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People. Ideas. Success.

THIS MATERIAL IS MARKET COMMENTARY AND NOT A RESEARCH REPORT October 27, 2011

U.S. Gas Exports Booming

BG's announcement yesterday that it would offtake production from the Cheniere

terminal marked a critical milestone toward the first Lower 48 LNG exports. But in

reality, one does not have to wait until 2015, as North America's transformation to

a gas export powerhouse has been plowing ahead for several years and it is

having an impact on the global market.

Imports from Mexico have fallen to almost zero, while exports have risen from

~800 mmcf/d in 2008-2010 to over 1.3 bcf/d in 2011. Partly as a result, Mexicos

LNG imports have declined by 1 mmtons (34%) so far in 2011 in other words, the

United States is indirectly exporting 1 mmtons of LNG by backfilling LNG that is

not going to Mexico.

Even with Canada, Americas largest gas supplier, the new supply dynamics are

evident. Exports to Canada are reaching record levels every year: so far in 2011,

gross exports are averaging 2.6 bcf/d, up 35% YOY. Imports from Canada are

more or less stabilized, which means that the net balance continues to fall.

Relative to 2008, the United States is importing about 2 bcf/d less from Canada.In short, the United States has dramatically improved its trade position over the

past few years by ~2.5 bcf/d (2 bcf/d with Canada and 0.5 bcf/d with Mexico). And

insofar as these volumes are displacing LNG that would otherwise go to Mexico

and Canada, the United States is already de facto exporting LNG.

EXHIBIT 1: U.S.-CANADA GAS TRADE

Source: PFC Energy-Guggenheim

0

2

4

6

8

10

12

2008 2009 2010 2011

bcf/d

Imports Exports Net

EXHIBIT 2: U.S.-MEXICO GAS TRADE

Source: PFC Energy-Guggenheim

-1.6

-1.2

-0.8

-0.4

0.0

0.4

0.8

1.2

1.6

2008 2009 2010 2011

bcf/d

Imports Exports Net

RAOUL LEBLANC CONSULTANT 713.568.8842

raoul.leblanc@guggenheimpartners.com

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North American Onshore October 27, 2