NATURAL GAS, THREE SYSTEMS

Transcription

1 Colegio de México May 21, 2012 NATURAL GAS, THREE SYSTEMS Jean-Marie BOURDAIRE

2 CONTENT World generalities North-East Asian LNG imports Europe PPL & LNG imports North America balance Conclusions

3 WORLD GENERALITIES BP reserves, demand and supply AIE Perspectives to 2035

4 REGIONAL NATGAS Natural gas trade is MARKETS limited by rigid, costly infrastructures, which limit trade over very long distances No world gas market but various national and regional gas markets Three Main Regional Gas Markets with Marginal Links NORTH AMERICA UNITED STATES EUROPE WESTERN EUROPE EAST ASIA JAPAN / SOUTH KOREA Canada Norway Russia Algeria Indonesia Australia Middle East With this world market structure, gas is in competition with regional references without mutual price adjustment and thus no international gas price marker

5 NATURAL GAS CHAIN Flared Gas Dry Sweet Natural Gas Transportation Pipeline High Pressure Industry Sector Commercial Sector Residential Sector Gross Production Processing Low Pressure Distribution Network Power Production Sector Petrochemicals Sector Re-injected Gas Liquefaction Plant LNG Tanker Regasification Terminal Transport Sector (CNG) Propane Butane Pentane & Heavy Fractions GTL plant High Quality Liquids Naphtha Kerosene, Gasoil Transport Sector ( oil products )

6 WORLD GAS CONSUMPTION (BCM/Y) 3500 WORLD GAS CONSUMPTION (BCM/Y) Asia-Pacific Africa Middle-East Former Soviet Union EUROPE OCDE S-C America North America Recent average growth rate 2,3%/y

7 3500 WORLD GAS PRODUCTION (BCM/Y) WORLD GAS CONSUMPTION (BCM/Y) Asia-Pacific Africa Middle-East Former Soviet Union EUROPE OCDE S-C America North America Recent average growth rate 2,3%/y

8 REGIONAL GAS PRICES ($/kcf) $/MMBtu Regional Natural Gas & LNG Prices - Feb 2012 A growing disconnection among the four price systems Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 NBP IFERC HH Monthly Japan avg LNG European Gas Contract

9 NORTHEAST ASIA LNG High JCC-indexed prices and increasing quantities

10 EAST OF SUEZ LNG IMPORTERS BCFD 25 Traditional v. Emerging Asian LNG Importers Japan, South Korea, Taiwan 5 - China, India, Kuwait, Dubai & Thailand Emerging Traditional

11 FAR-EAST LNG IMPORTS (BCF/D) ASIA-PACIFIC LNG IMPORTS (BCF/D) 15 China, Japan, South Korea, and Taiwan (interpolated between end- 02 and end-07) LNG imports fell because of the economic crisis 10 5 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

12 JAPANESE CRUDE COCKTAIL ($/B) JAPANESE CRUDE COCKTAIL OR JCC ($/B) LNG was first imported in Japan, to replace the blend of regional waxy heavy low-sulfur crudes used for direct burning in the industrial and power boilers. This is why LNG is JCC-indexed Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

13 ASIA-PACIFIC PRICING SYSTEM For the Asia-Pacific LNG imports, prices are based on LT contracts indexed on the JCC JCC was the fuel at the margin for Japanese large boilers because HFO imports were forbidden (to protect the refinery industry) and low sulfur fuels were required (for environmental reasons) To protect the LNG producers when JCC was low, a premium floor was added with, as a counterparty, a JCC multiplying factor smaller than 1

14 CHINA LNG IMPORTS LNG IMPORTS IN CHINA (MT/MONTH) 1,5 1,0 Still small but rising rapidly 0,5 0,0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

15 PRICE OF CHINESE LNG IMPORTS AVERAGE LNG PRICE IN CHINA VERSUS JCC 30 1,8 25 Average imported LNG price versus JCC suggeste a smoothed "collar" formula with a low price-cap and ~3-month lag 1,5 20 1,2 15 0,9 10 0,6 5 JCC in $/MBtu Average LNG price Gas as a % of JCC 0,3 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 0,0

16 JAPAN LNG IMPORTS LNG IMPORTS IN JAPAN (MT/MONTH) 9 Fukushima Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

17 PRICE OF JAPAN LNG IMPORTS AVERAGE LNG PRICE IN JAPAN VERSUS JCC 30 1,8 25 Average imported LNG price versus JCC suggeste a smoothed "collar" formula with a low price-cap and ~3-month lag 1,5 20 1,2 15 0,9 10 0,6 5 JCC in $/MBtu Average LNG price Gas as a % of JCC 0,3 0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 0,0

