Edgardo CurcioPresident AIEE

The First National Conference on Liquefied Natural Gas for Transports -Italy and the Mediterranean Sea

April 11, 2013

• The LNG (Liquefied Natural Gas) is a fluid in the liquid state,colorless, odorless, composed primarily of methane, containssmall amounts of ethane, propane, nitrogen and othercomponents normally present in natural gas. It does notcontain carbon dioxide and water.

What is LNG?

• At atmospheric pressure, it becomes liquid at about -160°C•

LNG takes up about 1/600th the volume of natural gas in thegaseous state

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The LNG represents an alternative way to the transportby pipeline of the natural gas, allowing a direct connectionbetween the regions of production and of consumptionwhere connection by pipeline is not possible.

The use of LNG responds to the strategic need todiversify geographically the sources of supply and makethe natural gas market truly global and not limitedgeographically.

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For transport over long distances, the LNG is moreprofitable than the pipeline transport.

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The history of LNGThe LNG industry is a young industry with a background of only 40 years. The first experimental transport was made in the 1959 (Lake Charles/Canvey Island).

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The LNG chain

field

naturalgas

purificationtreatment

liquefaction

LNG

LNG

submersiblepumps loading

storage tanksjetty

heavy

liquefaction

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treatment

LNGdistribution

natural gas

LNG

transport

storage tanks

submersible pumps

jettygasification

heavyhydrocarbons

GASIFICATION PLANT

landfill

International trade flow of natural gas

Fonte BP Statistical Review 7

LNG movement in Europe

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LNG exporter suppliers in 2011

RussianFederation

Egypt

Other

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Malaysia10%

LNG trade has incresed by 141% in the last decade

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According to the BP data in 2011, about 32% of the naturalgas world trade was represented by LNG, equivalent to 330.8bcm.

According to GIIGNL in 2012 there was a 1.9% decrease ofthe imported LNG due to the global economic crisis.

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However, the weight of LNG trade is likely to grow in thecoming years thanks to the increased use of natural gas inall end uses due to its higher efficiency and to its lowerenvironmental impact.

About 25% of the quantities traded in the LNG market goes to the spot market.

Spot and short-term LNG trade developmentsince 2000

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At the end of 2012, 8 Countries out of a total of 18 madeup 83% of global LNG exports.

In the same period, the LNG supply of the Pacific Basinhas declined by 3% and the supply of the Atlantic Basin

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has declined by 3% and the supply of the Atlantic Basinby 2.2%. Although the production of Nigeria, Norway,Trinidad & Tobago increased its level it could not fill thegap of the lower exports from Algeria, Egypt andEquatorial Guinea.

In the Middle East, in 2012, production shutdowns inYemen reduced total exports despite the increasedproduction of Qatar.

63%, of Qatar volumes were exported to Asian countries,with Japan retaining the largest share.

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with Japan retaining the largest share.

For 2010-2012, Qatar doubled its LNG exports to Japan

On the demand side, 7 importing countries out of a total of26 (Japan, South Korea, China, India, Taiwan, Spain, UK)attracted 81% of the total LNG volumes.

Japan and South Korea’s combined share was around 53%.

At the end 2012, there are:

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At the end 2012, there are:- 93 regasification terminals in 26 Countries, for a totalcapacity of 668 million tons/years;- 89 liquefaction plants in 18 Countries, for a totalcapacity of 282 million tons/years.

The total LNG tanker fleet was of 378 vessels.

Liquefaction and regasification plants

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Regasification capacity vs LNG imports in 2012

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The gas revolution in the USA, aiming to exploit the largereserves of unconventional gas (bed methane, shalemethane, etc.), has changed again the natural gas market.

The challenge of unconventional gas

on one hand, the higher volumes of gas produced in theU.S. have lowered the prices of the domestic market,

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U.S. have lowered the prices of the domestic market,

on the other hand the possibility to transport it, thanks toLNG in more profitable markets,

have allowed the market to assume a global connotation dropping the geographical logic of the market, existing so far.

Higher prices of natural gas that provide access to higher costs for the production of coal bed methane,

an improvement of related technologies,

a new U.S. energy policy, aiming to energy independence and enhancement of national sources,

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independence and enhancement of national sources,

have produced a great boost to the development of unconventional gas, such as coal bed methane (CBM) and shale gas.

World natural gas stocks

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The exploitation of these two types of unconventional gas,not only led to the cancellation of most of U.S.regasification plant projects, which planned the arrival ofLNG from different sources, both from the Middle East andNorth Africa, but it is changing the U.S. strategy that aimsto build new LNG liquefaction plant projects to export inEurope.Europe.

This policy is based on the higher LNG available volumes inUSA and on the spread of 4-5 $/MBtu between the U.S. gasprice and the European gas price, which allows transport andsale the U.S. LNG in Europe.

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The first import contract was signed recently by the UK’sCentrica with the U.S.’ Cheniere for the purchase of US LNGfor about 2,5 bcm/year by the Sabine Pass plant.

The agreement is for the supply of approximately 1.75tons/year of LNG by 2018, for 20 years extendable to 30years.The price will be equal to 115% of that on the Henry Hub,

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The price will be equal to 115% of that on the Henry Hub,plus a fixed fee of 3 $/Mbtu.

This agreement will make a valuable contribution to thediversification of suppliers in the UK, when it became the firstLNG European importer in period 2010-2012 in which UK hasseen very slow flows of LNG increasingly attracted by Asianmarkets.

In the future, other contracts will come with an increase in USLNG flows in Europe and then in Asia, so as to completelyalter the traditional “take-or-pay” gas market configuration.

The ENI’s CEO, Paolo Scaroni, sees a lowering of thecurrent prices of gas in Europe in view of the increasingly

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current prices of gas in Europe in view of the increasinglyactive role of US LNG.

The development of LNG, not only in USA but also in otherregions, such as Asia and Australia, will also allow toincrease the contribution of gas to the world’s energy needs.

According to the last IEA report, there will be more newLNG plants in the next years expecially in Asia, and theLNG would represent almost 50% of the gas sold in theworld in 2020, compared to 30% today.

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IEA estimates that the North American exports of LNG willreach 35 billion cubic metres by 2020 and more than 40bcm by 2035, two-thirds of which is expected to go to theAsian market.

The prospect of LNG exports has set off a debate in theUSA about the extent to which they will drive up domestic

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USA about the extent to which they will drive up domesticprices, by taking gas off the local market, and the USDepartment of Energy is waiting to review the results of aprice impact study before dealing with the pending exportapplications.

Due to this debate, the esteem is that 93% of the naturalgas produced in the USA remains available to meetdomestic demand.

In addition the WEO projections assume that the gas

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In addition the WEO projections assume that the gasprices in the U.S. will increase from their current level2 $/Mbtu in 2012 to 5.5 $/Mbtu in 2020, largely drivenby the domestic dynamics of supply and demand.

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Thanks for your attention