Gas in The Crisis Years - 一般財団法人日本エネルギー経 …eneken.ieej.or.jp/data/3346.pdf · default power gen source in the ... Pluto LNG T2 4.3 ... Gas in The Crisis

Strategic Advisors in Global EnergyStrategic Advisors in Global EnergyStrategic Advisors in Global Energy

Gas in The Crisis Years

A Special Presentation to IEEJ

Nikos Tsafos, Manager

September 10, 2010

IEEJ: 2010年9月掲載

Gas in The Crisis Years | Upstream & Gas Group | Page 2

What Gas World Do We Live In?

Global gas glut – the IEA says it

will last until 2015 at least

North American unconventional

gas has changed everything

International unconventional gas

will further revolutionize the

global market

Australia will be huge; the market

will be flooded with Australian gas

that will keep prices down

Demand is uncertain – efficiency

and renewables will chip away at

gas’ market share, to say nothing

of nuclear or carbon capture and

sequestration

Gas is the transition fuel – it is the

default power gen source in the

OECD and the development fuel

for the non-OECD

LNG markets are emerging in SE

Asia, the Middle East, Latin

America and Europe

Established LNG producers will

struggle to meet future demand

New LNG plants face problems –

some may never happen

Spot prices strong; and contracts

just below oil parity

“Long-term glut” “Too much demand”


What Hasn’t Changed Since 2008



Global Natural Gas Demand

OECD

Non-OECD

90

100

110

120

130

140

150

160

1992 1994 1996 1998 2000 2002 2004 2006 2008

bcf/d

Center of Gas Demand Shifting to Non-OECD



Natural Gas Still a Fragmented Market

Oil: Global, macro drives price Gas: Local, micro drives price

Average Realized Oil Price

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007 2008 2009

$/b

XOM

COP

CVX

Shell

TOTAL

BP

Average Realized Gas Price

0

2

4

6

8

10

2002 2003 2004 2005 2006 2007 2008 2009

$/mcf

XOM

COP

CVX

Shell

TOTAL

BP



Gas is Cheap Relative to Oil

Gas Prices Relative to Oil

Korea

Japan

Germany

US

-8

-6

-4

-2

0

2

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

$/MMBtu

Gas premium to oil

Gas discount to oil



Upstream Captures Upside from Higher Prices

Gas Value Chain (1999)

Resource

(wellhead,

import)

Downstream

(sales

minus

resource)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Korea Japan US UK

Gas Value Chain (2008)

Resource

(wellhead,

import)

Downstream

(sales

minus

resource)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Korea Japan US UK


Too Much Gas vs. Too Little



Massive LNG Expansions Planned

According to company plans, global liquefaction capacity will grow from 262

mmtpa in 2010 to over 550 mmtpa in 2020.

Global Liquefaction Capacity Forecast Based

on Announced Start Dates

Atlantic-

Mediterranean

Middle East

Pacific

0

100

200

300

400

500

6001

99

0

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

20

26

20

28

20

30

mmtpa



What Risks Do New LNG Projects Face?PFC Energy’s global risk survey shows very few low risk projects

Number of LNG Trains and Their Risk Score

11

65

24

33

54

43

23

35

5

103

48

84

66

32

35

40

19

19

4

5

10

19

32

40

55

64

94

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Market

Environmental Regulation

Project Economics

Domestic Gas Needs

Politics & Geopolitics

Partner Priorities

Ability to Execute

Feedstock Availability

OverallLow

Medium

High



Timeline for New LNG ProjectsWhat does PFC Energy think about LNG projects under FEED?

