Outlook for Japanese LNG demand, de-linking gas from oil prices and. investment in Australian projects

Transcription

1 0 Outlook for Japanese LNG demand, de-linking gas from oil prices and s investment in Australian projects 26 th February nd Annual Australian Domestic Gas Outlook 2014 Takashi Yoshida Director General Research & Analysis Department, JOGMEC Japan Oil, Gas and Metals National Corporation

2 JOGMEC Overview JOGMEC 1 Japan Oil, Gas and Metals National Corporation (JOGMEC) Established: February 29, 2004 [succeeded the functions of Japan National Oil Corporation (JNOC)] President: Hirobumi Kawano Capital: 502 Billion Yen (as of March, 2013) Activities = around 5.18 Billion US$ (1US$ = 97Yen) Mission Securing a Stable Supply of Oil, Natural Gas, Mineral Resources and Coal for Japanese Industries and Citizens Oil & Gas Upstream Investment and Research & Development Metals Strategy & Exploration, and Technology Development Stockpiling Mine Pollution Control Coal Strategy & Exploration, and Technological Support Geothermal Resources Development

3 Oil & Gas Upstream Projects Worldwide 2 Equity Capital (42 companies) Liability Guarantees (13 companies) Arctic Shale Gas Oil Sands Deep-Sea IOR / EOR Heavy Oil Deep-Sea As of September 30, 2013

4 Oil & Gas R&D JOGMEC s R&D Activities 3 Research & Development CO2-EOR Methane Hydrates Gas-to-Liquids

5 Oil and Gas Utilization Japan GTL (Gas-To-Liquids) 4 JAPAN-GTL Process Combination of Japanese technologies Direct utilization of CO2 in feed gas Producing clean diesel Conventional Process Japan-GTL Process GTL Demonstration Plant ( , 500bbl/d)

6 Japanese Energy Issues Electricity Mix and LNG Imports 5 Thermal power replaces Nuclear LNG import at a historic high Fukushima Daiichi nuclear disaster Source: The Federation of Electric Power Companies of Japan

7 Japanese Energy Issues Energy Basic Plan & LNG Demand 6 Japan s Energy Basic Plan is still under discussion, but the Japanese government is ready to cement the plan by end-march As a result, uncertainties remain around the electricity mix, including future plans for restarting nuclear reactors. Japanese utilities have already applied to the authorities (NRA) for safety standards checks to enable the restart of operations at 16 nuclear reactors (out of 50 reactors in total). However, undertaking these checks is expected to take a long time. As a result, LNG and oil will replace nuclear as the main energy sources for power generation in the meantime. In light of this, at least for the moment, LNG will continue to be a vital energy source for Japan. In the short term, Japan s LNG imports will remain at volumes, i.e.. approx. 90 mm tons. In the medium & long term, LNG import volumes will depend on the percentage of nuclear shortfall that needs to be replaced by LNG.

8 Balance of Trade Japan s Trade Deficit billion US$ trade deficit (2013) 70 billion US$ import of LNG (2013) 35 billion US$ in 2010 Security of supply and price are key challenges for Japan

9 Oil & Gas Upstream Efforts Toward Affordable Gas 8 New regions / businesses - US, Canada, Mozambique - Japanese companies in the upstream (Australia) Utilities are changing - Stringent assessment of increases to electricity tariffs, focusing on cutting fuel costs - Electricity market reform: direction and roadmap released - Nuclear re-start: new safety standards published by NRA in July 2013 Supporting policies and measures - 1 tn yen loan guarantee program for cheaper LNG projects - Building international joint studies to review LNG trade

10 LNG Procurement Estimates to LNG Export from US 9 Japanese industries have a strong interest in LNG imports from the US. - US Department of Energy (DOE) released a third-party study to gain a better understanding of how US LNG exports could affect the public interest. DOE has already given export permissions to six projects: - Sabine Pass, Freeport, Lake Charles, Dominion Cove Point, Freeport expansion and Cameron LNG. - Freeport, Dominion, Cove Point and Cameron LNG will supply Japanese LNG consumers.

11 LNG Procurement Actions by Japanese Utilities (1) 10 Osaka Gas & Chubu Electric Sign LNG-Export Agreement with Freeport in the US 20-year contracts to have Freeport liquefy about 4.4 million metric tons of natural gas in 2017 from the project s first phase. Two additional phases of the project, which require US approval, would bring total capacity to 13.2 million tons a year. Tokyo Gas & Sumitomo Secure US LNG from Dominion for Japan Sumitomo Corp and Tokyo Gas Co. agreed to buy 2.3 million metric tons of LNG annually for 20 years from Dominion Resources Inc. s planned Cove Point terminal, which is expected to start operating from Maryland in 2017.

