LNG in Atlantic Basin - European University Institute · 1 LNG in the Atlantic Basin Third Annual Conference on the Geopolitics of Energy European University Institute in cooperation

1

LNG in the Atlantic BasinThird Annual Conference onthe Geopolitics of Energy

European University Institute in cooperation with Aspen Institute ItaliaFlorence, July 9,2004

James Ball,President & Chief Mentor

Gas Strategies Consulting LtdRodwell House 100 Middlesex Street London E1 7HD

Tel: +44 (0)20 7650 1440 Fax: +44 (0)20 7650 1441 E-mail: [email protected] http://www.gas-strategies.com

2© Gas Strategies Consulting Ltd

YPF MaxusMarket Review SK301 gas

ALNG Train IV,Independent Market Advisors

World BankReview of Latvian regulatory framework and the Gas Comparative Fuel Economics

Market review for Investors, LendersGuangdong-Dapeng LNG

Commercial Advice across the Gas Chain…

ABN-AmroUK Storage Review


Gas Strategies Around the Globe

SakhalinIndependent advisers to lenders – LNG Market Review

Gas Exporters Counsel ForumDevelopment of a gas and LNG contracts database for use by member countries (sponsored by Iran)

World Bank BoliviaLNG Chain Model

Energy AfricaKudu LNG Commercial Support

Egypt LNGLenders, contracts and pricing due diligence

Atlantic LNGContracts & Price Review

QatarIndependent advisers to lenders, QGII, RasGas

Part of the CRISIL Group of companies

Atlantic LNGContracts & Price Review

Geopolitics LNG in Atlantic study, SRI/Rice Baker Institute

Affiliated to the EconoMatters training, information and forum companies:


Presenter

James BallJames Ball is an internationally respected commentator,

analyst and advisor on natural gas policy and strategy. President and Chief Mentor of Gas Strategies and its EconoMatters group affiliates, James has advised supply projects in all major producing areas and market players in the three main LNG markets and worked on all market due diligence assignments for lenders. James has a wide knowledge and understanding of the international gas business, with particular interest in corporate gas strategies, emerging and liberalising gas markets, power market strategies for gas, and international LNG markets.

[email protected]


LNG in the Atlantic basin

Will enough LNG be developed to meet the Atlantic Basin needs?Will the US LNG market really soar as predicted?Is this a threat to European supply?If not, what are the concerns?


Atlantic Basin LNG in a global and time context

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Europe US Asia Pacific

LNG as niche

Decline of US

Pacific takes hold

ME supply emerges

Return of the Atlantic

Global sales


Demand evolution Begat New Models of LNG Business

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

mill

ion

tonn

es

Atlantic Basin Capacity Asia Pacific Capacity Middle East Capacity

Atlantic Basin Exports Asia Pacific Exports Middle East Exports

Middle East emerges

Asian rise

Atlantic re-emerges

US promise


Snapshot...The US promise is both large and marginal …

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1000.00

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

Bcm

LNGAlaskaCanadaLower 48

Globally large

Marginal to North American supply

Source: EIA


Possible US Terminal capacity development

Terminal Capacity (mtpa)

18

40

79

18

62

100

2004 2010 2020

Low Case High Case

2010Expansions & E.BPossibly 1 new Gulf & West coast

20202010 high case and 2 new A/G Possibly additional expansions & 1-2 new

Source: Gas Strategies


European Gas Supply & Demand – a view

Source: GasStrategies

0

100

200

300

400

500

600

2000 2005 2010 2015 2020

mtp

a

EGTA - Indigenous supplies LNG pipeline Demand - EGTA

EGTA – European Gas Trading area


Possible Terminal capacity in Europe


Under constructionExisting

Planned

Terminals

Cartagena

Barcelona

Fos sur Mer

La Spezia

Revithoussa

Marmara Ereglisi

Zeebrugge

ValenciaHuelva

Sines

El Ferrol

Bilbao

Le Verdon

Montoir de Bretagne

Isle of GrainMilford Haven

Taranto

Brindisi

Rovigo

Terminal Capacity (mtpa)

48

8095

48

105115

0

20

40

60

80

100

120

2004 2010 2020

Low Case High Case

2010Existing + LikelyPossibly +Under Development

20202010 mid casePossibly 2010 high+ 2 new


LNG supply available to the Atlantic Basin

Existing plantsUnder constructionPlanned

LNG supply 2010 – 122 mtpa

20 29

37

25

4

2439

42

70

4

LNG supply 2020 – 180 mtpaSource: Gas Strategies


Will price drive LNG to US?

