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LNG—The Update
Good News and Bad News
GOOD: Still big LNG gains in Canada
BAD: Waiting for catalysts—everything in limbo now
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PROFIT FROM LNG?TODAY’S TALK
The US experience LNG Economics The BC Opportunity
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LNG—THE OPPORTUNITY
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LNG—THE OPPORTUNITY
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US LNG
SEXY, BUT EXPENSIVE!!Valuations now ultra highCash flows 2 years away4-6% yield baked in, lots of debtPositives?
-Asia desperate for supplier competition
-Panama Canal
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CANADIAN LNG STOCKS—
IT’S HAPPENING NOW
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CANADIAN LNG STOCKS—
IT’S HAPPENING NOW
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CANADIAN LNG STOCKS—
IT’S HAPPENING NOW
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LNG PRICING
Source: Kootenay Capital,Calgary AB
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LNG PRICING/SUPPLY COST
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LNG PRICING/SUPPLY COST
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• Liquefaction Plant Capital Costs $2.00 per Mcf– Based on $1,200 mln per mtpa construction costs at 8% cost of capital
• Natural Gas $4.00 per Mcf
• Pipeline Transportation $ .75 per Mcf
• Liquefaction and Refrigeration Costs$ .80 per Mcf
• Plant Maintenance Costs $ .50 per Mcf
• Operational Costs $ .20 per Mcf
• LNG Shipping Costs $1.12 per Mcf
• Total Delivered LNG Cost to Asia from BC $9.37 per Mcf
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N. AMERICA LNG BUILD OUTUSA
6 Proposals Approved to ship LNG8.5 bcf/d=13% current US production
1st export Sabine Pass late 2015
Brownfield—changing import to export—16 bcf capacity idle ($100 billion white elephant)
CANADA 14 Proposals; none approved—total 13 bcf/d 1st export Q4 15—but very small; #2 not until 2018 Greenfield—from scratch—higher risk
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14
Ambitious plans – consortiums ahead
Source: Transport Canada, Kootenay
Terminal Capacity by Project (bcf/d)
Prince Rupert
Initial FullXOM 1.6 4.0BG 1.8 2.8Petronas 1.6 2.4Total 5.0 9.2
Kitimat
KLNG 1.3 1.3LNGCan 1.6 3.2DCEP 0.2 0.2Total 3.1 4.7
Total 8.1 13.9
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BC LNG
Potential Multi-Year Run for service companies Huge spending to develop reserves $7.5 billion in construction per bcf export 13 bcf=$97.5 billion 13 bcf=all the natgas Canada produces today Like to see 3-5 bcf by 2020
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Where’s the BIG Money Going?
New gas pipelines = $4 billion in GDP/45,000 job years
Terminal facilities (Rupert/Kitimat) 8350 job years
Production profits from upstream gas extraction=$134 billion to 2035
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Where’s the BIG Money Going?
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SMALL TechnologyCould Win Big in BC LNG
BC LNG Cooperative / Golar LNG New Technology—Small Scale Floating Export
Terminals by Golar--FSRU 1st to production—2015/2016 Golar—GLNG-NASD—LNG shipper—make BIG
money They capture most of the “arb”—price difference
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Leading Edge Technology
2nd FSRU in the world I think BC could have multiple small scale
FSRUs $300 million capex vs. $10 billion 18 months to build vs 5 years I expect FID very quickly—big catalyst
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Who Will Be First in BC?1. Petronas—Malaysia—FID late 2014
(Pacific Northwest LNG)
2. Golar/Haisla—small scale floating barge
(BC LNG)
3. Woodfibre north of Vancouver
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Conclusion
Easy Money already made in US LNG Canadian LNG needs catalyst for next leg
GOLAR Makes FID should be that catalyst
But $100 billion spending will happen soonMulti year run for services stocks
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Questions?