Prospects for North American LNG Exports How Much and How Soon Ning Lin, PhD, RBAC, Inc., ning.lin@rbac.com Robert Brooks, PhD, RBAC, Inc, rebrooks@rbac.com 2017 USAEE Annual Conference, Houston, Texas November 14, 2017 GPCM is a registered trademark of RT7K, LLC and is used with its permission.
Prospects of North America LNG exports Changing game of global LNG G2M2 Global Market Model Design G2M2 Gas Market Forecast
What the shape of global gas? The dynamics of natural gas & LNG are changing in all aspects Changing positions of players Prized markets have suddenly become uncertain Bigger bets and higher stake
Supply side: changing positions 4 Incumbents: Russia and Middle East with eroding positions Challengers: Australia, East Africa and North America Incumbents Challengers
The Prize: 5 Market growth in Asia by new buyers: China India Pakistan Southeast Asia Market share in Europe Emerging markets Africa The Middle East (UAE, Jordan, and Kuwait) South America Asia Europe New Markets
Global LNG game is getting more complex Bigger game: Increasing in size: 2006: 176 million tons vs. 2016: 260 million tons Increasing in numbers of players: 2006: 28 countries (15 importing, 13 exporting); 2016: 58 countries (39 importing, 19 exporting) Evolving rule: Long term contracts are expiring Higher short term and spot trade Higher stake: Huge capital being spent and more political activities China s commitment for coal-to-gas Government policy support on diversified gas imports How will this game turn out?
G2M2 Global Market Model Design Geo-Political Units Big country splits Basic GPU structure Pipelines LNG transport
G2M2 What type of model is G2M2? A partial equilibrium model of global natural gas, with detailed network which connects gas supply to demand through both pipeline network and LNG shipping. The model computes prices that balance supply and demand over all market nodes in the network
G2M2 Geo-Political Units 113 countries modeled: Most countries in G2M2 represented as a single geo-political unit (GPU) But some are too big, so are sub-divided China India
Russia GPUs based on Federal Districts
North American GPUs
G2M2 Supply / Demand Area: GPU GPU = Geo-Political Unit (Country or Sub-Country Area) Internal Flows External trades 12 Consumption Pipeline Exports LNG Exports Gas Storage Injection GPU Withdrawal Re-gas Liquefaction LNG Storage Gas Production Pipeline Imports LNG Imports
G2M2 Pipeline Model 13 Demand Link A2 Demand Link A3 Pipe Int A3-B1 1 Segment 1 Pipe B Segment 1 Pipe A 1 Pipe Int A1-A2 2 Segment 2 Pipe A Pipe Int A2-A3 3 Segment 3 Pipe A Demand Link A4 Supply Link Pipe Int A2-A4 A1 Segment 4 Pipe A four pipe segments, representing crossing four GPUs. 4 Pipe A
G2M2 LNG Tanker Flow Model 14 1 Liquefaction / Export Region (GPU 1) - Liquefaction Capacity - Liquefaction Costs LNG Tanker Shipment from 1 to 2 LNG Tanker diversion from 3 to 2 LNG Tanker Shipment from 3 1 to 3 - Existing contracts Import Region - Nautical miles (GPU 3) - Available tankers by size for receiving ports 2 Import Region (GPU 2) - Regas Capacity - Regas Costs - LNG storage
LNG Transport Cost 15 The tanker Day Rate is a function of utilization: A + B * U / (1 - U) Example shows day rate multiplier for A = 1, B = 0.5 Note that the multiplier would be infinite at 100%. 12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
G2M2 Gas Market Forecast Global gas production and consumption Inter-regional LNG flows Global Demand for North American LNG LNG Prices/Destinations
Production by Region Challengers threatening the incumbents Major producers of gas: North America Russia and Middle East Fast growing regions: Australia Africa
Deliveries to Consumers by Region- The changing prize The Prize: Asia and north America adds largest incremental demand Africa has the highest growth rate.
Inter-regional LNG Flows Asia market - challengers taking over: Australia, North America, Russia, and Africa Europe changing dynamics supported by growing North America LNG Emerging market economics prevails from current political constraints.
Regional Gas Prices Sufficient spreads of prices encourage increasing LNG trades. Asia the traditional marginal market, with emerging markets competing for incremental imports, in the long term. America remains one of the most cost competitive suppliers.
Global Demand for North American LNG Period CAN-W USA-CP USA-SA USA-WSC Total 2016 - - - 1.44 1.44 2017 - - - 2.62 2.62 2018-0.66-5.62 6.28 2019-0.66-9.73 10.39 2020-0.66 0.24 12.04 12.94 2021-0.66 0.31 13.87 14.84 2022 1.02 0.66 0.31 14.32 16.32 2023 2.02 0.66 0.31 14.44 17.44 2024 2.02 0.66 0.31 14.58 17.57 2025 3.02 0.66 0.31 15.08 19.07 2026 3.02 0.66 0.31 15.12 19.12 2027 3.02 0.66 0.31 14.91 18.90 2028 3.02 0.66 0.31 14.67 18.66 2029 3.02 0.66 0.31 14.38 18.37 2030 4.02 0.66 0.31 14.57 19.57 2031 4.02 0.66 0.31 14.92 19.92 2032 4.02 0.66 0.31 14.97 19.97 2033 4.02 0.66 0.31 15.06 20.06 2034 4.02 0.66 0.31 14.94 19.94 2035 4.02 0.66 0.31 14.89 19.89 2036 4.02 0.66 0.31 15.22 20.22 2037 4.02 0.66 0.31 15.88 20.87 2038 4.02 0.66 0.31 16.85 21.84 2039 4.02 0.66 0.31 17.38 22.38 2040 4.02 0.66 0.31 17.61 22.61 25 20 15 10 5 0 2016 2018 US and Canada LNG Export Demand (bcf/day) 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 CAN-W USA-CP USA-SA USA-WSC 2040
LNG Exports Price and Destinations $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 USA-WSC Export Price vs Henry Hub ($/mmbtu) 2016 2019 2022 2025 2028 USA-WSC Export Price 2031 2034 2037 Henry Hub 2040 25 20 15 10 5 0 2016 US-CAN LNG Export Destinations (bcf/day) 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 Asia Caribbean Europe Middle East South America 2038 2040
Conclusions LNG game has much more potential North America will become the top LNG exporter in the world, serving Asia and Europe, with sharp ramp-up in next 5 years. 2016-2026, incremental 15 bcf/d 2026-2040, another 7 bcf/d
Thank you! GPCM: flagship platform for North America Market Model adopted by industry for 20 years. G2M2 Global Market Model: the answer to everchanging game of global gas Please contact RBAC for details for Special research and academic license program.
Contact Information 25 Ning Lin, PhD, Senior Consultant, ning.lin@rbac.com Robert Brooks, PhD, Founder, rebrooks@rbac.com Contact Numbers Administration (281) 506-0588 Contracts and Sales (281) 506-0588 ext. 126 Direct (281) 506-0588 ext. 124 More information: http://www.rbac.com