ERRA Webinar - Impact of COVID-19 on the energy sector€¦ · Tortue FLNG Mauritania/Senegal 2.5 2018 2022 BP, Kosmos Calcasieu Pass USA 10.8 2019 2022 Venture Global Sabine Pass

ERRA Webinar - Impact of COVID-19 on the energy sector

Impact on LNG Markets

Tony Regan

10 February 2021

Relatively little impact from the COVID-19 pandemic

Supply – declined from a peak in Q1 20 but this due to a series of unscheduled shutdowns and cancellation of US

cargoes rather than conscious decision by producers to reduce exports. Full year exports were about 5% higher than

2019.

Demand – weakened in Europe but elsewhere low prices stimulated new demand. Full year consumption about 3% higher

than for 2019.

Blame the weather – a cold snap in NE Asia in Q4 had far more impact on the Asian market than the COVID pandemic

Pricing – extreme volatility in Asian spot prices. JKM hit record low in April 2020 and a record high in Jan 2021.

Term prices less volatile due early recovery of crude prices from Q2 lows.

Contracting – relatively little contracting activity in 2020 – little evidence of a COVID impact on contract terms

Financing – two significant PF deals successfully agreed (Nigeria & Mocambique) but too early to assess Lenders

attitudes to future projects

Project sanctioning – only one project sanctioned in 2020 (Energia Costa Azul) rather than the twenty two forecast (see

slide 15)

COVID -19 had greatest impact here. It burst the potential capacity overhang bubble’. Developers forced to delay and

reconfigure proposed projects. Few likely to come back to the table for FID in 2021 – particularly as Qatar maintaining a

huge expansion programme

Project cancellation - low prices triggered massive write-downs in Q3 and some tweaking of portfolios – but no plant

shutdowns or project cancellation

Tomorrow got closer – no expectation of business as normal post pandemic. Major players announce an acceleration of

their energy transition

Executive Summary – the take-aways from 2020

LNG Market Update January 2021

LNG Supply Demand 2020

LNG Market Update

R/P = 98

R/P = 265 R/P = 41

Asia

260 mill tnNorth America2 mill tn

Caribb, Cent & S. America11.5 mill tn

LNG demand (million tonnes)

Asia Pacific

Middle East7 mill tn

Liquefaction capacity (million tonnes)

Demand 365 million tonnes

Active liquefaction capacity 426 mill tonnes (Dec 2020 )

Europe83 mill tn

Europe

Still very much an Asian business

Asia - 70% of demand

January 2021

Africa

USA

R/P = 98

R/P = 265 R/P = 41Europe

83 mill tn

North America

1.7 mill tn

Cent & S. America

11.5 mill tn

LNG demand (million tonnes)

Middle East

7 mill tn

Global LNG Demand 365 million tonnes

Global LNG Demand 2020

Japan

75 mill tnChina

69 mill tnKorea

41 mill tn

Taiwan

19 mill tnIndia

27 mill tn


Global LNG Demand

January 2021LNG Market Update

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Pct

Demand Growth rate

R/P = 98

R/P = 265 R/P = 41

Australia87 mill tn

Norway

Algeria

Nigeria

Eq. Guinea

Trinidad

Peru

Oman

Qatar 78mill tn

Yemen

Abu Dhabi

Brunei

MalaysiaIndonesia

Egypt

Russia

Global LNG liquefaction capacity 2020

Angola

PNG

USA68 mill tn

Russia

Global liquefaction capacity 426 million tonnes

(excl small scale LNG)

Cameroun

Argentina

Liquefaction plants

Global liquefaction capacity (Dec 2020)


Production 2016-2020

0

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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Australia Qatar USAXLS: lng production 2015-19 (Dec 2019).xlsx\Sheet1


