global gas/north american lng exports, and … -_ juden - final.pdf · mckinsey & company | 0...
TRANSCRIPT
McKinsey & Company | 0
Global Gas/North American LNG
Exports, and Gas/NGL/Crude
Flows and Consequences
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Houston Texas – February 19, 2015
© McKinsey & Company
Mike Juden, McKinsey & Company, Inc., Houston
McKinsey & Company | 1
A perspective on key structural trends in North American LNG, natural gas,
NGLs and crude markets – within a global context
B
D
Supply/demand: Gas production to 2020 is expected to
be driven by Appalachian gas; LTO is expected to
continue to grow even with lower oil prices
C
Natural Gas: Primarily, regional, incremental, gas
infrastructure is needed; with Marcellus moving quickly
to exports via reversals, but new build needed by ~2019
F Crude oil: Crude oil transportation needs continue, but
bottlenecks have recently improved with expansions and
new builds, and differentials have narrowed
E
Global gas/NA LNG exports: New supply coupled with a
potential demand slowdown, especially in China,
potentially moves the LNG market from balanced to
loosening from 2018 to 2021/2022; Tighter market
expected post 2022 as projects have difficulty “going
FID,” with ~7-10 years needed for new supply to come
on-line; North American FID’ed projects advantaged
NGLs: US ethane supply may change greatly, with lower
crude prices – potentially putting projects at risk
A Global oil: This time, the oil price shock is different;
$100/bbl is structurally difficult to support; potentially
dramatically different scenarios, moving forward
McKinsey & Company | 2
Different to other price collapse situations since 1990, there is no
supply or demand shock behind the current price collapse
Brent crude quarterly prices
USD per barrel
SOURCE: U.S. Energy Information Agency
Global finance
collapse
9-11
attacks Asian
financial
crisis
0
10
20
30
40
50
60
70
80
90
100
110
120
20
14
20
13
20
12
2011
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
-63%
+103%
-53% -37%
Iraq
invasion
of
Kuwait
▪ Prior price
changes
were led by a
supply or
demand
shock
▪ That is not
the case in
the current
situation
GLOBAL OIL
A
McKinsey & Company | 3
At $100 oil, the industry faced a difficult situation in which supply
growth was structurally exceeding demand growth
SOURCE: Bloomberg, Platts, Energy Insights
Global liquids supply and demand balance1 at USD 100/bbl
Estimated in September 2014
Spare
capacity
Million bpd
Supply &
demand
Million bpd
1.8
1.2
0
1
2
3
4
5
6
7
8
9110
105
100
95
0
2022 21 20 19 18 17 16 15 14 2013
Supply Demand Spare Capacity
CAGR
Percent
GLOBAL OIL
A
McKinsey & Company | 4
Based on this, we see three possible scenarios, moving forward
Leading indicators of scenario
Several drivers could occur to take
1.5Mbpd out of market
Supply
▪ OPEC members agree to jointly
curtail production
▪ Venezuela/ Russia/ Brazil economic
turmoil drives >0.5 Mill bpd out
▪ Mature assets globally (N Sea, GoM
Shelf) dramatically cut production
▪ LTO cuts of 250-300 rigs remove
>0.3Mbpd of potential 2015 growth
Leading indicators of scenario
Continued supply growth, lack of
OPEC action and tepid demand
Supply
▪ Oil prices remain in ~$50/bbl range
for much of 2015
▪ OPEC production cut only after
several members on default brink
▪ Longer downturn cause delays to
mega projects (e.g., Deepwater)
▪ Most Tier 2/3 LTO cut activity (100-
200 rigs); growth down 0.1-0.2Mbpd
Leading indicators of scenario
Non-OPEC supply adjusts to a lower
price; all continues to protect share
Supply
▪ Oil prices remain in ~$50-60/bbl
range for much of 2015
▪ OPEC members continue to
protect market share (e.g., Saudi
increases production levels if
prices trend up)
▪ Non-OPEC supply adjusts costs
down to be economic at $50-60/bbl
V-Shaped Recovery U Shaped Recovery No Recovery
Demand
▪ Low oil prices drive demand and
large SPR purchases, adding 0.5
Mill bpd to expected 2015 demand
Demand
▪ Global GDP and oil demand remain
tepid – (slow Chinese growth, Euro
demand remains low, etc.)
Demand
▪ Global GDP and oil demand slow
down or decline further (Greece
exits Eurozone; US slows down)
Cyclical Structural
GLOBAL OIL
A
SOURCE: McKinsey & Company, Inc.
