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Jordan Cove LNG

LNG Development in a Low


Oil Price Environment
Vern Wadey
Vice President, Jordan Cove LNG LLC, Veresen Inc.

2015 Petrochemical Conference


June 7 9, 2015

Forward-looking information advisory


Certain information contained in this presentation constitutes forward-looking information under applicable Canadian securities laws. All
information, other than statements of historical fact, which addresses activities, events or developments that we expect or anticipate may or will
occur in the future, is forward-looking information. Forward-looking information typically contains statements with words such as "may",
"estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or
outlook. Forward-looking statements in this presentation include, but are not limited to, statements with respect to: the ability of Veresen to
recognize synergies between Ruby and the Jordan Cove LNG project, the cost estimate, timing of, and our ability to successfully obtain
regulatory approvals for Jordan Cove LNG and the Pacific Connector Gas Pipeline, the timing of decisions to proceed with construction of, and
the in-service date of Jordan Cove LNG and the Pacific Connector Gas Pipeline and sources of gas supply to feed Jordan Cove LNG and the
Pacific Connector Gas Pipeline.
The risks and uncertainties that may affect the operations, performance, development and results of our businesses include, but are not limited
to, the following factors: our ability to successfully implement our strategic initiatives and achieve expected benefits; levels of oil and gas
exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of
capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange
and interest rates; our ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and
regulations; competitive factors in the pipeline, NGL and power industries; operational breakdowns, failures, or other disruptions; and the
prevailing economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect our
operations or financial results are included in our filings with the securities commissions or similar authorities in each of the provinces of
Canada, as may be updated from time to time.
Although we believe the expectations conveyed by the forward-looking information are reasonable based on information available to us on the
date of preparation, we can give no assurances as to future results, levels of activity and achievements. Readers should not place undue
reliance on the information contained in this presentation, as actual results achieved will vary from the information provided herein and the
variations may be material. We make no representation that actual results achieved will be the same in whole or in part as those set out in the
forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and, except as
required by law, we do not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new
information, future events or otherwise. We expressly qualify any forward-looking information contained in this presentation by this cautionary
statement.

Veresen Inc.: A strong and diversified portfolio of


energy infrastructure assets
Publically traded (TSX: VSN) company with a market cap of $7 billion and
earnings and cash flow reflecting the reliable, consistent performance of an
energy infrastructure business model
Significant Development Activities:
Alliance Re-contracting (50% ownership):
Rich gas transportation contracts post 2015
and 2020
Ruby Pipeline (50% ownership): Located
to serve California and Jordan Cove LNG
Veresen Midstream (50% ownership): $1.5
billion western Canada gas processing
assets. Growth prospects to $5 billion with
Encana & CRP (Encana & Mitsubishi)
Jordan Cove LNG and Pacific Connector:
Strategic infrastructure to export Canadian
and U.S. natural gas supplies to Asia
3

Creation of a world-class LNG project management team


Jordan Cove LNG Project Management Team, with significant LNG experience,
led by Betsy Spomer, President and CEO of Jordan Cove LNG
Financing and Execution
Target appropriate capital/markets for
the Project
Develop financing plan based on
Project specifics
Full preparation of materials / financial
modeling required

Regulatory
Compliance with all relevant permits
Review of regulatory strategy to ensure no
permitting delays with the development

Customers/Commercial Agreements
Optimal customer credit quality and mix
Financeability of commercial agreements

EPC

Appropriate risk sharing

LNG and facility technology reviewed


and approved

O&M
Suitable O&M plan and structure
Comprehensive O&M service agreement to the Project
LNG/Cryogenic experience and hiring plans
Training and handover procedures from the EPC
contractor
4

Appropriate EPC contract form


(Performance wrap LDs, contractor
liquidity, etc.)
Ability of EPC contractor to provide
security package and deliver project

Jordan Cove LNG: project components

Terminal and pipeline facilities filed for construction with FERC


Terminal: Jordan Cove LNG

Pipeline: Pacific Connector

6 mtpa facility (phase 1)

expandable to 9 mtpa (later date)

400+ acre site includes:


marine facility;
two 160,000 m3 LNG tanks;
four 1.5 mtpa liquefaction trains;
two gas treating facilities; and,
420 MW power plant.

