Inclusive Growth in Mozambique: conference

Transcription

1 UNU WIDER Inclusive Growth in Mozambique: conference Maputo, Nov 27 th. 218 THE GLOBAL LNG MARKET OUTLOOK - OPPORTUNITIES AND CHALLENGES FOR MOZAMBIQUE BY HENRIK M. POULSEN RYSTAD ENERGY 1

2 Agenda The global LNG market outlook Mozambique s: Resource potential Production forecast E&P economy, government take and economic implications Resource governance an important factor to attract investments 2

3 Longer distances between supply and demand of natural gas to facilitate more LNG trade Supply and demand of natural gas Bcm 14 Australia Asia Middle East Africa South America North America Europe Russia More LNG exports More LNG imports, mostly from Australia, and pipeline from Russia More LNG exports (but limited by increasing demand), some countries become importers New East African LNG exports going mostly to Asia Switching from LNG exports to imports Switching from LNG imports to exports Likely still rely on piped gas and LNG imports Key exporter to Europe, in future - increasingly to Asia Net Export Net import Production Demand Source: Rystad Energy GasMarketsCube (Pilot), Rystad Energy research and analysis 3

4 Global LNG demand to reach 56 Mt by 23 Rystad Energy forecasts global LNG demand to increase from 289 Mt in 217 to 559 Mt in 23 due to longer distances between supply and demand. China will drive East Asian demand up from 176 Mt in 217 to 258 Mt in 23 with its target to increase the use of natural gas in its energy mix. South Asian LNG demand is set to increase from 23 Mt in 217 to 77 Mt in 23. India is increasing its share of natural gas in it s energy mix, while Bangladesh and Pakistan are offsetting declining production domestically. LNG demand in the Middle East is set to grow from 19 Mt in 217 to 53 Mt in 23 driven by Turkey, Kuwait and Bahrain. Global LNG demand by region Mt Africa S/C America Europe South Asia North America Middle East South East Asia East Asia Source: Rystad Energy GasMarketsCube (Pilot) 4

5 India is a possible future taker of East African LNG The expected surge of India s need to import LNG fits very well with the predicted ramp up of East African LNG supply. It is expected that India will more than double its LNG import from today s level at 2 Bcm/y to 5 Bcm/y in 23. Another doubling to > 1Bcm/y is expected by the 24 India s future needs for LNG import versus predicted East African supply Bcm/y 1 Mozambique (LNG production) Tanzania (LNG production) India's domestic gas production India's import needs, RE case Source: Rystad Energy analysis and research and UCube 6

6 Sanctioned liquefaction capacity to reach 473 Mtpa in 225 driven by US and Australia Global sanctioned liquefaction capacity will reach 473 Mtpa by 225. This reflects a 222 Mtpa increase from 21 and 113 Mtpa increase from 217. Australia has been driving the capacity additions in the current LNG wave. By the end of 218, the US will have 26 Mtpa of its sanctioned capacity operational while another 45 Mtpa of capacity is scheduled to start in 219. Indonesia, Malaysia, Mozambique and Russia will add another 22 Mtpa of export capacity by 222. Liquefaction capacity by continent Mtpa Mtpa Mtpa Russia Europe America N America S Africa Middle East Asia Australia Change in sanctioned LNG production by continent, y/y Mt Despite seeing a significantly tighter LNG market in 218, Rystad Energy expects to see a ramp-up in US LNG production to cause a looser market in 219 and Russia Europe America N 1 America S Africa Middle East Asia Australia Source: Rystad Energy GasMarketsCube (Pilot) 7

7 LNG market to tighten in 222/223, 45 Mt of new LNG production needed within 225 Ramp up of new LNG production towards 22, primarily from US and Australia is expected to result in loose market conditions in 22/221, followed by a call for new supply of ~45 Mt within 225 and further 193 Mt within 23. LNG sanctioned supply and demand balance Mt 6 5 Demand 4 3 Call for new production Sanctioned supply 2 Without any new investment decisions for liquefaction facilities, we could see a quick turnaround in the market with the balance tightening significantly post-222. However, there is more than 6 Mt of new liquefaction capacity proposed through new projects, which could meet demand long term, but time is running out to avoid a LNG shortage in the short term. To meet the growing deficit starting in 222 and 223, new LNG projects needs to be sanctioned in 218 with a construction period of less then five years. Further delays in FIDs could cause a shortage Over supplied Need for sanctioning of new projects to meet demand Balance 45 Mt 193 Mt Source: Rystad Energy GasMarketsCube (Pilot) 8

