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-/("--*&4 $0"-*5*0//&84-&55&3 "13  LNG Allies —News & Insight

HOEVEN AND MCCAIN TALK LNG IN NORWAY

U.S. Senators John Hoeven (R-ND) and John McCain were in Norway on Monday (April 14) as part of a small Republican “codel” to Europe. While in Norway, the two senators met with high ranking Norwegian energy of- ficials and senior executives of Statoil. According to a news release issued by Hoeven, the pair met with Kåre Fostervold, Norwegian State Secretary for and Energy, and Statoil’s Senior Vice President of Marketing and Supply Grete, Birgitte Haaland, and Chief Economist, Eirik Wærness. In the news release, Hoeven said: “Norway is working to reduce European dependence on Russian natural gas... [and] Statoil and other Norwegian companies are also going beyond Norway to invest in production globally. They are a key part of plans to bring gas to Europe from the west through Turkey and also through the Adriatic Sea. Statoil is also a major investor in North Dakota, developing gas resources that could be made 644FOT#BSSPTTP )PFWFO BOE.D$BJO-BUWJBO1SFT#ǖS[JǬÝ available on a global gas market if the federal government approves more permits to export liquefied natural gas (LNG). “Norway cannot solve the problem of European LNG Allies energy dependence on Russia all on its own,” Hoeven said. “The only real, long-term solution is to make addi- IN THIS ISSUE tional LNG supplies available, and this means the United Ŷ )PFWFOBOE.D$BJO5BML-/(JO/PSXBZ States has a strong role to play as a world leader.” Ŷ $SPBUJBO.JOJTUFS-/(5FSNJOBMi&WFO.PSF3FBMJTUJDw Following their visit to Norway, the codel traveled to Ŷ #BLFS.D,FO[JF%VP%FDSZ-/(3FHVMBUPSZ%FMBZT Latvia and Estonia (April 15) and Lithuania (April 16) Ŷ /FXT$MJQQJOHT"QSJM and then on to Moldova (April 17). Sens. John Barrosso (R-WY) and Ron Johnson (R-WI) accompanied Hoeven QUICK LINKS and McCain on the latter stages of the trip. Ŷ 4FO)PFWFO/FXT3FMFBTFPO/PSXBZ-/(5BMLT Ŷ 4FO.D$BJOT/FXT3FMFBTFGSPN-JUIVBOJB At an event held at Vilnius University in Lithuania, Ŷ McCain said: “We and Lithuania’s leaders agree that #BLFS.D,FO[JFi$PNQFUJUJWFOFTTw4UPSZ

European countries need to increase their efforts to di- Ŷ "NCBTTBEPS1BTDVBMT&&*OUFSWJFX TVCTDSJQUJPO versify their supply of energy, as Lithuania is taking the Ŷ 1VUJOT-FUUFSUP/BUJPOT lead in doing... [and] United States can be an important part of that solution in Lithuania and Europe.” 'PSBEEJUJPOBMJOGPSNBUJPO DPOUBDU'SFE)VUDIJTPO Continues on page two... &NBJMGII!DHBHSPVQDPN

