ICIS China Gas Market Webinar - PDF Free Download

ICIS China Gas Market Webinar 13 November 2014 Ricki Wang, Senior Industry Analyst ICIS China Ben Wetherall, Head of Gas ICIS Energy Click here to access the recording of the webinar - http://bcove.me/41zphdnz

ICIS Market intelligence for the energy, chemical and fertilizer industries

You can rely on ICIS to stay up to date with the latest developments in China natural gas Reliable pricing information The ICIS China Gas Markets Report enables you to understand price drivers and fluctuations and settle your contract prices more confidently by giving you access to delivered and import LNG prices as well as information on shipping information, market moving news, operating rates and turnaround schedules. Comprehensive supply and demand data and analysis The ICIS China LNG Supply/Demand & Investment Opportunities Report provides detailed information on the LNG demand outlook for China broken down by 24 key provinces, autonomous regions and municipalities. In addition, it provides important information on domestic policies, infrastructure developments and other key factors for consideration when making investment-related decisions. Request a sample report >> Enquire about the report >>

Content Overview of China s Gas Market

China s Energy Mix China s Energy Mix (2006-2020) Under environment pressure, Chinese government is encouraging clean energy usage. Natural gas consumption is going to reach 15% of total primary energy mix by 2020. 100% 90% 80% 70% 60% 50% 40% 8 8 8 11 15 4 5 5 8 19 19 18 12 18 17 68 68 69 63 56 2005 2006 2007 2008 2009 2010 2011 2012 2015E 2020E Coal Petroleum Natural Gas Non-fossil Energy Source: NBS, ICIS C1 Energy

China s natural gas Supply and Demand Forecast of China s Natural Gas (2007-2019E) 400 bcm 25% 20% 300 148 20% 200 13 13% 62 26 12% 43 170 15% 10% 100 14 25 123 5% 67 0 0% 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Source: ICIS Net Import Export Production Consumption Growth Rate

Gas Consumption by region in 2012 Heilong jiang Xinjiang Uygur autonomous region Gansu Qinghai Inner Mongolia autonomous region Ningxia Shanxi Beijing Tianjin Hebei Shandong Liaoning Jilin Tibet autonomous region Sichuan Shaanxi Chong qing Guizhou Hubei Henan Hunan Jiangsu Anhui Jiangxi Fujian Zhejiang Shanghai Yunnan Guangxi Guangdong Consumption volume: Large Small Hainan Macao Hong Kong Source: ICIS C1 Energy 7

LNG Consumption by region in 2013 Large Small

Gas Distribution Forecast of China's Natural Gas Consumption by Sector (2013-2017E) 100% 80% 60% 40% 2013 China s NG consumption by Sector 20% 0% Source: ICIS C1 Energy 2013E 2014E 2015E 2016E 2017E City gas Industrial/Commercial fuel Chemical feedstock Fuel for power plants 29% City Industry 35% Gas 14% Fertilizer Gas Power Plant 22%

Domestic Gas Supply

Domestic Natural Gas Supply Forecast of China s Gas Production (2007-2019) 180 bcm 18% 160 169.7 16% 140 120 100 80 132.1 123.2 14% 12% 10% 8% 60 40 20 0 66.6 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 6% 4% 2% 0% Source: ICIS Production Growth Rate PetroChina is the largest gas supplier Most of the conventional gas belongs to PetroChina, Sinopec, CNOOC C. China NW. China N. China S. China SW. China E. China PetroChina CNOOC Sinopec Yanchang Petroleum Group

Unconventional Gas Development Supply target set by China government (2015, 2017) 2015 billion cubic meters 180 160 140 Import LNG 14% SNG 4% CBM Shale Gas 3% Conventi al Gas 57% 120 100 80 Import 60 40 Pipeline 18% 20 0 Conventio nal Gas Import Pipeline Gas Import LNG SNG CBM Shale Gas 2015 138.5 45 34.7 10 9 6.5 10% 5% 2017 3% 2017 165 65 47.2 32 17 10 49% Source: ICIS C1 Energy 14% 19%

Unconventional Gas Distribution SNG Shale Gas SNG Shale Gas CBM Northern China North East China East China Southern China Central China South West China North West China Shale Gas Shale Gas

Gas Import in China

China s Gas Import Forecast of China s Gas Import (2007-2019E) China s Gas Import (2006-2014E) bcm 180 323.9% 160 152.6 140 120 100 80 76.1 64.2 60 40 20 3.9 21.2% 18.6% 18.8% 0 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E Source: ICIS Import Growth Rate 350% 300% 250% 200% 150% 100% 50% 0% 10,000 tonne 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 E Source: GAC NG Import LNG Import Annual Growth Rate 350% 300% 250% 200% 150% 100% 50% 0%

Gas Import Infrastructure China Russia Gas Pipeline East-West P IV East-west P II East-West P III Tianjin Tangshan Dalian Qingdao Rudong Shanghai Ningbo Zhoushan JOVO Putian 来源 : 安迅思息旺能源 Myanmar Gas Pipeline Guangxi Shenzhen Zhuhai Hainan Import LNG

