Outlook for the Global Gas Industry and What it means for the Financial Community

1. Outlook for the Global Gas Industry and What it means for the Financial Community LNG 17 January 2013

2. Table of Contents 1. Global Gas Market: A European Perspective 4 2. New Supply of Gas and LNG: a Banker Perspective 8 3. Funding Gas Growth: Project Financing in current market 10

3. Introduction Outlook for the Global Gas Industry and what it means for the Financial Community 1 2 3

4. 1. Global Gas Market: A European Perspective

5. Global Gas Market What is the outlook for the global gas industry? • Gas market keeps growing and LNG has a very different position in the “Gas Mix” function of the region • Contracted LNG remains an important part of the Asia equation • 2010-30 global gas demand +2% per year Increasing faster than oil demand, driven by Asia • New LNG projects needed to satisfy European and Asian demand, even with potential additional supply from shale gas • Security of supply has justified a decoupling between Asia and US with premium for gas delivered to Asia, but buyers are now looking into more integrated prices Satisfaction of gas demand by region Bcf/d North America +1.1% CAGR Europe +1.3% CAGR Asia +4.4% CAGR Local gas demand But Traditional Long Term Buyer putting pressure on Supplier Asia looking for HH indexation “Japan’s liquefied natural gas industry, the world’s largest, is starting to move away from using crude oil-linked contracts and is instead partially pricing agreements to US gas quotes – a critical step towards the creation of a truly global natural gas market. Financial Times, December 18, 2012 “Kansai Electric Power last month became the latest buyer to sign an innovative long term agreement where LNG prices are linked to daily settlements at Henry Hub in Louisiana, the US gas futures pricing point.” Financial Times, December 18, 2012 Source: SCB Analysis, TOTAL Gas & Power

6. European Gas Market Specificity of the European Gas Market: Re-Export • Some key factors: • Increasing LNG demand outside Europe • Limited new source of LNG supply over the last 2 years • A larger, cheaper and more flexible LNG Fleet • Leading to : • The LNG market still tightening for the first half of this decade • Diversions from Europe likely to continue European LNG Imports (Million Tonne per Annum) CAGR: +15% -25% Unused regas LNG re-export booming (Million Tonne per Annum) +160% From 6 terminals Note: (1) Source: SCB Analysis

7. European vs. USA Gas Market The European Paradox: More Regulation = More Emissions • European Gas Market illustrating a surprising paradox • Lower Nuclear output due to an increasing political pressure • A low cost of CO2 not penalizing the coal producers • Combined Cycle Gas Turbines becoming less competitive than Coal plants • leading to increasing CO2 emissions • USA are demonstrating a reduction in both coal and CO2 emissions Europe Carbon Emission Price ICE EUA carbon emission futures ($/tonne) US Carbon Emission Price California carbon allowance price ($/tonne) Source: Bloomberg, maximum available trading history Source: Bloomberg, maximum available trading history Europe – Carbon Emissions v/s Coal Consumption Trend over last 10 years US– Carbon Emissions v/s Coal Consumption Trend over last 10 years Source: Trends in global co2 emissions 2012 Report , BP Statistical Survey June 2012 Source: Trends in global co2 emissions 2012 Report , BP Statistical Survey June 2012

8. 2. New Supply of Gas and LNG: a Banker Perspective

9. New Gas Supply Key Risks and Challenge to Bankability

10. 3. Funding Gas Growth: Project Financing in current market

11. Recent Financing Benchmarks Importance of the Price Signal in Upstream and LNG Transactions Key Market Comparables Recent Project Finance and RBL Transactions (1) • Global financial crisis had a limited impact on price achieved by LNG transactions during the last 3 years • LNG deals’ pricing has been led by a combination of • Regional appetite and liquidity • Quality of the sponsors and offtakers • Contrary to Upstream / Reserve Base Lending, commercial banks are not “lenders in last resort” • Upstream transaction demonstrated an important price elasticity • On LNG, a reduction in liquidity does not translate immediately in a price increase • Reversely, drastically increasing pricing might not attract the relevant liquidity 1 – Egyptian Methanex Methanol Co SAE – Emethanex 2 – Agrium Egypt 3 – Idku Natural Gas Liquefaction Co (Train 2 Co) 4 – El Behera - Egypt LNG1 5 – Oman LNG 6 – RasGas 2& 3 7 – Tangguh LNG 8 – Qatar Gas IV Short Tenor: “high price elasticity” + Financial Crisis impact Financial Crisis impact + LNG “Sweet spot” Qatari’ “Cooked” Deal - 1 3 2 4 5 6 8 7 Africa Asia LNG Size of bubble – deal size US$500m Note: Dealogic as at April 2012

12. Funding LNG Projects Understanding Primary Sources of Funds Recent LNG Project Financing Sources of Funds for Selected Transaction – Average Sources of Funds(1) • As mentioned on the previous page reduction in liquidity pool does not translate systematically to dramatic price increase • APLNG is a good example of pricing pressure • Nevertheless Qatar levels are exceptionally low and remain unparalleled • Recently ECAs and Equity had to step in to fill the gap left by commercial banks and Project bonds $bn 27% 38% 6% 5% 13% 11% Notes: (1) Source: Thomson Reuters, company websites & SCB Analysis

13. Basel III Impact on Project Finance Market Rationale behind the Potential Impacts of Basel III Market perception on the likely impact of Basel III on credit markets • Changes in RWA calculation • Risk-weighted Assets (RWAs) are used by banks to measure risk and capital requirements • Calculation of RWA: • RWA = EAD x Risk Weight, where • EAD: Exposure at default; • Risk weight is a function of • Probability of default (PD) • Loss given default (LGD) • Maturity • Firm size • In Basel III the RWA calculations have been extended to include a set of credit risks that caused significant losses through the crisis • The final standard of the new framework introduces the requirement that EAD calculation reflect a higher EAD value for counterparties where specific wrong way risk has been identified Cut Risk-Weighted Assets (RWA) ? To achieve higher required capital ratio Higher cost of funding to banks Higher lending spread to private sector lenders Issue New Equity Increase Retained Earnings • Market perceptions (above) state that Basel III will result in higher lending costs • However, no certain conclusions can be drawn at the moment as there are many complicated and far-reaching issues arising from the new framework • Based on historical data on the trend in BB and AAA corporate spreads across the US and Europe it seems that loan pricing is rather selective – there is an increase in the delta between good and bad credit quality • In addition, bank loan and project financing liquidity in the Oil & Gas industry is back to pre-crisis levels • Current rationale behind the possible impacts of Basel III suggests that market perceptions are worse than reality; the pricing of financings will depend on credit quality and alternative sources of financing (e.g. ECA finance) are still expected to remain a strong component in bank lending

14. Appendix

15. Market - CDS • CDS for key lenders Standard Chartered Bank – superior credit profile Standard Chartered 5-year CDS compared to major banks Source: Bloomberg 5-year CDS for 10 major banks as of January 3, 2013

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