LNG Production 2020

4 3.7 3.5 3.7

S America

5.2 4.6 4.9 5.2

Europe

24.3 22.9 24 23.1

Middle East

37.634.3 34.2

37.85

Asia

14.210

7.3

15

N America

10.7 10.3 9.9 10.1

Africa

Q2 2020

Million tonnes

96.0

85.8

95.6

Q1 2020

Q4 2020

Q2 2020 84.4


LNG Consumption 2020

2.4 2.9 3.2 3

S America

26.6 2316 17.35

Europe

0.5 2.4 3.1 2.8

Middle East

67.7

56.962.5

73.09

Asia

0.8 0.3 0.3 0.3

N America

Q2 2020

Million tonnes

98.0

85.5

96.5

Q1 2020

Q4 2020

Q3 2020 85.5

LNG Production 2014-2020


Supply ran ahead of demand in 2019. Peaked in Q1 20, fell in Q2 and Q3 but only slightly

less than Q2/3 2019

In 2020 producers did not shut in capacity. Lower exports mainly due to unscheduled

shutdowns and cancellation of US cargoes

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N. America S. America Europe Asia Middle East Africa

XLS: lng production 2015-19 (Dec 2019).xlsx\Sheet1

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nnes

N. America S. America Europe Asia Middle East Africa

XLS: lng production 2015-19 (Dec 2019).xlsx\Sheet1

LNG Demand 2018-2020


Limited impact of COVID -19. European gas demand impacted, lower LNG imports Q3 20

Asian demand (2020) up 5.6% compared with 2019

2020 global demand was 365 million tonnes, 2.9% higher than 2019

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C&S Amer N Amer Europe Asia Mid East

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Q1 18 Q2 8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 -20 Q4 20


LNG Demand


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C&S Amer N. Amer Europe Asia Mid East

Mill

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es

Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20

LNG imports by quarter

COVID has had little impact, Europe down in Q2-4 20 but full year up 3.1%

Asia – weak Q2 but full year up 5.6%

Full year 2020 was higher than 2019 (+10 mill tns)

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LNG imports 2019 v 2020

2019 2020 % increase

N America 1.3 1.7 31.0

C&S America 14.7 11.5 -22.0

Europe 85.6 83.0 -3.1

Asia 246.3 260.2 5.6

Middle East 7.0 8.8 25.7

354.9 365.1 2.9

US LNG ramp up LNG liquefaction start ups 2020

New LNG Supply 2020


Project Country mtpa Start up Shareholders

Freeport T2 USA 5 2020 Freeport LNG

Cameron LNG T2 USA 4.6 2020 Sempra, Total, Mitsubishi, Mitsui

Freeport T3 USA 5 2020 Freeport LNG

Cameron LNG T3 USA 4.6 2020 Sempra, Total, Mitsubishi, Mitsui

Elba Island T6 USA 0.25 2020 Kinder Morgan EIG Energy

Elba island T7-10 USA 1 2020 Kinder Morgan EIG Energy

20.45

Liquefaction projects under construction


Project Country mtpa FID Start Up Shareholders

Portovaya Russia 1.5 2020 Gazprom

PFLNG Dua Malaysia 1.5 2014 Q3 20 Petronas,

Yamal T4 Russia 1.0 2017 Q4 20 Novatek 50.1%, Total 20%, CNPC 20%, China Silk Road Fund 9.9%

Tangguh T3 Indonesia 3.8 2016 Q3 21 BP 40.22%, MI Berau 16.3%, CNOOC 13.9%, Nippon Oil 12.23%, KG Berau 8.56%, Others 8.79%

Coral Sul FLNG Mocambique 3.4 2017 2022 ENI, CNPC, ENH, KOGAS, Galp Energia

Corpus Christie T3 USA 4.5 2018 Q2 21 Cheniere Energy

Tortue FLNG Mauritania/Senegal 2.5 2018 2022 BP, KosmosCalcasieu Pass USA 10.8 2019 2022 Venture Global

Sabine Pass T6 USA 4.5 2019 Q4 22 Cheniere Energy

Mocambique LNG Mocambique 12.9 2019 2023 Anadarko, Bharat, ENH, Mitsui, PTT, Oil India, ONGC Videsh

Arctic LNG T1 Russia 6.6 2019 2023 Novatek 60%, Total 10%, CNPC 10%, CNOOC 10%, Mitsui JOGMEC 10%

Arctic LNG T2 Russia 6.6 2019 2024 Novatek 60%, Total 10%, CNPC 10%, CNOOC 10%, Mitsui JOGMEC 10%

