LNG Market Outlook

PIP Annual Conference Islamabad April 2011

About Vitol
Vitol is the worlds largest independent oil and gas trading company 44 consecutive years of profitable operations Revenues of $190 Billion in 2010; nearly 400 million metric tonnes of physical product delivered Upstream assets across Central Asia, West Africa, and the Philippines Pipeline gas portfolio in Europe and the USA, and a global LNG portfolio Over 5,600 ship charters per annum - the worlds largest spot charterer Major oil terminal owner/operator, with over 8.5 million cubic metres of capacity in operation and under construction Owner of two oil refineries: in UAE and Belgium
50

Volumes (million tonnes)

450 400 350 300 250 200 150 100 50 0 2001
250

2002

2003

2004

2005

2006

2007

2008

2009

2010

Revenues (Billion US dollars)

200

150

100

Numerous successful partnerships with private and public sector companies

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Page 2

Vitol LNG
Vitol started marketing and trading LNG in 2005 and is currently the largest independent LNG trader / marketer Term supply and spot sales into Europe, Asia, India, Turkey, and Kuwait Extensive supply relationships with LNG producers in the Atlantic, Mediterranean, Asia and the Middle East Spot and term capacity at key LNG receiving terminals LNG business is integrated with US and European gas businesses, complementing storage and crosscommodity pricing Extensive ship chartering and fleet operation Developing select LNG investments in liquefaction and regasification

Page 3

Medium-Term LNG Balances (Post-Japan tsunami)

Annual Balance (BCM)
2010
Exports Asia Middle East N America S America Africa Europe Total Imports Asia Middle East N America S America Europe Total 108 102 1 23 58 5 296 178 3 20 10 87 297

2011
110 129 0 27 64 5 334 193 5 23 14 94 329

2012
112 132 0 27 71 5 347 200 5 25 15 97 341

2013
110 132 0 27 76 5 350 213 5 27 17 100 361

2014
112 132 0 27 85 5 360 224 5 28 18 104 379

2015
132 131 0 27 85 5 381 241 5 29 20 109 404

2016
165 131 0 33 85 5 420 255 4 30 22 113 424

Difference

-1

-11

-19

-23

-4

Market is expected to tighten, even if Page 4 all projects completed on time

Medium-Term Asian LNG Demand

Projected Asian LNG Import Requirements (BCM)
Probability: Volume: Existing Importers: China Importing India Importing Japan Importing Korea Importing Taiwan Importing Total New Importers: Thailand Malaysia Singapore Bangladesh Pakistan Indonesia Vietnam Total High High High High Medium High High 6.8 4.7 4.7 5.5 4.7 4.7 1.4 38.4 Start: Q3-11 Q3-12 Q2-13 Q1-13 Q4-14 2014 2015 2010 12.9 12.1 94.3 44.1 14.8 178.3 2011 16.5 13.7 100.1 45.9 15.9 192.0 1.5 2012 19.2 13.2 100.0 47.1 16.5 195.9 3.0 0.5 2013 24.9 13.2 101.5 48.3 17.1 205.0 4.0 1.0 1.5 1.0 2014 27.3 14.8 102.5 49.5 17.5 211.6 5.0 1.5 2.0 2.0 0.5 1.0 12.0 2015 33.6 17.2 103.5 50.8 18.0 223.1 5.5 2.5 2.5 3.0 2.0 2.0 0.5 18.0 2016 36.7 19.8 104.5 52.0 18.5 231.5 6.0 3.0 3.5 4.0 3.0 3.0 1.2 23.7

0.0

1.5

3.5

7.5

Total Asia Demand

178.3 193.5 199.4 212.5 223.6 241.1 255.2

Page 5

Global LNG Production Outlook

Projected LNG Liquefaction Capacity (BCM)
450 425 400 375 350 325 300 275 250 225 200 2009 2012 2015 2008 2010 2011 2013 2014 2016
Existing Production UnderConstruction Medium Probability

High Probability

Page 6

Global LNG Production Outlook

Regional LNG Supply Developments (BCM)
450 400 350 300 250 200 150 100 50 0 2006 2009 2012 2015 2005 2007 2008 2010 2011 2013 2014 2016
Algeria Australia Brunei Indonesia Malaysia Nigeria Oman Qatar Trinidad UAE Others

Page 7

Outstanding Issues
Supply
Maintenance Unknowable Supply Disruptions (Unrest / Weather) Start Dates Of New Capacity Incremental Capacity Creep / Field Maturity Do Producers Max Output? Gas OPEC?

Demand
Price Impacts / Relative Price Against Other Fuels Competition / Supply Constraints From Other Fuels Contract Considerations Weather / Natural Disasters Economic Activity Long Term > Govt Mandates / Efficiencies Regas > Increasingly Short Lead Times
Page 8

Pricing
Currently there are three regional pricing markets: Asia (oil indexed) North America (Henry Hub pricing) Europe (mixed: NBP, Henry Hub, oil) Will there ever be global price convergence? North America is still an island: geographically, and logistically, leading to a regional pricing basis In Asia, alternative power feedstock is oil European contracts vary Emerging Middle East market (e.g., Dubai, Kuwait) attempting to avoid oil-based pricing, with mixed results
Page 9

Focus on Middle East LNG imports

Growing regional demand for LNG Originally planned as a short-tomedium term solution, but could become permanent part of energy mix New projects under development in Bahrain, Bangladesh Logistics for Arabian Gulf suppliers can be attractive, but ultimately the LNG will go to the markets with the best netback to the producers
Middle East: LNG Imports (Mln Tons)
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Aug Feb Jun Jan Oct Jul Nov May Mar Dec Sep Apr
2008 2010 2009 2011

Page 10

What does this mean for Pakistan?

Acute energy shortages today, partly a result of declining domestic gas fields All options seem to be under consideration: Conservation / efficiency efforts Domestic exploration and production Pipeline imports from Iran and Turkmenistan Domestic and imported coal Renewables, e.g., wind Import more petroleum products Import LNG

Page 11

LNG imports for Pakistan

Recent history: LNG Policy of 2006 setting the framework for LNG imports Mashal integrated project started in 2007 but aborted in 2011 Fast track LNG project started and stopped in 2009 Today: potential new government-led project, plus several private sector initiatives Important considerations: The LNG market is tight and will tighten further over next 5-7 years A straightforward technical and commercial structure will attract greater interest from experienced international companies and governments Counterparty (ies) must have the ability to underwrite LNG terminal tariff and LNG supply. For a 2 million mtpa project this could reach 1.4 1.8 billion USD per year
Page 12

THANK YOU
PIP Annual Conference Islamabad April 2011