Will the growth of LNG create a global gas market?

Transcription

1 Will the growth of LNG create a global gas market? Chris Evans Vice President Global LNG Supply Shell Gas & Power FLAME, Amsterdam 25 th February 25

2 Increasing choice for consumers and producers Environmental issues enhance value of gas Cost of moving gas has fallen relative to its price More supply and demand nodes Choices now span the globe Long-term contracts remain vital Short-term/spot business has smoothed out lumpy growth. Spot prices have been linked - but not always Delivery to multiple markets assists project startup These factors increase interconnection of markets

3 Robust future for gas Long-term, vital role in sustainable energy future Not resource constrained Global LNG growth boom Dawn of GTL industry

4 bcf/d 4 Gas Demand Growth: The Growing Role of LNG % 15% 4% LNG % Increase over 2 Pipeline imports Indigenous Sources: Cedigaz, bp statistical review 24, Shell

5 Global LNG Demand Growth Other India China Korea Japan Europe US MTPA

6 LNG: Changing Competitive Position 8 US supply sources pipeline imports 6 new unconventional fields bcf/d 4 2 new conventional fields existing fields LNG imports new conventional existing wells Source: adapted from National Petroleum Council, Balancing Natural Gas Policy Fueling the Demands of a Growing Economy, 23 Source: Global Insights Note: Europe includes EU 15, Norway, Switzerland, E. Europe, Turkey

7 LNG: Changing Competitive Position 8 US supply sources 8 European supply sources pipeline imports 6 new unconventional fields 6 LNG imports bcf/d 4 2 new conventional fields existing fields LNG imports new conventional bcf/d 4 2 Pipeline imports Indigenous pipeline existing wells Source: adapted from National Petroleum Council, Balancing Natural Gas Policy Fueling the Demands of a Growing Economy, Source: Global Insights Note: Europe includes EU 15, Norway, Switzerland, E. Europe, Turkey

8 LNG: Changing Competitive Position bcf/d US supply sources pipeline imports new unconventional fields new conventional fields existing fields LNG imports new conventional existing wells bcm 199 European supply sources LNG Imports Pipeline Imports Indigenous Production Source: adapted from National Petroleum Council, Balancing Natural Gas Policy Fueling the Demands of a Growing Economy, 23 Source: Global Insights 25 EU 31 Note: Europe 31 includes EU 15, and Eastern Europe

9 North America LNG regas projects Russia North American LNG regasification terminals Existing Permitted Permits filed Publicly announced Scouting Russia Norway Algeria Egypt Indonesia Nigeria Australia Peru Bolivia Venezuela Equatorial Guinea Trinidad and Tobago Middle East

10 Terminal capacity in the Atlantic Basin Total Net Regasification Capacity in the A-Med, mmtpa 3 25 Terminals Existing / Under Construction (25) 2 Total Planned Capacity by Cheniere ExxonMobil SEMPRA BP ENAGAS GdF Conoco Phillips Shell Qatar Petroleum Dominion Suez Energy Intl.* National Grid Transco Chevron BG McMoran Exploration Oxy Anadarko Depa Gas Natural El Paso Source: PFC Energy mmtpa

11 China: A Big, Uncertain Growth Engine LNG MT\PA Pipeline High economic growth > power generation, city gas & industrial sectors Energy diversity to mitigate significant pollution problems

12 China LNG Import Terminals (Under construction & Proposed) Beijing Tianjin Dalian Shandong, Sponsor: Sinopec Jiangsu Rudong Shanghai Zhejiang Under construction Being proposed / under development Conceptual Macao / Zhuhai Fujian 2.6mtpa 27/8 Sponsor: CNOOC Source: Tangguh Guangdong 3.7mtpa 26/7 Sponsor: CNOOC Source: NWS Provincial government > more proactive role in developing regas terminals to fill the natural gas/electricity demand gap

13 Average distance travelled by gas molecules New LNG ship price ($/m 3 ) 21 $ nominal miles Tcf Tcf 35 Tcf

14 LNG Fleet Sept. 25 Vessels (Assumes no scrapping) Delivered On order

15 LNG Vessel Supply and Demand The market remains long shipping to 21 as new build vessels enter the fleet before projects are ready to utilise them. Demand for new ships including speculative builds has seen prices rise and all slots filled well into 29. No significant retirements have been announced. 5 4 Qatar Effect LNG Fleet Count Older than 3 yrs Newer than 3 yrs On Order Newbuild Capacity Expected Demand Worst Case Best Case