McKinsey & Company | 5
Global gas/LNG summary – and North American LNG export issues CRUDE OIL TRANSPORTATION NEEDS
SOURCE: Energy Insights, a McKinsey Solution; McKinsey experts; Industry sources
B
Global gas/
LNG demand
▪ High natural demand growth in Asia, with modest ~3% growth in North
America and flat demand in Europe
▪ Highest LNG growth markets are expected to be China and Southeast Asia,
although expected demand growth is slowing in China
▪ Tight LNG market, until recently with a mild, prior winter in Europe and Asia
LNG supply ▪ Australian and US LNG volumes coming on-line over the next several
years, coupled with a slower growth rate of Chinese demand is expected to
move the long-term LNG market from a balanced to a potentially loosening
market from 2018 through 2021/2022
▪ A dramatically tighter LNG supply market is expected post 2022 as project
are have trouble “going FID1” – and new supply is delayed, with traditional
LNG pricing mechanisms unable to support needed, marginal projects
▪ Current, approved US projects are proceeding with some signs of
accelerated progress; most US brownfield projects are still economic
North
American
issues
▪ Canadian projects have had difficulty “going FID” with contract pricing
pressures, environmentalist opposition, and “green-field” cost issues
▪ New pipeline infrastructure to the Gulf Coast, beyond pipeline reversal, will
be needed at about the time LNG projects come online; approved US
projects – both FOB and tolling arrangements – appear unlikely to support
long-distance pipeline construction with long-term Firm contracts
▪ Potential, regional bottlenecks appear likely as project are fully operational
Note: “FID” – notes “Final Investment Decision” - To “go FID” – in to make the final investment decision for proceed
McKinsey & Company | 6
Asian LNG price at $75/bbl oil price $/mmbtu
With a sustained oil price of $75/bbl, for example, Asian LNG prices
may drop to $10-11/mmbtu by 2020 – lower sustain prices a potential. . .
SOURCE: Worldbank, McKinsey
0
10
20
15-16
10-11
Brent
price
Asian LNG price as function of the oil price1 $/mmbtu
1 Asian LNG price = 1.25 + brent price * 0.127, with a R2 of 0.75.
0
4
8
12
16
20
2020201520102005
10-11
Asian LNG price forecastJapan LNG
$75/bbl $110/bbl
B
GLOBAL GAS/NA LNG EXPORTS
Potentially, significantly
lower pricing with lower,
sustained crude prices
McKinsey & Company | 7 SOURCE: Energy Insights
. . . making it more difficult to support needed LNG projects,
especially beyond 2022 B
GLOBAL GAS/NA LNG EXPORTS
500
10
3
5
7
9
200150100500
1
8
13
6
4
2
0
18
16
11
450400350300250
14
12
17
15
750700650600550
Volumesbcma
AustraliaAsia AfricaMiddle EastNorth AmericaSouth AmericaRussiaOther
EXCLUDING PROJECTS UNDER CONSTRUCTION DELIVERY TO ASIA
Project economics
Break even delivered LNG prices for future LNG supply
US$/mmbtu
$10-11/mmbtu
$15-17/mmbtu
▪ Near/mid-term new supply, coupled with slower demand growth – potentially moves
market from a balanced to a potentially loosening market from 2018 through 2021/2022
▪ A dramatically tighter LNG supply market expected post 2022 as projects are “unable”
to “go FID,” with around 7-10 years needed for incremental supply to come on-line
McKinsey & Company | 8 SOURCE: Energy Insights
700
600
500
400
300
200
100
0
2013 2015 203020252020
Current Capacity
Post FID
Less than $12
$12-13
Greater than $13 Reference case demand
Impasse
on project
FIDs
Project
delivery
constraints
Cost
escalation
Even with previous high LNG prices in Asia the LNG market has
been expected to be tight, beyond 2022, given market dynamics B
GLOBAL GAS/NA LNG EXPORTS
Mpta
▪ A large number of Post FID projects coming on line to 2021/22
▪ Downward pressure on demand – balance to potentially loosening Dramatically tighter
market post ~2022
McKinsey & Company | 9