Gas Import by Source 2000 10,000 tonne 1800 1600 1400 1200 1000 800 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 E Source: Gac Qatar LNG Australia LNG IndonesiaLNG Malaysia LNG Other Countries LNG Turkmenistan Others

Import Gas Price 20 $/MMBtu 18 16 14 12 Qatar Import LNG price Australia Import LNG price Indonesia Import LNG price 10 8 6 4 2 Malaysia Import LNG price Other Countries Import LNG price Turkmenistan Pipeline Import price Other Pipelien Import price 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 E Source: GAC

Content Price Reform

Evaluation of China s Gas Pricing Mechanism Government Set and Guide the Price Hub Price Price Reform Two Tier Pricing + Base on Cost Two Tier Pricing Base on Cost Base on Cost Market Orientation Before 2005 2010 2012 2013-2015 After 2020

Price Formula Coefficient Thermal Value VAT Import Price Import Price

Regional Gas Price Government-capped City-gate Prices of Natural Gas by Province/Municipality/Region Province/Municipality/Regio n Price for existing consumption Price for outstanding consumption RMB Yuan/cbm USD $/MMBtu RMB Yuan/cbm USD $/MMBtu Beijing 2.660 11.68 3.140 13.79 Tianjin 2.660 11.68 3.140 13.79 Hebei 2.640 11.59 3.120 13.70 Shanxi 2.570 11.29 3.050 13.40 Inner Mongolia 2.000 8.78 2.480 10.89 Guangdong 2.860 12.56 3.320 14.58 Guangxi 2.690 11.81 3.150 13.83 Heilongjiang 2.420 10.63 2.900 12.74 Shanghai 2.840 12.47 3.320 14.58 Jiangsu 2.820 12.39 3.300 14.49 Zhejiang 2.830 12.43 3.310 14.54 Anhui 2.750 12.08 3.230 14.19 Jiangxi 2.620 11.51 3.100 13.62 Shandong 2.640 11.59 3.120 13.70 Note: The price is inclusive of value-added tax (VAT). Source: National Development and Reform Commission

Impact of Price Reform Upstream Middle stream Supplier Import LNG Downstream LNG terminal Domestic LNG plant Pipeline Industry Gas Power Plant Vehicle Fertilizer

Government Policies Pipeline Gas Fertilizer Vehicle City Gas Gas Field Purify Pipeline City Gate Pipeline Upstream Transportation Commercial Domestic LNG plant Gas Power Plant Citizen LNG trucks Industry Gas refill station Downstream Vehicle

Government Policies LNG Vehicle City Gas Import LNG Shipping LNG terminal Pipeline Gas Power Plant Citizen Commercial LNG trucks Industry Gas refill station Vehicle

Content Chinese gas market reforms in a regional context

Chinese import requirements uncertain but will impact wider region Chinese domestic shale gas production uncertain. Government cuts targets 30Bcm by 2020 down from 60-100Bcm in original 2011-2015 development plan. Imports from Turkmenistan set to reach 30Bcm in 2014, up to 65Bcm by 2021. Russia-China pipeline agreement via Eastern Route up to 38Bcm/year. Gazprom-CNPC sign framework agreement in Nov 14 for 30Bcm/year via Altai (Western Route). Chinese buyers have signed SPAs to import more than 50mtpa of LNG in 2020 China s LNG imports compared with NE Asia China LNG import s (mt) 6% 08 09 10 11 12 13 14 end Sept 3.37 5.74 9.6 0 China holds more than 50mtpa in LNG SPAs in 2020 17% 24% 4% 6% 5% 13.1 14.65 18.6 14.67 Chinese LNG imports as percentage of regional demand NE Asia 3.05 5.47 7.72 9.4 9.62 11.65 12.35 38% Australia Indonesia Malaysia Qatar Russia Portfolio Supply Papua New Guinea

New Russian pipeline imports competitive with LNG Selected LNG and pipeline import prices to China on forward curve (12 Nov 2014) 16.00 15.00 LNG Prices - $/MMBtu 14.00 13.00 12.00 11.00 10.00 US liquefaction DES Asia (Cheniere)* Qatar/China DES Russia-China (Shanghai delivery estimate) Australia/China 2011/12 source: ICIS, CME and NYMEX Australia/China CSG S-Curve * from Corpus Christi statement - March 2014

Japan tries to align liberalisation and lower price goals

Chinese price reform raises questions for new contestable LNG supply East Africa Eni and Anadarko developing multi-train project in Mozambique. Eni also plan 2.5mtpa FLNG project offshore Area 4 CNPC holds a 30% stake in Eni-led consortium developing Area 4. North America Australia/Russia Nine liquefaction projects at various stages of development in Western Canada have been given export approval PetroChina and Sinopec stakeholders in two LNG projects Cost challenges and uncertainty over royalty tax Regulatory issues over Western US greenfield projects Australian greenfield and FLNG projects under costs pressure Browse, Bonaparte, Scarborough Russian LNG (Sakhalin expansion/vladivostok, Yamal LNG) questions over financing, technology.

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