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Croatian Minister: LNG Terminal “Even More Realistic” prices at the Henry Hub enable U.S. export- Ivan Vrdoljak, Minister of Economy of the Republic ers to sell LNG for the lowest prices on the global market. of Croatia said recently that events in made The wildcard for these projects is the DOE, in particular, its Croatia’s proposed LNG project near the town of Omisalj lack of transparency regarding the criteria used to evaluate on the northwest portion of island of Krk in the Adriatic exports to non-FTA countries. Sea “more realistic now then ever before.” In a statement, Another cause for concern is the DOE’s post-approval Vrodljak said: “For a couple of months we have been revocation authority, which most concerns Asian inves- trying to convince potential partners and the European tors with ample balance sheets and large appetites for en- Commission that this LNG project is a project of com- ergy. The DOE reserves the power to reconsider approv- mon interest for the South Eastern Europe and its gas als of non-FTA exports after those approvals have been supply... [the present crisis] shows that Croatia was right granted, which worries investors, owners, and potential when asking the E.U. Commission to get involved in the offtakers. Compare this to, for example, the regime created project and to provide financing. We are currently final- by Congress to review the national security implications izing the documentation for the LNG terminal and we of foreign investment in the U.S. under the Committee on hope that the E.U. Commission will decide before the end Foreign Investments in the U.S. (CFIUS), where a clear- ance of a transaction is a safe harbor, and CFIUS cannot of this year whether it will provide part of the funding for reconsider such decisions unless it finds that the parties the project and if so, in what manner.” misled or withheld critical facts from the committee. This Baker McKenzie Duo Decry LNG Regulatory Delays post-approval revocation authority in the LNG export con- Natalie Regoli and Brian Polley of the Houston office of text creates great uncertainty and slows final investment Baker & McKenzie penned a story for the Unconventional decisions. Oil & Gas Report that contains some interesting obser- The slow pace of the DOE’s approval process alone is vations about how the U.S. regulatory scheme is hurting enough to hamper the competitiveness of U.S. [LNG] proj- the competitive position of U.S. LNG projects. Regoli and ects, especially if the export project is in the middle or end Polley write that: of the queue. A bottleneck at the Federal Energy Regulatory U.S. brownfield [LNG] projects require less capital in- Commission amplifies the problem, with the second filer, vestment than greenfield projects due to existing infra- Freeport LNG, only expected to receive final project ap- structure, and therefore these projects are expected to be proval in the third quarter of 2014. the first online. Lower investment costs and depressed gas Entire article here: http://bit.ly/1gDsQMh

NEWS CLIPPINGS: APRIL 12-16

LNG Allies Ŷ Canada-Japan LNG Joint Venture Cleared for Exports Canadian regulators approved a 25-year liquefied ABOUT US natural gas export license on Wednesday for the -/("MMJFT‰BDPBMJUJPOBEWPDBUJOHGPSUIFGSFFUSBEFJO Triton LNG project backed by AltaGas Ltd and Japan’s OBUVSBMHBTCFUXFFOUIF6OJUFE4UBUFTBOEJUTBMMJFT‰JT Idemitsu Kosan Co., the latest in a number of planned NBOBHFECZ$PSOFSTUPOF(PWFSONFOU"òBJST liquefaction proposals for Canada’s West Coast to re- ceive the clearance. The National Energy Board said LNG ALLIES CORE TEAM the Triton Project has been approved to liquefy and Ŷ 'SFE))VUDIJTPOGII!DHBHSPVQDPN ship about 320 million cubic feet a day from a planned Ŷ &SJD5PCFSFUPCFS!DHBHSPVQDPN floating LNG facility whose site has not yet been cho- Ŷ %FOJTF#PEFECPEF!DHBHSPVQDPN sen. The approval is the latest for the nascent industry, Ŷ 3PO#POKFBOSPO!TJOHFSCPOKFBODPN following applications from other would-be projects Ŷ #SJBO8BMTICSJBO!TJOHFSCPOKFBODPN such as the Kitimat LNG plant planned by Chevron