Nigeria LNG T7 Nigeria 7.6 2019 2024 NNPC 49%, Shell 25.6%, Total 15%, ENI 10.4%

Golden Pass T1 USA 6.0 2019 2024 Qatar Petroleum 70%, ExxonMobil 30%

LNG Canada Canada 14.0 2018 2025 Shell 40%, Petronas 25%, Mitsubishi 15%, KOGAS 5%, PetroChina 15%

Golden Pass T2/3 USA 12.0 2019 2025 Qatar Petroleum 70%, ExxonMobil 30%

Arctic LNG Russia T3 6.6 2019 2026 Novatek 60%, Total 10%, CNPC 10%, CNOOC 10%, Mitsui JOGMEC 10%

105 mtpa currently under construction and coming

on stream over next five years

R/P = 98

R/P = 265 R/P = 41

Australia87 mill tn

Norway

Algeria

Nigeria

Eq. Guinea

Trinidad

Peru

Oman

Qatar78 mill tonnes

Yemen

Abu Dhabi

Brunei

MalaysiaIndonesia

Egypt

Russia

Angola

PNG

USA105 mill tn

Russia49 mill tn

Global liquefaction capacity 536 million tonnes

(Existing plus under construction)

Cameroun

Argentina

Liquefaction plants

Global liquefaction capacity 2025

Mocambique16.3 mill tn

Canada 14 mill tn

Senegal/Mau

Largest liquefaction capacity

Capacity doubles 2018-2025

January 2021

▪ Weaker demand growth means supply

surplus could continue until 2026

▪ Short about 40 million tonnes by 2030

▪ Pressure removed for prompt

sanctioning of new capacity

Supply/Demand balance


Supply from existing plus under construction

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600

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Mill

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tonn

es

N. America C. Amer/Caribb S. America Europe

Asia Middle East Africa Supply

Market could be tighter than implied above if demand growth rates increase and there are

supply interruptions (non scheduled shutdowns)

Projects proposing to take FID in 2020/2021


Project Country Mill tn FID New FID Start up ShareholdersDelfin FLNG USA 13 2020 2023 Delfin Midstream,

Golboro Canada 10 2020 2021 2023 Pieride EnergyPlaquemines LA USA 10.0 2020 2024 Venture Global

Driftwood USA 27.6 2020 2021 2024 Telurian, Total

Obsky Russia 4.8 2020 2021 2024 Novatek

Energia Costa Azul Mexico 2.5 2020 Q4 2020 2024 Sempra (Sanctioned Nov 2020)

Port Arthur USA 13.5 2020 2021 2024 Sempra

Corpus Christie Phase 3 USA 10 2020 2024 CheniereRio Grande LNG USA 27.0 2020 2021 2024 Next DecadeFreeport T4 USA 4.5 2020 2021 2024 Freeport LNG

Sakhalin T3 Russia 4.8 2020 2024 Gazprom, Shell, Mitsui, Mitsubishi

Far East LNG Russia 6.2 2021 2024 Rosneft, ExxonMobil, ITOCHU, JAPEX, MarubeniBrownsville TX USA 4.0 2020 2021 2024 Texas LNG

Qatar exp T1-4 Qatar 32 2020 2021 2024 Qatar Petroleum

Vystock expansion Russia 1.2 2021 2024 Novatek

Vladivostok LNG Russia 1.5 2021 2024 Gazprom, Mitsui

Woodfibre LNG Canada 2.1 2020 2021 2024 Pacific Oil & Gas

Ust Luga Russia 13.0 2021 2024 Gazprom, RusGazDobycha, Mitsui

Brownsville TX USA 6.0 2020 Delayed 2024 Annova LNG (Excelon)

