major
exporter
70
80
C t t
BCM
50
60
Cove Point Russia
Contract
signed
30
40
50
DOE
Freeport
Cove Point Russia
Algeria
10
20
30 DOE
Approved
Yemen
Egypt
0
10
Projects with DOE approval or signed export contracts LNG from other countries
Oman
© OECD/IEA 2013
Can Henry Hub+ emerge as a price signal for Asia?

13. Russian gas: the East is the manifest
destiny?destiny?
•Production constrained by EU and domestic demand
•Surging independent production backed by NGLs
Source: Gazprom. Note that political boundaries are not endorsed by the IEA
© OECD/IEA 2013
•Asian exports depend on capital‐intensive infrastructure

14. Facilitating market development
 3rd party access and
unbundling in gas AND
electricity
 Wholesale price
liberalizationliberalization
 Flexible infrastructure
 Encouraging entry of new g g y
supply
 Diversifying the primary
i ( lenergy mix (nuclear,
renewables)
© OECD/IEA 2013
Investment security and producer confidence needs to be maintained

15. Towards an efficient LNG market inTowards an efficient LNG market in
the Asia ‐ Pacific
Maria van der Hoeven
Executive DirectorExecutive Director
10 September, 2013
© OECD/IEA 2013