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From LNG to unconventionals: the North American story and global potential Platts LNG Conference February 24,
From LNG to unconventionals: the North American story
and global potential
Platts LNG Conference
February 24, 2011
Amber McCullagh
www.woodmac.com From LNG to unconventionals: the North American story and global potential Platts LNG Conference February

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Expectations about the role of LNG in the US market have changed rapidly, reflecting two key
Expectations about the role of LNG in the US market have changed rapidly,
reflecting two key factors—one much discussed and one overlooked
US production
US LNG imports
80
16
70
14
60
12
50
10
40
8
30
6
20
4
10
2
0
0
Conventional
Tight
CBM
Shale
2007 forecast
2010 forecast
2007 forecast
Source: Wood Mackenzie NAGS
Source: Wood Mackenzie NAGS
2000
2002
2004
2006
2008
2010
2012
2014
bcfd
2016
2018
2020
2022
2024
2008 2010 2012 2014 2016 2018 2020 2022 2024
bcfd
www.woodmac.com Expectations about the role of LNG in the US market have changed rapidly, reflecting two

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Production costs in highly productive shales fell rapidly, as operators gained expertise and optimized production techniques
Production costs in highly productive shales fell rapidly, as operators gained
expertise and optimized production techniques
Marcellus drilling and completion costs
Haynesville rig and well productivity
20
80
Data
10
acquisition
1200
Facilities
Pad
16
70
1000
Drilling
8
Multi
Completion
800
12
60
techniques
6
600
8
50
4
400
Woodford
4
40
2
200
0
30
0
0
2007
2008
2009
2010*
Q1
Q2
Q3
Q4
Q1
Q2
2009
2009
2009
2009
2010
2010
Average D&C Costs
Horizontal Wells
Average 30-day IP rate
Spud-to-spud drilling time
*Based on data from 9 operators
Source : Pennsylvania DEP, Operator Reports
Source: Wood Mackenzie NAGS
D& C Costs ($MM)
Ho rizontal Wells
mmcfd
Days
www.woodmac.com Production costs in highly productive shales fell rapidly, as operators gained expertise and optimized production

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But just as important, oil prices rose significantly, pushing up global oil- linked gas prices Gas
But just as important, oil prices rose significantly, pushing up global oil-
linked gas prices
Gas forward curves
Oil forward curves
9
20
8
18
16
7
14
6
12
5
10
4
8
3
6
2
Woodford
4
1
2
0
0
Feb. 2007
Feb. 2011
Feb. 2007
Feb. 2011
Source: Nymex
Source: Nymex
Mar-11
May-11
l-11
Ju Sep-11
Nov-11
Jan Mar-12
-12 May-12
$/mmbtu
l-12
Ju Sep-12
Nov-12
Jan-13
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
S ep-12
Nov-12
Jan-13
$/mmbtu
www.woodmac.com But just as important, oil prices rose significantly, pushing up global oil- linked gas prices

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Now, North American shale gas production is set to grow steeply, and LNG is being remarketed
Now, North American shale gas production is set to grow steeply, and LNG is
being remarketed to surprisingly flexible global gas markets
North American shale production
40
35
30
25
20
15
Woodford
10
5
0
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
Barnett
Fayetteville
Woodford
Haynesville
Marcellus
Eagle Ford
Horn River
Montney & Duverney
Source: Wood Mackenzie NAGS
bcfd
www.woodmac.com Now, North American shale gas production is set to grow steeply, and LNG is being

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And US prices may even be low enough to support LNG exports from the Gulf Coast
And US prices may even be low enough to support LNG exports from the
Gulf Coast or from Canada
Global gas price outlook
14
12
10
8
6
4
2
0
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Henry Hub
AECO
NBP
Oil-indexed Europ ean
Source: Wood Mackenzie NAGS, EGAPS, Global Gas
201
0$/mmbtu
www.woodmac.com And US prices may even be low enough to support LNG exports from the Gulf

