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transcript
Summer 2019
Fundamentals
Cautionary statements
The information in this presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,” “forecast,” “initial,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will,” “would,” and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this presentation relate to, among other things, gas resources, production and costs, infrastructure needs and costs, LNG export and pipeline capacity, LNG bunkering, LNG prices, future demand and supply affecting LNG, and general energy markets and other aspects of our business and our prospects and those of other industry participants.Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. These statements are subject to numerous known and unknown risks and uncertainties, which may cause actual results to be materially different from any future results or performance expressed or implied by the forward-looking statements. These risks and uncertainties include those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and our other filings with the Securities and Exchange Commission, which are incorporated by reference in this presentation. Many of the forward-looking statements in this presentation relate to events or developments anticipated to occur numerous years in the future, which increases the likelihood that actual results will differ materially from those indicated in such forward-looking statements.
The forward-looking statements made in or in connection with this presentation speak only as of the date hereof. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by securities laws.
Reserves and resourcesEstimates of non-proved reserves and resources are based on more limited information, and are subject to significantly greater risk of not being produced, than are estimates of proved reserves.
Forward-looking statements
Disclaimer
Contents
3
Short-term fundamentals – updated monthly
U.S. natural gas – plentiful, low-cost U.S. natural gas supply
Global LNG – global gas market is growing and becoming commoditized
2019 U.S. dry gas production (bcf/d)
4
9.3 9.7
Jan Jul
9.7 10.0
Jan Jul9.4 9.9
Jan Jul4.8 4.8
Jan Jul
10.4 10.5
Jan Jul
Midcontinent(1)
Permian
Eagle Ford
Haynesville
30.0 31.3
Jan Jul
Appalachia
88.1
90.0
Jan Jul
U.S. Lower-48(2)
Source: IHS Markit.
Notes: (1) Includes Anadarko, Fayetteville, Cherokee, Mississippian, Ardmore Woodford, Arkoma Woodford, Cana Woodford, and Granite Wash.(2) Due to relative magnitude of production, production axis not at scale with other basins.
The use of this content was authorized in advance. Any further use or redistribution of this content is strictly prohibited without written permission by IHS Markit.
Rockies/Williston
25
27
29
31
33
35
37
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
MT per month
LNG demand is growing 13.6% y/y in 2019
Sources: IHS Markit, Tellurian analysis.
The use of this content was authorized in advance. Any further use or redistribution of this content is strictly prohibited without written permission by IHS Markit.
5
2019 expected capacity
2018 LNG demand2019 LNG demand+13.6% y/y LNG demand H1
LNG capacity H1 +13% y/y
Utilization rate +600 bps y/y
2019
Firm LNG capacity forecast
Source: Tellurian Research, Wood Mackenzie.
6
292 318 347 377 408 412 412 412 412 406 401
4 24 35 48 51 67 93
248 264298
324
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global LNG capacity and output (mtpa)
Under construction capacityCapacityLNG output
Firm LNG capacity schedule mtpa
Source: Tellurian Research, Wood Mackenzie.
