Natural Gas Industry Perspectives

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1 Previsioni di Mercato Oil&Gas - Raffinazione, Chimico e Petrolchimico, Offshore, Techint S.p.A. energia convenzionale e alternativa Natural Gas Industry Perspectives Vittorio Folla Senior VP, Business Planning & Marketing Techint S.p.A. Sezione Componentistica d Impianto ANIMP I Convegno, Villa Torretta, 5 novembre 2009

2 The Techint Group 1/4 Techint is a private company that was established in 1945 by Agostino Rocca and today has more than 100 companies operating worldwide Today the Group is focused on steel production (pipes and flat products) The Techint Group had a fast evolution, and in the 2008 the significant data are: Annual revenues: US$ 26 billion Employees: 68,732 2

3 The Techint Group 2/4 Techint E&C Sales: USD 2.1 billion Tecpetrol Sales: USD 625 million EPC services on a global basis Oil and gas exploration and production (E&P) company Tenaris Sales: USD 12.1 billion Ternium Sales: USD 9.0 billion Leading supplier of tubes and related services Leading manufacturer of finished steel products in Latin America Tenova Sales: USD 1.55 billion Humanitas Operative beds: 1,260 Worldwide supplier of advanced technologies, products, and services for the metal and mining industries Promotes, implements and manages health care projects 3

4 Techint Engineering & Construction in the world 3/4 Canada Mexico Italy Netherlands Russia Kazakhstan Argentina Brazil Chile Colombia Ecuador Perù Trinidad & Tobago Uruguay Algeria Libya Egypt Nigeria Saudi Arabia Qatar U.A.E. 4

5 Techint Engineering & Construction Market Segment 4/4 Oil & Gas production facilities Petroleum Refineries and Petrochemical plants LNG Power plants Pipelines Power and Telecommunication lines Mining Architectural works Infrastructure 5

6 The Market: global market overview market analysis: Techint point of view market drivers Natural Gas Chain Investment Outlook Conclusions Main Issues 6

7 Global Market Overview Even if Oil & Gas companies have reassessed their investments economic feasibility, because of the ongoing crisis, in the middle and long term it is expected a new positive market trend: World energy demand within 2030: +50% World GDP: $165 trillion within 2030 ($56 trillion in 2005) Expected investments in energy infrastructures: $26 trillion (by 2030) The most rapid growth in energy demands is expected in non-oecd countries: World Marketed Energy Consumption [Source: IEA 2009] 7

8 Market Analysis: Techint point of view Fast market growth in the period , thanks to the Oil & Gas sector, which lead to the economic bubble Downturn during 4Q of 2008: Drop in new investments and high competition on prices Difficulty in making a clear market forecast; but a new growth is foreseen starting from 2010 Middle East: even if some projects have been postponed, it is the area less affected by the crisis In the gas processing sector, Middle East and Russia are the most interesting areas. Good opportunities are also foreseen in Africa (Nigeria, Libya, ) 8

9 Natural Gas: Market drivers 1/2 Natural Gas Demand Gas price: lower than oil New petrochemical plants are expected to rely more and more on natural gas feedstock In Middle East, oil producers are turning to natural gas for domestic uses, in order to maximize revenues from oil exports Higher natural gas demand by Gasfired power plants, due to lower capital costs than nuclear plants and more environmental advantages (less carbon intensive) than other traditional fuels Higher gas consumption in Middle East in the industrial and electricity generation sectors Natural Gas Transportation Growth in LNG market but at lower rate than in the past years, because of cost escalation and domestic demand increase by exporting countries 9

10 Natural Gas: Market drivers 2/2 Investments Innovation Unconventional gas sources production (tight sands, gas shale, CBM, ) Legislation Much severe control upon environmental impacts and energy efficiency New legislation limiting greenhouse gas emissions Mb/d Investments for new gas treatment plants LNG liquefaction and regasification terminals are affected by the growing domestic consumption (i.e. Middle East) International Oil Companies / Private Companies role (IOCs) bcm 10

11 World Natural Gas Demand Average annual growth rate expected by Region Europe: about +1% per year, thanks to electricity consumption Russia: about +1% per year. Russia is second only to United States in total natural gas consumption, which represents 56% of the global energy consumption mix In Cina and India, vice versa, natural gas currently is a minor fuel in the overall energy mix, representing only 3% and 8%, respectively, of total primary energy consumption, but with an expected fast growing by 5.2% and 4.2% per year on average to Middle East and North Africa s consumption are foreseen to growth up +2% and +3.2% per year, respectively. Natural Gas Consumption by Region ( ) 1/2 35,0 North America 30,0 OECD Europe [tcf] 25,0 20,0 15,0 Non-OECD Europe&Eurasia Non-OECD Asia Middle East 10,0 Africa 5,0 0, Central and South America [Source: IEA 2009] 11