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With brownfield economics favoring Gulf Coast exports relative to Kitimat and superior indexation terms favoring Asia
With brownfield economics favoring Gulf Coast exports relative to Kitimat
and superior indexation terms favoring Asia over Europe
LNG exports from Gulf Coast to Europe
LNG Exports from Gulf Coast to Asia
11% Brent; $100/bbl
15% Brent; $75/bbl; Panama Canal exp.
15% Brent; $75/bbl
11% Brent $75/bbl
;
R egasified (E urope): HH + $4/mmbtu
Regasified (Asia): HH + $5.50/mmbtu
Regasified (Asia; Panama Canal):
HH + $4.85/mmbtu
Feedgas
Capital
Commodity
Plant
Shipping
Regas
Feedgas
Capital
Commodity
Plant
Shipping
Regas
price
cost
char ge
losses
price
cost
char ge
losses
Source: Wood Mackenzie
Source: Wood Mackenzie
$ /mmbtu
$ /mmbtu
www.woodmac.com With brownfield economics favoring Gulf Coast exports relative to Kitimat and superior indexation terms favoring

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Beyond exports, could US upstream success be replicated globally? And what would it mean for LNG
Beyond exports, could US upstream success be replicated globally?
And what would it mean for LNG markets?
Europe
Resource: 159 tcf
Production: 0.0 bcfd
N
or
th A
mer ca
i
Resource: 908 tcf
Production: 31.7 bcfd
Asia
Resource: 192 tcf
Production: 1.3 bcfd
Africa
Resource: 83 tcf
October 2010 Global Unconventional Gas Production
Production: 0.0 bcfd
5.5 bcfd
16.1 bcfd
Australia
Middle East
Resource: 71 tcf
Latin America
Resource: 25 tcf
Production: 0.7 bcfd
Resource: 21 tcf
12.1 bcfd
Production: 0.0 bcfd
Production: 0.04 bcfd
Tight Gas
Shale Gas
CBM
Source: Wood Mackenzie Unconventional Gas Service – 2010 resource figures represent only those plays covered
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But infrastructure, labor, and service sector challenges suggest a more moderate development pace than seen in
But infrastructure, labor, and service sector challenges suggest a more
moderate development pace than seen in North America
Unconventional commercialization index
Investment environment
Favorable
Moderate or TBD
Challenging
Resource
Supply
Land
Regulatory and
Country
Potential
Chain
Access
Environmental
North
America
Australia
E urope
China
India
Source: Wood Mackenzie Global Gas Service
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And even in North America unconventional gas development took many years—but global prices are likely to
And even in North America unconventional gas development took many
years—but global prices are likely to be supportive of LNG development
US shale production ramp-up
Unconventional gas breakevens
12
6
10
5
8
Haynesville
4
6
3
Barnett
4
Fayetteville
2
2
0
1
-
North America
Global
Months since first production
$75/bbl; 11% indexation
$75/bbl; 15% indexation
Sources: Wood Mackenzie, state data
Source: Wood Mackenzie (Unconventional Gas Tool)
0 24 48 72 96 120 144 168 192 216 240 264 288 312
bcfd
Fayet teville cellus esvil le
Mar
Hayn Chin a
shale shale shale
Poland Vienna
$/mmbt u
www.woodmac.com And even in North America unconventional gas development took many years—but global prices are likely

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Key takeaways The shift in expectations about the role of LNG in the North American market
Key takeaways
The shift in expectations about the role of LNG in the North American market reflects not just
changes in domestic gas production costs, but also the substantial shift upward in global oil
prices
Land access, infrastructure, and permitting are less supportive of unconventional gas
development globally than in North America, likely meaning a slower pace of development
and higher costs
These constraints are more easily bridged in Asia, and as a result, unconventional gas
production is likely to be much higher in Asia than in Europe, potentially meaning a limited
window for LNG targeting Asian markets—whether coming from the Pacific Basin or from the
Gulf Coast
www.woodmac.com Key takeaways The shift in expectations about the role of LNG in the North American

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Wood Mackenzie Disclaimer This presentation has been prepared by Wood Mackenzie Limited for delivery at the
Wood Mackenzie Disclaimer
This presentation has been prepared by Wood Mackenzie Limited for delivery at the 2011
Platts LNG Conference – Houston – February 24, 2011. It has not been prepared for the
benefit of any particular attendee and may not be relied upon by any attendee or other third
party. If, notwithstanding the foregoing, this presentation is relied upon by any person, Wood
Mackenzie Limited does not accept, and disclaims, all liability for loss and damage suffered
as a result.
The information contained in these slides may be retained by attendees. However, these
slides and the contents of this presentation may not be disclosed to any other person or
published by any means without Wood Mackenzie Limited's prior written permission.
www.woodmac.com Wood Mackenzie Disclaimer This presentation has been prepared by Wood Mackenzie Limited for delivery at

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