7
Project Country CapacityEst. start
date 2019 2020 2021 2022 2023 2024 2025Elba Island LNG Export T1-6 US East 1.5 8/1/2019 0.6 1.5 1.5 1.5 1.5 1.5 1.5
Ichthys T2 Australia 4.5 10/1/2019 1.1 4.5 4.5 4.5 4.5 4.5 4.5 Vysotsk LNG Russia West 0.7 9/1/2019 0.2 0.7 0.7 0.7 0.7 0.7 0.7
Sengkang LNG Indonesia 0.5 10/1/2020 – 0.1 0.5 0.5 0.5 0.5 0.5 Freeport Train 1 US East 5.1 9/1/2019 1.7 5.1 5.1 5.1 5.1 5.1 5.1 Portovaya LNG Russia West 1.5 9/1/2019 0.5 1.5 1.5 1.5 1.5 1.5 1.5
Elba Island LNG Export T7-10 US East 1.0 1/1/2020 – 1.0 1.0 1.0 1.0 1.0 1.0 Cameron LNG Export T2 US East 4.0 2/1/2020 – 3.7 4.0 4.0 4.0 4.0 4.0
Freeport Train 2 US East 5.1 5/1/2020 – 3.4 5.1 5.1 5.1 5.1 5.1 Freeport Train 3 US East 5.1 10/30/2020 – 1.3 5.1 5.1 5.1 5.1 5.1
Cameron LNG Export T3 US East 4.0 9/1/2020 – 1.3 4.0 4.0 4.0 4.0 4.0 PETRONAS FLNG 2 Malaysia 1.5 1/1/2021 – – 1.5 1.5 1.5 1.5 1.5 Tangguh Phase 2 Indonesia 3.8 10/1/2021 – – 1.0 3.8 3.8 3.8 3.8
Coral FLNG Mozambique 3.4 1/1/2022 – – – 3.4 3.4 3.4 3.4 Corpus Christi LNG Train 3 US East 4.5 1/1/2022 – – – 4.5 4.5 4.5 4.5
Tortue FLNG Senegal 2.4 3/1/2022 – – – 2.0 2.4 2.4 2.4 Sabine Pass LNG T6 US East 4.7 6/1/2023 – – – – 2.7 4.7 4.7
LNG Canada T1 Canada West 7.0 4/1/2024 – – – – – 5.3 7.0 Golden Pass LNG T1 US East 5.2 5/1/2024 – – – – – 3.5 5.2 Golden Pass LNG T2 US East 5.2 10/30/2024 – – – – – 1.3 5.2
LNG Canada T2 Canada West 7.0 1/1/2025 – – – – – – 7.0 Golden Pass LNG T3 US East 5.2 7/2/2025 – – – – – – 2.6
Mozambique Area 1 T1 Mozambique 6.4 6/1/2024 – – – – – 3.8 6.4 Mozambique Area 1 T2 Mozambique 6.4 1/1/2025 – – – – – – 6.4
4.2 24.0 35.4 48.1 51.3 67.0 93.1 –
20
40
60
80
100
2019 2020 2021 2022 2023 2024 2025
Cumulative new LNG capacity by country (mtpa)
US East MozambiqueCanada West IndonesiaMalaysia Russia WestAustralia Senegal
LNG capacity growth should peak in 2019Incremental LNG capacity (mtpa)
Sources: Wood Mackenzie, Tellurian analysis.Notes: (1) Percentage change of incremental volumes compared to previous year’s total capacity expected to be online.
8
26 37
18 9
4 (2) (1)
(8) (8)(2) (5) (2) (3)
–
3
12
8 8 14
26
3 – – – –
9%
12%
8%
4%
3%
(0%)
3%4%
(1%)(0%)
(1%)(0%) (1%)
(2.0%)
–
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
(20.0)
(10.0)
–
10.0
20.0
30.0
40.0
50.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030Existing Under construction Y/Y change
26
40
30
1712
(2)
13
18
5
(2)(5)
(2) (3)
(1)
Contents
9
Short-term fundamentals – updated monthly
U.S. natural gas – plentiful, low-cost U.S. natural gas supply
Global LNG – global gas market is growing and becoming commoditized
82 99
135
17
53
Plentiful, low-cost U.S. natural gas
10
Production growth and resource base from selected U.S. unconventional basins
Source: EIA 2019 Annual Energy Outlook, DrillingInfo, RBN, Tellurian analysis.Note: (1) RBN high case – extrapolated from 2024 to 2025 by Tellurian.