Capacity Prior to 2015 2016 2017 2018 2019 2020 2021+ N/A

mmtpa 2009 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Asia Pacific

Queensland Curtis T1 4.25 l u n

Queensland Curtis T2 4.25 l u n

Gladstone LNG T1 3.6 l u u n

Gladstone LNG T2 3.6 l u n

Australia Pacific LNG T1 4.5 u n

Australia Pacific LNG T2 4.5 u n

Fisherman's Landing T1-3 5.25 l

Wheatstone LNG T1 4.3 u n

Wheatstone LNG T2 4.3 u n

Ichthys LNG T1 4.2 u u n n

Ichthys LNG T2 4.2 u u n n

Prelude LNG (Floating) 3.6 u n

Pluto LNG T2 4.3 u n

Pluto LNG T3 4.3 u n

Atlantic-Mediterranean

EG LNG T2* 3.25 l n

Santos Basin (Floating)** 3.7 u n

Shtokman LNG 7.5 u u n n

Middle East

North Pars LNG T1-4 20 n

Persian LNG T1-2 16.2 l n

Pars LNG T1-2*** 20 l

Upstream FEED

Liquefaction FEED

Liquefaction & Upstream FEED

FEED Completed l

Target FID u

Announced Start n

PFC Energy Estimated Start

Indefinetly Delayed / Cancelled

2013 2014

Development Updates for FEED and FEED Completed Projects: 2H2010

2009 2010 2011 2012

Note: This chart only includes projects that are currently in the FEED stage of development or have completed FEED. Arrows denote

delays.

*EG LNG T2 partners have not announced an expected date for FID. Upstream FEED will be needed to move forward.

**Santos Basin LNG (Floating) partners have not announced a specific quarter in 2011 for FID.



Global Liquefaction Capacity ForecastPFC Energy expects large gap between announced and actual capacity

Global Liquefaction Capacity Forecast

0

100

200

300

400

500

6001990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

mmtpa

PacificMiddle EastAtlantic-MediterraneanAnnounced Start

PFC Energy expects a significant gap between announced and realized

liquefaction capacity as several projects are delayed and several others never

materialize.



LNG Contracts Signed from 2005 to 2009Very strong buying activity in 2009 with usual suspects and new players



New Projects Very Successful in Securing Offtake

Percent of Output Contracted for Projects Expected Online Between 2015 and 2020

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Contracted Uncontracted



Floating Regasification Supply and DemandMany countries, floating regasification is their entry into LNG

Forecasted Demand Outpaces Supply

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

mmtpa

Floating Regasification Supply Based on Current Orders

PFC Energy Forecasted Demand for Floating Regasification

Announced Demand for Floating Regasification



Recent LNG Contract PricesAsian LNG contracts show persistent link to oil – and at high prices

Buyer Project / Partner Signed Contract Details

Chubu Electric Qatargas 2 Jul-07 Oil Parity (slope of 0.17)

Kansai Electric & Tokyo Gas Pluto LNG (Woodside) Aug-07 Price floor of ~$5.52/MMBtu

PetroChina Browse LNG (Woodside) Sep-07 Just Below Oil Parity

CNOOC Qatargas 2 Jun-08 ~Oil Parity (slope of 0.16)

PetroChina Qatargas 4 (Shell) Nov-08Oil Parity

(slope of 0.163)

PetroChina Gorgon LNG (Shell) Nov-08 Oil Parity

Kansai Electric & Chubu Power Donggi-Senoro Jun-09 ~Oil Parity

PETRONAS Gladstone LNG (Santos / PETRONAS) Jun-09 Oil Parity

Petronet & PetroChina Gorgon LNG (ExxonMobil) Aug-09 ~Oil Parity

Tokyo Gas & Osaka Gas Gorgon LNG (Chevron) Sep-09 ~Oil Parity

Sinopec PNG LNG (ExxonMobil) Dec-09Discount to Parity (Slope between

0.1485 and 0.15)

Sui Southern Gas Company & 4Gas

GDF SUEZ Portfolio Feb-100.75 * (Higher of NBP or Henry Hub) +

0.0395 * Brent + 1.58

CNOOC Queensland Curtis LNG (BG) Mar-10Below Parity, S-Curve

(Slope between 0.138 and 0.153)



Gas Demand Growth in 2010Several countries have experienced sharp demand growth in 2010

Gas Demand in Select Markets 2010

Country Period vs. 2009 vs. 2008

China 1H 2010 19.7% 22.2%

India 4M 2010 41.9% 46.6%

Italy 5M 2010 10.8% -2.6%

Japan 1H 2010 5.0% -1.9%

Korea 1H 2010 34.0% 14.3%

Spain 1H 2010 1.7% -7.0%

Turkey 1Q 2010 17.9% -2.7%

United Kingdom 1H 2010 11.7% 7.5%

United States 4M 2010 3.3% -1.2%



How Long Does the LNG Glut Last?Even without US LNG demand, demand overtakes supply by 2014

Global LNG Supply vs Demand

Demand ex. US

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

mmtpa


Structural Changes?