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Corp. and Apache Corp. The projects are looking to have the fossil fuel resources to meet its energy needs, take gas from Western Canada’s massive shale fields and has to import 70% of its oil, 50% of its natural gas to high-paying Asian markets, though none have yet and 44% of its coal (IIEA). At a cost of almost €600 bil- been approved by their backers. Eight planned LNG lion a year (x 1.39$/€ = U.S.$830 billion/yr). The IEA facilities have now been granted export licenses. projects this dependency will increase by almost 20% > http://reut.rs/QgugpI in the next 20 years, even in the face of an anticipated increase in renewable energy. Russia provides over half Ŷ Assures Europe on Gas Reliability of the EU’s fossil fuel imports. In 2013, Europe import- Vladimir Soldatkin reports: Alexei Miller, The head of ed a third of its oil from Russia (over 2 billion barrels), Gazprom told Energy Commissioner more than from any other region of the world, plus Guenther Oettinger on April 15 that the Russian com- 40% of its natural gas and a little over 25% of its coal pany “is a reliable supplier of gas to the European (BP Review of World Energy). Germany was the big- market and will remain one going forward,” Gazprom gest recipient of Russian gas. said in a statement. Amid a tense political dispute with Forbes > http://onforb.es/1hFwlX5 Kiev and the West, Russia has threatened to decrease gas supplies to transit nation Ukraine if it continues Ŷ Mozambique Emerges as LNG Front-Runner to fail to pay its debts, but Moscow has also sought to Mozambique’s proposed LNG project has the lowest reassure European consumers it will abide by all con- upstream capital costs in the world, making the coun- tracts. Gazprom said Ukraine now owes $2.2 billion. try a highly attractive location for development. With Reuters > http://reut.rs/1t54Ieg more than 25 new countries looking to build LNG projects over the next five years, Mozambique is rac- Ŷ Germany’s RWE Begins Natural Gas Deliveries to Ukraine ing to become East Africa’s first LNG exporter—with a Christoph Steitz and Michael Kahn: Germany’s RWE project slated for start‐up in late 2018-19. “East Africa began deliveries of natural gas to Ukraine on Tuesday has emerged as an important hydrocarbon province in as a diplomatic crisis between Kiev and Moscow raises the wake of enormous natural gas discoveries made in the risk of Russia cutting off gas supplies to Ukraine. Mozambique and Tanzania since 2010,” Royal Bank of The gas is being delivered via under a frame- Canada Capital Markets said. “This abundant resource work agreement signed by Ukraine’s Naftogaz and picture has piqued the interest of Asian LNG buyers RWE subsidiary RWE Supply & Trading in 2012 who are seeking to diversify their portfolios. Tanzania which allows for delivery of up to 10 billion cubic does not envision LNG exports this decade, but meters (bcm) of gas per year. Deliveries are based on Mozambique could be an LNG exporter by late 2018- European wholesale prices including delivery costs, 19.” Mozambique is not the only East African nation it said, and involves gas from the E.U., Norway and eyeing LNG exports. Next-door neighbor Tanzania is Russia. also sitting on formidable reserves of natural gas. Reuters > http://reut.rs/Q9MzNu Zawya (Dubai, UAE) > http://bit.ly/1gUkHCC Ŷ Nukes Best Option Against Russian Gas Ŷ The LNG Lessons Canada Can Learn from Australia Despite Europe’s commitment to decreasing the use of The world is undergoing an LNG boom, and Australia fossil fuel... natural gas use keeps increasing, even in is at the epicentre... Half a world away, meanwhile, Germany. At the same time, nuclear energy, the best there are bold plans to make Canada an LNG pow- hedge against Russian fuel imports, will decline as erhouse, targeting many of the same Asian firms as Germany shuts down its nuclear fleet. Replacing coal customers. But Australia’s huge head start, the massive with natural gas is the easy way to make low-carbon scope of its LNG projects, and major cost overruns progress. Unfortunately, it has increased Russia’s influ- encountered along the way threaten Canada’s success ence. The central problem for Europe is that the E.U. is as it jumps into a global industry that promises to be the world’s largest energy importer. The E.U. does not