411
112
74
23
52
Resource size, Tcf
Marcellus-Utica< $1.00
Haynesville< $1.50
Eagle Ford$0 - $1.50
Permian< $1.00
Anadarko$0-$1.00
29.2 36.0
2018 2025
3.6 7.4
2018 2025
4.9 7.9
2018 2025
8.6 9.4
2018 2025
Total U.S. lower-48 dry natural gas productionBcf/d
EIA
RBN(1)
2018 2025 Production growth
9.6 16.9
2018 2025
BasinWellhead cost, $/mmBtu
6
10
14
18
22
26
2018 2019 2020 2021 2022 2023 2024 2025
Permian gas outlook – range of forecasts
Sources: Rystad, Wood Mackenzie, RSEG, IHS, DrillingInfo, BP, EIA, Tellurian Research.Notes: (1) Estimates based on guidance from Pioneer Energy. See https://www.spglobal.com/marketintelligence/en/news-insights/trending/ymld4hxz_zriyxkwqxdgmg2.
(2) Assumes 20% initial production (“IP”) improvement per year and flat completion activity levels.(3) Assumes flat seasonally adjusted rig drilling and completion activity, and 2% upward shift in basin wide type curve per quarter.(4) Current type curves (no improvement over time) and flat rig count based on current levels.
11
2025 YE production (Bcf/d)
Pioneer(1)
Rystad/BP/EIAWood Mackenzie/IHS(2)
RSEG(3)
Scenario – $70/bbl WTI(4)
Permian dry gas production• Permian gas supply
driven by oil production economics
• Gas-to-oil ratios in the Basin are increasing, meaning wells are getting “gassier”
• Consolidation and more investment from the majors underpins resilient production outlook2018 2019 2020 2021 2022 2023 2024 2025
Permian by the numbers
Sources: Rystad, EIA, World Bank, Platts via Marketview, and BTU Analytics.
12
2.5-4.0Gas-to-oil ratio
(“GOR”)
~1bcf/d
4.1million bpd
Average GOR in the Permian with higher GORs in the Delaware, the recipient
of most investment
One of the most prolific oil basins in the world with
extremely low oil breakevens and negative
breakevens for gas production
Estimated natural gas flared in the Permian Basin every
day in Q2 2019
The United States is among the top 4 flaring countries,
behind Russia, Iran, and Iraq
-$0.90$/mmBtu
3-year avg. basis
3-year average basis for gas prices in West Texas
compared to Henry Hub; as of August 2019, forward
curve averaging -$0.55 mmBtu for 2023
#4ranking
+7
+4
+7
+1
+3
Looming challenge of U.S. gas oversupply
13
U.S. natural gas must be exported
Sources: DrillingInfo, EIA, Tellurian analysis.Note: (1) Assumes $70/bbl oil price and $3/mmBtu Henry Hub price; incremental supply comes from Permian, Scoop/Stack, Haynesville, Eagle Ford, and Appalachia.
(2) Assumes U.S. natural gas demand grows 0.6% p.a. and that the 7.4 bcf/d of LNG terminals under construction produce at a 90% utilization rate. (3) Assumes new LNG terminals produce at a 90% utilization rate. (4) Assumes new liquefaction capacity costs $1,000 per tonne plus an additional $70 billion of pipeline infrastructure to transport gas supply to the terminal.
Bcf/d total gas supply growth(1)
Bcf/d excess gas supply(2)
mtpa LNG capacity required(3)+100
~$150 - $225 billion(4) of investment required to build 100-150 mtpa of LNG and supportive pipeline infrastructure
to export excess U.S. gas supply
+12
+22
2018-2025:LegendOperating/under construction LNG
Future infrastructure required
Incremental gas supply by 2025 (bcf/d)+X
Contents
14
Short-term fundamentals – updated monthly
U.S. natural gas – plentiful, low-cost U.S. natural gas supply
Global LNG – global gas market is growing and becoming commoditized
0
100
200
300
400
500
600
700
800
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global LNG demand pull
Sources: Wood Mackenzie, Tellurian Research.Notes: (1) Assumes 86.5% utilization rate.
(2) Assuming sustained 2015-2018 demand growth rate of ~9.3% p.a. post-2019.(3) Assumes estimate of 5.0% p.a. demand growth rate post-2020.