18 KOREA LNG IMPORTS LNG IMPORTS IN KOREA (MT/MONTH) Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

19 PRICE OF KOREA LNG IMPORTS AVERAGE LNG PRICE IN KOREA VERSUS JCC JCC in $/MBtu Average LNG price Gas as a % of JCC 2,0 1,7 15 Average imported LNG price versus JCC suggeste a smoothed "collar" formula with low price-cap and ~3 months lag 1,4 10 1,1 5 0,8 0 J-01 J-02 J-03 J-04 J-05 J-06 J-07 J-08 J-09 J-10 J-11 J-12 J-13 0,5

20 TAIWAN LNG IMPORTS LNG IMPORTS IN TAIWAN (MT/MONTH) 1,5 1,0 0,5 0,0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

21 PRICE OF TAIWAN LNG IMPORTS $/MBtu 25 AVERAGE LNG PRICE IN TAIWAN VERSUS JCC LNG/JCC 1,8 20 JCC in $/MBtu Average LNG price LNG versus JCC 1,5 15 1,2 10 0,9 5 0,6 0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 0,3

22 LNG PRODUCTION VS. CAPACITY Bcf/d LNG Production vs Capacity The LNG market is tightening 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ja n -0 8 M a y-0 8 S e p -0 8 Ja n -0 9 M a y-0 9 S e p -0 9 Ja n -1 0 M a y-1 0 S e p -1 0 Ja n -1 1 M a y-1 1 S e p -1 1 Ja n -1 2 Nameplate Production Utilization

23 LNG SHIPPING RATES The LNG shipping market is also tightening

24 NEW LNG CONTRACTS SINCE FUKUSHIMA Asia Pacific Contracts signed (MARCH-11) since March ' Japan and India dominate Japan Korea China India Taiwan Singapore Malaysia Thailand Pakistan MTA SPA HOA Share MOU Framework S-T

25 CONCLUSIONS ASIA-PACIFIC Some countries like Korea did succeed to lower their LNG supply cost but oil-indexation will likely remain, especially in the post-fukushima context The nuclear crisis will add new LNG requirements in Japan and Western Europe (e.g. in Germany) to replace nuclear, pushing LNG prices up High LNG prices make unconventional attractive but the lack of liquids in dry gas such as Australian CBM, and controlled domestic prices reduce the incentives

26 NWE EUROPE: PPL & LNG THE UK SPOT MARKET (LNG) AND THE CONTINENTAL LT PPL CONTRACTS

27 SEASONAL PROFILES

28 LOAD PROFILE PER GAS SECTOR

29 (Tcf) RUSSIA: REGIONAL RESERVES A lot of available reserves when EU gas demand will increase 600,0 West Siberia 500,0 400,0 Kara-Yamal Already extracted Remaining (2P+PVR) Tcf 300,0 200,0 100,0 0,0 528,1 453,6 East Siberia Barents Pre Caspian 90, ,5 0,1 6,4 Sakhaline & Okhotsk Volga-Urals Tim an- Pechora 36,5 31,6 28,1 2,3 51,4 14,5 Caspian 12,4 North Caucasus 10,7 24,9-100,0-200, ,0-400,0-500,0-600,0

30 FIELDS TO BE DEVELOPED Kharasavejskoe Production from: 2014 Reserves: 1,3 tcm Bovanenskoe Production from: 2011 Reserves: 4,4 tcm Kamennomyskoe More Production from: Reserves: 0,5 tcm Yamburgskoe Production from: 1986 Reserves: 3,7 tcm Severo Urengojskoe 1 Production from: 2001 Reserves: 0,3 tcm Bolshehetskaya Production from: 2004 Reserves: 0,4 tcm Planed for 2010 Planed for after 2010 Shtokman Production from: 2013 Reserves: 3,6 tcm S.-Kamennomyskoe Production from: Reserves: 0,4 tcm Baltic sea Medvezhje Production from: 1972 Reserves: 0,5 tcm St. Petersburg Urengojskoe Production from: 1978 Reserves: 5,1 tcm Orenburgskoe Production from: 1974 Reserves: 0,7 tcm Azov sea Astrahanskoe Production Black from: 1987 Reserves: 2,4 seatcm Komsomolskoe Production from: 1993 Reserves: 0,4 tcm Moscow Petrovsk Volgograd Barents sea Kazan Ukhta Perm Orenburg Tyumen AstrakhanGubkinskoe Production from: 1999 Caspian Reserves: sea 0,4 tcm Yamal Karskoye Sea Yurharovskoe Production from: 2003 Reserves:0,65 tcm Yamburg Surgut Zap. Tarkosalinskoe Production from: 1996 Reserves: 0,4 tcm Noyabrsk Novosibirsk Urengoi Kemerovo Novokuznetsk Krasnoyarsk East Siberia Irkutsk Vost. Tarkosalinskoe Production from: 1998 Reserves: 0,35 tcm Laptev Zapolyarnoe sea Production from: 2001 Reserves: 3,1 tcm Yuzno-Russkoe 4 Production from: 2008 Reserves: 0,8 tcm Beregovoe 2 Far East Production from: 2003 Reserves: 0,3 tcm Yakutsk Komsomolsk-na-Amure Chayndinskoe Production from: 2016 Reserves: 0,4 tcm Sea of Okhotsk Sakhalin Kovyktinskoe 5 Sea of Japan Production from: 2017 Reserves: 2 tcm East Siberian sea Bering sea Lunskoe (Sakhalin 2) 3 Production from: 2008 Reserves: 0,6 tcm Chukchi Sea

