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Prospects for unconventional natural gas supply in Asia

Roberto F. Aguilera

Perth, 16 February 2016

CRICOS Provider Code Curtin 00301J (WA) 02637B (NSW) www.business.curtin.edu.au

Curtin University

Background Expansion of natural gas share in primary energy mix,

especially Asia Gas demand is dominated by OECD, but growth in

Asia is fastest Global unconventional gas resources are abundant,

yet there are potential barriers Uncertainty clouds outlook for unconventional gas in

Asia Increased inter-regional; linkages among regional

markets?


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1

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1965 1975 1985 1995 2005 2015 2025

YEAR

Asia Pacific Primary Energy Consumption, Quads

Primary Energy Consumption Per Capita, million BTU

Asia Pacific Population, Billions

Asia Population and Consumption

Source: Aguilera et al (2014), Energy Policy


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Asia Energy Mix (Reference)

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1850 1870 1890 1910 1930 1950 1970 1990 2010 2030

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Solids - calculated

Gases - calculated

Liquids - calculated

Solids - measured

Gases - measured

Liquids - measured

Source: Aguilera and Ripple (2013), Applied Energy


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Conventional vs. Unconventional Gas and Oil

Source: National Energy Board of Canada

Source: American Petroleum Institute


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Source: US Energy Information Administration (2013)

Shale gas in Asia

Out of 6,634 TCF of technically recoverable shale gas resources in the world (outside US), Asia accounts for 1,403 TCF The majority, 1,115 TCF, is in China


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Resources:

Assessment commissioned by US EIA, estimates global shale gas resource of around 7299 TCF

Of the total, China accounts for 15%, Argentina 11%, Algeria 10%, US 9%, Canada 8%, Mexico 7%, Australia 6%, South Africa 5% and Russia 4%

Constraints:

Environmental impacts of fracking with inherent risk of releasing toxic chemicals into groundwater

Possible surface spills of chemicals; disposal of waste water; excessive water use; rising traffic volumes

Technical and commercial concerns involve high decline rates and future costs

Shale Gas Resources and Constraints

Source: US Energy Information Administration


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Key Considerations for Shale Development

1. Developed infrastructure 2. Ownership 3. Drillers 4. Risk capital 5. Supply chains 6. Regulation 7. Water requirements 8. Public acceptance


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Recommendations for Unconventional Gas Development

Some organizations have identified specific measures to reduce environmental impact and help assure the safety of unconventional gas production


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China: Well-suited for Shale Development?

Difficult physical access to some zones Fiscal and regulatory regime under development –

outcomes uncertain Market and infrastructure development lagging Difficult geology and water shortages

Source: based on Schlumberger Business Consulting


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Global Shale Gas Supply Curve

Source: based on Aguilera et al (2014)

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CF)

Shale Gas Resource (TCF)

95 basins assessed by US EIA (2013)= 7299 TCF

China average production cost estimate: ~ $10/MCF


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Natural gas market exhibited price divergence between different regions as unconventional gas supply increased; but then converged

Comparison of Natural Gas Prices

Source: IMF data 0

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Btu

US (Henry Hub spot) German border Japan LNG

UK (NBP spot) LNG Asia (FOB)


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Extent to which US and others starts exporting LNG

uncertain: exports may be hampered by unfavorable economics

How exports might impact Asian markets is still subject of debate, in which LNG transportation costs, gas and oil prices, and gas/LNG demand are key determinants

Effect of LNG on Regional Markets

13


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About 30% of total LNG trade in 2014 was classified as spot or short-term trade.

Spot and Short-term vs. Total LNG Trade since 2010

Source: GIIGNL (International Group of Liquefied Natural Gas Importers).


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Published late 2015

Why it rose stupendously over the past 40 years

Why it is likely to remain low in the coming decades

What it will mean for the world economy, politics and the environment

THANK YOU

[email protected]

Prospects for unconventional natural gas supply in Asia

Perth, 16 February 2016


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Estimates for LNG deliveries from the US Gulf Coast to markets in Europe and Asia.

Economics of LNG Transportation

Estimated US Gulf Coast LNG export costs

Source: Based on Oil & Gas Journal and Energy Studies Institute at National University of Singapore.

Delivered to Europe Asia USD / million BTU

US gas price 4.00 6.00 4.00 6.00Liquefaction charge 2.50 2.50 2.50 2.50Fuel surcharge 0.40 0.60 0.40 0.60Transport 1.50 1.50 3.75 3.75Delivered Cost 8.40 10.60 10.65 12.85


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Economics of LNG Transportation Illustrative cost build-up for North American LNG exports to Asia

Appears to be viable considering current gas price differentials in excess of $10 per MMBtu.

Source: Energy Studies Institute, National University of Singapore


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Natural gas market exhibited a trend towards price divergence between different regions as shale gas supply increased

Natural Gas Prices to 2040

Source The Institute for Energy Economics, Japan.

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Roberto F. Aguilera - Business School : Business School ... · PDF fileRoberto F. Aguilera . Perth, ... CRICOS Provider Code Curtin 00301J ... rising traffic volumes Technical and