17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17)

Transcription

1 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17) EXPANSION AND EVOLUTION OF THE ASIA PACIFIC LNG MARKETS By: Hiroshi Hashimoto, Tsukasa Koyama, The Institute of Energy Economics, Japan (IEEJ) Wednesday 17 April 2013

2 Outline 1. The current biggest issue: cost of LNG procurement Widening gaps of regional gas prices 2. Evolution in the LNG markets in recent years Increasing shares of the Asia Pacific markets and Japan 3. Changing pattern of LNG procurement Shifts between contract and cargo purchases 4. More proactive involvement in projects Incremental supply sources and accompanying more proactive involvement of Asian buyers 2

3 The biggest problem: widening gaps Henry Hub New York Citygate NBP Japan LNG average JCC (USD / million Btu) (USD / bbl crude oil equivalent) From 2003 to 2007, prices in the United States were often more e xpensive than prices of Japanese imports. Since 2008, price gaps have been much wider (Data sources) Japan s custom statistics, Department of Energy (United States), Energy Intelligence, compiled and converted by the authors. 3

4 Bloody performance by the Japanese electric power sector JPY billion Hokkaido Tohoku Tokyo (Tepco) Chubu Hokuriku Kansai Chugoku Shikoku Kyushu Okinawa * Fiscal year (Note) *2012 preliminary estimates. (Data source) companies, compiled by the authors. 4

5 Shifting primary energy mix Mtoe (m illion tonnes oil equiv alent) gas nuclear oil coal hydro Other renewables (Source) EDMC Energy Trend, April 2013, IEEJ Calendar year 5

6 Japanese LNG buyers dilemma: misinterpreted both in and outside of the country Ordinary people in Japan tend to think that Japan buys the most expensive LNG because it is supplied as LNG and because the utility buyers do not work hard to reduce prices. Some external experts describe Asian buyers are willing to pay higher prices for security of supply and Utility companies can easily pass incremental fuel costs onto customers. Anti-nuclear and pro-nuclear discussions in Japan do not always recognise global implications of Japanese policy, including those on global LNG supply/demand and pricing. 6

7 February 2019 (Ishikari Power Station) Ishikari January 2014 (Naoetsu) April 2015 (Hachinohe) Tobata November 2014 (Hibiki) Fukuhoku Yanai Nagasaki Himeji 1 Himeji 2 Mizushima Hatsukaichi Oita Sakaide 2023 July 2016 (Joetsu Power Station) [name to be decided in the future] Joetsu Power Station 2018 or later (Toyama Power Station) Senboku 1 Senboku 2 Sakai Kawagoe Yokkaichi 1 Yokkaichi 2 Niigata Negishi 2015 (Hitachi) Sodegaura Shimizu Sodeshi Minato (Sendai) Chita 1 Chita 2 Chita Midorihama (Shin Sendai Power Station) 2018 (Soma) Higashi Ohgishima Ohgishima Futtsu Kagoshima (Wakayama Power Station) 2021 or later 7 Yoshinoura

8 Global LNG trades declines in 2012, whereas share of Asia (Japan) increases (million tonnes) Americas Europe Other Asia, Middle East 100 China Chinese taipei Korea Japan Calendar year (Data source) GIIGNL, customs statistics, etc. 8

9 90 (million tonnes) Japan s LNG imports by source 10 0 United States (Alaska) Indonesia Australia Abu Dhabi Oman Egypt Nigeria Norway France Trinidad and Tobago Peru Brunei Malaysia Russia Qatar Yemen Algeria Equatorial Guinea Belgium Spain Brazil * (note) Figures are for fiscal years. *Only 2012 Figures are for the calendar year. 9 (Date source) Japan s customs statistics.

10 Changing supply sources from 2010 to * United States (Alaska) Brunei Indonesia Malaysia Australia Russia Abu Dhabi Qatar Oman Yemen Egypt Algeria Nigeria Equatorial Guinea Norway Belgium France Spain Trinidad and Tobago Brazil Peru (note) Figures are for fiscal years. *Only 2012 Figures are for the calendar year. (Date source) Japan s customs statistics. 10

11 Changing flows of LNG trade 2012 (major shifts of products from the Atlantic to the Pacific) 11

12 Changing flows of LNG trade 1997 (before major Atlantic sources began exports) 12

13 Evolving short-term procurement Flexibility of global LNG has responded to Japan's nuclear crisis Share of short-term volume in the total imports in Japan Short-term volumes (million tonnes, left axis) Total imports (million tonnes, left axis) Share of short-term (%, right axis) 25% 20% % % % % (Data sources) compiled from customs statistics and GIIGNL data Calendar year 13

14 Evolving short-term procurement Trading patterns tend to shift back from spot/short-term to term contracts. 14 Monthly spot cargo purchase in (Data sources) compiled from ICIS Heren, Argus, Platts information

