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Examining the Changing Face of LNG

Examining the Changing Face of LNG. 15 th Annual Flame LNG Summit Amsterdam, 9 th March 2009 David Fuller Global Head of LNG RWE Supply & Trading GmbH. RWE AG (Group Center). RWE – A Vertically Integrated Energy Business. RWE Power

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Examining the Changing Face of LNG

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  1. Examining the Changing Face of LNG 15th Annual Flame LNG Summit Amsterdam, 9th March 2009 David Fuller Global Head of LNG RWE Supply & Trading GmbH

  2. RWE AG (Group Center) RWE – A Vertically Integrated Energy Business RWE Power Germany‘s biggest power producer & among the largestin Europe RWE Innogy The leading European player in renewable energy activities RWE Dea A significant exploration and production portfolio for hydrocarbons mainly in Europe and North Africa RWE Supply & Trading Responsible for trading and the commercial optimisation of RWE‘s non regulated gas activities and our European energy business RWE Energy Sales and grid company for customers in Continental Europe RWE npower Responsible for our UK energy business • Integrated business model: Strong presence along all parts of the energy value chain • Stability and growth: Well-balanced portfolio of leading market positions in mature and growing markets in Europe • Vertical integration and portfolio optimisation across the value chain

  3. RWE Upstream & LNG activities throughout the world Snøhvit Denmark Poland Wilhelmshaven GasPort Teesside GasPort Adria Northeast Gateway Gulf Gateway LNG Fleet Mauritania Excalibur (traditional vessel) Excelsior Excellence Excelerate Explorer Express (due Q2 09) Exquisite (estimated Q3 09) Expedient (estimated Q4 09) Exemplar (estimated Q2 10) Algeria Mina Al Ahmadi GasPort Libya Egypt RWE Dea upstream activities Bahia Blanca GasPort LNG production

  4. RWE covers the entire gas chain – we will grow… Exploration/Production Supply/Trading Transport/Storage Distribution Sales RWE Energy (Europe) RWE Supply & Trading RWE Dea RWE npower (UK) • Gas Reserves:ca. 539 mboe*(~ 78 bcm) • Gas Production:ca. 22 mboe/year (~ 3.2 bcm/year) • Gas supply: ca. 40 bcm**/year • Gas trading volumes: ca. 90 bcm/year • Transport pipelines: 23,700 km • Gas storage volume: ca. 6.1 bcm • Length of the distribution pipelines: 92,800 km*** • Gas supply: ca. 40 bcm/year (supply of customers and power plants) • Gas customers: ca. 10.6 million * mboe = million barrels oil equivalent; Reserves = proved and probable ** bcm = billion cubic meters *** RWE will sell the gas transportation network in Germany to an independent third party within the next two years ****Gas supply and customers are 53bcm/year and 12..5million when combined with recent acquisition Essent

  5. …and LNG plays an important role in our growth story • RWE has the goal of increasing the gas supply base from approx. “40 bcm/a today to 60 bcm/a” by the year 2013 • Pipeline gas will contribute to new RWE supplies and there is also no doubt that LNG will also be a major contributor. Hence, secure access to LNG plays a key role in our strategy • RWE is a leading company in the development of new pipeline routes into Europe (Nabucco) • Our investment in Excelerate provides synergies between RWE´s upstream activities and the world´s LNG suppliers and RWE´s huge downstream market RWE Procurement of gas [bcm/a] 60 bcm/a More RWE production New suppliers Caspian / Middle East 40 bcm/a RUS Contracts expiries D UK NL NOR 2006 2013