0

200000

400000

600000

800000

1000000

1999 2000 2001 2002 2003

cubi

c m

etre

s LN

G

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

$/M

MB

tu

USA Spain HH-Spain Differential



US price promise; too good to be true?

Real 2004 ($/MMBtu)

2

3

4

5

6

7

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Gas Strategies EIA

Henry Hub

Europe

Source: Gas Strategies, BSA, EIA


Let us consider some scenarios with:

Potential LNG projects / expansions inCaribbeanN AfricaW AfricaM.E

Flexible destination clausesShipping capacity not a constraintTrade follows Henry Hub – Spain price differentials


All cargoes could divert to US even at differentials < 1 $/ MMBtu

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

2000

250020

01

2002

2003

Mill

ion

Cu.

m

-4

-3

-2

-1

0

1

2

3

4

N Africa W Africa Carribean ME HH-Spain

500

1000

1500

2000

2500

Spare supplyswitches to Europe

Spare supplyswitches to US

US

EU


0.00

1.00

2.00

3.00

0 100 200 300 400 500 600

BCM

$/M

MBt

u PipelineLNG

Even if LNG were diverted… would have marginal impact on European prices


Europe – 2004

LNG terminal

Russia

Netherlands

Norway

Algeria

LNG

UK


Likely LNG Scenario 2010 (mtpa)

LikelyLNG

SupplyFor

Atlantic BasinMkts

122

Terminal Capacity

40-50

EuropeTerminal Capacity

70-80

5065

Europe likely to be Oversupplied up to 2010

Terminal capacity likely to bea constraint in the US



Balanced LNG Scenario 2020 (mtpa)

LikelyLNG

SupplyFor

Atlantic BasinMkts

180

NATerminal Capacity to match demand

EuropeTerminal Capacity95-115

80

100



LNG Scenarios 2020 – High US demand (mtpa)

LikelyLNG

Supply

180

N.ATerminal Capacity to match demand


10080

Europe balances its deficit with pipeline supply



LikelyLNG

Supply

180

NAUnder

UtilisedTerminal capacity


50

115

Surplus LNG ... looks for new markets?Pressure on European prices?

LNG Scenarios 2020 (mtpa) – US intake constrained; public panic



LNG Scenarios 2020 – ME Supply constraint

LikelyLNG

SupplyFor

Atlantic BasinMkts

140

LikelyLNG

SupplyFor

Atlantic BasinMkts

EuropeUnder

utilised Terminal capacity

100

70

Europe has a massive potential of Pipeline supply stack at

reasonable cost

New Med / Atlantic supply needed, but …Deficit 30



Europe – 2020

4.81.85

LNG terminalRussiaNetherlandsNorwayAlgeria

Trans-Sahara

UKIranLibya

New or expanded route

LNG

From Libya

From Yamal

Nigeria Trans-Sahara

From

Kazakhstan

From Iran

From Turkmenistan

From Azerbaijan


Conclusions

Enough LNG projects being developed to meet even the US high demandEurope supply stack shows massive pipeline potential at reasonable costOversupply in Europe to 2010 – need to shift supplyHigher US prices an incentive to move flexible LNG supplies to the US; but not all EU contracted LNGTerminal capacity in the US may be a constraint to increased LNG demand and balancingEurope & LNG suppliers perhaps should be more concerned about US closure of capacity orME supply constraints may propel more Med / Atlantic supply by 2020Diversity of supply remains a key security need


[email protected]

Expertise, Insight and Perspective to deliver results


Flexible Atlantic trade has emerged but the Pacific* is much larger than the Atlantic

For my paper on LNG in the Pacific, please e-mail me asking for LNG-14 paper

[email protected]

Documents

LNG in Atlantic Basin - European University Institute · 1 LNG in the Atlantic Basin Third Annual Conference on the Geopolitics of Energy European University Institute in cooperation