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intensely competitive. Canada, or more specifically Ŷ U.S. Response to Putin’s Letter British Columbia, will be lucky to have three LNG Reuters reports: President Vladimir Putin warned on export terminals by the end of the decade. There is a Thursday that Russian gas supplies to Europe could lot of promise in B.C. but relatively little happening be disrupted if Moscow cuts the flow to Ukraine over on the ground. There are at least 14 B.C. LNG proj- unpaid bills, drawing a U.S. accusation that it is using ects planned, but industry experts caution that launch- energy “as a tool of coercion.” In a letter to the lead- ing just one project will be a major challenge... Of the ers of 18 European countries, Putin made clear that planned projects, Pacific NorthWest LNG project, his patience would run out over Kiev’s $2.2 billion gas headed by Malaysia’s state-owned , is the most debt to Russia unless a solution could be brokered ur- likely to proceed to construction on Lelu Island near gently. “We condemn Russia’s efforts to use energy as Prince Rupert. Another promising project is Kitimat a tool of coercion against Ukraine,” State Department LNG, owned by the Canadian units of Chevron Corp. spokeswoman Jen Psaki said. and Apache Corp... B.C. Natural Gas Development Reuters > http://reut.rs/1gUerdZ Minister Rich Coleman says other players remain Ŷ Gas Carousel Makes Spain Europe’s Biggest LNG Exporter committed, even if their projects aren’t as advanced, Anna Shiryaevskaya and Julia Mengewein write: Spain but warns that B.C.’s window of opportunity will close overtook Norway last month to become the region’s in the next five to seven years. biggest exporter of liquefied natural gas. The southern The Globe and Mail > http://bit.ly/1hCpw9r European nation has never produced any of the fuel... NEWS CLIPPINGS: APRIL 8-11 Spanish buyers including Iberdrola SA and Endesa SA are obliged to buy LNG volumes under their long-term Ŷ Natural Gas Losing Decades-Old Tie to Oil? contracts, most of which have so-called destination Tara Patel writes: A contract for France’s largest natural clauses, meaning the cargoes can’t be diverted at sea. gas company to buy the commodity from Azerbaijan [Consequently,] Spain dispatched seven loaded LNG shows the decades-old structure of Europe’s energy tankers from its import terminals in March, accord- market is starting to crumble. For the first time, GDF ing to Enagas SA, the Madrid-based network operator. Suez signed a 25-year contract to buy gas from BP Plc That compares with five from Norway’s Hammerfest, and partners in the former Soviet republic at prices Europe’s only [LNG export] plant... Global demand tied to those in Western Europe’s domestic gas mar- will exceed supply until at least 2020, BG Group Plc kets... Europe’s gas contracts have been tied to oil since said last month. The tight market signals that LNG re- the 1960s as a way of providing certainty to suppli- loads will continue, Andrew Walker, vice president for ers who would then invest billions to build fields and global LNG at BG Group Plc, said. pipelines. More recently, as gas prices fell and oil rose, Bloomberg > http://bloom.bg/1ggZBCi utilities including GDF and Electricite de France SA as well as Germany’s EON and RWE pressed Russian Ŷ Arctic LNG Project Backs Russia’s Political Strategy gas-export monopoly Gazprom and Norway’s Statoil On the Arctic tundra far to the north of Moscow, to revise long-term agreements. Gazprom will prob- Russia is charting a course away from the West and ably reduce the price it charges European buyers in towards Asia. In Yamal—which in the local Nenets a bid to overcome competitors such as Azerbaijan, language means “the end of the earth”—a $27 billion Societe Generale said in a March 19 report. Gazprom’s liquefied natural gas (LNG) scheme is assuming major market share in Europe is expected to plateau at about political as well as economic significance. The proj- 29 percent in 2016 to 2018 after dropping to as low as ect fits well with a more aggressive eastward push by 22 percent in 2010, according to the report. Moscow since the United States and European Union Bloomberg > http://bloom.bg/1ex2IHZ imposed sanctions over its annexation of Crimea from Ukraine last month. Instead of sending gas by pipeline