West Canada
Montney
Horn River
Powder River
Wind River Gas
Green River Gas
Hilliard Baxter
Mancos
Uinta Piceance
Raton
San Juan
Anadarko
Permian
Barnett
Eagle Ford
Tex La
Haynesville
East Texas
Antrim
New Albany
Marcellus
Utica
Black warrior
Floyd Neal
Miss Alabama
Fayetteville
Arkoma Tight gas
Woodford
Granite Wash
Most incremental gas production is expected out of Appalachia MODELED
Cumulative incremental production – “sufficient
infrastructure case” – Bcfd growth vs. 2014
C
NATURAL GAS SUPPLY/DEMAND; CRUDE SUPPLY
Appalachia Area
0
2
4
6
8
10
12
14
16
18
20
22
2020 2019 2018 2017 2016 2015
-2
0
2
2020 2019 2018 2017 2016 2015
Midcon Area
Southern Supply
-4
-2
0
2
2019 2015 2018 2016 2017 2020
0
0.5
1.0
2020 2019 2018 2017 2016 2015
WCSB
0
1
2019 2020 2018 2017 2016 2015
Bakken
Rockies Area
-4
-2
0
2017 2016 2015 2020 2019 2018
SOURCE: Energy Insights
McKinsey & Company | 10
Boom in North America oil could bring ~5-7 Bcfd of
incremental associated gas production by 2020 vs. 2014
US associated gas production
Bcfd
NATURAL GAS SUPPLY/DEMAND; CRUDE SUPPLY
MODELED
SOURCE: McKinsey Energy Insights North American Supply Model; EIA Annual Energy Outlook 2014
US oil production under different scenarios
Million bpd
0123456789
1011121314
2020 07 2005 13 09 11 14 16 18
Lower 48 conventional
GOM
Alaska
8.1
7.1
6.3
5.5
2020 LTO production x 16.3
9.6
5.5
2020
production
LTO at
5.5 Mill
bpd
2014
0.6 0.4
LTO at
7.1 Mill
bpd
0.3
LTO at
6.3 Mill
bpd
LTO at
8.1 Mill
bpd
C
McKinsey & Company | 11
To 2020 our reference case outlook for NA demand is for modest growth,
increasing from 90 Bcfd (2014) to 109 Bcfd (2020), driven by LNG exports
SOURCE: EIA April 2013 with team adjustments for LNG exports, transportation, power and industrial demand
US natural gas demand outlook – EIA reference case
Bcfd
0
10
20
30
40
50
60
70
80
90
100
110
90
2013
89
2012
87
2011
84
2010
80
Commercial
Industrial
Electric power
Transportation
Other
Exports to Mexico
Canada
LNG Exports
2020
109
2019
105
2018
101
2017
100
2016
98
2015
95
2014
Residential
2.5%
▪ Ave GDP growth at 2.6% / year Overall:
▪ EE improvement of 1% p.a.
▪ Population growth of 0.8% p.a from
2012-20
▪ EE improvement of 0.4% p.a.
▪ Offsetting sq. footage growth of 1.2% p.a.
till 2020
▪ Steel production to grow by 21 mil. tonnes
▪ Ammonia production to increase by 2 mil.
tonnes
▪ Methanol production to see an at least 10x
increase till 2020
▪ 52 GW of coal retirements by 2020
based on current age of plants + lifetime
assumption of 40 years
▪ 16.6% renewable market share by 2020
▪ Begins 2016, 0.6 Bcfd; 6.9 Bcfd by 2020
NATURAL GAS SUPPLY/DEMAND; CRUDE SUPPLY
▪ Lease & plant fuel, pipeline fuel
▪ 10% scenario of gas in fleet vehicles
C
McKinsey & Company | 12
-2
02
4
4
2
0
-2
4
2
0
1
0
2
0
2
1
Marcellus gas production is displacing imports to the Northeast –
flows on pipelines to Northeastern markets are starting to reverse
SOURCE: Ventyx Energy Velocity; McKinsey
TGP (Tenn) – OH/PA Border
TETCO - Berne compressor
Transco – Station 180
Columbia Gulf – Leach KY
TGT (Texas Gas) – Dillsboro compressor
-77%
-12%
-38%
52%
34%
16%
49%
16%
22%
-24%
Flows at key points (Bcfd flows and average Bcfd/year)
Bcfd Capacity utilization
Grand Island
Niagara Falls
Waddington
Calais
East Hereford
Champlain
Highgate Springs
Massena
2014
0.35
2010
1.39
2009
1.85
2013
0.46
2012
0.88
2011
1.20
NE US receipts from Canadian pipelines (Ave. Bcfd)
NATURAL GAS TRANSPORT
D
2
1
0
-1
Jul-
14
Jan-
14
Jul-
13
Jan-
13
Jul-
12
Jan-
12
Jul-
11
Jan-
11
Jul-
10
Jan-
10
REX (Rockies Express) – Lebanon to Chandlersville
21% -8% 38%
56%
73%
23%
1%
34%
McKinsey & Company | 13
0
0.5
1.0
1.5
2.0
2.5
3.0
Feb-
14
Aug-
14
Aug-
13
Feb-
13
Aug-
12
Feb-
12
Aug-
11
Feb-
11
Aug-
10
Increased Bakken
associated gas
volumes have begun
displacing Western
Canadian volumes . . .