8 Over 18 Mtpa of LNG projects with BE prices under $8.4/MMBtu to compete for 225 startup Of the proposed projects, projects in Qatar have the lowest breakeven price, sourcing gas from the major North Field. Qatar has the potential of seeing four new trains with a total capacity of 45 Bcm (33 Mtpa) starting production by 225, however, it is not certain that all four will start up by 225. We estimate Qatar's breakeven price (BEP) to be around $5.5 per MMBtu. Mozambique is working on the last approvals and contracts to make an FID on the Area 1 LNG project operated by Anadarko. The first two trains have a total capacity of 14 Bcm (1 Mtpa) and a BEP around $7.8 per MMBtu. In Australia, the proposed expansion of Gorgon, Pluto and Wheatstone can add 12 Mtpa of LNG by 225. Overall, there are significantly more LNG export projects proposed than demanded, and we expect to see a lot of delays and cancellations over the next years. LNG sellers need to offer competitive contracts to attract the right buyers, including destination flexibility, hybrid contract structures, and competitive slopes in the oil-indexed contracts. Volumes and breakeven prices* for unsanctioned LNG projects, 225 $ per MMBtu, Mtpa Volumes and breakeven prices for unsanctioned LNG projects, 225 (including transport to Asia) 8.2 USD 8 per MMBtu, MT per annum QatarGas T8-11 Greater Tortue FLNG T1 Congo-Brazzaville FLNG T1 Fortuna FLNG Papua LNG T1-2 PNG LNG T3 Sakhalin 2 T3 Arctic LNG-2 T1-2 Gorgon T4 Wheatstone T3 Pluto T2 Mamba LNG T1 (Area 4) MZLNG T1-2 ( Area 1) Brass LNG Driftwood LNG T1-1 Delfin FLNG T1-2 Magnolia LNG T1-4 Golden Pass T1 Rio Grande LNG T1-2 LNG Canada T1-2 Goldboro T1-2 Bear Head T1-4 * The breakeven price is in real 218 US dollars and includes project costs, feed gas costs and transportation to the Asian market. Source: Rystad Energy GasMarketsCube (Pilot) Iran Qatar Congo Mauritania Equatorial Guinea Papua New Guinea Russia Australia Mozambique Nigeria United States Canada Weighted average BEP

9 Asian and European gas prices to increase post 222 as the LNG market tightens We have recently increased our forecast for Europe (TTF) and Asia slightly in the medium term due to higher oil and coal prices and stronger demand from Asia in particular. The drivers for US Henry Hub price forecast remains unchanged. Rystad Energy s US Henry Hub price forecast is driven strong production growth in the Permian and Appalachian basin in combination with delayed LNG and pipeline export infrastructure, which will result in downward pressure for Henry Hub towards 22. Historical gas prices and Rystad Energy base-case natural gas price forecast $ per MMBtu (nominal) Asia oilindex Ramp up of US liquefaction capacity Need for new liquefaction capacity Asian and European spot prices are forecasted to increase to cover Long Run Marginal Costs (LRMC) of new liquefaction infrastructure. Asian oil-indexed prices are expected to gradually decrease as new contracts are signed at a lower indexation (of around 11%) to be more competitive with Henry Hub-indexed contracts. 1 Asia spot LRMC TTF Henry Hub Source: Rystad Energy GasMarketsCube (Pilot), Thomson Reuters, Rystad Energy research and analysis 11

10 Agenda The global LNG market outlook Mozambique s: Resource potential Production forecast E&P economy, government take and economic implications Resource governance an important factor to attract investments 12

11 The remaining conventional economic viable gas resource potential in Mozambique is estimated to be close to 25 TCFs. Somewhere between Australia s and Norway s Remaining economic viable gas resources split by project life cycle TCF Australia 175 TCF Mozambique 9 TCF 14 TCF Norway 65 TCF Tanzania 9 TCF Producing Under development Discovery Undiscovered Source: Rystad Energy UCube 13

12 The discoveries in Mozambique are in a different league of size than those in Tanzania Remaining resources in economic viable gas projects (fields & discoveries). Color represent operator. TCF Mamba South, MZ Prosperidade (Barquentine), MZ Orca, MZ Atum, MZ Golfinho, MZ Prosperidade (Lagosta), MZ Mamba North East, MZ Mamba North East-2, MZ (sanctioned) Coral, MZ Espadarte, MZ Mzia-1, TZ Prosperidade (Windjammer), MZ Jodari-1, TZ Prosperidade (Camarao), MZ Tangawizi, TZ Tubarao, MZ Lavani, TZ Chewa, TZ Agulha, MZ Tubarao Tigre, MZ Gas (producing) Source: Rystad Energy UCube Pande, MZ Pweza, TZ Mronge, TZ ExxonMobil Shell Eni Equinor Anadarko Sasol

13 The sum of the remaining discovered gas resources in Mozambique and Norway is about equal Troll East (Gas), NO Mamba South, MZ Prosperidade (Barquentine), MZ Orca, MZ Atum, MZ Golfinho, MZ Prosperidade (Lagosta), MZ Mamba North East, MZ Mamba North East-2, MZ Snohvit Phase 1, NO Coral, MZ Espadarte, MZ Ormen Lange, NO Prosperidade (Windjammer), MZ Oseberg, NO Aasgard, NO Troll West (Gas), NO Prosperidade (Camarao), MZ Gullfaks South, NO Aasta Hansteen, NO Tubarao, MZ Visund, NO Agulha, MZ Tubarao Tigre, MZ Pande, MZ Gina Krog, NO Tyrihans, NO Martin Linge, NO Ormen Lange Subsea Compression, NO Kvitebjorn, NO Heidrun, NO Source: Rystad Energy UCube 15 Remaining resources in economic viable gas projects (fields & discoveries) in Mozambique and Norway. TCF LNG Mozambique Norway

