Global and China Gas Market Update

Gloria Zhou, BP China Disclaimer

This presentation contains forward-looking statements, particularly those regarding changes to the mix, global economic growth, population and productivity growth, consumption, energy efficiency, mobility developments, policy support for renewable , sources of energy supply and growth of carbon emissions. Forward-looking statements involve risks and uncertainties because they relate to events, and depend on circumstances, that will or may occur in the future. Actual outcomes may differ depending on a variety of factors, including product supply, demand and pricing; political stability; general economic conditions; demographic changes; legal and regulatory developments; availability of new technologies; natural disasters and adverse weather conditions; wars and acts of terrorism or sabotage; and other factors discussed elsewhere in this presentation. BP disclaims any obligation to update this presentation. Neither BP p.l.c. nor any of its subsidiaries (nor their respective officers, employees and agents) accept liability for any inaccuracies or omissions or for any direct, indirect, special, consequential or other losses or damages of whatsoever kind in connection to this presentation or any information contained in it. Table of content

1. Global gas market update and future LNG trade flows

2. Global gas demand outlook by sector

3. Major opportunities and challenges faced by Asian LNG market

4. China gas market outlook 1.1 Global energy demand growth was supported by gas and renewables

Consumption growth by fuel Shares of consumption Annual change, Mtoe 350 50% 300 250 40% Oil 200 Nuclear 150 30% Coal Hydro 100 Gas Oil 20% 50 Hydro 0 Renew. 10% Nuclear -50 Gas Renew. -100 0% 2006-16 2016 2017 1965 1978 1991 2004 2017

Source: BP Statistical Review, 2018; Note: Oil includes 1.2 Looking back 2017, global gas demand grew by 96 bcm

Consumption Production Annual change, bcm 175 China Russia Iran Turkey Australia Saudi Arabia US Rest of world 150

125

100

75

50

25

0

-25 10-year average 2017 10-year average 2017

Source: BP Statistical Review 2018 1.3 Gas grows strongly, with broad-based demand, low cost supplies and increasing global availability

Gas demand and production, 2017-40 Gas trade, 2017-40 Bcm Bcm 5500 5500 LNG Others Pipeline Europe 5000 5000 Africa Other Asia Produced 4500 China 4500 within region Russia 4000 4000

3500 3500

3000 2017 Demand 2017 Production 3000 2017 Production Trade Source: BP Energy Outlook 2019 1.4 A lot of new LNG export capacity starting mtpa 50 45 Others US Russia Australia Africa 40 35 30 25 20 15 10 5 0 2014 2015 2016 2017 2018 2019 2020

Source: IHS, GIIGNL 1.5 LNG exports increase significantly led by US and Qatar, fostering a more competitive and globally integrated market

LNG imports and exports Imports Exports

2017

2020

2030

2040

-1,000 -800 -600 -400 -200 0 200 400 600 800 1,000 Bcm

Source: BP Energy Outlook 2019 2.1 Growth in gas demand is driven by use in and industry, with the use of gas varying across countries and regions

Shares of primary Bcm Growth by sector and region, 2017-40 Oil Gas 700 60% Other Coal Nuclear 600 Other Asia Hydro Renewables India 50% 500 China Africa 40% 400 30% 300

200 20% 100 10% 0 0% -100 Power Industry Buildings Non- Transport combusted Source: BP Energy Outlook 2019 2.2 Three windows on the

Primary energy demand Primary energy demand Primary energy demand End-use sector Region Fuel Billion toe 20 20 Transport Other 20 Renewables Industry* Africa Hydro Non-combusted Other Asia Nuclear 15 Buildings 15 India 15 Coal China Gas OECD Oil 10 10 10

5 5 5

0 0 0

Source: BP Energy Outlook 2019 3.1 Opportunity: The global faces a dual challenge, the need for ‘more energy and less carbon’

Primary energy consumption by fuel Billion toe bcm Gas demand 25 2040 6000 Evolving transition (ET) 20 Renew.* 5000 More energy (ME) Hydro Less globalization (LG) 15 4000 Nuclear Rapid transition (RT) Coal 3000 10 Gas 2000 Oil 5 1000

0 0 2017 ET ME LG RT 1970 1980 1990 2000 2010 2020 2030 2040

Source: BP Energy Outlook 2019 3.2 Opportunity: Trend of more flexible LNG contractual structure

Destination flexibility of new signed contract Oil-indexed Contract price slope by Chinese buyer MMtpa 50 16% 14.3% 14.1% 40 14% 13.6% 12.5% 12.2% 12% 11.3% 30 10%

20 8% Mtpa

6% 10 4%

0 2% FixedFlex. FixedFlex. FixedFlex. FixedFlex. FixedFlex. N/A 2014 2015 2016 2017 11M 2018 0% 2012 2013 2014 2015 2016 2017 2018 Existing Under Construction & Proposed Portfolio

Source: IHS, Woodmac, BP research 3.3 Challenge: constraints

China LNG imports and receiving capacity Gas infrastructure comparison Million tonnes 8 Import Storage/Cons Pipeline Per Capita LNG Receiving capacity Country umption Length/Squar Receiving 2016 e 2017 Capacity 2018 6

(%) (Metre) (TPA) China* 3.04 7.09 0.04 4 US 17.20 51.52 0.40

UK 1.83 106.97 0.53

2 France 27.48 67.08 0.39 Italy 26.65 109.63 0.19

Japan 0.99 100.53 1.59 0 South Korea N/A 35.58 2.72 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 *China data has been updated to year 2018 Source: BP Statistical Review 2018, includes data from IHS Markit 3.4 Challenge: Asian premium still exists with winter peaks

US LNG exporters’ costs and Asian spot prices China wholesale LNG ex-plant prices $/mmBtu Thousand RMB/tonne 20 NBP 9.00 18 Henry Hub (HH) 16 Japan Korea Marker Average 14 (JKM) Northern… 12 Asian LNG price 6.00 10 8 6 3.00 4 2 0 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 - Jan 16 Jul 16 Jan 17 Jul 17 Jan 18 Jul 18 Jan 19 Source: BP Statistical Review 2018, includes data from IHS Markit 3.5 Challenge: New investment in LNG capacity will be needed

LNG exports LNG exports, existing and new Bcm Bcm 900 Others 900 Australia 800 New Existing Africa 800 700 M. East 700 Russia 600 600 N. America 500 500 400 400 300 300 200 200 100 100 0 0 2015 2020 2025 2030 2035 2040 2015 2020 2025 2030 2035 2040

Source: BP Energy Outlook 2019 4.1 China: transition to non-fossil and lower carbon energy mix

Primary energy demand growth by fuel Shares of primary energy Mtoe per annum 140 80% Renewables* Hydro Coal 120 70% Nuclear Gas 100 60% Oil Coal 80 50% 60 40% 40 30% 20 Oil 0 20% Renewables Gas -20 10% Hydro Nuclear -40 0% 1990-2017 2017-40 1990 2000 2010 2020 2030 2040

*Including biofuels Source: BP Energy Outlook 2019 4.2 China: Import dependency potentially rise to over 40% by 2040

Import dependency Gas supply to China Mtoe bcm 700 Domestic LNG Russia Other 100% Oil production 600 80% Gas Coal 500 60% 400 40% 300 20%

0% 200

-20% 100

-40% 0 2000 2010 2020 2030 2040 2010 2020 2030 2040

Source: BP Energy Outlook 2019 Thank you for your attention