LNG WorkshopCentrica LNG11 February 2008

Simon Sydenham

2

Presentation Outline

• Introduction

• Global LNG Market

• LNG access to the UK market

• Conclusions

3

Introduction

• Centrica is UK largest buyer of gas and a supporter of liberalised energy markets

• As UK switches to being an importer of gas, then there is a requirement for new infrastructure

• Centrica has played a key role in encouraging the build of new gas infrastructure for the UK

• Centrica/Statoil contract => Langeled pipeline• Centrica/Gasunie contract => BBL pipeline• Centrica Reverse flow in Interconnector => enhanced reverse flow capacity

• Centrica is making significant investment in LNG • Regas capacity in Isle of Grain Phase 2 and 3• Upstream investment in Nigeria

4

The original British Gas is back in LNG…

British Gas Canvey Island LNG Terminal January 1959: A World First: ‘Methane

Pioneer’

British Gas Isle of Grain LNG Terminal November 2008: A British First: ‘Al Khuwair’

““What a difference 50 years make…”What a difference 50 years make…”

5

LNG importing countries are expanding

6

Global Regas throughput utilisation is around 50%

Asia Regasification Utilization 2007 - 2009

0102030405060708090

100

Q1

Q2

Q3

Q4

Year Q

1

Q2

Q3

Q4

Year Q

1

Q2

Q3

Q4

Year

2007 2008 2009

%

Europe Regasification Utilization 2007 - 2009

0102030405060708090

100

Q1

Q2

Q3

Q4

Year Q

1

Q2

Q3

Q4

Year Q

1

Q2

Q3

Q4

Year

2007 2008 2009

%

US Regasification Utilization 2007 - 2009

0102030405060708090

100

Q1

Q2

Q3

Q4

Year Q

1

Q2

Q3

Q4

Year Q

1

Q2

Q3

Q4

Year

2007 2008 2009

%

Global Regasification Utilization 2007 - 2009

0102030405060708090

100

Q1

Q2

Q3

Q4

Year Q1

Q2

Q3

Q4

Year Q1

Q2

Q3

Q4

Year

2007 2008 2009

%

CERA FORECAST

CERA FORECAST

CERA FORECAST

CERA FORECAST

ASIA EUROPE

GLOBAL

USA

• Utilisation can be defined in terms of slot, storage or throughput

• All LNG terminals are used at times for storage (particularly in Asia)

• Global regas terminal utilisation was below 50% for the whole of 2007

• This trend is forecast to continue though 2008 and 2009.

7

Significant global regas facilities vs supplyProbable

Under Construction

Existing

Atlantic Basin

Middle East

Asia Pacific

Source: CERA/Platts/WoodMacPROBABLE REGAS

-

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014 2015

bcm

PROBABLE LIQUEFACTION

LIQUEFACTION UNDER CONSTRUCTION

ONSTREAM LIQUEFACTION

PROBABLE REGAS

GROWTH IN GLOBAL RELIQ & REGAS CAPACITY

8

0

20

40

60

80

100

120

Feb-04

Jul-04

Dec-04

May-05

Oct-05

Mar-06

Aug-06

Jan-07

Jun-07

Nov-07

Apr-08

Sep-08

Feb-09

Jul-09

Dec-09

May-10

Oct-10

p/th

erm

NBP

Henry Hub

Continental Contract

Assumed Oil Linked Contract(16.6% Brent)

LNG should flow to the highest priced available market, but there are logistical constraints

Currently there are 4 main gas price structures

February 3rd Forecast

9

LNG Buyers “playing field”

0

2

4

6

8

10

0 2 4 6 8 10

Market Liberalisation

LNG

Dep

ende

ncy

North America

China

GreecePortugalIndia

Italy

UK

Belgium

Turkey

South Korea

Taiwan

SpainFrance

Japan

Gas Index

10

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06S

ep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08S

ep-08

Nov-08

Jan-09M

ar-09

May-09

Jul-09

Sep-09

Nov-09U

tilis

atio

n R

ate

-25

-21

-17

-13

-9

-5

-1

3

7

11

15

19

23

Spre

ad $

/mm

btu

Lake Charles Utilisation IOG UtilisationNBP-HH Spread LT Asia - Atlantic SpreadSpot Asia - Atlantic Spread

Isle of Grain vs Lake Charles terminal utilisation

• 2005 – December 2008 utilisation based on UK/US Price differential

• 2008 – Asia price is higher than both UK and US prices

November 24th 2008 Forecast

11

World LNG Imports for December 2008

12

Capacity Holders

0

2

4

6

8

10

12

2005 2008

UK LNG Regas facilities

ISLE OF GRAINDRAGON LNG

Bacton

St Fergus

Easington

LNG can access the UK market via 4 terminals and regas capacity is held by 10 companies

2005 2008

SOUTH HOOK

TEESSIDE

Reags Capacity (bcm)

0

5

10

15

20

25

30

35

2005 2008

ISLE OF GRAIN

13

NW Europe Regas• Increased supply sources and market

outlets

• Diversions can happen with short notice

BILBAO

SINES

HUELVA

SAGUNT0

CARTAGENA

BARCELONA

MONTOIR DE BRETAGNE

FOS SUR MERLA SPEZIA

ROVIGO

BRINDISI

DRAGON LNG ISLE OF GRAINZEEBRUGGE

TEESSIDE

SOUTH HOOK

EL FERROL

1 DAY

1 DAY

Construction ExistingShipping TimeLiquefaction Port

1 DAY

Snohvit

AlgeriaMiddle East

Qatar

Nigeria

Trinidad

GATE

10 DAYS

1 DAY

10 DAYS

3 DAYS

3 DAYS

1 DAY

11 DAYS

14

Centrica LNG sourcing

• Centrica is actively looking to secure LNG supplies through:• Equity production• Term purchase contracts• Spot purchases

• Cargoes have so far been sourced from Qatar and Trinidad

• Multiple discussions are being held for future deliveries with increasing interest in the UK market

• Centrica intends to make maximum use of our capacity in Grain

• Final mechanisms that are in place are:• Centrica Secondary Capacity Mechanism (SCM)• Grain UIOLI mechanism

15

Final Terminal Access Mechanisms

Centrica Secondary Capacity Mechanism• Auction process for a slot, temporary storage and deliverability• Centrica sends out LNG ahead of slot to create sufficient space for cargo• Cargo is sent our over period until next Centrica slot• Centrica retain option to swap LNG in store for NBP gas• User has a direct contractual relationship with the terminal• LNG must meet terminals gas quality specification• Ship must have undergone terminal vetting procedure

Example timetable• D-14 Notification of slot availability sent to registered users• D-13 User submits bid• D-12 If bid accepted, winner notified• D-11 User provides credit and supporting cargo information• D-10 Centrica begins emptying space• D0 Ship arrives and unloads• D+1 User begins withdrawal• D+9 Withdrawal ends• D+10 Next ship arrives

Grain UIOLI mechanism• Slot released to Grain at D-7• Grain advertise slot on Grain bulletin board

16

Conclusions

• Global demand for LNG is greater than available supply• Average Regas utilisation is around 50%• The market for LNG supply is highly competitive• Gas market structures show significant differences

across the globe• Centrica is actively seeking LNG supplies for the UK

from a range of sources• Final access mechanisms are in place• Our contact details can be found on the Grain website.