Natural Gas World Market Is Coming Of Age? George H.B. Verberg President International Gas Union GASTECH, Bilbao, March 2005

Long Ago....... Natural Gas Was Used To ....... predict the future of gods and mankind.... Apollo temple Delphi, Greece 04/12/2018 GASTECH, Bilbao, March 2005

Not That Long Ago…..:The Gas Industry Started To Serve The Customer! 04/12/2018 GASTECH, Bilbao, March 2005

Since than demand has been growing: incremental demand of natural gas till 2010 and 2020…. largest liquefaction train: 7.8 mtpa (Qatar) 148 60 (2002 - 2010) (2002 – 2020) 04/12/2018 GASTECH, Bilbao, March 2005

Important driver for natural gas growth: Power Generation (global) TWh Fuel market-shares in power generation IEA weo 2004 04/12/2018 GASTECH, Bilbao, March 2005

CO2 emission from power plants spread due to type of coal (lignite/hard coal) and technology (old/new-high-efficiency) CCGT when wind is low Sources: life-cycle assessment of electricity generation systems and applications for climate change policy analysis, Meier, 2002, published on website Nuclear Energy Institute; own data; IEA 04/12/2018 GASTECH, Bilbao, March 2005

Costs in the LNG chain Average price per ship ($ million) 8 5 6 7 9 10 11 1989 1991 1993 1995 1997 1999 2001 2.5% p.a. Upstream costs ($/boe) Liquifaction costs transformed ($ per ton of capacity) From a presentation by BP (february 2003) 04/12/2018 GASTECH, Bilbao, March 2005

Middle East LNG—Setting a New Global Cost Benchmark ($ per MMBtu) Source: Cambridge Energy Research Associates. 31001-10 04/12/2018 GASTECH, Bilbao, March 2005

Natural Gas in a Liberalised Market: Spot Prices USA Fluctuerende Bron AGA 04/12/2018 GASTECH, Bilbao, March 2005

LNG prices Japan, USA, EU US gas & oil prices (EIA) Report IEEJ 2003 04/12/2018 GASTECH, Bilbao, March 2005

LNG trade history and perspectives 15 Bcm LNG trade as % of total gas market 11 8 6 History (CEDIGAZ) Forecast (IEA weo 2004) 04/12/2018 GASTECH, Bilbao, March 2005

Five fundamentals for the sound development of the gas industry SAFETY and Reliability of Infrastructure and Appliances, Security of Supply, Competitive Pricing, Clear Regulatory Framework Indiscriminately by Nature and in Execution, Sustainability! 04/12/2018 GASTECH, Bilbao, March 2005

Importer’s security of supply and LNG Importers like to diversify their supplies; the only cost-effective way to cope with the security of supply issue, Also suppliers like to diversify their sales portfolios; Some 9% of LNG sales are at present spot-sales, and it is expected to grow to some 20% in the coming years. 04/12/2018 GASTECH, Bilbao, March 2005

Importer’s security of supply and LNG (2) Growing LNG trade will enable price arbitration, so prices in the demand regions become more and more inter-linked, it will take time: >5 years The growing LNG spot market enhances flexibility and competition, at the same time it is an essential tool for the big gas suppliers to push gas prices in the desired direction (a reliable supplier cannot close the valve for a LT-gas contract, but he can do for spot supplies) Long term contracts will remain Europe’s backbone for pipeline gas and LNG; 04/12/2018 GASTECH, Bilbao, March 2005

International LNG trade: connecting markets 04/12/2018 GASTECH, Bilbao, March 2005

How to diversify further in Europe ?! 2000 km 3000 km 4000 km Yamal Central Iran sif 04/12/2018 GASTECH, Bilbao, March 2005

Structure of the (world)gas market changes.. Russia no longer confined to serve Europe: China and the Pacific Rim and the US are within their reach; Middle East suppliers will ship their LNG to wherever; Algeria, Trinidad Tobago, Nigeria serve both sides of the Atlantic Basin; China sources around the globe (Iran, South America, Australia…) India imports LNG but wants also pipeline gas (Iranian gas via Pakistan) 04/12/2018 GASTECH, Bilbao, March 2005

So for Many Decades to Come... Enough natural gas, but Regions of demand are NOT the regions with reserves, so A lot of long distance transportation and transit, Through many countries or narrow sea straits And production areas are more and more difficult and costly 04/12/2018 GASTECH, Bilbao, March 2005

The best supply is the saved m3, What About the Climate..? The best supply is the saved m3, 04/12/2018 GASTECH, Bilbao, March 2005

GAS: Triennium 2003 - 2006 Powers the People Preserves the world Promoted by IGU BUSAN,S-Korea,May 23-25,2005, 7th Congress on Information Technology in Energy AMSTERDAM, June 5-9,2006 WORLD GAS CONFERENCE 04/12/2018 GASTECH, Bilbao, March 2005

INTERNATIONAL GAS UNION covers >95 % of world gas sales ‘spokesman’ of the gas industry www.IGU.org Non Members Membership from 67 countries and 18 Associated Members 04/12/2018 GASTECH, Bilbao, March 2005

23rd World Gas Conference and Exhibition Thank you See you in Amsterdam! 23rd World Gas Conference and Exhibition June 5 – 9 2006

04/12/2018 GASTECH, Bilbao, March 2005