. . . driving down
Bakken prices towards
Canadian price levels
Up to ~1.5 bcfd of
incremental Bakken
associate gas could
displace additional
Western Canadian
volumes . . .
. . . further pressuring
Western Canadian gas
prices; but recently
marginal Canadian
volumes have been in
demand to fill
Canadian storage
Capacity
12.0
2.0
0
-2.0
Empress
Watford City
AECO
Ventura
Cheyenne
Canada
Rockies Bakken
Canadian volumes
displacing Rockies
volumes from Bison
Associated gas
from LTO
displacing volumes
from Alberta
Receipts from Bakken are starting to displace Canadian volumes, and as
Bakken LTO grows, displacements could reach an additional 1.5 Bcfd
NATURAL GAS TRANSPORT
Basis differentials to HH
USD/MMBtu
SOURCE: Ventyx Energy Velocity; SNL; North Dakota Department of Mineral Resources, Oil and Gas Division;
team analysis
Northern Border Receipts Upstream of Ventura
Bcfd
W. Can. Storage fill
diverts AECO volumes
D
McKinsey & Company | 14
Proposed1 natural gas, interstate pipeline projects –
are now expanding beyond regional projects to reversals to the GoM
SOURCE: Ventyx Energy Velocity, EIA; Company websites and presentations; Trade press; team analysis
1 Includes projects under construction, approved, filed and proposed in all regions. Reversals included as expansions. Does not include any pipeline conversion projects
2 Laterals to storage, LNG, terminals, power plants, other pipelines, LDCs, etc 3 Where capacity ranges are given used largest
55
19
21
3
Expansion
Regional
Laterals2
Trunklines
Number of
projects
98
Proposed1 natural gas pipelines
Miles
6,357
542
3,033
966
1,816
69
8
19
Bcfd3
36
6
PRELIMINARY NATURAL GAS TRANSPORT
B
▪ Appalachian
regional focus
▪ Reversals to
the Gulf Coast
▪ ~50% y-o-y
increase in
projects
▪ ~70% y-o-y
increase in
project miles
AIM (Algonquin)
ANR East
Atlantic Coast (Dominion)
Atlantic Sunrise (Transco)
Constitution (Williams)
Leach Xpress (Columbia
Mountain Valley (EQT/NextEra)
Dakota Pipeline (MDU)
Eagle Ford NET Mexico
Nexus Gas (Spectra)
Northeast Energy Direct (TGP)
Pacific Connector (Northwest)
PennEast (TETCO)
Rover (Energy Transfer)
Sabal Trail / SE (Spectra/NextEra)
Washington Exp. (Northwest)
Proposed Natural Gas Pipeline Projects
McKinsey & Company | 15
Indicatively, export capacity expected to be full by ~2018 – requiring
new pipelines to the Gulf Coast (area of incremental demand)
Appalachia Area Production –
“sufficient infrastructure case”
0
2
4
6
8
10
12
14
16
18
20
22
2020 2019 2018 2017 2016 2015
Cumulative incremental production –
Bcfd growth vs. 2014
2.0
3.0
2.5
1.2
1.4
1.6
1.61.0
1.5 12.2
2.4
1.5
Transco Col-
umbia
Gulf
Net TETCO TGP Trunk-
line
TGT ANR NGPL Conver-
sions
-3.0
TGP to
TCPL
0.5
Adjust-
ments
for 80-
90%
capacity
~Pipelines full at
80% utilization
~Pipelines full at
90% utilization
Appalachia Area Pipeline Export Capacity
Potential pipeline export capacity out of Appalachia –
Bcfd
VERY PRELIMINARY
ESTIMATE
NATURAL GAS TRANSPORT
D
Out of region
exports – 2014
SOURCE: McKinsey Energy Insights North American Supply Model; Energy Insights, a McKinsey Solution; Conversions/
repurposed pipelines are estimates of pipelines out of service in ~2018 during conversion
Note: REX in upstream of export pipelines (e.g., Trunkline, ANR, NGPL) – and is not included is estimate; pipelines to Dawn are regional
McKinsey & Company | 16
U.S. (lower 48 states) ethane supply vs potential capacity to consume (CTC) ethane1
SOURCE: IHS; Goldman Sachs, ICIS; Hodson; literature search; McKinsey analysis
