New Delhi 24 November 2016 5 th IEF-IGU Ministerial Gas Forum IEF Background Materials
Overview 1. 3+3 Challenges 2. 7 Observations on gas markets 3. What the JODI Gas Data Base Shows 4. 3 Proposals
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due to hub indexed prices and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due to hub indexed prices and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
Producers see gas take the largest share of demand % 35 World Primary Energy Demand Shares Outlook Reference Case to 2040 30 25 20 15 10 5 0 2014 2020 2030 2040 Oil Coal Gas Non Fossil* * Includes nuclear, hydro, biomass and other renewables Data Source: OPEC World Oil Outlook November 2016
Consumers see more moderate natural gas growth IEA and OPEC project annual gas growth from 1.5%-1.9% to 2.1% up to 2040 Primary Energy Demand Shares in 2014 and 2040 IEA and OPEC New and Current Policy Scenarios and Reference Case 100% 90% 80% 70% 60% 10% 10% 5% 5% 21% 22% 6% 4% 5% 11% 9% 10% 7% 24% 5% 24% 6% 27% 50% 40% 30% 31% 31% 27% 28% 26% 20% 10% 29% 28% 23% 27% 24% 0% IEA OPEC IEA NPS IEA CPS OPEC 2014 2040 Other renewables Biomass Hydro Nuclear Gas Oil Coal Data Sources: OPEC World Oil Outlook IEA World Energy Outlook November 2016
Asian Pacific gas trade is dominated by LNG Bcm 300 Asian Pacific Pipeline and LNG Import Volumes 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 BP Cedigaz Data 2011-2016 Pipeline LNG
But growth has peaked and slowed bcm 300 Asian Pacific Pipeline and LNG Import Volumes 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 BP Cedigaz Data 2011-2016, Indicative IEF trends lines Pipeline LNG
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due hub to indexed prices and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
Convergence show transferable prices across regions Gas is commoditizing but prices continue to reflect regional characteristics US$/Mmbtu 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 Regional Natural Gas Prices Trends US$/Barrel 120.00 100.00 80.00 60.00 40.00 20.00 0.00 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Jan-16 Mar-16 May-16 Jul-16 Sep-16 0.00 US Natural Gas Europe Natural Gas LNG Japan Crude Oil Global Average RHS Source: World Bank Average Annual Commodity Prices to 2015, and Average Monthly Prices from January to October 2016
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due to hub indexed prices renewed contract flexibility and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
Slow down in LNG investment recovers after 2020 with North America and Asia in lead 80 70 60 50 40 Global LNG Investment -28% Regional LNG Investment 3% 2% 1% 6% 6% 37% 12% 30 20 33% 10 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 North America Asia Eastern Europe FSU Australasia Africa Middle East West Europe Latin America Sources 2016 Douglas Westwood World LNG Market Forecast 2017-2021
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due to hub indexed prices and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due hub indexed prices and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
Short-term LNG demand eased on reduced demand Bcm 80 Asian Short Term LNG Purchases 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Total Japan South Korea India China Other Asia *Estimates Sources Chi-Kong Chyong and Roman Kazmin The economics of global LNG trade: The case of Atlantic and Pacific inter-basin arbitrage in 2010-2014 University of Cambridge Energy Policy Research Group Working Paper 1602, January 2016 Howard V. Rogers Asian LNG Demand Key Drivers and Outlook. Oxford Institute for Energy Studies NG 106, April 2016
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due to hub indexed prices, and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
LNG - pipeline interactions stage the future bcm 1200 Historical gas trade volumes by pipeline and LNG 1000 Phase I Phase II Phase III 800 Newly Independent States Financial Crisis 600 400 New Borders 200 0 New Players Rising Hubs Liquidity/Price Re-negotiations 1970 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BP 2016 Cedigaz 2015 Data Pipeline LNG Total
Chances for gas to deliver transition are historic More dialogue and new approaches are needed Net Tradable Volumes Across Key Regions by 2020 deficit Surplus Europe -273 China -148 Asia Oceania -78 Other Asia -10 Latin America -1 North America 51 Africa 78 Middle East 128 Euro Asia bcm -300-200 -100 0 100 200 300 251 IEA 2015 Data
New sources, routes and price discovery mechanisms create more competitive Asian Market Key Gas Trading Hubs New Gas Trading Hubs