16 Evolution of Gas Markets LNG flows Greater interconnectedness 199 bcf/d % * 199 N. America LNG Imports 1 6% 199 Europe LNG Imports 1 65% 199 Asia LNG Imports Korea, Japan, Taiwan, India and China * Share of gas supply Sources: Cedigaz, bp statistical review 24, Shell

17 Evolution of Gas Markets LNG flows Greater interconnectedness bcf/d % 2% N. America LNG Imports 1 8% 6% Europe LNG Imports 1 62% 65% Asia LNG Imports Korea, Japan, Taiwan, India and China * Share of gas supply Sources: Cedigaz, bp statistical review 24, Shell

18 Evolution of Gas Markets LNG flows Greater interconnectedness bcf/d % 1 14% *.3% 2% N. America LNG Imports 1 17% 8% 6% Europe LNG Imports 1 62% 65% Asia LNG Imports Korea, Japan, Taiwan, India and China * Share of gas supply Sources: Cedigaz, bp statistical review 24, Shell

19 Plant Capacities (mtpa) Middle East Asia Pacific Atlantic Basin

20 Features of the Interconnected Market Market: demand 2.5% pa, LNG 7-1% pa; firm prices; long term contracts Globalisation: new trade flows Customers: seeking security, diversity, flexibility Suppliers: seeking customer access Financers: seeking secure long-term cash flows

21 Pricing complexity US: 1% exposure to gas price EU: linked to oil prices to varying extent Traditional Asian markets: link to crude oil New Asian markets: low link to crude oil Increasing number of players Growth of demand and supply nodes Increased complexity of netbacks available to suppliers

22 Price comparisons for Middle East US$/MMBtu Older Cont. Older Cont. Older Cont Brent $2 HH $4. Brent $3 HH $5.3 Brent $5 HH $8.

23 Price comparisons for Middle East Newer Cont. Older Cont. Newer Cont. Older Cont. Newer Cont. Older Cont. Brent $5 HH $8. Brent $3 HH $5.3 Brent $2 HH $4. US$/MMBtu

24 Price comparisons for Middle East New Asia Newer Cont. Older Cont. New Asia Newer Cont. Older Cont. New Asia Newer Cont. Older Cont. Brent $5 HH $8. Brent $3 HH $5.3 Brent $2 HH $4. US$/MMBtu

25 New Asia Newer Cont. Older Cont. USGC New Asia Newer Cont. Older Cont. USGC New Asia Newer Cont. Older Cont Price comparisons for Middle East USGC Brent $5 HH $8. Brent $3 HH $5.3 Brent $2 HH $4. US$/MMBtu

26 Price comparisons for Middle East US$/MMbtu USEC UK 4. Far East 2. Belgium. Nov-1 May-2 Nov-2 May-3 Nov-3 May-4 Nov-4 May-5 Nov-5 May-6 Nov-6 May-7

27 Price comparisons for Middle East US$/MMBtu UK Belgium USEC Far East Jan-5 Feb-5 Mar-5 Apr-5 May-5 Jun-5 Jul-5 Aug-5 Sep-5 Oct-5 Nov-5 Dec-5

28 What price flexibility? US: fully priced via spot market Many storage options EU: increasingly priced Increasing storage options Low pipeline flexibility Asia: increasingly demanded, but undervalued Few storage options Strong seasonality Value becoming apparent

29 Based on temporary spare capacity Spot market In growing market capacity is quickly sold but beware overshoot Reflects the balance between GAS demand and supply Links regions via arbitrage Is not necessarily cheap!

30 From managing market growth with multiple small trains mtpa Year

31 . to managing wedges - placing large trains in several markets 8 mtpa Year

32 Evolving LNG markets Long term Take or Pay contracts Mainly long term ToP Some mid and short term No spot market Limited spot market around 1% Major regional price differences Towards global price interconnectedness

33 Remaining vital Relationships Long-term contracts Reliability and safety

34 Increasing choice for consumers and producers Environmental issues enhance value of gas Cost of moving gas has fallen relative to its price More supply and demand nodes Choices now span the globe Long-term contracts remain vital Short-term/spot business has smoothed out lumpy growth. Spot prices have been linked - but not always Delivery to multiple markets assists project startup These factors increase interconnection of markets

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