15 More proactive involvement by Japanese companies Tohoku Tepco Chubu Kansai Chugoku Kyushu Tokyo Gas Osaka Gas Toho Gas NWS Darwin Pluto Gorgon Wheatstone Prelude Ichthys QCLNG GLNG APLNG Arrow LNG PNG LNG Canada Cordova Cordova Cordova United States Cameron Freeport Cove Point (Freeport) Cove Point Freeport East Africa (Note) = long-term purchase, = equity participation, ( ) = suspected main supply source unde r portfolio deals 15

16 Other Asian players are also increasingly active in supply projects Kogas CNOOC PetroChina Sinopec CPC Petronet Gail PTT Petronas NWS Darwin Pluto Gorgon Wheatstone Prelude Ichthys QCLNG GLNG APLNG Arrow LNG PNG LNG Canada LNG Canada LNG Canada United States Sabine Pass (Sabine Pass) Sabine Pass Cove Point East Africa Area 4 Area 4 Area 1 Pacific Northwest LNG (Note) = long-term purchase, = equity participation, ( ) = suspected main supply source unde r portfolio deals 16

17 Liard Cordova Cutbank Ridge Pacific Northwest LNG (JAPEX) LNG Canada (Mitsubishi) AltaGas Idemitsu (Idemitu) TBD White River mine Mitsui Mitsubishi, Chubu EP, Tokyo Gas, Osaka Gas, JOGMEC Permian Basin Sumitomo INPEX, JGC Mitsubishi Itochu Marubeni Freeport LNG (Chubu EP, Osaka Gas) Cameron LNG (Tolling: Mitsubishi, Mitsui, Mitsui, Buyer: TEPCO) JGC Mitsui Marubeni Osaka Gas JAPEX INPEX, JGC Cove Point LNG (Tolling: Sumitomo, Buyer: Tokyo Gas, Kansai Electric) LNG export project with Japanese involvement United States Freeport - Osaka Gas and Chubu Electric Power Cameron Mitsubishi/Mitsui + Tepco Cove Point - Sumitomo + Tokyo Gas/Kansai Electric Canada LNG Canada Inpex / JGC Idemitsu Japex (Source) Compiled from Golden Rules for a Golden Age of Gas, World Energy Outlook Speci al Report on Unconventional Gas, 17 International Energy Agency (IEA), 29 May 2012 and company annou ncements.

18 More LNG is looking at Japan (million tonnes per year capacity) Yemen LNG Tangguh Qatargas3-4 6/7 Final Investment decisions (FIDs) made (or expected to be made) on LNG export projects since A red circle indicates Japanese buyers offtake commitments before the FID. 40 Snøhvit 30 ALNG T4 NLNG Plus 4/5 RasGas3 6/7 20 Segas Egyptian LNG Qatargas 2 4/5 PNG LNG Wheatstone Sabine Pass APLNG T1 Angola LNG Prelude 10 ALNG T2/3 APLNG T2 RasGas2 T4 Donngi Senoro NWS 4 NWS 5 Gorgon Skikda Qalhat Sakhalin 2NLNG Plus 6 MLNG Tiga QCLNG GLNG Ichthys NLNG T3 RasGas2 T3 Darwin EGLNG RasGas2 T5 Peru LNG Pluto Gassi Touil (Source) Author, based on publicly available information 18

19 There have already been many notable events in the LNG industry so far in Rate cases by electric power companies in Japan are explicitly linked with future LNG procurement costs 2. There have been limited spot LNG deliveries into Asia partly because South American markets attract more cargoes 3. Tepco, Tokyo Gas, and Kansai Electric Power plan to purchase LNG from the United States and BP reserves liquefaction capacity at Freeport LNG 4. LNG Canada is granted a federal license to export LNG 5. Chevron becomes the Kitimat LNG operator 6. Idemitsu and Japex respectively participate in LNG projects in Canada 7. LNG export projects in Mozambique continue to advance 8. Nigeria and Egypt reduce LNG production 9. A new LNG liquefaction plant starts operation in Algeria 10. Winter gas prices spike in New England and the United Kingdom 11. New LNG import terminals start operation in Singapore, Israel an d India 12. Methane hydrate production test is carried out in Japan 19

20 The 10 biggest question marks in the LNG industry 1. When and how much LNG will be allowed to be exported from (how many projects in) the United States 2. How effective LNG imports from the United States will be in reducing Japan s (and Asian) LNG prices 3. How the Panama Canal expansion will facilitate more LNG trades 4. How Australia s LNG projects will be realised on schedule and within budget 5. How LNG supply/demand balance beyond 2015 will be relaxed or tightened 6. How much incremental LNG Japan will import 7. How many more LNG receiving terminals Japan will have 8. If Japan will have a nationwide trunk pipeline network, as well as any international pipeline 9. How far and effectively Japanese companies will be able to go into and lead LNG supply value chains 10. If Asia will have an LNG trading hub 20

21 Thank you for your attention. LNG is expected to expand its market reach, so long as it is priced reasonably to both buyers and sellers, as well as to final consumers; 2. projects are structured beneficially to both buyers and sellers, as well as to other parties involved; and 3. diversification of supply sources (markets), supply routes and pricing terms, as well as flexibility of LNG trades, are maintained and enhanced. Contact: Hiroshi Hashimoto 21