15
Under construction
In operation
Capacity required(1)
9.3%(2)
5%(3)
~100 mtpa
~250 mtpa9.3% p.a. growth rate
Key drivers
China
India
Europe
New markets
170 97
208
885
Liquid maritime fuels(HFO)
Oil burned for powergeneration (ex-North
America)
Coal burned forpower generation
(EU + JKT)
Coal burned forpower generation
(China + India)
2018 fuel consumption (mtpa LNG equivalent)
$ 0
$ 2
$ 4
$ 6
$ 8
$ 10
$ 12
$ 14
$ 16
Jan
2016
Apr
201
6
Jul 2
016
Oct
201
6
Jan
2017
Apr
201
7
Jul 2
017
Oct
201
7
Jan
2018
Apr
201
8
Jul 2
018
Oct
201
8
Jan
2019
Apr
201
9
Jul 2
019JKM Brent Newcastle
Latent LNG demand from fuel substitution There is substantial latent demand for LNG, which is competitive with oil prices and cleaner than coal
Source: ICE via Marketview, BP Statistical Review, Oxford Energy Institute Tellurian analysis. Notes: (1) Newcastle coal includes a $15 per tonne shipping fee and is heat rate adjusted.
(2) Assumes a 7,800 average heat rate for global gas-fired power plants. (3) Includes Central America, Europe, Middle East, and Asian markets.
16
LNG prices trade between oil and coal prices ~1,359 mtpa LNG equivalent latent LNG demand
Gas is cheaper than oil Gas is cleaner than coal
Coal-to-gas switching point
(1)
(2)
(3)
Natural gas demand linked to renewables
Source: UK Department for Business, Energy, and Industrial Strategy (2019), Lazard.
17
Natural gas share in UK’s power mix grew to ~50% as higher CO2 prices incentivized dispatch of cleaner fuels
0
10
20
30
40
50
60
70
80
90
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
mtoeUK power generation by fuel
Coal Oil Gas Nuclear Hydro (natural flow) Wind Solar
0 100 200
Gas CCGT
Nuclear
Coal
PV Rooftop
PV Utility scale
Wind
Levelized cost ($/MWh)
Unsubsidized levelized cost of energy (LCOE)
Gas-fired power generation is a cleaner, more affordable, and reliable backup to renewables
LNG required to offset Groningen declines
Global LNG
Netherlands capping production from the Groningen field requires ~10 mtpa of LNG
Source: NAM, Energy Aspects.
18
Gas fieldsEarthquakes
54
42
28 28 24 22
15 12 12 12
8 4 3
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
bcm Groningen yearly production
Netherlands
Mandated production cap
Forecast
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
- 500 1,000 1,500 2,000
GDP/capita
Emerging consumption: China and IndiaPopulation and economic growth imply significant upside to gas consumption in China and India
Sources: IHS Markit, SIA Energy, EIA, CIA World Factbook, BP Energy Outlook.
19
China7 mcf/capita
India2 mmcf/capita
United States87 mcf/capita
Size indicates relative volume of gas consumed per capita in 2018 (mcf/capita)
Argentina38 mcf/capita
Natural gas’ share of 2018 energy mix
6% 7%
23%31%
49%
India China EU U.S. Argentina
European Union38 mcf/capita
Population (millions)
203
330 391
74
108
120
2018 2025 2030
Growing demand in China Economic growth and emerging environmental policy drives demand growth
Source: SIA.
20
277
438
510
LNG
Domestic production & pipeline imports
Chinese gas demandbillion cubic meters per year
6.1% CAGR (2018-2030)
4.5% CAGR (2018-2030)
668721
751777
830 850 868
26
29
3034
3940
42
2012 2013 2014 2015 2016 2017 2018
Number of importing countriesGlobal regascapacity (mtpa)
Growing number of importers accessing LNGThe number of LNG importing nations has grown by ~60% in the last 7 years
Source: GIIGNL, IGU (2019), IHS Markit.Notes: Includes Lampung, Nusantara, and Tanjung Benoa (all in Indonesia) and Northeast Gateway (United States).