  6. Bcm 4,000 3,000 2,000 17% 17% 1,000 15% 15% 13% 13% 7% 7% 0 2003 2010 2015 2020 The LNG business is seeing a worldwide period of unprecedented expansion… Global Natural Gas Demand and LNG’s Share Asia Pacific Africa Middle East Europe & Eurasia South & Central America North America Global LNG Fundamentals: • LNG supply will increase from 262 bcm today to 341 bcm in 2010 • Capacity of global LNG shipping will increase by more than half by 2010. 2008 will see a record level of LNG-ships delivered – 58 ships added to existing fleet of 251 • CERA estimates that 40% of LNG supply under construction is non-dedicated and flexible to trade. Growing regasification network will allow arbitrage Source: CERA

  7. LNG Flows in 2008 Norway U.S N. Africa Middle East Trinidad W. Africa S.E Asia LNG Markets Australia Supply Flows 2008 • High Oil Prices made LNG attractive to Asian Buyers • Oil parity was attained by Sellers • Surging economies created gas demand • Cargoes could easily be diverted from other regions • Delays in liquefaction projects

  8. Changes in LNG flows Norway Russia U.S N. Africa Middle East Trinidad W. Africa S.E Asia LNG Markets Australia Supply Flows 2008 Supply Flows 2009

  9. … whereas the global LNG-Market is currently turning due to reductions in LNG demand in Asia 2007/2008 LNG boom in Asia 2009 LNG recession in Asia? Strong Asia demand draws record LNG imports in '07 Fri Jan 25, 2008 TEPCO Jan fuel use falls; nuke rate up, demand down Fri Feb 13, 2009 TOKYO, Feb 13 (Reuters) - Thermal power consumption at Japan's Tokyo Electric Power Co (TEPCO) fell in January from a year earlier, as a higher monthly nuclear run rate and weakening energy demand dented fossil fuel use. The use of fuel oil, crude oil, liquefied natural gas (LNG) and coal all dropped below the previous year's level, the company said in a statement on Friday, falling for the fourth straight month. NEW YORK, Jan 25 (Reuters) - Strong Asian demand for liquefied natural gas, primarily from Japan, China and India, drove LNG imports in the region to record high levels last year, according to a Houston-based consulting firm. “Asian LNG imports overall increased by a whopping 480 bcf (billion cubic feet, or 10 million tonnes), a record-setting import year. There was growth across the board for all importing countries in Asia," Waterborne Energy, which monitors the global flow of liquefied gases, said in a report this week. For all of 2007, total Asian LNG imports hit a record 112.742 million tonnes, up 10 percent from 2006, according to Waterborne Energy data. Japan Jan industrial output falls 10 pct mth/mth Fri Feb 27, 2009 Japan's industrial output fell 10.0 percent in January from the previous month, government data showed on Friday, posting the biggest drop on record and in line with a median market forecast.

  10. How does RWE see the LNG-Market? • The LNG growth story continues • In 2008, traditional Atlantic Basin LNG supplies moved to Asia due to numerous factors which then combined reduced the availability of spot LNG cargoes in the Atlantic Basin. • IN 2009 Asian demand had dropped and the market will return LNG flow back top the Atlantic Basin • Substantial Change in Global Gas Market • Isolated markets are becoming more integrated • As more supply emerges arbitrage opportunities would cause a price convergence and the price differential between major demand regions will be unsustainable

  11. RWE´s believe: (Offshore) Flexibility is “the name of the game” in tomorrows volatile, global converged LNG business • The LNG business will experience an uneven development across the value chain • Regasification presents companies with a strategic dilemma • Therefore, RWE is developing a flexible LNG solution offered by: • Seeking investment opportunities in LNG

  12. Bahia Blanca GasPort, Argentina Dockside LNG regasification Utilizes ship-to-ship LNG transfer with continuous natural gas send out Capable of 400 mmcfd throughput (closed-loop mode) Provides seasonal service during Argentina’s winter Short development time and low cost Final investment decision to in-service in less than 6 months Fixed facilities cost <5% of a land-based LNG terminal Project partners are YPF and Repsol-Gas Natural May 2009 will mark the start of the GasPorts second year of service Dockside ship-to-ship LNG transfer Gas offloading arm Excelsior docked at the Bahía Blanca GasPort

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