31 PLANNED 2010 EUROPE SUPPLY For illustrative purpose only Contracted LNG 90 Import Pipe (Contracted) 260 Export US 4 Demand Of which 650 Norway Pipe 124 Production (inc. Norway) 317 Norway 2 (LNG) Russia LNG Pipelines in Bcm Nigeria 17 (LNG) Azerbaijan 5 Trinidad 4 (LNG) Alternative Europe = EU 35 Algeria 76 (LNG 22) Libya 9 (LNG 1) Egypt 10 (LNG) Qatar 34 Oman 3 (LNG) Iran 8 Source: Total

32 EUROPEAN NET IMPORTS EUROPEAN NET IMPORTS (BCF/D) 30 Note Note the the strong winter seasonality seasonality J-01 J-02 J-03 J-04 J-05 J-06 J-07 J-08 J-09 J-10 J-11 J-12 J-13

33 UK GAS DECOUPLED SINCE UK 12-MONTH STRIP AND BRENT ($/MBTU) 20 NBP spot price Brent weekly UK 12-month strip Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

34 THE STORY OF UK FUTURES UK GAS FUTURES ($/MBTU) Prices fell as cheap Qatar spot LNG was plenty, but less spot availability has driven spot prices up recently 5-May-03 6-Oct-03 5-Apr-04 5-Jul-04 4-Oct-04 7-Mar-05 4-Jul Oct May Nov Dec-06 3-Sep Nov Jan Mar juin Aug Nov-08 9-Mar Jul nov feb-10 3-nov-10 2-mars juil nov mars-12 0 May- 03 Nov- 03 May- 04 Nov- 04 May- 05 Nov- 05 May- 06 Nov- 06 May- 07 Nov- 07 May- 08 Nov- 08 May- 09 Nov- 09 May- 10 Nov- 10 May- 11 Nov- 11 May- 12 Nov- 12 May- 13

35 BRENT VS. UK SPOT AND LT CONTINENTAL GAS PRICES BRENT VS. CONTINENTAL AND UK NATURAL GAS PRICES ($/MBTU) 25 Weekly spot price at NBP 20 Average CIS-NL-NW price Average continental price Weekly spot price of Brent source: WGI Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

36 EU GAS DECOUPLED SINCE 2009 EU AVERAGE MONTHLY BORDER PRICE ($/MBTU) 17,5 Note the discoupling thanks to the coming of cheap spot LNG 15,0 12,5 10,0 Average imported European gas price 7,5 5,0 2,5 75% of 5-month lagged Brent (smoothed over 5 months) 0,0 J-02 J-03 J-04 J-05 J-06 J-07 J-08 J-09 J-10 J-11 J-12 J-13

37 EU GAS DECOUPLING EUROPEAN SPOT NATURAL GAS PRICES ($/MBTU) Spot UK price (NBP) Spot prices at Zeebrugge Spot gas price at Bunde (NL) Monthly Continental Europe Average Monthly NBP UK spot price Average CIS-NL-NW price Long term contracts (red, orange) and spot prices in the UK, Belgium and the NL (blue and green) diverge Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

38 ZEEBRUGGE-NBP DIFFERENTIAL Driven ZEEBRUGGE by pipeline LESS NBP tariffs DIFFERENTIAL and bottlenecks ($/MBtu) 2,0 Positive differential if gas flows from the continent to the UK and capacity (25 Bcm/y) is lacking 1,0 0,15 $/Mbtu = IUK tariff 0,0 Negative differential if gas flows from the UK to the continent and capacity (20 Bcm/y) is lacking 0,15 $/Mbtu = IUK tariff -1,0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

39 IMPACT OF THE LOW US PRICES Natural gas is not impacted by the low oil price as their markets are specific with no competition UK NBP was down thanks to the economic crisis and the LNG abundance (no more cargoes to the US) Continental Europe spot prices followed the trend and Russian contracts were renegotiated But, in the post-fukushima context, the LNG spot market and the LNG shipping market tighten

