Eastern Australian Gas

Purchasing in a changing demand and supply environment

David Pethick, Head of Major Customers, Origin

Origin is the leading Australian integrated energy company

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The Major Customers group serves Commercial & Industrial clients

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Major Customers provides energy risk management services, focussed on meeting the needs of Australia’s largest 600 energy consumers.Total annual energy consumption across this segment is ~70 TWh of electricity and ~320 PJ of gas.The Origin Major Customers team incorporates approximately 30 staff in 3 business streams.

Energy Markets

Upstream Generation

Wholesale & Trading

Retail Markets

Major Customer

s

Sales Service Innovation

A brief history of gas commercialisation in Eastern Australia

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• In the early 1960’s Exploration & Production (E&P) for oil and gas received investment.

• By the mid-1970’s the largest gas reserves were in the Cooper and Gippsland Basins.

• In the late-1990’s, focus moved to the commercialisation of Coal Seam Gas (CSG) resources in the Bowen & Surat Basins.

• Commercialisation of the offshore resources in the Bass and Otway basins also began in this period.

• By the turn of the century, Eastern Australian gas consumption had reached approximately 400 PJ pa against 2P reserves of 10,000 PJ.Source: Core Energy Group Pty.

Ltd.

Since 2005, Eastern Australia’s 2P reserves have increased 5-fold...

... with a further 350,000 PJ of contingent and prospective resources.

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Growth in Eastern & Southern Australian Gas

Reserves(1,2)

Eastern & Southern Australian Gas Reserves

and Resources(3)

(1) Report to AEMO, Gas Reserves Development in Eastern Australia – projections prepared for the GSOO 2010, McLennan, Magasanik & Associates.

(2) Energy Quarterly August 2012 Report, EnergyQuest, December 2011 data shown in table 17.(3) Eastern & Southern Australia: Existing Gas Reserves & Resources. April 2012. Core Energy Group. December 2011 data.

LNG exports will become Eastern Australia’s largest gas demand segment

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Eastern Australian Gas Demand Segments – 2010(1)

Eastern Australian Gas Demand Segments – 2016(2)

Large Industrial segment includes all loads with an annual gas consumption greater than 10 TJ.(1)

Annual growth forecasts are 1% for mass market, 1.2% for industrial and 3.5% for generation.(2,3)

LNG Export assumption is total production in 2016 of ~21 MTPA, consuming ~1,260 PJ.(3)(1) Annual gas demand by market segment Gas Statement of Opportunities 2011 for Eastern and South Eastern Australia, AEMO

(2) 20 year average annual growth rate for Mass Market & Large Industrial segments from table 5-2 of same source. (3) Origin estimate of annual growth rates to approximately replicate 2016 projections shown in figure 5-5 and 5-10 from

same source.

+21 PJ pa

+11 PJ pa

+42 PJ pa

APLNG’s industry leading 2P reserves base continues to expand …

… and more than covers gas requirements for all commitments.

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5,000

10,000

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30,000

APLNG Reserves and Resources (100%)

0

20

40

60

80

100

120

PJ

J an-J un

J ul-Dec

Origin Share

Estimated Requirement

s

Note: Some of APLNG’s CSG reserves and resources are subject to reversionary rights. Refer to Origin’s Management Discussion & Analysis for the year ended 30 June 2012 for further information.

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5,000

10,000

15,000

20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

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5,000

10,000

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20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

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5,000

10,000

15,000

20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

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5,000

10,000

15,000

20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

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5,000

10,000

15,000

20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

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5,000

10,000

15,000

20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

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5,000

10,000

15,000

20,000

25,000

30,000

Ramp and Tail Gas Train 2 Train 1 QCLNG GSA Domestic Gas Origin Contract 3C 2C 3P 2P

Electricity demand growth forecasts have been revised downwards

8 | (1) 2012 Electricity Statement of Opportunities for the National Electricity Market , AEMO

Comparison of NEM-wide energy projections(1)

Development in base-load gas generation lags wind and peaking plant

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• Declining demand growth and the RET is driving generation investment towards wind and away from gas fired generation (particularly CCGT).

• It is anticipated that the 2012 Gas SOO will revise downwards growth forecasts for gas powered generation over the next 5 years.

(1) 2012 Electricity Statement of Opportunities for the National Electricity Market , AEMO

Current commitment status of public generation developments in the NEM(1)

RELATIONSHIPProven value

delivery leading to preferred

supplier status

SOLUTIONTailored deals developed in partnership

PRICELow price, reputable supplier

OPPORTUNISTAlignment of

portfolio needs

ComplexNeeds

Standard Needs

Low Value

High Value

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Different approaches to managing energy risk

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Considerations for your next gas supply negotiation

• Term• Length of contract should be driven by business needs first, market view

second.• Understanding the cost of gas as a proportion of operational costs is critical.

• Volume Certainty• Greater daily and annual volume certainty allows for price discounts.• Potential growth in load is valuable for retailers in a competitive market.• Ensure you understand take-or-pay and banking mechanisms.

• Price Certainty• Review all terms associated with the delivered price. Understand pass-through

and price adjustment mechanisms that reduce price certainty.• Potential to reduce costs through tailored contracts (e.g. non-firm, spot

pricing).• Link costs to an index, allowing transparency and potentially hedging of value.

In summary - define an energy risk management strategy and pursue value.

Conclusions

• Development of coal seam gas resources in the Bowen & Surat Basins has led to a large volume of gas being available for commercialisation.

• A new industry, CSG to LNG export, is being created in Queensland. It will become the largest consumer of gas in Eastern Australia.

• As with any market, significant changes in demand and supply will have a price effect.

• Declining electricity demand and increasing renewable energy supplies from wind and solar will have an effect on requirements for new build electricity generation.

• Effective energy risk management requires knowledge of all components of the energy supply chain. Today we haven’t talked about electrification, coal exports, carbon pricing etc.

• Origin is Australia’s leading fuel-integrated generator/retailer. The Major Customers team would be happy to help you develop an energy risk management strategy.

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Thank you

Further Information

David PethickHead of Major CustomersEmail: david.pethick@originenergy.com.au Office: (02) 8345 5223Mobile: 0438 692 814

Websitewww.originenergy.com.au

Introduction to the Petroleum Resources Management System (PRMS)

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Reserves are that part of resources which are recoverable both technically and economically. Contingent Resources are not yet considered mature due to technological or business hurdles.Prospective Resources are as yet only known to exist through indirect (i.e. non-drilling) measures.1P, 2P and 3P (and their equivalents in Resources) can be interpreted as confidence levels. The measures are cumulative. For example, 2P can never be greater than 3P.

Source: Petroleum Resources Management System 2007 guidelines, published by the Society of Petroleum Engineers