LNG Market Outlook and Arbitrage Opportunities

Transcription

1 LNG Market Outlook and Arbitrage Opportunities Rajnish Goswami Senior Vice President Head of Gas & Power Consulting Asia Workshop on Liberialisation of Malaysian Gas Market KL, 23 April Trusted Trusted commercial commercial intelligence intelligence

2 We will explore 3 questions in today s session How will the global LNG landscape evolve? Is HH or JCC better for LNG buyers? What should Malaysia do to attract LNG.. assuming Malaysia needs LNG? 2

3 What a difference 12 months make! Global Spot Prices Asia prices converge with Europe 3

4 First half of 2015 to be the lowest point for Brent with recovery thereafter. Brent price history and forecast to Brent WTI Forecast 90 US$/bbl Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Source: History - Argus; Forecast - Wood Mackenzie 4

5 But there are major upward and downward risks to oil price forecasts Upward Risks/Support Stronger oil demand recovery Increased focus on geopolitical issues Significant outages Downward Risks OPEC production cuts Lower oil demand growth mainly China Upstream spending cuts/delays to new supply No OPEC cuts or increase in OPEC production China filling their strategic reserves Outages reduce and production put back in market Easing of Iran sanctions Not enough slowdown in US tight oil Lower than expected oil price floor for US tight oil Fundamentally, there is enough oil supply in the market 5

6 Proposed LNG supply has increased tremendously in the last few years given significant gas reserve discoveries. Global Gas Resource (by type) Proposed 2025 LNG liquefaction capacity by location Others tcm 150 Russia US 100 Australia Unconventional Conventional East Canada Africa >260 Mtpa of export capacity proposed 6

7 The increase in the volume of LNG available into Asia is being led by new supply growth from Australia. Australian LNG projects by liquefaction status Australasian LNG Ramp-Up Mtpa mtpa Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q PNG LNG CSG Train 1s Operational Possible Qatar capacity Under construction Speculative CSG Train 2s Wheatstone Ichthys Gorgon Prelude Current Operator Guidance* 7

8 US LNG has been the growth story in LNG supply with FID on 45 mmtpa; a further 2 projects could FID in N 30 N San Francisco Woodfibre LNG Calgary Vancouver Seattle Oregon LNG Jordan Cove Los Angeles Costa Azul Proposed North America LNG Export Projects 120 W Pacific Northwest LNG Douglas Channel LNG Kitimat LNG LNG Canada West Mexico West Canada Edmonton US West Coast CANADA UNITED STATES OF AMERICA Denver MEXICO 100 W US Gulf Coast Golden Pass Chicago St.Louis Sabine Pass 5 & 6 Lavaca Bay USA Alaska AK LNG 80 W Alaska Detroit New York Philadelphia Baltimore WASHINGTON Atlanta Lake Charles Magnolia Gulf LNG Louisiana LNG OTTAWA Quebec Canaport Downeast LNG Miami CUBA 60 W Boston BAHAMAS Goldboro 50 N East Canada 30 N mtpa North American LNG flows / capacity Likely that 60+mtpa of US LNG from the Gulf and East Coasts will be under construction by end-2015 km ,000 Salina Cruz BELIZE JAMAICA W 80 W 8

9 Huge reserves have been discovered in East Africa and Canada but progress remains challenging. 8 S 10 S 38 E TANZANIA SONGO SONGO Proposed LNG Facility 40 E Block 4 Ophir Energy Block 3 Ophir Energy Block 1 Ophir Energy Planned Area 1 and Area 4 Mozambique LNG Block 2 Statoil Prosperidade Fields Indian Ocean Mamba Fields Coral Planned FLNG 42 E 8 S 10 S 54 N Key 135 W Liquefaction Plant Planned Pipelines Pacific Trails Pipeline Coastal GasLink (TransCanada) BG/Spectra Pipeline USA Alaska 130 W Prince BG Project Rupert Petronas Kitimat LNG Rupert LNG Kitimat BC LNG Queen LNG Canada Charlotte Islands Yukon Liard Fort Nelson Montney Station 4 CANADA British Columbia Pacific Northern 125 W Prince George Station 2 Fort Liard Alliance Bear Lake Summit Lake Horn River 120 W Northwest Territories Nova Gas (TCPL) 115 W Mackenzie River Dawson Creek Alberta Gas Processing Duvernay Edmonton 60 N 54 N 12 S Area 1 Anadarko Area 4 Eni COMOROS 12 S Pacific Ocean Vancouver Island Westcoast Mainline S pectra MOZAMBIQUE Area 3 Petronas Carigali Area 6 Petronas Carigali Kamloops Bow Calgary Vancouver 14 S km S 48 N km Bellingham U.S.A. Washington 38 E 40 E 42 E 130 W 125 W 120 W Source: Wood 115 WMackenzie 9

10 Regional disparities in LNG prices will remain. LNG pricing mechanisms North American LNG price mechanism - Henry Hub linked Hybrid, spot and other mechanisms Traditional LNG project price mechanism JCC linked North American is almost self sufficient, with numerous producers. The all-time low gas prices have encouraged a lot of investment in LNG export projects. Their pricing is linked to Henry Hub which is the domestic gas price index. Asian buyers are increasingly interested in hybrid pricing mechanisms. LNG at the spot market is traded using different price structures. Biggest importing markets almost exclusively dependent on LNG. Most of supply contracts link to oil prices. Wide range of oil indexed price levels depending on the time that the contract was signed. LNG (unlike other commodities) is priced based on different mechanisms depending on the supply source, destination market and seller/buyer priorities and objectives 10

11 Whether oil indexed or HH indexed LNG is best for LNG buyers depends on the forward view of oil prices. 12 Oil at $60/bbl US$/mmbtu Oil indexed LNG more competitive than HH But oil at US$60/bbl will lead to FID being postponed on most LNG supply projects 0 Oil indexed ( %) US link (HH, $3-5) Oil at $80/bbl US$/mmbtu Oil at US$80/bbl and above means HH LNG is a more competitive option for buyers More chances of projects getting to FID and less tightness in LNG markets beyond Oil indexed ( %) US link (HH, $3-5) 11

12 An Asian pricing Hub is still a distant dream. Prerequisites for liquidity Potential barriers to liquidity Trading points Monopoly Buyers Destination Restrictions Multiple sellers Multiple buyers Supplier Power Liquidity Regulations Project Financing Lack of market connection or access 12

13 Malaysia and other South East Asian countries faces a significant decline in domestic gas production. Supply - Demand Gap Indonesia Singapore Malaysia Thailand Vietnam Total domestic demand 20,000 mmcfd 15,000 10,000 LNG Imports or Domestic Gas 5,

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