40 NORTH AMERICA A NEARLY AUTONOMOUS REGION WITH PRODUCTION UP AND PRICES DOWN

41 30 YEARS OF US GAS STORY HENRY HUB SPOT PRICE OF NATURAL GAS ($/MBTU) , prices are up because of scarcity shale gas up & price down 10 Up to 1985, long-term contracts , "bubble": spot pricing, partly against coal , spot competition against HFO 5 0 j-80 j-82 j-84 j-86 j-88 j-90 j-92 j-94 j-96 j-98 j-00 j-02 j-04 j-06 j-08 j-10 j-12 j-14

42 US STORY OF FOSSIL FUELS GULF COAST INTER-FUEL COMPETITION ($/MBTU) 1954 (Phillips)-1978 (NGPA): Price controls & shortages (oil counter shock): Contract prices falter : Spot prices compete with coal in the South : Spot prices between heating oil & HFO : Shale gas "revolution" and price collapse Natgas is now cheaper than coal Natural gas at Henry hub WTI/6, a proxy for heating oil WTI/10, a proxy for heavy fuel oil Coal (brought from Ohio to Texas) 5 0 j-86 j-88 j-90 j-92 j-94 j-96 j-98 j-00 j-02 j-04 j-06 j-08 j-10 j-12 j-14

43 US NATGAS MONTHLY BALANCE Bcf/d Shale gas US push NATGAS production SEASONAL up CONSUMPTION and net imports down Final demand Marketed production Storage withdrawals Net imports Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

44 NORTH AMERICAN SHALE PLAYS

45 US Wellhead Shale Production (MMcf/d) US SHALE PRODUCTION GROWTH 8,000 7,000 6,000 5, ,000 3,000 2,000 1,000 0 Barnett Woodford Fayetteville Haynesville Eagleford Marcellus

46 NET IMPORTS ARE DOWN TOTAL US NET IMPORTS (BCF/D) Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

47 AS US NET LNG IMPORTS (BCF/Y) US NET LNG IMPORTS (BCF PER YEAR) Fareast (exports) Mideast Africa Europe Trinidad & Tobago

48 EXPORTS TO MEXICO (BCF/D) UP US NET EXPORTS TO MEXICO (BCF/D) 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

49 GOM PRODUCTION (BCF/D) 16 Little gas GULF as the OF MEXICO Gulf is MARKETED a «cold kitchen» PRODUCTION mostly (BCF/D) oil-prone Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

50 US MARKETED PRODUCTION US NATURAL GAS MARKETED PRODUCTION (BCF/D) Impressive growth now ending J-80 J-82 J-84 J-86 J-88 J-90 J-92 J-94 J-96 J-98 J-00 J-02 J-04 J-06 J-08 J-10 J-12

51 NATGAS RIGS & PRODUCTION US NATURAL GAS RIGS AND PRICES 20 Smoothed gas rig number /100 Weekly 12-month strip in $/MBtu Monthly HH price in $/MBtu The rig count closely follows the price trend Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

52 STORAGE FULL = PRICES TO FALL

53 PRICES AND DIFFERENTIALS With the growth of shale gas, prices have fallen, as low as 2 $/MBtu for spot Henry hub price Such a low price is not exceptional: Price will fall again below 2 $/MBtu because storage is full Winter NE price differentials may surge because the high demand creates pipeline bottlenecks In spite of the growth of Marcellus shale in the region, the pipelines last km bottlenecks remain

54 GC-NE DIFFERENTIALS 5 AVERAGE NORTHEAST* - HH DIFFERENTIAL ($/MBTU) * Average of Boston city gate, NY city-gate, and Transco Z6-NY 4 The average differential moves up and down with the fuel costs for moving gas in the pipelines from the Gulf coast to the NE Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

55 DIFFERENTIAL LESS FUEL COST NE-HH DIFFERENTIAL LESS TRANSPORT FUEL COSTS (~6% of HH price) Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

56 US DEMAND IS IMPROVING The economic momentum and the low prices are pushing R-C consumption International industrial competitiveness has been re-established by the low gas prices Gas is competitive for power in all regions and pushing coal demand and price down The new LNG plants (Sabine Pass in 2015) will be an outlet available by Exports will be an incentive for boosting supply

57 OVERALL CONCLUSIONS AIE Perspectives to 2035

58 IEA: REGIONAL NATGAS DEMAND

59 REGIONAL NATGAS PRODUCTION Russia will be the main supplier for additional gas to WE and China IEA

60 IEA: NATURAL GAS DEMAND GROWS IN ALL SECTORS BY 50+%