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LNG Workshop Centrica LNG

LNG Workshop Centrica LNG. 11 February 2008 Simon Sydenham. Presentation Outline. Introduction Global LNG Market LNG access to the UK market Conclusions. Introduction. Centrica is UK largest buyer of gas and a supporter of liberalised energy markets

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LNG Workshop Centrica LNG

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  1. LNG WorkshopCentrica LNG 11 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… “What a difference 50 years make…” 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’

  5. LNG importing countries are expanding

  6. ASIA USA EUROPE CERA FORECAST CERA FORECAST CERA FORECAST CERA FORECAST GLOBAL Global Regas throughput utilisation is around 50% • 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 supply Probable Under Construction Existing Middle East Atlantic Basin Asia Pacific PROBABLE REGAS GROWTH IN GLOBAL RELIQ & REGAS CAPACITY PROBABLE LIQUEFACTION PROBABLE REGAS Source: CERA/Platts/WoodMac LIQUEFACTION UNDER CONSTRUCTION ONSTREAM LIQUEFACTION

  8. Currently there are 4 main gas price structures February 3rd Forecast LNG should flow to the highest priced available market, but there are logistical constraints

  9. LNG Buyers “playing field”

  10. Isle of Grain vs Lake Charles terminal utilisation November 24th 2008 Forecast • 2005 – December 2008 utilisation based on UK/US Price differential • 2008 – Asia price is higher than both UK and US prices

  11. World LNG Imports for December 2008

  12. ISLE OF GRAIN UK LNG Regas facilities 2005 2008 St Fergus TEESSIDE Easington Bacton SOUTH HOOK ISLE OF GRAIN DRAGON LNG LNG can access the UK market via 4 terminals and regas capacity is held by 10 companies

  13. Construction Existing Shipping Time Liquefaction Port Snohvit 1 DAY NW Europe Regas Qatar 3 DAYS • Increased supply sources and market outlets • Diversions can happen with short notice TEESSIDE GATE SOUTH HOOK ZEEBRUGGE DRAGON LNG ISLE OF GRAIN 1 DAY 1 DAY 10 DAYS MONTOIR DE BRETAGNE 1 DAY 11 DAYS ROVIGO 3 DAYS BILBAO LA SPEZIA FOS SUR MER EL FERROL BRINDISI BARCELONA SAGUNT0 SINES 10 DAYS CARTAGENA Trinidad HUELVA 1 DAY Middle East Nigeria Algeria

  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.

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