Prospects for unconventional natural gas supply in Asia

Transcription

1 Perth, 16 February 2016 Prospects for unconventional natural gas supply in Asia Roberto F. Aguilera

2 Background Expansion of natural gas share in primary energy mix, especially Asia Gas demand is dominated by OECD, but growth in Asia is fastest Global unconventional gas resources are abundant, yet there are potential barriers Uncertainty clouds outlook for unconventional gas in Asia Increased inter-regional; linkages among regional markets?

3 Asia Population and Consumption 1000 Asia Pacific Primary Energy Consumption, Quads Primary Energy Consumption Per Capita, million BTU Asia Pacific Population, Billions YEAR Source: Aguilera et al (2014), Energy Policy

4 Asia Energy Mix (Reference) Solids - calculated Gases - calculated Liquids - calculated Solids - measured FRACTION OF MARKET Gases - measured Liquids - measured YEAR Source: Aguilera and Ripple (2013), Applied Energy

5 Conventional vs. Unconventional Gas and Oil Source: American Petroleum Institute Source: National Energy Board of Canada

6 Shale gas in Asia Out of 6,634 TCF of technically recoverable shale gas resources in the world (outside US), Asia accounts for 1,403 TCF The majority, 1,115 TCF, is in China Source: US Energy Information Administration (2013)

7 Shale Gas Resources and Constraints Resources: Assessment commissioned by US EIA, estimates global shale gas resource of around 7299 TCF Of the total, China accounts for 15%, Argentina 11%, Algeria 10%, US 9%, Canada 8%, Mexico 7%, Australia 6%, South Africa 5% and Russia 4% Constraints: Environmental impacts of fracking with inherent risk of releasing toxic chemicals into groundwater Possible surface spills of chemicals; disposal of waste water; excessive water use; rising traffic volumes Technical and commercial concerns involve high decline rates and future costs Source: US Energy Information Administration

8 Key Considerations for Shale Development 1. Developed infrastructure 2. Ownership 3. Drillers 4. Risk capital 5. Supply chains 6. Regulation 7. Water requirements 8. Public acceptance

9 Recommendations for Unconventional Gas Development Some organizations have identified specific measures to reduce environmental impact and help assure the safety of unconventional gas production

10 China: Well-suited for Shale Development? Difficult physical access to some zones Fiscal and regulatory regime under development outcomes uncertain Market and infrastructure development lagging Difficult geology and water shortages Source: based on Schlumberger Business Consulting

11 Curtin University Global Shale Gas Supply Curve basins assessed by US EIA (2013) = 7299 TCF Production Cost (USD / MCF) China average production cost estimate: ~ $10/MCF Shale Gas Resource (TCF) Source: based on Aguilera et al (2014)

12 Comparison of Natural Gas Prices US$ per MMBtu Source: IMF data Jul-16 Jan-16 Jul-15 Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 US (Henry Hub spot) German border Japan LNG UK (NBP spot) LNG Asia (FOB) Natural gas market exhibited price divergence between different regions as unconventional gas supply increased; but then converged

13 13 Effect of LNG on Regional Markets Extent to which US and others starts exporting LNG uncertain: exports may be hampered by unfavorable economics How exports might impact Asian markets is still subject of debate, in which LNG transportation costs, gas and oil prices, and gas/lng demand are key determinants

14 Spot and Short-term vs. Total LNG Trade since 2010 Source: GIIGNL (International Group of Liquefied Natural Gas Importers). About 30% of total LNG trade in 2014 was classified as spot or shortterm trade.

15 Why it rose stupendously over the past 40 years Why it is likely to remain low in the coming decades What it will mean for the world economy, politics and the environment Published late 2015

16 Perth, 16 February 2016 Prospects for unconventional natural gas supply in Asia THANK YOU

17 Economics of LNG Transportation Estimated US Gulf Coast LNG export costs Delivered to Europe Asia USD / million BTU US gas price Liquefaction charge Fuel surcharge Transport Delivered Cost Source: Based on Oil & Gas Journal and Energy Studies Institute at National University of Singapore. Estimates for LNG deliveries from the US Gulf Coast to markets in Europe and Asia.

18 Economics of LNG Transportation Illustrative cost build-up for North American LNG exports to Asia Source: Energy Studies Institute, National University of Singapore Appears to be viable considering current gas price differentials in excess of $10 per MMBtu.

19 Natural Gas Prices to 2040 Source The Institute for Energy Economics, Japan. Natural gas market exhibited a trend towards price divergence between different regions as shale gas supply increased