LNG & Gas Hubs Ane de Ariño (October 2010)
- Relation between LNG and gas hubs - 1. LNG weight on gas markets 1 2 1. Gas Hubs depth and liquidity 3 1. Price linkage 4 1. Conclusions
World gas demand 3000 Bcma LNG 250 Bcma 1 LNG weigh on gas markets
LNG in Asia 0% Asia 4% 0% 0% LNG 2009 = 152 Bcma 66% 31% 45% 56% 100% LNG P.Propia Indig. production Asia Pacific = 500 Bcma P.Propia Asian LNG consuming countries = 275 Bcma (Japan, S.Corea, Taiwan, India and China) P.Propia Pipel Asian LNG consolidated markets = 130 Bcma P.Pro (Japan S.Corea & Taiwan) Biggest LNG consuming region. 1/3 of the gas demand covered by LNG. Main LNG consuming countries 100% dependency on LNG. Long term ToP contracts. security of supply its the main driver Price Oil indexation (floor and ceiling) No HUB, but new spot price reference (JKM)
LNG in Europe Europe LNG 2009 = 60 Bcma LNG P.Propia Indig. production 58% 36% 6% 22% 11% 67% GN Eurasia = 1060 Bcma EU 27 = 540 Bcma LNG Europe = 275 Bcma P.Propia P.Propia P.P (France, Spain, UK, Belgium, Italy, Turkey, Greece and Portugal) 14% 23% 63% Pip Declining indigenous production and high dependency on Russian imports Clearly differentiated markets: - Northwestern (Deregulated + interconnections + Hubs) - Southern (Less deregulated + non developed Hubs + poorly interconnected) coexistence of Long Term ToP contracts with increasing spot LNG and pipeline supplies
LNG in USA America LNG 2009 = 20 Bcma LNG P.Propia Indig. production 14% 2% 15% 2% 14% 2% 84% 83% 84% America = 945 Bcma N.America = 810 Bcma USA = 645 Bcma P.Propia P.Propia(LNG = 13 Bcma) Pipe P.Pr USA: Biggest gas market with low dependency on imports USA LNG forecasts Boost in unconventional gas production Unutilized new regasification capacity High liquidity in gas Hubs Prices respond quickly to changing domestic supply and demand balances LNG demand forecast decreasing year by year
World gas demand 3000 Bcma Physical gas traded in Hubs* 700 Bcma 2 Gas Hubs * Stream estimation, assuming most of US physical gas trade
Bcma times NBP TTF ZEE NCG PEGs PSV CEGH BEB 2008 there s still a long way to reach relevant liquidity in European gas Hubs 500 100 Churn rate Churn rate > 10 = Liquid market 15 5 5 2 3 2 1 Brent HH NBP ZEE TTF PSV CEGH NCG LNG 1000 60 Traded volumes in Gas Hubs in Europe 45 25 16 15 15 10
3 Price linkage
ene-00 jul-00 ene-01 jul-01 ene-02 jul-02 ene-03 jul-03 ene-04 jul-04 ene-05 jul-05 ene-06 jul-06 ene-07 jul-07 ene-08 jul-08 ene-09 jul-09 ene-10 jul-10 ene-00 jul-00 ene-01 jul-01 ene-02 jul-02 ene-03 jul-03 ene-04 jul-04 ene-05 jul-05 ene-06 jul-06 ene-07 jul-07 ene-08 jul-08 ene-09 jul-09 ene-10 jul-10 NBP vs. Oil index $/MMBtu 16,00 14,00 12,00 10,00 8,00 6,00 4,00 2,00 0,00 NBP/Oil form. = 100% 110% 80% Correlation = 0,6 0,4 0,85 Oil index NPB $/MMBtu 2000-2003 2004-2007 2007-2010 16,00 HH vs. Oil index 14,00 12,00 10,00 8,00 HH/Oil form. = 145% Correlation = 0,8 NBP Brent 120% 70% 0,2 0,7 6,00 4,00 2,00 0,00 Oil index HH
ene-00 ene-00 jul-00 jul-00 ene-01 ene-01 jul-01 jul-01 ene-02 ene-02 jul-02 jul-02 ene-03 ene-03 jul-03 jul-03 ene-04 ene-04 jul-04 jul-04 ene-05 ene-05 jul-05 jul-05 ene-06 ene-06 jul-06 jul-06 ene-07 ene-07 jul-07 jul-07 ene-08 ene-08 jul-08 jul-08 ene-09 ene-09 jul-09 jul-09 ene-10 ene-10 jul-10 jul-10 loss of US LNG attractive in favour of European hubs $/MMBtu $/MMBtu 20,00 20,00 15,00 15,00 10,00 10,00 5,00 5,00 0,00 0,00-5,00-5,00-10,00-10,00 NBP vs. HH NBP/HH ratio = 70% 90% 120% Correlation = 0,6 0,5 0,9 Future Spread HH Brent Spread HH Brent will European Hubs be able to maintain this spread to HH in the long term?
Emisión (Mcm/d) NBP (GBp/th) Emisión (Mcm/d) NBP (GBp/th) we ve seen some effect on NBP prices from S. Hook output, but still very limited. 55 70 50 45 60 South Hook (Qatar) UK vs. NBP 40 35 30 25 20 35 (Mmcm/d) 30 50 (GBp/th) 40 30 15 20 10 5 10 1800 70 0 160 60 140 140 120 (Mmcm/d) 3050 (GBp/th) Norway UK vs. NBP 100 80 60 40 30 20 40 20 10 0 0
Sellers Buyers Market 4 Conclusions
4 Conclusions In our view, the question today is more how much the hubs have effect on LNG trade than the opposite In a market where increased flexibility and uncommitted LNG contributes in a 20-30% of the total LNG trade, gas Hub prices are one of the key elements that can attract flexible LNG around the world. LNG short term pricing is driven by the forces of supply and demand of different regions, and it is increasingly disconnected from long-term contracts prices Neither the markets nor the suppliers are driving the industry towards full commoditization, nonetheless, some convergence of LNG pricing may occur. We still have a long way to reach a level of total globalization, comparable to oil markets but are we in the process of slowly and gradually breaking away LNG Oil indexation to some LNG Gas Price?
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