US Supply and Demand BalancePFC Energy expects that US supply can meet demand easily to 2020

US Supply and Demand Balance

0

10

20

30

40

50

60

70

80

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

bcf/d

Federal GOM Conv On. / St. Off Alaska Shale

Tight Gas CBM Imports Total

As domestic production grows, imports will shrink as domestic supply can meet

forecasted demand.



Are Exports from North America Viable?Testing the economics of Kitimat LNG and Sabine Pass LNG

Indifference Curve Between LNG and Domestic Sales

0

20

40

60

80

100

120

140

2 4 6 8 10 12

Henry Hub ($/MMBtu)

Oil Price ($/b)

Sabine Pass LNG (PFC Energy Base Case)Sabine Pass LNG (Cheniere Announced CAPEX)Kitimat LNG

Selling LNG to

Asia more

economic

Selling to North

America more

economic

At $6/MMBtu, Kitimat LNG would need an oil price of $56/b to be indifferent

between selling LNG versus selling domestically, whereas Sabine Pass LNG

would need $65/b (assuming PFC Energy’s Base Case for CAPEX).



Risk Profile for Unconventional Gas: Asia

North

AmericaA B C D E F

Resource base

quality

Resource base

quantity

Property rights

clarity

Cooperative

government

Service sector

capacity

Competition that

spurs innovation

Willingness to

spend money

Favorable natural

gas prices

Easy to market

gas

Incentives for

unconventionals

Overall Risk

Profile



How Will Gas Pricing Change in the Future?

Region Hub Oil-linked RegulatedRegulated

Below Cost

North America

NW Europe

Continental Europe

OECD Asia

MENA

India

China

Other Asia

Latin America

Russia

Former Soviet Union

Africa

= Change Between 2010 and 2030



Conclusions

Long-term structural changes haven’t weakened.

– Non-OECD gas demand, attempt to bridge oil-gas gap, a fragmented market,

upstream capturing value.

There are very few “easy” projects – and many projects will never

be completed.

Very active buying interest from traditional and new players.

LNG is still available but the sellers expect a good price – and so

far have been getting it.

Unconventional gas has transformed North America; but exports

are risky and the replication of US success internationally will take

time.


Strategic Advisors in Global Energy

Main regional offices:

Asia

PFC Energy, Kuala Lumpur

Level 27, UBN Tower #21

10 Jalan P. Ramlee

50250 Kuala Lumpur, Malaysia

Tel (60 3) 2172-3400

Fax (60 3) 2072-3599

PFC Energy, China

79 Jianguo Road

China Central Place Tower II, 9/F,

Suite J

Chaoyang District

Beijing 100025, China

Tel (86 10) 5920-4448

Fax (86 10) 6530-5093

Europe

PFC Energy, France

19 rue du Général Foy

75008 Paris, France

Tel (33 1) 4770-2900

Fax (33 1) 4770-5905

PFC Energy International,

Lausanne

19, Boulevard de la Forêt

1009 Pully, Switzerland

Tel (41 21) 721-1440

Fax: (41 21) 721-1444

Middle East

PFC Energy, Bahrain

Bahrain Financial Harbor (BFH)

East Tower

5th Floor

P.O. Box 11118

Manama- Bahrain

Tel (973) 7705 8880

North America

PFC Energy, Washington D.C.

1300 Connecticut Avenue, N.W.

Suite 800

Washington, DC 20036, USA

Tel (1 202) 872-1199

Fax (1 202) 872-1219

PFC Energy, Houston

4545 Post Oak Place, Suite 312

Houston, Texas 77027-3110, USA

Tel (1 713) 622-4447

Fax (1 713) 622-4448

www.pfcenergy.com | [email protected] regional offices are shown in blue.

PFC Energy consultants are present in

the following locations:

Beijing

Brussels

Delhi

Ho Chi Minh City

Houston

Kuala Lumpur

Lausanne

London

Manama

Mumbai

New York

Paris

Vancouver

Washington, DC


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Documents

Gas in The Crisis Years - 一般財団法人 日本エネルギー経 …eneken.ieej.or.jp/data/3346.pdf · default power gen source in the ... Pluto LNG T2 4.3 ... Gas in The Crisis

Gas in The Crisis Years - 一般財団法人日本エネルギー経 …eneken.ieej.or.jp/data/3346.pdf · default power gen source in the ... Pluto LNG T2 4.3 ... Gas in The Crisis