LNG project launches in Australia Project North West Shel Venture T 1-5 Darwin LNG T1/2 Partners Woodside, BHP Billiton, BP, Chevron, Shell, MIMI ConocoPhillips, Inpex, Eni, Santos, Tokyo Electric, Tokyo Gas Total Capacity bcm/y Expenditure $billion First Start up 22 50 1989 5 1.5 2005 Pluto T1 Woodside, Kansai Electric, Tokyo Gas 5.8 15.3 2012 Arrow Shell, Petro China 10.2 20 Cancelled in 2015 Browse FLNG Wodside, Shell, BP, Japan LNG, PetroChina n.a. 40 Cancelled 2016 Queensland Curtis LNG T1/T2 BG Group CNOOC, Tokyo Gas 11.5 23.7 2015 Gladstone LNG T1/2 Santos, Petronas, Total, Kogas 10.6 21.6 2015/2016 Australia Pacific LNG T1/T2 Wheatstone T1/2 Origin ConocoPhillips, Sinopec Chevron, Apache, KUFPEC, Kyushu Electric Power Wheatstone 12.6 24.7 2015/2016 12 29 2016/2017 Gorgon T1-3 Chevron, ExxonMobil, Shell 20 54 March 2016-2017 Ichtys T1/2 Inpex, Total 12.1 37 2017 Prelude FLNG Shell, Inpex, KOGAS, CPC Corporation 4.7 13 2018 Total Australian LNG Capacity and Expenditure 116.3 269.8 Sources: The Australian Petroleum Production & Exploration Association and Individual Company Reports
7 Observations on gas markets 1. Gas demand will continue to grow to 2040, especially in Asia growth markets 2. LNG trade and new price signals create a global gas market 3. Abundant gas supplies show reduction in LNG investment 4. Lower spot prices mean higher longer term prices will remain subject to renegotiation 5. Traditional contract clauses on price indexation, destination, nomination and others are eased 6. US exports reduce Asian prices due hub indexed prices renewed contract flexibility and geography; panama canal 7. Gas is likely to play a larger role for longer in keeping up with future global energy demand
Gas can play a larger and longer role in Asia Bcm 600 500 Total Projected Asian Gas Consumption in High Growth Scenario 530 Bcm 400 290 Bcm 300 ~240 Bcm 200 100 0 2010 2015 2020 2025 2030 Japan South Korea Taiwan China India Singapore Thailand Indonesia Malaysia Pakistan Bangladesh Vietnam Source: Howard V. Rogers Asian LNG Demand Key Drivers and Outlook. Oxford Institute for Energy Studies NG 106, April 2016
Overview 1. 3+3 Challenges 2. 7 Observations on gas markets 3. What the JODI Gas Data Base Shows 4. 3 Proposals
The US turned into an LNG exporter in March 2016 bringing a 2 nd wave to markets Mcm 2000 US LNG Net Trade 1500 1000 500 0-500 Jan2010 Aug2010 Mar2011 Oct2011 May2012 Dec2012 Jul2013 Feb2014 Sep2014 Apr2015 Nov2015 Jun2016
Russian gas production picks up from lows caused by weak domestic demand Russia Natural Gas Production MCM 70000 65000 60000 55000 50000 45000 40000 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg 2011-2015 2015 2016
Russian gas exports have recovered from 5 year lows reached in 2015 Russia Natural Gas Exports MCM 24000 22000 20000 18000 16000 14000 12000 10000 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Algerian gas production grew steadily Algeria Natural Gas Production MCM 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016
Algerian pipeline exports have increased 6000 Algeria Natural Gas Exports 5000 4000 3000 2000 1000 0 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Pipeline LNG
Indonesian gas exports are in decline Indonesian Natural Gas Exports 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Jan2010 Apr2010 Jul2010 Oct2010 Jan2011 Apr2011 Jul2011 Oct2011 Jan2012 Apr2012 Jul2012 Oct2012 Jan2013 Apr2013 Jul2013 Oct2013 Jan2014 Apr2014 Jul2014 Oct2014 Jan2015 Apr2015 Jul2015 Oct2015 Jan2016 Apr2016 Jul2016 #N/A Indonesia Natural Gas in Million m3 Exports
Indonesian gas demand has fallen too Indonesian Natural Gas Demand MCM 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Chinese production remains robust despite economic rebalancing Mcm China Natural Gas Production 14000 12000 10000 8000 6000 4000 2000 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Australia LNG exports have taken off since October 2015 reaching new record levels Mcm 4500 Australia LNG Exports 4000 3500 3000 2500 2000 1500 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Unlike Japan and Korea, Taiwan LNG imports remain robust at five year highs Mcm Taiwan LNG Imports 2500 2000 1500 1000 500 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Japanese LNG imports have slowed since April 2015 Mcm 12500 Japan LNG Imports 12000 11500 11000 10500 10000 9500 9000 8500 8000 7500 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Korean LNG imports slowed as well at the lower end of the five year range Mcm 7000 Korea LNG Imports 6000 5000 4000 3000 2000 1000 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2015 Avg 2011-2015 2015 2016
Greater supply flexibility push Indian LNG imports beyond five year trend Mcm 2500 India LNG Imports 2000 1500 1000 500 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Range 2011-2013 Avg 2011-2015 2015 2016
Overview 1. 3+3 Challenges 2. 7 Observations on gas markets 3. What the JODI Database shows 4. 3 Proposals
3 Proposals 1. JODI Gas already covers 90% of world gas demand and supply but data reporting timeliness, completeness and use must be improved. 2. Asia needs to move forward with the establishment of a transparent and effective functioning gas pricing hub. 3. A rolling energy dialogue on gas markets enables producers and consumers to improve prosperity in healthy energy markets.