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Global LNG: New Supplies, Growing Demand Jay Cuclis | Vinson & Elkins LLP March 7, 2012 Jay Cuclis | Vinson & Elkins LLP March 7, 2012.

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Presentation on theme: "Global LNG: New Supplies, Growing Demand Jay Cuclis | Vinson & Elkins LLP March 7, 2012 Jay Cuclis | Vinson & Elkins LLP March 7, 2012."— Presentation transcript:

1 Global LNG: New Supplies, Growing Demand Jay Cuclis | Vinson & Elkins LLP March 7, 2012 Jay Cuclis | Vinson & Elkins LLP March 7, 2012

2 © 2012 Vinson & Elkins LLP LNG Export Terminals 2012 LNG Terminals Operational (34) 2012 LNG Terminals Operational (34) Under Construction/Planned (56) Total (estimated): 90

3 © 2012 Vinson & Elkins LLP LNG Imports by Country (2010) ImporterMmtpa Japan70.6 S Korea34.1 Spain20.5 UK14.2 Taiwan11.6 France10.5 China9.5 India9.3 US8.5 Italy6.7 Turkey5.9 Belgium4.5 Mexico4.4 Chile2.3 Portugal2.2 Kuwait2.1 Brazil2.0 Canada1.5 Argentina1.3 Other1.1 Total Imports223.8 Asia represents >60% of LNG imports

4 © 2012 Vinson & Elkins LLP Asian LNG Markets Lack of sufficient indigenous energy resources has driven LNG demand Japan: Concerns raised by Fukushima have increased focus on LNG Strong government support for LNG purchases New LNG buyers emerging in Asia (e.g., Thailand, Malaysia, Indonesia) Potential for shale gas development in Asia, particularly in China, Indonesia and India

5 © 2012 Vinson & Elkins LLP New Sources of LNG Supply Continuing expansion of the Australian gas supply, including potential shale gas Development of major new gas projects around the world, including in Russia, East Africa, the Mediterranean and South America Emergence of North America as a potential LNG exporter Greater deployment of floating LNG facilities, creating potential to un-strand gas reserves

6 © 2012 Vinson & Elkins LLP Source: Federal Energy Regulatory Commission North American LNG 2005 LNG Import Terminals Operational Import Terminals (4) 2005 LNG Import Terminals Operational Import Terminals (4) Proposed/Planned Import Terminals (55) Total (estimated): 59 2012 LNG Import Terminals Operational Import Terminals (14) 2012 LNG Import Terminals Operational Import Terminals (14) Proposed Export Terminals (10) Existing Export Terminal (1) Total Import Terminals: (14) Total Export Terminals: (11)

7 © 2012 Vinson & Elkins LLP North American LNG Canada Several new LNG export projects under development Canadian gas currently being exported to the US may find better markets in Asia Recent political issues in the US (e.g., Keystone) likely to increase and accelerate Canadian interest in Asian markets United States New shale gas discoveries have vastly increased domestic supply, reducing LNG imports and creating the potential for LNG exports Government approvals needed from DOE and FERC –At least 8 companies currently seeking LNG export rights –To date, one approval for export to non-FTA countries granted by DOE (Cheniere/Sabine Pass) –LNG from Cheniere contracted to be sold to Gas Natural Fenosa, GAIL, KOGAS and BG –Denial of export permit requires finding that exporting LNG would not be in the public interest

8 © 2012 Vinson & Elkins LLP Legal Issues Affecting Supply and Demand Complexity of Project Development Complexity of Project Development Key Sales Terms often Contentious LNG Sales Documentation LNG Sales Documentation Additional Issues Long lead time to develop projects, achieve FID Complex JVs, typically including multiple parties from various countries Government approvals Pricing mechanisms and price reviews Term of contract, volumes committed Transportation terms and LNG vessels Supply source flexibility for seller; destination flexibility for buyer Demand by buyers for equity positions Lengthy period to negotiate, commonly a year or more Some efforts to standardize, but still typically bespoke Legal regimes in new supply sources Sanctions or other political considerations impacting free market flow of natural gas/LNG LNG Supply & Demand

9 © 2012 Vinson & Elkins LLP For More Information, Please Contact Jay Cuclis, Vinson & Elkins LLP James L. Cuclis, Partner Hong Kong +852.3658.6410 Houston +1.713.758.3415 jcuclis@velaw.com Jay's practice involves the representation of clients in international mergers and acquisitions, energy matters, and project development and finance transactions. During the last 30 years, he has worked on transactions in more than 50 countries throughout the Americas, Asia, Europe, the Middle East, and Western Africa, with a particular focus on the energy industry. Jay worked in Europe for five years, in the London office from 1990-1992 and in the Moscow office from 1992-1995. Jay is a member of V&E's Management Committee and serves as Head of the Corporate Department, International Coordinator of the firm's Asia practice, and Managing Partner of the Hong Kong office.


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