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to long-standing E.U. customers, Russia aims to ship requirements from Russia. Reuters calculations show LNG from the remote Yamal peninsula by sea largely that the plans being pushed ahead in the region could to Asian buyers such as China, which has avoided con- soon drastically change its , with Russia’s fronting Moscow since Russian troops took control share of Poland’s gas market set to drop from 90 per- of Crimea. Yamal will eventually involve the drilling cent in 2009 to 66 percent in 2013 and with the poten- of more than 200 wells through the permafrost and tial to fall as low as 15 percent in the next two years... building facilities to liquefy the gas. Construction at Lithuania also hopes to begin importing LNG next year the port of Sabetta, more than 2,000 km (1,200 miles) via the “Independence” floating LNG facility, [allow- north of Moscow, is well under way. (The French en- ing] imports of 2-4 bcm of natural gas per year, poten- ergy group Total and China National Petroleum Corp. tially enough to meet all of the country’s 3 bcm annual each have 20 percent stakes in Yamal LNG.) gas needs... Lithuania [also] plans to use some of the The Maritime Executive > http://bit.ly/1qUXDZW fuel for shipping, where new environmental controls Ŷ Putin Warns Europe About Ukraine’s Mounting Gas Debt are coming into place in 2015, making LNG a competi- Nataliya Vasilyeva and Vladimir Isachenkov write: tive fuel with oil for small ships.“We will be able to load Putin’s letter to 18 leaders, released Thursday (April 9) LNG into smaller vessels and... supply smaller termi- by the Kremlin, is part of Russia’s efforts to retain con- nals in the Baltic countries,” said Rokas Masiulis, CEO trol over its struggling neighbor, which is teetering on of Klaipedos Nafta, the state-owned petroleum com- the verge of financial ruin and is facing a pro-Russian pany that will operate Lithuania’s LNG terminal. separatist mutiny in the east. The amount that Putin Some of that LNG for transport would go to Estonia claims Ukraine owes is growing by billions every day. and Finland, who... signed an agreement in February In the letter, Putin said Ukraine owes Russia $17 bil- to build either a single terminal that would give both lion in gas discounts and potentially another $18.4 bil- countries on each side of the Gulf of Finland access lion incurred by Ukraine as a minimal take-or-pay fine through a planned pipeline, or to build two LNG ter- under their 2009 gas contract. He added, on top of that minals, one on either side of the Gulf. $35.4 billion, Russia also holds $3 billion in Ukrainian Reuters > http://reut.rs/1qFYZaO government bonds. Ŷ Chile’s Gas Atacama has U.S. LNG Providers Lined Up Boston Globe (AP) > http://b.globe.com/1hx9tbW Alexander Ulmer reports: GasAtacama, energy pro- Ŷ Text of Putin Letter to 18 National Leaders vider to metal producers in Chile’s Atacama desert, has Sent to the leaders of Germany, France, Italy, Austria, lined up eight potential U.S. natural gas suppliers for a Hungary, Czech Republic, Poland, Slovakia, Slovenia, proposed import terminal on its Pacific Coast, but un- Croatia, Serbia, Bosnia, Bulgaria, Romania, Macedonia, certainty about energy demand has delayed deals, CEO Greece, Turkey and Moldova, the letter from Russian Rudolf Araneda told Reuters on April 10. GasAtacama Federation president Putin was released by the Kremlin plans to build a $350 million offshore liquefied natural and has been made public by Reuters. gas (LNG) import terminal that would take shipments Reuters > http://reut.rs/1ieIa64 of the fuel to help create 500 megawatts of electricity for power-hungry miners in the mineral-rich north. Ŷ Poland and Baltic States to Boost LNG Import Capacities Henning Gloystein writes: The Baltic region is fast- Reuters > http://reut.rs/1jwJiBC tracking plans to boost its liquefied natural gas (LNG) Ŷ High-Cost Australia May Miss LNG Expansion Wave imports, hoping to drastically cut Moscow’s grip Reuters: Stung by soaring costs, the gas industry paints on the region’s supply... Many Baltic states such as a gloomy outlook for new liquefied natural gas (LNG) Estonia, Latvia, Lithuania and Finland rely entirely projects in Australia, putting at risk $180 billion of on Russia for their gas demand while the region’s big- developments from 2018 onwards. While Australia gest economy, Poland, buys almost two thirds of its gas