Ownership: 100% Veresen

Liquefaction

Power Plant

Design capacity of ~1 Bcf/d for 6 mtpa


LNG terminal requirements

expandable to 1.5 Bcf/d (later date)

232-mile, 36-inch diameter pipeline (1,440


psig MAOP)

Ownership: 50% Veresen; 50% Williams

Gas supply diversification and existing pipelines are


Jordan Coves most unique benefits
Gas supply sourcing from both
Canada and the United States
Existing infrastructure accesses
Western Canada Sedimentary Basin
and U.S. Rockies

Horn
Cordova / A L B E R T A
BRITISH
COLUMBIA Muskawa

TransCanada

BC / Alberta
Montney

Spectra

Western
Canada Basin

Duverney

Flexibility in gas purchases


Use of marketing and trading
companies

Contract purchase with producers


JV for gas reserves in the ground

AECO HUB

Fortis

Alberta / Sask
Bakken

GTN

Sourcing gas supplies by electronic


trading platforms
Change and alter gas purchases /
sources at any time

SASKATCHEWAN

Alberta
Deep Basin

Jordan Cove

US
Rockies
Powder
Big Horn
River Basin

OREGON IDAHO

Malin Hub

Pacific
Connector
PG&E

Kingsgate
Border Point

RUBY Pipeline OPAL Hub

CALIFORNIA

Source: Veresen map files

MONTANA
WYOMING

Green Wind
River River

NEVADA

Uinta
UTAH

WIC

Denver /
Julesburg

Cheyenne Plains

Piceance

COLORADO

Raton
6

CIG

Jordan Coves benefit to Western Canada and the


Alberta Petrochemical industry

AEGS is a significant service provider to the Alberta petrochemical industry


Retains use of Western Canadas
significant, existing natural gas
infrastructure
Promotes efficient use of gas gathering and
processing, field NGL extraction, significant
regional gas pipeline systems
Maximizes use of the NGTL west
transmission system and west straddle
plants

Encourages natural gas production


Gas flows through the west-leg delivery
system, for use at Jordan Cove LNG,
contributes upwards of an incremental
20,000-25,000 bbl/d of ethane feedstock to
Albertas petrochemical industry at Fort
Saskatchewan and Joffre

Globally, natural gas is becoming the dominant energy


LNG is outpacing global gas industry growth and justifying new, large scale
capital expenditures
Global shares of
primary energy %

2013 Global GAS consumption

LNG as a share of Global Gas (%)

Approximately 323 Bcf/d

450 MTPA Projected by 2025

International
trade ~ 31%

25%

10%

20%

LNG
15%

Gas

21%

Pipeline

69%

Domestic
consumption

10%
5%

Source: Actuals: BP Statistical Review of World Energy 2014


Outlook: Wood Mackenzie (2015)
8

2025

2020

2015

2010

2005

2000

1995

1990

1985

1980

1975

1970

0%

Global LNG buyers seeking new, reliable, price


competitive, LNG sources

Plentiful amounts of natural gas, sourced from all regions of North America

Source: Geological base map by PacWest Consulting

Multiple facilities proposed within North America.


1.) Listed by BC Government; 2.) Potential, Proposed, or Approved by FERC
Pacific NW LNG
Prince Rupert LNG
Kitsault LNG
Stewart Energy LNG
Kitimat LNG
Douglas Channel LNG
Cedar LNG
LNG Canada
Discovery LNG
Steelhead LNG

WCC LNG
Watson Island LNG
Aurora LNG
Grassy Point LNG
New Times LNG
Orca LNG

TOTAL Proposed in Canada: 53.7 Bcf/d


Bearhead LNG
Goldboro LNG

WesPac LNG
Woodfibre LNG

Repsol LNG
Downeast LNG

Oregon LNG

Jordan Cove

Cove Point

TOTAL Proposed in U.S.: 39 Bcf/d


SCT&E LNG
Venture Global
Rio Grande LNG
Port Lavaca
Port Arthur LNG
Annova LNG

Cheniere Corpus Christi


Gulf Coast LNG
Pangea LNG
EOS / Barca LNG
Annova LNG
Texas LNG
10
Source: FERC website and B.C. Government website

Gasfin LNG
Waller LNG
G2 LNG

Cameron LNG

Freeport
Cheniere Sabine Pass
Golden Pass
Next Decade LNG

Main Pass LNG


Torp LNG
Delfin LNG

Elba Island
Louisiana LNG
CE LNG
Gulf LNG
Lake Charles LNG
Trunkline LNG
Magnolia LNG
Live Oak LNG

Timeline reality for first LNG group -- prior to 2021


Regulatory approval and construction timeline is at least 8 10+ years!