14 Agenda The global LNG market outlook Mozambique s: Resource potential Production forecast E&P economy, government take and economic implications Resource governance an important factor to attract investments 16

15 Mozambique to save the African gas production as Egyptian and Nigerian gas production decline in the 2 s In the next two 2 years, we predict gas production in Africa to increase almost 5% from 26 to 38 Bcm/y in 23.. The traditional three largest gas producers in Africa are Algeria, Egypt and Nigeria. Algeria has been the main driver behind the growth from the mid-199s, however, between 21 and 23 the gas output from Algeria is forecasted to remain relatively stable at around 8-9 Bcm. Egypt and Nigeria are both expected to increase their gas output until 22, which is causing a temporary African gas peak in 22. On the other hand, Mozambique s many new startups are set to boost gas production after 22, which will offset the production drop in Egypt and Nigeria. The new fields in Mozambique are part of the LNG expansion that will place the country among the largest LNG exporters in the world. African natural gas production by country Bcm/y Other Tanzania Equatorial Guinea Libya Mozambique Nigeria Egypt Algeria Source: Rystad Energy GasMarketsCube (Pilot) 17

16 Mozambique is predicted to reach a gas production at 5 Bcm/y by 23, dominated by LNG for export 9 Mozambiquean natural gas production by type Bcm/y LNG 8 Left Gas Bcm/y Mozambique Source: Rystad Energy UCube 18

17 Current discoveries and producing fields have a production potential of approximately 7 Bcm/y 9 Mozambiquean natural gas production by asset and maturity Bcm/y Agulha Bcm/y 5 4 Mamba North East-2 Golfinho Mamba North East 3 2 Prosp. Lagosta Mamba South Prosp. Camarao 1 Prosp. Barquentine Coral Prosp. Windjammer Temane Pande Source: Rystad Energy UCube 19

18 Agenda The global LNG market outlook Mozambique s: Resource potential Production forecast E&P economy, government take and economic implications Resource governance an important factor to attract investments 2

19 Annual E&P Economics in Mozambique 2 years ahead. The total petroleum economy is expected to exceed the current GDP within 1 years Total petroleum economy, production multiplied by price BUSD Total petroleum economy, split by costs, investments and net revenues BUSD Opex Exploration Capex Capex Government Take Free Cash Flow Mozambique s GDP Source: Rystad Energy UCube, IMF 21-1

20 Net government take revenues will exceed the current GDP level in 2 years, and the revenue side of the national budget in 1 years 18 Net government take BUSD 18 Gross revenues and free cash flow ENH BUSD Free Cash Flow Gross revenues 12 Mozambique s GDP Mozambique s National Budget 218, revenue side 4 Mozambique s National Budget 218, revenue side Source: Rystad Energy UCube, IMF & Mozambiquean Government 22

21 NPV (223) at 85 BUSD of Mozambique s government take, in addition comes ENH s NPV of Free Cash Flow at 8 BUSD 9 NPV (223) government take, ENH and free cash flow left for the E&P industry BUSD Free cash flow Income Tax Royalty effects Government Profit Oil Free Cash Flow for the oil companies (excl. ENH) E&P Industry Government Take ENH Source: Rystad Energy UCube 23

22 Mozambique has overall a more benign tax level than Norway, but gross taxes are higher 1. NPV (223) calculation of government take and free cash flow left for the E&P industry split fraction % 58% Income Tax Royalty effects Government Profit Oil Free Cash Flow %.2.1. Australia Mozambique Norway Source: Rystad Energy UCube 24

23 Agenda The global LNG market outlook Mozambique s: Resource potential Production forecast E&P economy, government take and economic implications Resource governance an important factor to attract investments 25

24 The Resource Governance Index Increasing risk premiums will be added to a project s breakeven price Resource Governance: Efficiency Stability Ability Transparency Regulatory quality Corruption Rule of flaw Open data Regular licensing rounds Taxation Local content demands State participation Governmental spending of revenues Norway UK US GoM Australia Ghana Mexico Malaysia Tanzania Resource Governance Index* 55,5 52,7 66,8 61,1 74,4 7,6 77,5 85,8 Score -1 1=best % Country risk premium Norway UK US GoM India Ghana Mexico Malaysia Increasing country risk premium reflected by increasing discount rate Tanzania Incremental breakeven at rising risk premiums Johan Castberg used as example % 1% 2% 3% 4% Base breakeven 31 USD/bbl 3 Incremental breakeven Mozambique Vietnam 5,2 48,5 Mozambique Vietnam 5% 15 Russia 44,6 Russia 6% 18 Nigeria Congo Eq. Guinea 41,5 39,3 38, Nigeria Congo Eq. Guinea 7% 22 Angola Algeria Myanmar DRC Libya Eritrea 31, 25,4 1,3 17,9 35,5 33,2 Good Satisfactory Weak Poor Failing 1% Angola Algeria Myanmar Eritrea 8% 9% 1% Source: Rystad Energy research and analysis. *National Resource Governance Institute, 26