Energy and commodity price benchmarking and market insights

Energy and commodity price benchmarking and market insights London, Houston, Washington, New York, Portland, Calgary, Santiago, Bogota, Rio de Janeiro, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg

European gas and global LNG 5 June 2013 IFIEC Europe Brussels

US shale coal now

bn m³/d US shale coal now, LNG later? Shale drives record US gas production 2,0 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1,0 US marketed gas production

bn m³/d US shale coal now, LNG later? Shale drives record US gas production 2,0 1,9 1,8 1,7 1,6 1,5 1,4 1,3 US marketed gas production

bn m³/d US shale coal now, LNG later? Shale drives record US gas production 2,0 1,9 1,8 1,7 2009 Gustav/Ike 1,6 1,5 1,4 1,3 2005 Katrina/Rita US marketed gas production

bn m³/d US shale coal now, LNG later? Shale drives record US gas production 2,0 1,9 +628mn m³/d 1,8 1,7 2009 Gustav/Ike 1,6 1,5 1,4 1,3 2005 Katrina/Rita US marketed gas production

bn m³/d US shale coal now, LNG later? Shale drives record US gas production 2,0 1,9 or + 2.6 times UK demand each day 1,8 1,7 1,6 2009 Gustav/Ike 1,5 1,4 1,3 2005 Katrina/Rita US marketed gas production

bn m³/d US shale coal now, LNG later? Shale drives record US gas production 2,0 1,9 or + 1.6 times Chinese demand each day 1,8 1,7 1,6 2009 Gustav/Ike 1,5 1,4 1,3 2005 Katrina/Rita US marketed gas production

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 bn m³/d US shale coal now, LNG later? Shale drives record US gas production 3,0 2,5 2,0 1,5 US production 35pc shale in 2012 1,0 0,5 0,0 Dry onshore Associated Coalbed Dry offshore Alaska Tight Shale

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 bn m³/d US shale coal now, LNG later? Shale drives record US gas production 3,0 US production 50pc shale in 2040 2,5 2,0 1,5 US production 35pc shale in 2012 1,0 0,5 0,0 Dry onshore Associated Coalbed Dry offshore Alaska Tight Shale

US shale coal now 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% US electricity turns away from coal Coal Gas Nuclear Renewable Other

US shale coal now 2001 100% US electricity turns away from coal 90% 80% 70% 16pc gas Coal Gas Nuclear renewable other 2012 60% 50% 40% 30% 20% 10% 0% 30pc gas Coal Gas Nuclear Renewable Other Coal Gas Nuclear renewable other

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 Steam coal exports (mn t/yr) US shale coal now 50 45 40 35 30 25 20 15 10 5 0 Net exports 2005 AEO

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Steam coal exports (mn t/yr) US shale coal now 100 90 80 70 60 50 40 30 20 10 0 Net imports 2005 AEO 2013 AEO

Q102 Q302 Q103 Q303 Q104 Q304 Q105 Q305 Q106 Q306 Q107 Q307 Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 US shale coal now EU27 coal import balance SA/US/AUS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Australia South Africa US

US shale LNG later?

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 LNG imports (mn t) US once on course for vast imports 140 120 100 80 60 40 20 0-20 Net imports 2005 AEO

Oregon Bradwood Oregon LNG Portwestward Jordan Cove US once on course for vast imports California Sound Energy Port Esperanza Ocean Way Cabrillo Port Clearwater Port Planned or proposed import projects New England Downeast LNG Quoddy Bay Calais Weaver s Cove Keyspan NY/NJ Crown Landing Blue Ocean Broadwater Liberty Safe Harbor Maryland Cove Point II Sparrows Point 1.4bn m³/d of sendout capacity Texas Vista del Sol Ingelside Port Arthur Port Lavaca Corpus Christi Beacon Point Louisiana Creole Train Cameron II Main Pass Gulf Landing Pearl Crossing Port Pelican Alabama/Mississippi Bienville Compas Point Casotte Landing Gulf LNG Florida/Georgia Port Dolphin Calypso Elba Island III

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 LNG imports (mn t) US once on course for vast imports 140 120 100 80 60 40 20 0-20 Net imports 2005 AEO 2008 AEO

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 LNG imports (mn t) US poised for exports 140 120 100 80 60 40 20 0-20 -40 Net imports 2005 AEO 2012 AEO 2013 AEO

Oregon Oregon LNG Jordan Cove US poised for exports Planned or proposed export projects Maryland Cove Point Georgia Elba Island 725.3mn m³/d of liquefaction capacity Texas Gulf Coast Freeport Golden Pass Corpus Christie Lavaca Bay Louisiana Main Pass Sabine Pass Lake Charles Cameron Mississippi Gulf LNG

US LNG exports, but at what price?