21
33 total floating storage and regasification units (FSRUs) represent ~130
mtpa of global regasification capacity as
of May 2019
New demand from LNG bunkering
LNG offers shippers a smart way to meet existingand upcoming maritime emissions regulations
LNG bunkering expected to grow substantially over the long term as marine and transportsectors seek a cleaner fuel alternative― Unlike conventional marine fuels, LNG emits
near-trace levels of SOx, NOx, and PM
Total addressable market of 170 mtpa, based on today’s global marine fuel oil consumption
Over 120 LNG-fueled vessels already in operation, with over 130 on order or under construction
Cleaner burning LNG is becoming more popular as a fuel for marine vessels for IMO 2020
Sources: OIES 2018, DNV-GL.
22
0
10
20
30
40
50
60
70
2025 2030 2035 2040
mtpa Comparison of LNG bunkering forecasts
IEA Sustainable Development IEA New PoliciesENGIE/PWC Lloyds Register maxWood Mackenzie
Physical and financial liquidity is growingFinancial derivatives Physical liquidity
Sources: Platts, GIIGNL.
23
59.2 65.0
69.6 68.4 74.6
77.6
99.3
2012 2013 2014 2015 2016 2017 2018
Spot and short-term LNG trade
Total trade (mtpa)Share of total trade (%)
25%28%
28%29%28%
27%
32%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2012 2013 2014 2015 2016 2017 2018 YTD2019
JKM futures traded (10,000 mmBtu/lot)Lots
2019 annualized JKM swapsJKM swaps
Mtpa LNG equivalent 0.06 0.08 0.35 0.58 2.60 9.62 35.2 41.1
U.S. emerges as the world’s largest LNG exporterBased on firm capacity
Source: Wood Mackenzie, Tellurian Research. Notes: Includes existing and under construction projects.
24
Triangle of low-cost supply
30.6
88.8
77.8
Current capacity (mtpa) (producing and under
construction)
92.4
Current LNG buildout has experienced cost overruns Announced total capex cost increases for selected Australia and Papua New Guinea projects
Announced liquefaction EPC cost increases for selected existing and under-construction U.S. projects
Source: IHS Markit, Tellurian Research.
25
0 1000 2000 3000 4000 5000 6000
Queensland Curtis LNG T1-2
Pluto LNG T1
GLNG T1-2
PNG LNG T1-2
APLNG T1-2
Gorgon LNG T1-3
Wheatstone LNG T1-2
Ichthys LNG T1-2
Total capital costs ($ per tonne)
Cost at FID Cost increase
– 100 200 300 400 500 600 700 800 900 1,000
Sabine Pass LNG T3-4
Sabine Pass T1-2
Corpus Christi LNG T3
Sabine Pass LNG T5
Corpus Christi LNG T1-2
Freeport LNG T3
Freeport LNG T1-2
Cameron LNG T1-3
Cove Point LNG
Golden Pass LNG
Total capital costs ($ per tonne)
Estimated sunk regas costs Cost at FID Cost increase
Natural gas and LNG
To:1 billion cubic meters of natural gas (bcm)
1 billion cubic feet of natural gas (bcf)
1 million metric tonnes LNG (mt)
1 trillion British thermal units (tBtu)
1 million tonnesof oil equivalent (mtoe)
From Multiply by1 billion cubic meters of natural gas(bcm) 1 35.3 0.72 35.7 0.9
1 billion cubic feet of natural gas (bcf) 0.028 1 0.021 1.01 0.025
1 million tonnes LNG(mt) 1.38 48.7* 1 52 1.22
1 trillion British thermal units (mmBtu) 0.028 0.99 0.019 1 0.025
1 million tonnes of oil equivalent (mtoe) 1.11 39.2 0.82 39.7 1
Conversion factors
Conversion factors26
*includes 6.3% losses in transportation for international LNG trade
1 MWh = 3,412 mmBtu = 3.412 mmcf