Israel Natural Gas Demand Forecast 2014-2040

  • View
    54

  • Download
    0

Embed Size (px)

DESCRIPTION

Israel Natural Gas Demand Forecast for Delek's Tamar international bond offering in April 2014. Chen Herzog was the market consultant for Delek / Avner $2 billion international bond offering.

Text of Israel Natural Gas Demand Forecast 2014-2040

  • Israel Natural Gas Demand Forecast 2014-2040

    January 26, 2014

  • Legal Notice

    This report is provided for information purposes only, and does not constitute any recommendation or advice for any purpose .

    This report relies on publicly available information and other sources of information, including information provided by Noble Energy Inc, Delek Drilling LP (Delek Drilling), Avner Oil Exploration LP (Avner Oil, and together with Delek Drilling and each of their respective affiliates, the Delek Parties) and/or Isramco and/or Dor (collectively, the Project Co-Sponsors), and which Economic Models Ltd. believes is reliable, without any independent verification of said reliability, unless specifically noted otherwise. The information provided in this report does not purport to include all elements that a prospective investor may desire and thus does not replace the need for a full analysis of all the facts and details appearing herein .

    With regard to any use or reliance on this document by any party, Economic Models Ltd., nor any persons acting on our behalf: (a) makes any warranty, expressed or implied, with respect to the use of any information or methods disclosed in this report; or (b) assumes any liability with respect to any information or methods disclosed in this report, except to the extent resulting from any fraud or willful misconduct of Economic Models Ltd. or any persons acting on its behalf .

    Any recipient of this document, by acceptance or use of this document, releases Economic Model Ltd. and anyone acting on its behalf from any and all liability for damage and/or loss that may be caused by use of this report, if any, and Economic Models Ltd. similarly disclaim any and all guarantee of, or liability for, the reliability of the information contained herein, except in all cases, to the extent resulting from any fraud or willful misconduct of Economic Models Ltd. or any persons acting on its behalf.

    In no event will Economic Models Ltds directors, officers or employees be liable to the recipients hereof for any liability, damages, expenses and losses of any nature caused by or resulting from the services of Economic Modesl Ltd. or the report. The Delek Parties have indemnified Economic Models Ltd. for certain claims regarding this report.

    The economic forecast herein represents our understanding only and includes our forecasts of the Israeli economy and electricity and gas markets therein. Different methods of estimating and different assumptions are liable to lead to different results. The information contained herein is subject to change and may be rendered irrelevant at any time .

    Capital Market Models Ltd., an investment management company under the control of the shareholders of Economic Models Ltd., is a portfolio manager and as such may hold, or currently holds, or may purchase, publicly traded securities issued by the Project Co-Sponsors and/or parent companies for various clients and/or mutual funds managed by it.

    Prepared by Dr. Yacov Sheinin and Chen Herzog

    Chen

    Chen

  • Table of Contents

    1 METHODOLOGY 6 2 EXECUTIVE SUMMARY 12

    2.1 GAS DEMAND FORECAST SUMMARY 13 2.2 NATURAL GAS DEMAND COMPETITIVE ENVIRONMENT 22 2.3 DEMAND FORECAST BY SECTOR 26

    3 ELECTRICITY DEMAND FORECAST 43 3.1 INTRODUCTION 44 3.2 INTERNATIONAL COMPARISON 48 3.3 ELECTRICITY DEMAND FOR DESALINATION 58 3.4 DEMAND FOR ELECTRICITY IN THE PALESTINIAN ECONOMY 60 3.5 DEMAND SENSITIVITY ANALYSIS 61

    4 ELECTRICITY SUPPLY FORECAST 64 4.1 INTRODUCTION 65 4.2 COAL TO GAS CONVERSION 66 4.3 PROJECT D 69 4.4 ELECTRICITY SUPPLY BY IPPS 70 4.5 ELECTRICITY SUPPLY BY COGENERATION 71 4.6 RENEWABLE ENERGY SUPPLY 72 4.7 FUTURE NUCLEAR ENERGY 75

    5 ISRAEL NATURAL GAS DEMAND FOR ELECTRICITY FORECAST 77 5.1 INTRODUCTION 78 5.2 THE DEMAND FOR NATURAL GAS 80 5.3 DEMAND FOR GAS FOR COGENERATION 83

    6 GAS DEMAND FOR CHEMICALS AND TRANSPORTATION 85 6.1 DEMAND FOR GAS FOR TRANSPORTATION 86 6.2 DEMAND FOR GAS FOR CHEMICAL INDUSTRY 89 6.3 GLOBAL DEMAND FOR AMMONIA 92 6.4 THE MARKET FOR AMMONIA IN ISRAEL 93 6.5 POTENTIAL PRODUCTION OF AMMONIA IN ISRAEL 94 6.6 THE GLOBAL METHANOL MARKET 96 6.7 METHANOL AS A TRANSPORTATION FUEL 98 6.8 THE POTENTIAL FOR METHANOL IN ISRAEL 99 6.9 PRODUCTION OF METHANOL-BASED OLEFINS (MTO) 101 6.10 GAS TO LIQUIDS (GTL) 102

    7 GAS DEMAND FOR EXPORT 104 7.1 JORDANIAN NATURAL GAS DEMAND 105 7.2 ISRAEL'S LNG EXPORT ALTERNATIVES 109 7.3 LNG EXPORT THROUGH EGYPT'S EXISTING PROJECTS 112

    8 COMPETITIVE ENVIRONMENT 115 8.1 ISRAEL GAS RESERVES 116 8.2 GAS SUPPLY AND DEMAND 118

    9. FORECAST TABLES 122

  • 5

    Abbreviations used throughout this document: IEC Israel Electric Corp.