$/mn Btu Exporting US shale, but at what price? US LNG exports must compete on price 12 10 8 6 4 2 0 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 US futures NBP

$/mn Btu Exporting US shale, but at what price? 115pc Nymex commodity cost US LNG exports must compete on price 12 10 8 6 4 2 0 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 US futures +15 pc basis NBP

$/mn Btu Exporting US shale, but at what price? 115pc Nymex commodity cost +$2.85 fixed cost (margin) US LNG exports must compete on price 12 10 8 6 4 2 0 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 US futures +15 pc basis Fixed NBP

$/mn Btu Exporting US shale, but at what price? 115pc Nymex commodity cost +$2.85 fixed cost (margin) +Freight US LNG exports must compete on price 12 10 8 6 4 2 0 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 US futures +15 pc basis Fixed Freight NBP

$/mn Btu Exporting US shale, but at what price? 115pc Nymex commodity cost +$2.85 fixed cost (margin) +Freight US LNG exports must compete on price 12 10 8 6 4 2 0 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 US futures Fixed NBP +15 pc basis Freight Breakeven for DE power, free CO2

Gas prices and the power sector

/MWh Gas prices and the EU power sector Costs and P/L scenarios 2015 80 70 60 50 40 30 20 10 0-10 -20 Real 31 May coal Real 31 May gas Fuel costs CO2 cost Profit/Loss Power price

/MWh Gas prices and the EU power sector Implies CO2 price at 48.75/t At least 10x higher than current prices Costs and P/L scenarios 2015 80 70 60 50 40 30 20 10 0-10 -20 Real 31 May coal Real 31 May gas CO2 balanced coal CO2 balanced gas Fuel costs CO2 cost Profit/Loss Power price

/MWh Gas prices and the EU power sector Implies CO2 price at 48.75/t At least 10x higher than current prices Costs and P/L scenarios 2015 80 70 60 50 40 30 20 10 0-10 Implies gas price at 18.30/MWh -20 Real 31 May coal Real 31 May gas CO2 balanced coal CO2 balanced gas Gas balanced coal Fuel costs CO2 cost Profit/Loss Power price Gas balanced gas

Global shale resources

Global shale resources Trillion m³ EIA April 2011

Australia France Germany Netherlands Norway U.K. Denmark Sweden Poland Turkey Ukraine Lithuania United States Canada Mexico China India Pakistan South Africa Libya Tunisia Algeria Morocco Western Sahara Mauritania Venezuela Colombia Argentina Brazil Chile Uruguay Paraguay Bolivia Trillion m³ Global shale resources Chinese resources estimated to be larger than those of the US 40 35 30 25 20 15 10 5 0 Technically recoverable shale gas resources Trillion m³

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 bn m³/yr China will still require imports Even at target, shale still insufficient to completely close supply gap 50 0-50 -100-150 -200-250 Implied import requirement Shale target

Shale oil more of the same?

mn bl/d US crude production Shale drives rebound in US oil output 300 280 260 240 220 200 180 160 140 120 100 US crude output

mn bl US crude stocks Crude stocks at or near historic highs 250 200 150 100 50 0 East Coast (Padd 1) Midwest (Padd 2) Cushing Gulf Coast (Padd 3) Rocky Mountain (Padd 4) West Coast (Padd 5) 24 May 2013 Observed max

$/bl US-North Sea price spreads WTI v Brent 30 25 20 15 10 5 0-5 -10-15 -20 28-Jun-2007 28-Jun-2008 28-Jun-2009 28-Jun-2010 28-Jun-2011 28-Jun-2012 Brent-WTI

Matthew Monteverde VP Generating Fuels Argus Media London matthew.monteverde@argusmedia.com +44 207 780 4225 Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, ARGUS MEDIA, the ARGUS logo, FMB, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Ltd. Visit www.argusmedia.com/trademarks for more information. Disclaimer All data and other information presented (the Data ) are provided on an as is basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.