12 World Natural Gas Demand Average annual growth rate expected by Sector Gas consumption will be much more addressed to the power sector, mainly in non-oecd countries where electricity demand is foreseen to rise most rapidly End-use sectors, especially industry, will absorb almost all of the remaining part of the increase of world primary gas demand to 2030 Demand for gas in the residential sector in foreseen about stable in the OECD countries, where the per-capita use of gas is approaching saturation levels. However demand is growing more quickly in non-oecd countries, thanks to a parallel growth in population Gas-to-liquids (GTL) plants, account for a small but growing share of global natural gas demand, especially in Middle East and Africa (from 5 to 33 bcm between 2006 and 2030) [about 180!1.170 Tcf] 2/2 World primary natural gas demand and its Increase by sector, Billion cubic metres [Source: WEO 2008] 12

13 World Natural Gas Production In order to meet the growth in demand, the world s natural gas producers will need to increase supplies by 48 tcf [about 1.360bcm] between 2006 and World s gas resources are unquestionably large enough to meet the projected increase in global demand. Investment in infrastructure will be required to fill the gap between gas exporters and importer countries. 1/3 [tcf] 45,0 40,0 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Natural Gas Production by Region ( ) North America OECD Europe Non-OECD Europe&Eurasia Non-OECD Asia Middle East Africa Central and South America [Source: IEA 2009] 13

14 World Natural Gas Production 2/3 Much of the supply increase is expected to come from the non-oecd countries, which account for more that 80% of the total increase in world natural gas production in the reference period The proximity of NG reserves to markets will continue to drive gas production. I.e. Middle East, with more than 40% of the world s proved natural gas reserves, accounts for 1/5 of the total increase in gas production Saudi Arabia has developed an investment plan in order to reduce gas production from oil sources Russia is the country with the major gas reserves Gazprom is planning new investments to develop new sources of natural gas, in order to face toward the decline of the actual ones Substantial growth in natural gas production in Africa (increasing from 2006 to % and +110% by 2030) More than 85% of Africa s natural gas is produced in Algeria, Egypt and Nigeria 14

15 World Natural Gas Production Change in natural gas production by country/region, by /3 Source: WEO

16 Natural Gas Chain Sweetening H2S Sulphur Recovery Tail Gas Tail Gas Clean Up Effluents Gas Field off-shore/on-shore Drying HC Dew Point Control CO2 LNG Liquefaction! LNG Shipping! Sulphur Degassing LNG Regasification S Compression Station NGL Separation C2, C3, C4+ Pipelines Peak Sheaving UGS to petrochemical manufactures NG GTL liquid hydrocarbons 16

17 Foreseen investments ( ) Gas Processing Capex Foreseen investments ( ) in the more interesting region (Middle East, North Africa, Europe, FSU), according to announced projects, are about 35 bln", that is about 11.6 bln" per year on average New projects are expected mainly in UAE, Russia, Saudi Arabia, and Qatar, both for domestic needs and for export and LNG Gas Processing expected market ( ) other than LNG and regasification Russia 18% Est EU + Kaz. 5% Europa 1% [Ml!] Nord Africa 13% Medio Oriente 63% 17

18 Foreseen investments ( ) LNG regasification Capex Foreseen investments ( ) in the more interesting region (Europe, America), according to announced projects, are about 7.3 bln", that is about 2.4 bln" per year on average High announced investments in Europe. Expected high mortality ratio of the initiatives 4000 LNG regasification expected market ( ) Americhe 18% 3000 [Ml!] Europa 82% 18

19 EQUIPMENT AND MATERIALS GOSP PRIMARY TRAETMENTS AND DESULPHURATION COMPRESSION STATIONS LIQUEFACTION (AND PEAK SHEAVINHG) PIPELINES LNG REGAS. UNDERGROUND STORAGE CARBON STEEL AND LOW ALLOY PIPELINE STAINLESS STEEL PIPELINE COMPRESSORS AND GAS TURBINES PUMPS CARBON STEEL AND LOW ALLOY PRESSURE EQUIPMENTS STAINLESS STEEL PRESSURE EQUIPMENTS SPECIAL PRESSURE EQUIMENTS SCADA AND CATHODIC PROTECTION CRIOGENIC EQUIPMENTS SHIPPING LOADIND AND UNLOADING EQUIPMENTS 19

20 Conclusions 1/2 Projections about Natural Gas Market are still interesting Market is expected to start growing again by the next year Some years are necessary to reach the past levels of investments Some countries, i.e., Middle East, are less affected by the crisis We must improve competitiveness against far east new coming players 20

21 Conclusions 2/2 TECNOLOGY Licensor Process Company Contractor that operates in a technology niche Far east new coming players Global EPC contractor r New coming threat Generalist / Construction society / Regional player New coming threat CONTRACTS VOLUME 21

22 Previsioni di Mercato Oil&Gas - Raffinazione, Chimico e Petrolchimico, Offshore, energia convenzionale e alternativa Thank you. Sezione Componentistica d Impianto ANIMP I Convegno, Villa Torretta, 5 novembre 2009

23 Techint S.p.A. Focus on solar thermal power TARGET: to develop the potential of melted salts technology over the currently used oil technologies (Spain, USA), in order to enter in a new sustainable future market segment Cumulative installed CSP capacity CSP growth scenario MW 23