12 LNG Procurement Actions by Japanese Utilities (2) 11 Kansai Electric Inks Low-Cost LNG Purchase Deal with BP Kansai Electric Power Co., Inc. (KEPCO) agreed a contract with BP Singapore to purchase 500,000 tons of LNG annually for 15 years. Supply sources are not specified, but BP Singapore ships LNG from a number of sources worldwide, such as Trinidad & Tobago and Egypt (under a portfolio contract). The new system will cut procurement costs by about 30%. Chubu Electric and KOGAS Execute Tripartite LNG Sales and Purchase Agreement with ENI Under the agreement, Chubu Electric and KOGAS will, for the period May 2013 to December 2017, purchase 28 cargoes of LNG from ENI. Quantities of LNG shared by Chubu Electric and KOGAS can be reallocated between the two companies. The agreement represents the very first international joint purchase in Asia.

13 LNG Procurement Actions by Japanese Utilities (3) 12 Participation in LNG project upstream in Australia - Tokyo Electric - Wheatstone, Darwin LNG - Kansai Electric - Pluto - Chubu Electric - Gorgon, Ichthys - Tokyo Gas - Ichthys, Pluto, Darwin LNG, Gorgon, QC LNG - Osaka Gas - Gorgon, Ichthys, Sunrise Reduction in transportation costs by using their own fleet - Tokyo Electric, Kansai Electric, Chubu Electric, Tokyo Gas, Osaka Gas Review of the price formula - Henry Hub-based price: LNG from the US - Hybrid Price

14 Oil & Gas Upstream Natural Gas Projects 13 Sakhalin I Project (Russia) North Montney Shale Gas Project (Canada) Horn River Shale Gas Project (Canada) Cordova Shale Gas Project (Canada) Cutbank Dawson Shale Gas Project (Canada) Rovuma Offshore Area 1 Project (Mozambique) Tangguh LNG Project (Indonesia) PNG LNG Project (Papua New Guinea ) Abadi LNG Project (Indonesia) Kudu Project (Namibia) Wheatstone LNG Project (Australia) Ichthys LNG Project (Australia) Equity Capital (41) Liability Guarantee (13) (As of May 31, 2013)

15 Oil & Gas Upstream JOGMEC s Activities in Australia (1) 14 Liability Guarantee (Under Development) INPEX Ichthys (Ichthys Project) Liability Guarantee & Equity Capital (Under Development) PE Wheatstone (Wheatstone Project) Equity Capital (Exploration) Cosmo Oil Ashmore (AC/P17, AC/RL5, AC/RL6 w/pttep) Japan Energy E&P Australia (WA-412-P, Operator) Diamond Resources Exmouth (WA-384-P, w/shell)

16 LNG Procurement JOGMEC s Activities in Australia (2) 15 Japan GTL The Japan GTL consortium led by JOGMEC has conducted GTL operations to various stages of development, such as a laboratory-based study ( BPD), pilot plant (7BPD) and demonstration plant (500BPD). JOGMEC is now discussing Japan GTL implementation with several countries. In Australia, JOGMEC has taken the opportunity to talk with a QLD-based firm about the possibility of CBM-GTL and UCG-GTL, as well as a WAbased firm about the possibility of GTL fed by natural gas produced onshore. In addition, JOGMEC has been in discussions with several state governments and the federal government.

17 Oil & Gas Industry Competitiveness of Australian LNG 16 Major LNG supplier to Japan - Australia has gained its position as the biggest LNG supplier to Japan, shipping 18 million metric tons in Australia is expected to supply over 80 million metric tons of LNG per annum by end Future uncertainties - While there are numerous LNG projects in Australia at the pre-fid stage, most of them will face hard competition from other countries. Australian LNG projects share the issues of increasing labor and materials costs, as well as securing construction workforce. In addition, tax reform has recently become a hot topic. - Foreign investors are interested in finding appropriate responses to resolve these issues, among which is the creation of suitable LNG price mechanisms.

18 Oil & Gas Industry Relationship with Australia 17 Australia Investment Seminar in Japan - The federal government has held an Australian Investment Seminar every year in Tokyo, in conjunction with their annual offshore acreage release. This encourages Japanese firms to participate in bidding rounds implemented by the federal government. - JOGMEC has fully supported this event for a long time. Besides this, ministers and high officials of each state and the federal government frequently visit JOGMEC. This has contributed to the strengthening of the relationship between the Australian government and JOGMEC.

19 Conclusion 18 Japan s Energy Basic Plan should be finalised within the month. Whatever the outcome, demand for LNG in Japan will remain at a high level. Diversification of energy sources and a good balance of energy mix should be considered. Japan s trade deficit has soared in recent years. Higher LNG prices have resulted in high electricity costs, which create a burden on both private sector competitiveness and households. To resolve this, Japan needs affordable energy. In light of this, Japanese utilities are making an effort to reduce their LNG procurement costs via negotiations with LNG suppliers on reviewing the price mechanism. Diversification of LNG suppliers is one way companies can strengthen their negotiating position in price reviews. It is very important for Japanese firms to participate further up the value chain in LNG projects, in order to secure a stable and affordable supply of LNG to Japan. JOGMEC is in a strong position to support them. Thank you for your kind attention