The Emerging Global Gas Market

1. The Emerging Global Gas Market FGT Annual Shippers Meeting

2. B&V - 2 A Future World - August, 2012

3. B&V - 3 The principle demand areas are US, Europe, and Asia

4. B&V - 4 Stranded supply sources are in Africa, Middle East, SE Asia, & the Former Soviet Union

5. B&V - 5 LNG Trade Provides the Physical Connectivity

6. B&V - 6 Lukens Energy Group - Enterprise Management SolutionsThe Management Consulting Division of Black & Veatch Strategy Solutions for business, financial, regulatory and M & A. We Help Identify Opportunities and Create Solutions Process Solutions to optimize operations and improve organizational performance. Enterprise-Wide Programs that Increase Value Technology Solutions leveraging the wealth of information in your organization. Innovative Information Solutions that Enhance Capabilities Conceptually, we deliver solutions in three categories: Strategy Solutions assist our clients in their most critical decisions. Advising them on ways to improve various aspects of their business, helping them maximize the return on the investments and financial decisions they make, assisting them at succeeding in today’s complex regulatory landscape, and even helping when it’s time to acquire or divest specific assets… or complete businesses. Process Solutions are how EMS identifies all of the services we provide to optimize the operations of your existing business. Whether it’s optimizing the value of all of your assets throughout their lifecycle, or helping you do succession planning as your workforce ages, EMS Process Solutions increase your operational capabilities and add value across your organization. Technology Solutions acknowledge that your business and your supporting technologies and integrated to such an extent that your business options are often enabled or limited by the underlying, supporting technologies, and how well you leverage the wealth of information contained within your organization. Some of the specific solutions EMS Professionals are prepared to help with include improving your Customer Information Systems for better service, streamlining billing and internal management systems for reduced O & M costs, and implementing Program Management Systems, or providing a complete outsourced Program Management capability, to consolidate like projects, to assure efficiencies, and to maintain project alignment with your business goals. Conceptually, we deliver solutions in three categories: Strategy Solutions assist our clients in their most critical decisions. Advising them on ways to improve various aspects of their business, helping them maximize the return on the investments and financial decisions they make, assisting them at succeeding in today’s complex regulatory landscape, and even helping when it’s time to acquire or divest specific assets… or complete businesses. Process Solutions are how EMS identifies all of the services we provide to optimize the operations of your existing business. Whether it’s optimizing the value of all of your assets throughout their lifecycle, or helping you do succession planning as your workforce ages, EMS Process Solutions increase your operational capabilities and add value across your organization. Technology Solutions acknowledge that your business and your supporting technologies and integrated to such an extent that your business options are often enabled or limited by the underlying, supporting technologies, and how well you leverage the wealth of information contained within your organization. Some of the specific solutions EMS Professionals are prepared to help with include improving your Customer Information Systems for better service, streamlining billing and internal management systems for reduced O & M costs, and implementing Program Management Systems, or providing a complete outsourced Program Management capability, to consolidate like projects, to assure efficiencies, and to maintain project alignment with your business goals.

7. B&V - 7 Emerging Global Market Centers

8. B&V - 8 Emerging Global Market Centers

9. B&V - 9 Enablers of the Emerging Global Gas Market Expansion of Global LNG Liquefaction Excess Import Terminal Capacity in Demand Regions Expansion of LNG Fleet Increased short-term trading Contracting on established Gas indices: HH LNG value chain cost structure Liberalization of EU Gas Market Increased Optionality of LNG Trade

10. B&V - 10 World Liquefaction Capacity is expected to more than double through 2010

11. B&V - 11 World Re-gasification Capacity is expected to almost double by 2010 although this still reflects a fraction of all proposed re-gasification terminals

12. B&V - 12 North America & Europe become more import-dependent Asia (Japan, S. Korea, India, & China) remain import-dependent

13. B&V - 13 Major Increase in N.A. Import Capacity by 2010 LNG is an economical alternative that will help the U.S. meet its rising demand for energy. However, it will not be until 2008 that a significant amount of additional LNG will become available. It is only by 2010 that most of the planned projects will begin deliveries at their ‘steady state’ levels. In the meantime, the market will continue to be tight. LNG is an economical alternative that will help the U.S. meet its rising demand for energy. However, it will not be until 2008 that a significant amount of additional LNG will become available. It is only by 2010 that most of the planned projects will begin deliveries at their ‘steady state’ levels. In the meantime, the market will continue to be tight.

14. B&V - 14 135 new LNG ships projected to be built between now and 2010.

15. B&V - 15 Short-Term LNG market growing Traditional LNG market is driven by long-term contracts. Uncommitted production capacity built without committing the full production volumes. Spain, United States, Korea building excess import capacity. Increased ship capacity not dedicated to projects. Contract terms growing more flexible. Short-term market has grown from virtually zero before 1990 to 8 percent in 2002. Short-term trading is projected to continue to grow, especially in the Atlantic Basin, 15 to 20 percent over the next decade.

16. B&V - 16 LNG delivered costs comparable to US Production

17. B&V - 17 LNG plant construction costs stopped declining and began to rise some 3 years ago as a result of rising steel prices.

18. B&V - 18 EU requires the European Gas & Power markets to open to full retail competition by July 2007. Could increase liquidity of markets Provide positive signals for investors. Environmental Incentive Market based instruments for energy savings and emission trading Emergence of EU oligopolies?

19. B&V - 19 Where will LNG go?

20. B&V - 20 U.S. must compete with other countries for supply

21. B&V - 21 Not all gas is created equal…

22. B&V - 22 The heat content of most LNG cargoes exceeds U.S. pipeline tariff specifications FGT proposed 1110 in proceedingFGT proposed 1110 in proceeding

23. B&V - 23 Gas quality standards can impact U.S. supply

24. B&V - 24 Additional pipeline capacity will be needed in growing supply basins and for new LNG import terminals

25. B&V - 25 Several pipeline development projects are in the works to move gas from the new supply sources

26. B&V - 26 Hot, hot, hot - storage asset transactions & development Selected 2005 storage transactions: Encana divestiture: Wild Goose Salt Plains Starks AECO WHP Lodi Falcon Gas Pine Prairie Announced storage projects (partial listing): Sempra – Bluewater SemGas LP Windy Hill Storage Copper Eagle Eastern Expansion S.W. Wyoming Liberty Gas Southern Pines Falcon – MoBay Pine Prairie – Sempra sold to PlainsAllAmerican/Vulcan Lodi – Kirby Hills Storage Falcon – MoBay Pine Prairie – Sempra sold to PlainsAllAmerican/Vulcan Lodi – Kirby Hills Storage

27. B&V - 27 LNG imports to the U.S. – tied to prices?

28. B&V - 28 Global Gas Market Implications Local Gas prices subject to geo political events Global Storage may become a market mover Tune to the Global Weather Channel Market Intelligence on Ship movements Contracting evolves with increased optionality Linkage between oil and gas prices driven by supply side versus demand side Arbitrage opportunities across regions

29. B&V - 29 What should you be looking for? Supply connections across regional boundaries Contracting: Increased short term optionality Excess import capacity Size of import markets: influence marginal price Regional takeaway capacity Electronic Trading Platforms Transparent regional storage information Liberalization of EU Market Pipe Supply across regions: Russia; Alaska

30. B&V - 30 Black & Veatch builds energy infrastructure to serve global markets We currently provide consulting, construction and engineering services to four primary market sectors: Energy Water Information Government We currently provide consulting, construction and engineering services to four primary market sectors: Energy Water Information Government