    IPP Independent Power Producers

    LDC Low pressure gas distribution companies (distribution to small

    commercial and industrial gas customers)

    Cogen Cogeneration

    Desal Desalination

    PUA Public Utility Authority

    FO Fuel Oil

  • 1 Methodology

  • 1. Methodology

    7

    Economic Models is a leading Israel macroeconomic research and economic consulting firm. It is best known for its exclusive macroeconomic model and its

    forecasts of fundamental economic indicators such as: GDP, employment,

    foreign trade, investment and inflation.

    The firm develops and maintains comprehensive models for various Israeli

    industries, and provides detailed demand forecasts such as: energy, electricity,

    communication services, cargo shipping, housing, and cement.

    Projects include:

    1. Over 20 years of providing long-term electricity demand model.

    2. Long-term demand for fuels.

    3. Economic analysis of IPP projects.

    4. Analysis of desalination projects, and demand for desalination.

    This analysis is based on Economic Models' long-term macroeconomic model of the Israeli economy. In preparing this analysis we have incorporated only

    official data and plans which were publicly published by IEC, the PUA and the

    Ministry of Energy and Water Resources and the Central Bureau of Statistics

    (CBS).

  • 1. Methodology

    8

    Our detailed macro-economic forecast assumption is presented in a separate

    presentation document. The following tables summarized the main

    characteristics of our forecast.

    Macro-Economic Forecast Summary

    2013 2015 2020 2030 2040 CAGR 2013-40

    Gross domestic product (2012 NIS bills.) 1,026 1,074 1,300 1,906 2,782 3.8%

    GDP per capita (2012 kNIS) 127.3 128.7 143.2 180.5 229.4 2.2%

    Population (thousands) 8,056 8,348 9,076 10,560 12,125 1.5%

    Households (thousands) 2,339 2,428 2,672 3,231 3,881 1.9%

    Participation rate 63% 63% 63% 64% 64% 0.1%

    Civilian labor force (thousands)

    3,654 3,761 4,080 4,901 5,758 1.7%

    Average annual growth rate Cumulative 2013-2015

    2016-2020

    2021-2025

    2026-2030

    2031-2035

    2036-2040

    2013-2040

    Gross domestic product

    2.3% 3.9% 3.9% 3.9% 3.8% 3.9% 171.2%

    Government consumption**

    2.9% 3.4% 3.5% 3.9% 3.8% 3.8% 161.0%

    Private consumption

    3.0% 3.9% 4.0% 4.1% 4.0% 4.0% 181.0%

    Fixed investment 3.4% 6.1% 3.6% 3.5% 3.3% 3.2% 180.4% GDP per capita 0.5% 2.2% 2.3% 2.4% 2.4% 2.4% 80.2%

  • 1. Methodology

    9

    The charts below illustrate our methodology. Our demand model is based on

    the bottom-up approach, including several main demand components:

    a) Residential demand for electricity (private consumption), based on

    demand models for main appliances, factoring penetration rates, usage

    intensity and energy efficiency.

    b) Demand by the government sectors, commerce and services, based on

    our Israel macro-economic model.

    c) Demand by the industry, based on our macro-economic model, factoring

    in the relative energy intensity of various industries.

    d) Demand for desalination and water pumping based on our

    macroeconomic forecast and demand for water forecast

    e) Palestinian demand currently included within Israel demand. We

    assume that the Palestinians will shift to self-generation of electricity in

    10 years (assuming normalization of the defense situation).

    Our electricity demand model is based on a bottom-up approach, which

    includes the effect of energy efficiency improvement, along with the effect of

    increased penetration rates and usage of household appliance. The results

    indicate convergence to demand levels in regions with comparable weather

    such as the US "Sun Belt" States (see detail in chapter 3).

    For natural gas demand estimate purpose, in this study we see the electricity

    generation sector (IEC and IPP's) as a single demand source. Assuming similar

    generation technologies, the demand for gas is not sensitive to the potential

    market share of new entrants to the electricity generation sector (see chapter 4

    below).

    The explicit assumption is that all the increase in Israel's electricity supply

    throughout 2040 will be generated by natural gas (except from renewable

  • 1. Methodology

    10

    energies that may reach 10% of Israel's electricity supply, and nuclear power

    stations that could be built in 2031 and beyond).

    The main assumptions are outlined in the corresponding chapters through our

    report.

    Electricity Demand Model Methodology

  • 1. Methodology

    11

    Natural Gas Demand Model Methodology

  • 2 Executive Summary

  • 2 Executive Summary

    13