Propan som konkurransefortinn i global industrivirksomhet. Nicholas R. Martin Gasskonferansen, Trondheim 2018

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1 Propan som konkurransefortinn i global industrivirksomhet Nicholas R. Martin Gasskonferansen, Trondheim 2018

2 Hydro Energy It all started with energy create a more viable society by innovative and efficient use of natural resources and products

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4 Captive hydropower production increased to 10 TWh Norway s 3 rd largest power producer Power production capacity (TWh), per region and reversion year Sogn * Normal annual production 10 TWh Røldal-Suldal 2022* 3.2 Telemark * No reversion Subject to reversion Bubble size = production in TWh Vigeland 0.2 * Reversion year 4

5 Energy represents ~ 1/3 of smelter cost and ~ 50% of the total value chain cash cost 40% Primary 15% 30% Alumina Carbon Bauxite 35% 35% 5% 25% Energy Energy Energy Energy Total energy cost: ~50% Percentages indicate share of respective input costs globally Illustrative figures Source: CRU

6 Leveraging global energy competence for internal use Energy Portfolio Management (Energy Sourcing Operations) Alumina Energy Energy sourcing Energy trading desk Energy policy Energy analysis Grid unit Bauxite Primary Metal Recycling Use phase Rolled Products Extrusion 6

7 Hydro is a significant global buyer of gas Rolled Products, Re-melt, Primary (smelters), Extruded Solutions, Building Systems and Precision Tubing Gas Exposure Total (TWh/yr) 0,8 Europe Exposure per hub (TWh/yr) US Exposure per hub (TWh/yr) 0,72 1,44 1,8 11,65 4,45 4,45 1,8 2 0,16 0,13 Europe US World ex. Above TTF PEG NBP NCG Gaspool Henry *Includes Alunorf 100%

8 Hydro s gas usage in Norway Gas is used in rolling mill activity, laquering, casthouses and carbon production Mix of LPG, LNG and pipeline Sunndal (Smelter) tonn LNG by ship/tank Mainly coastline situated plants Mostly truck/tank rather than ship/tank due to size Historic reasoning for choice of fuel tonn LNG by truck Høyanger (Smelter) Årdal (Smelter) tonn LPG by ship Several suppliers Søral, Husnes (Smelter) Security of supply Demand depends on several factors tonn LNG by truck Holmestrand (Rolling mill) tonn LPG by truck Karmøy (Smelter/Rolling mill) mill m3/ 140 GWh Gas pipeline

9 Årdal smelter and carbon plant LPG by ship / truck arrangement t/a Distance Årdalstangen-Øvre Årdal Approx: 16 km LPG tanks Quay 9

10 Holmestrand rolling mill and laquer facility LPG delivered by truck arrangement 7000 t/a 2 x 1 tanks situated apart Quay 2 LPG tanks at rolling mill (5.500 ton/per annum) 1 LPG tank at laquer facility remote Approx: 4 km distance from rolling mill (1.500 ton/per annum) 10

11 LPG for industrials Global traded commodity for small to large industry outside pipeline network Obvious choice if oil or coal consumption Flexible delivery solutions, train, ship or truck Need for storage/ service solution Lower priced gas «hardware» LPG forward market potential for price fixing Security of supply lies with supplier (AMR) 11

12 LPG vs LNG Substitute potential? Shale gas/oil revolution No price correlation Share some of the same key price drivers Usage: Feedstock or heat Price formula Supplier and transport solutions 12

13 Total gas cost today and in the future Maintaining a gas strategy 5 years ahead LPG, LNG target in new tax regime, EU 3rd gas package GHG gas content Cost of transport now and in the future Small Scale LPG vs LNG Choice of suppliers, what if scenario Build and maintain HSE for gas Understanding the market to do the right calculation 13

14 Alternatives for Hydro/industry Could Hydro be better of using one type of gas and establish logistics? LNG import from Europe, etc.: TTF add on Port fee s Gate/Zebrugge Ship, TC LNG tanks/containers etc. LPG import from alternatives: Supplier fee Transport LPG tanks 14

15 Future importance of gas in Hydro Gas analysis and hedging Jan Hydro trades power to understand the composition, now gas consumption has reached a significant exposure volume Hydro gas consumption could increase further if LNG is supplied to Alunorte - Brazil Globally, gas is quickly replacing dirtier fossil fuels such as coal and fuel oil could gas be the LTMC driver? Shale oil/gas exploration has exploded with massive projects realizing, more to come online in the coming years CCGTs will likely play a part of the flexible energy stack for balancing renewables Total gas market will increase and market access/handling will become cheaper Source: FERC

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