Existing capacity to consume
The outlooks for US ethane demand and supply are likely going
to greatly change – potentially putting projects at risk
Kbpd
ESTIMATE
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
16 15 14 13 2012 2025 24 23 22 21 20 19 18 17
2012 CTC ethane
Feedstock flexibility
Greenfield being built
Mariner East ethane export
Enterprise ethane export
Potential new greenfield
Expansion
Low end outlook
Middle case
High end outlook
Historical ethane supply
Estimated feed to crackers2
1 Based on crackers feeding ethane at design limits ("normal yields") and at 93% utilization
2 Ethane is forced into crackers despite lower yields or throughput rates due to its low price relative to alternative feeds. Ethane supplies not put into
crackers are generally left in the natural gas (i.e., rejected) or is removed and injected into drier gas streams
Ethane
consumption
at risk of
cancellation
▪ The second wave of new crackers and
some ethane export plans are at risk of
being implemented
▪ Crackers under constructions are likely
to be completed
▪ Will ethane supply remain in excess?
Forecast range
before crude oil
downturn
NGLs
E
McKinsey & Company | 17 SOURCE: Industry press; team analysis
Hardisty
Chicago
Wood River
- Patoka Cushing
Houston
Enbridge
Transcanada (Keystone)
Kinder Morgan (Express)
(Pegasus)
Sarnia
Oil Sands
Bakken
W Texas
Centurion
Edmonton
Burnaby/ Anacortes
Trans Mountain
GULF OCS
Major bottlenecks
– 2013
xxx Crude supply
sources
Pipeline bottlenecks between the Midwest and the Gulf Coast have
been improving with pipeline expansions and builds
CRUDE OIL TRANSPORTATION NEEDS
F
▪ 520 kbpd capacity
additions
▪ Rail marginal out of the
Bakken – with periodic
pipeline capacity limits
▪ Seaway reversal
and twin looping
▪ Cushing to Houston
bottleneck relieved
for now
McKinsey & Company | 18 SOURCE: Platts, McKinsey analysis
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
2010 2005 2014
Canadian Sweet
LLS
WTI
Bakken
Traditionally, all NA
light crudes were
at a premium to
Brent reflecting
import economics
Inter-regional
pipeline bottlenecks
led to deep
discounts for all
inland grades
despite very similar
qualities More-localized
bottlenecks led to
additional discounts for
Canadian light sweet
and Bakken
New pipeline
capacity and
tight USGC
market led to
narrower
discounts
As a result, North American inland crude differentials have
compressed
North American light sweet crude prices – differential to Brent
$/bbl
CRUDE OIL TRANSPORTATION NEEDS
F
McKinsey & Company | 19
Pipeline and Midstream Operations Roundtable guiding questions
2
1
Natural Gas: What is the expected impact of the
projected, dramatic increases in Marcellus and Utica
production on the regional and interstate pipeline
grids? Other basins (e.g., Permian/MidContinent)?
4 Crude oil: How to you see crude pipelines developing
vs. rail transport for crude? Operational issues?
3
LNG exports: Do you see flow or operational issues
associated with North American exports as export
facilities come on-line?
NGLs: Will there be sufficient NGL pipeline capacity in
the Marcellus to maintain pipeline quality gas for the
gas pipeline grid, or will drilling be restricted by lack of
liquids take-away capacity? Other basins (e.g., Eagle
Ford, Bakken, and Permian)? Operational issues?
5 Equipment: Do you see changes in near-term
equipment purchases now vs. this time last year (what
has changed or is expected to change and why)?