In the United States Regulatory approval, developers at-risk dollars, and


existing pipeline infrastructure are key drivers:
Community acceptance and local land use permits
FERC and DOE (and all other related permits and licenses) -- 5 year process
FERC FEIS must be issued before U.S. DOE will consider non-FTA export application
At least $70 - $100+ million at risk, per application, to reach FEIS
U.S. 3 5 year construction build after 5 year regulatory process

In Canada Social License and Economic viability issues are key drivers:
Community acceptance and local land use permits (community and First Nations)
Extensive promotional and resource support by BC Government
Social license issues First nations, tax, environmental and political subjectivity
Facility capital costs must be in line with global competitiveness
5 year construction build after 4 5+ year regulatory, social license process

11

Asia Pacific Buyers are attracted to the characteristics


and price of U.S. tolling models
Tolling models provide a direct connection to North American gas prices and
provide customers with both commodity control and destination flexibility
Tolling arrangements lock in the cost of infrastructure
about 60% of overall costs are locked-in, with only gas commodity costs floating
Traditional JCC and / or LNG Sales Agreements have 100% of infrastructure and commodity costs floating
with oil prices

Control over gas purchase and pipeline transportation strategies supply diversification (Henry
Hub, Opal, AECO)
U.S. Gulf Coast brownfield tolling models have set LNG price targets for the first wave of LNG from
North America before 2021
LNG delivered to Japan, at approximately $10.25 $10.75/MMBtu, based on $4 Henry Hub Gas
LNG clearing price is based on U.S. / Canadian commodity gas price, pipelines, liquefaction infrastructure
cost, and cost of shipping to Asia regas facility
Traditional LNG JCC or Sales & Purchase Agreement price
Gas Production & Gas
Sales / Marketing to
liquid Hub

Pipeline / Liquefaction /
LNG Storage / Customer
Capacity

Pacific Connector
Gas Pipeline
12

Jordan Cove LNG

LNG Transportation /
Interim LNG Storage

Regasification/
Pipeline / Gas Storage

Gas Marketing /
Transportation and
Distribution

Liquefaction tolling model infrastructure is priced


independent of traditional JCC oil-linked LNG pricing
AECO and OPAL gas prices, via Jordan Cove, are very competitive with USGC
LNG pricing alternatives
22.50

JCC LNG cost

$100
15.00

$80

12.50

Asia Spot LNG

$60
U.S. LNG delivered cost to
Japan, based on current
$2.50/MMBtu gas cost at
Malin Hub

10.00

7.50

5.00

2.50

Malin Hub gas cost

0.00

2011

2012

2013

2014

JCC
Source: Wood Mackenzie, ICIS, Poten & Partners
Note: Japan shown as example destination

13

Future Cost
of JCC oillinked LNG
prices???

17.50

US$/MMbtu

Delivered LNG into Tokyo Bay

20.00

2015

Malin Hub

2016

Asia spot

2017

2018

Future
Cost of
Malin Hub
Natural
Gas???

Shipping distance and logistics from the U.S. west coast


is a competitive advantage over the U.S. Gulf Coast
TransCanada
Alberta
Prince Rupert
/ Kitimat

Spectra /
Fortis
AECO Hub

~9 shipping
days to Asia
GTN

Kingsgate

Jordan Cove

~9 shipping
days to Asia
(4300 nmi)

Malin Hub
Pacific
Connector

Ruby
Pipeline

Opal Hub

Australia LNG
~7 to 9 shipping days
to Asia
(3100 - 4300 nmi)

Source: Terminal websites, DOE; Japan as comparative market

14

USGC LNG
~9 shipping days
to Europe
USGC LNG
~22 shipping days to Asia
(9200 nmi) plus Panama
Canal Costs

Jordan Coves capital cost estimates rank well with


other global LNG facilities
Jordan Coves LNG shipping advantage offsets slightly higher capital costs
versus U.S. Gulf Coast brownfield sites

Jordan Cove

15

Source: Gas Strategies

A handful of large-scale LNG export facilities will


be in-service prior to 2021

Post 2021, economic expansions of these facilities are likely (DOE study
examining 12 20 Bcf/d export limit )

BC west coast LNG


Developments

LNG export capacity from Canada and U.S. in 2021: 11 13 Bcf/d


Jordan Cove
Cove Point

Sabine Pass
Freeport
Corpus Christi
16

Source: Terminal websites, DOE; Japan as comparative market

Cameron

Thank you!
Vern Wadey
Vice President, Veresen
+1 403 213-3639
vwadey@vereseninc.com

www.vereseninc.com
www.jordancovelng.com