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enjoys political stability and is close to Asian custom- Europe, leaving it vulnerable to sanctions and com- ers, big cost overruns at a series of giant offshore proj- petition from U.S. exports of . “We hope to ects have dismayed various companies. conclude the contract in May,” Deputy Prime Minister Reuters > http://bit.ly/1sIOw2f Arkady Dvorkovich said in Beijing yesterday after meeting Chinese Vice Premier Zhang Gaoli, accord- Ŷ Japan’s Osaka Gas Eyes U.S. Shale Upstream Stakes ing to Itar-Tass news wire. “The base price is the only Takeo Kumagai reports: Osaka Gas, Japan’s second- problem to be solved.” largest city gas utility, is considering acquiring ad- Bloomberg > http://bloom.bg/1sFsTQe ditional upstream stakes in U.S. shale gas assets as a way to hedge price risk for its LNG exports from Ŷ 2014 May Be Most Active Year for Global Shale Drilling the Freeport project, President Hiroshi Ozaki said Oil companies are planning to drill nearly 400 shale Thursday. “Acquiring U.S. shale gas upstream assets wells in countries outside of North America in 2014, means we will be able to secure gas at a fixed cost and with most in Argentina, China, Australia this year. But save [procurement] costs,” Ozaki said at a press brief- only one in five global shale regions may succeed in ing in Tokyo. Ozaki said its upstream stakes would producing significant amounts of oil and gas as coun- also help Osaka Gas secure “a sufficient volume of gas” tries from China to Argentina seek to emulate the U.S. from its equity “even when the market prices soar.” boom, said Andrew Latham, Wood Mackenzie’s vice Platts > http://bit.ly/1hwT8VG president for exploration research, in an interview in Australia this week. “You hear people talk about lots Ŷ Gazprom Buys Out Kyrgyzgaz for $1 of different basins,” Latham said. “It’s all good, but it’s Russia’s Gazprom has bought 100 percent of Kyrgyzgaz all potential, and I’d be surprised if more than one in for a symbolic $1, as it also undertook to cover the five plays that gets drilled ever becomes commercially company’s $40 billion debt. The deal makes Russia’s gas significant in terms of production. You only get to be monopoly the sole gas supplier to Kyrgyzstan. “It’s a one of the five by drilling.” historic day. Today we signed an agreement to acquire Fuel FIx > http://bit.ly/1qxXr2L 100 percent of Kyrgyzgaz and this company is join- ing the big Gazprom family,” Gazprom CEO Aleksey Ŷ Cyprus LNG Plant Talks Finally Back on Track Miller said Thursday (April 10). Kyrgyzgaz will be re- Elias Hazou writes: Face-to-face talks between the gov- named Gazprom Kyrgyzstan, and Gazprom plans to ernment and Noble Energy on the construction and invest at least 20 billion rubles over the next five years. operation of an LNG plant are finally back on track. RT > http://bit.ly/1hk9rEg A government-appointed negotiating team—which includes the Cyprus Hydrocarbons Company—held Ŷ Russia Expected to Sign China Gas Deal meetings with the Texas-based firm on April 8-9. The Elena Mazneva reports: Vladimir Putin is more likely negotiations between the government and the Block to sign a 30-year deal to supply pipeline gas to China 12 partners—Noble, Delek and Anver—are aimed at next month after more than a decade of false starts be- concluding a final project agreement for an LNG ter- cause the crisis in Ukraine is forcing Russia to look for minal. Talks were to all intents and purposes suspend- markets outside Europe. While Putin and President ed in November when Noble decided to allow the gov- Xi Jinping will make the final decision in Beijing next ernment time to make up its mind on several issues month, Russia’s need for new customers means it’s relating to the onshore LNG facility. pushing to complete a deal...The crisis in Ukraine has Cyprus Mail > http://bit.ly/1qm5gKz increased the importance of Russia’s relationship with China, its largest trade partner outside the E.U. and the only country in the U.N. Security Council not to censure its actions in Crimea. Until a China pipeline is built, Russia has few export markets for gas outside

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