Commonwealth LNG USA 8.4 2021 Delayed 2024 Commonwealth LNG

Lake Charles USA 16.5 2020 2021 2025 Energy Transfer

Pluto T2 Australia 4.9 2020 2021 2025 Woodside

Rovuma LNG Mocambique 15.2 2020 2021 2025 ExxonMobil, ENI, KOGAS, CNPC

Great Tortue Phase 2 Mauritania/Senegal 3.8 2020 2022 2025 BP

Great Tortue Phase 3 Mauritania/Senegal 3.8 2020 2023 2026 BP

PNG LNG T3 PNG 4.0 2020 2021 2027 ExxonMobil, Oil Search

Papua LNG PNG 5.4 2020 2021 2027 Total

Qatar exp II Qatar 16.0 2021 2021 2027 Qatar Petroleum

271.7

▪ 22 projects aimed to take

FID in 2020

▪ One project sanctioned in

2020

▪ All others have slipped

into 2021 or later

▪ Many unable to give new

FID estimate

▪ Ranked by proposed start

up date (unrealistic)

rather than viability or

credibility

▪ No projects cancelled

(yet) but many in limbo

▪ Only 2 or 3 might take FID

in 2021

The project bubble has burst

Many project were struggling before the pandemic struck – unable to attract customers

Oil v Gas pricing


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$/M

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Brent UK NBP JKM

XLS: LNG Metrics (Updated 16 Nov 2020).xlsx\Summary

Gas – lower for longer

JKM hits record low in April 2020 and record high in Jan 2021

Widening of oil:gas differential

Oil crashes but V shape recovery

Pricing


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$/M

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JKM NBP Henry Hub Term @13% slope

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JKM Term @13% slope


Spot versus term

▪ Henry Hub trading in a narrow band

▪ JKM & NBP much more volatile

▪ Spot prices (JKM & NBP) collapsed 2019 due

over supply

▪ Term prices (oil linked) remained high

▪ Term prices double spot in Q1 20

▪ Term prices half spot prices Q4 20

Spot versus term

▪ Reasonably close correlation 2016-2018

▪ Wide differential in 2019

▪ Pressure to move away from oil linked pricing

formulas

▪ Spot significantly above term in Q4 20

Pricing – LNG versus fuel oil and diesel


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180 HSFO Diesel LNG (JKM)


Asia

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1% fuel oil FOB NW Europe Diesel LNG (NBP)


Europe

Gas cheaper than oil

LNG cheaper than petroleum products

LNG the cheaper marine fuel

LNG cheaper “at the pump” than diesel

LNG substantially cheaper than diesel for industry

US Exports


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US Exports to Europe

HH 15% Liquefaction Freight NBP

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US Exports to Asia

HH 15% Liquefaction Freight JKM

US exports “out of the money” since early 2019

Significant deterioration in 2020

Buyers cancelled cargoes – about 175 cargoes cancelled between April & November

Economics look better Q4 20 – no cargoes cancelled for Dec

Liquefaction project financing


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XLS: LNG Database Feb 20.xlsx\Under construction

Money remains available for projects with strong fundamentals

US$14.9 Bn in project finance loans for Mocambique LNG and US$3 bn for

Nigeria LNG Train 7

Refinancing – Ichthys LNG, Freeport LNG and Cheniere (Sabine Pass & Corpus

Christie)

▪ Limited impact from COVID-19

▪ LNG remains the fastest growing hydrocarbon market

▪ A major threat (massive overcapacity) has been removed

▪ Low prices triggered huge write-downs which triggered corporate re-organisations

and a faster transition to net zero

▪ Some MNC’s seeking to divest some assets

https://www.nexanteca.com/blog/202010/impact-covid-19-lng-mnc%E2%80%99s-supply-

strategy

▪ Gas’s position as the ideal transition fuel enhanced

▪ Environmental & economic drivers have enhanced LNG as a diesel replacement

▪ Market growing – Vietnam and Philippines set to become LNG importers

▪ Development of downstream LNG markets is bringing in new players, new capital

▪ USA on course to become the largest producer (liquefaction capacity) by 2024

overtaking Australia – but Qatar has plans to recover the crown

▪ Growth all in Asia – becoming even more Asia oriented

Where are we now?


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Documents

ERRA Webinar - Impact of COVID-19 on the energy sector€¦ · Tortue FLNG Mauritania/Senegal 2.5 2018 2022 BP, Kosmos Calcasieu Pass USA 10.8 2019 2022 Venture Global Sabine Pass