McKinsey & Company | 20
Global Gas/North American LNG
Exports, and Gas/NGL/Crude
Flows and Consequences
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Houston Texas – February 19, 2015
© McKinsey & Company
Mike Juden, McKinsey & Company, Inc., Houston
McKinsey & Company | 21
APPENDIX
McKinsey & Company | 22
Energy Insights maintains McKinsey proprietary tools
and insight in Oil & Gas
SOURCE: Energy Insights, a McKinsey Solution
Market
Analytics
▪ Analytical
services
▪ Market
Overviews –
reports &
subscriptions
Informs strategic decision making
and performance improvement
by delivering robust forecasting
and advanced market analytics
on global crude, refined product,
and natural gas markets
Diligence &
Business
Intelligence
(DBI)
▪ Commercial
due diligence
▪ Micro-market
analysis
▪ Bespoke
analysis
Enables fact-based decisions for
commercial due diligence,
strategic planning, and business
development through expert
professionals and proprietary
models
Bench-
marking
▪ Performance
benchmarking
Helps drive asset productivity
and performance by providing in-
depth quantitative benchmarks,
objective assessments of
comparative performance and
practices, and actionable insights
into major areas for improvement
A McKinsey Solution
▪ 45+ team of dedicated experts
across 4 major hubs: London,
Houston, Singapore, Delhi
▪ Proprietary methodologies,
insights, and data on global
markets and supply chain
▪ Suite of integrated models and
new online technologies
▪ 20 year track record and multiple
offerings in benchmarking
▪ Focused Diligence capability
▪ Linked to McKinsey’s global
network of energy expertise
McKinsey & Company | 23
Energy Insights has 3 major hubs
SOURCE: Team analysis
Houston
▪ Conventional and unconventional oil &
gas production market studies
▪ Unconventional and production cost
analysis (benchmarking)
▪ Export capacity and infrastructure
analysis (LNG)
▪ Oil product pricing analytics
▪ M&A opportunity identification, due
diligence
London
▪ Global gas market analytics
▪ Global downstream market analytics
▪ Upstream and OFSE1 market analytics
▪ Operational benchmarking
▪ Global energy demand market analytics
▪ Proprietary data (in development)
▪ Software development & IT
▪ Econometrics, and algorithmic
optimisation specialists
Singapore & Kuala Lumpur
▪ Asia gas market analysis
▪ Market due diligence
▪ Asia energy demand research
McKinsey & Company | 24
Market analytics: philosophy
▪ Analyse numerous sources
of available market data
▪ Collect and leverage significant
expertise and local knowledge
of McKinsey extended energy
practitioner group (200+ people)
▪ Use advanced analytics that
integrate available information
and help create future scenarios
▪ Integrate analytics across
geographies and commodities
▪ Quantitative assessment of the
impact of global trends on an
individual asset (e.g., impact of LTO
on feedstock for Asian refiner)
▪ Product price forecasts for the
different global hubs as a function
of global crude quality balances
and a market crude price
▪ Landed cost of different sources
of LNG by origin
▪ Infrastructure bottlenecks in
North America and impact on inland
crude or gas prices
▪ Impact of specific technological
breakthroughs on oil and gas
demand by region and sector
To deliver advanced insight
Combine large sets of insights
and information
SOURCE: Energy Insights, a McKinsey Solution
EXAMPLES
McKinsey & Company | 25 SOURCE: Energy Insights
Market Analytics approach includes a combination of five elements
performed in a distinctive way
Approach Description What is distinctive about “Market Analytics?”
A Bottom up
approach
▪ We build our models bottom up,
based on an understanding of what
drives demand and supply dynamics
rather than use statistical tools
▪ Not a mere extrapolation of latest trends
▪ Market outlook based on fundamentals
(SD balances, cost position and technology
trends)
B
Granular
understanding
across sectors
▪ We build our perspectives integrating
McKinsey’s industry knowledge from
other practices (e.g. automotive)
▪ We monitor trends before they
substantially impact the industry
▪ Unparalleled access to industry knowledge
across global geographies and industry
sectors
C Integrated
perspective
▪ Our market outlooks are consistent
across geographies and commodities
▪ Allows to assess cross market, cross
geography implications of trends
D Expert
contribution
▪ Our market outlooks are reviewed in
detail by our foremost senior experts
to ensure relevance and business
relevance
▪ McKinsey’s senior expert network is extended
in terms of industry expertise and
geographical reach
▪ Our market outlooks are insight and
implication focused and presented
in a top management format
▪ We can present our market outlooks
in dedicated client workshops
▪ McKinsey is a top-tier management consultant
in the world E
Top
management
delivery
McKinsey & Company | 26
Primary models and advanced analytics: integration delivers
detailed and advanced insights
LTO production
scenarios for
North America
by basin, 4
scenarios
Light tight oil
Capability is
focused on research
and database
creation
Capability is
focused on
advanced analytics
and “big data”
updates
Sector by
sector demand
forecasts for
regions, out to
2030
China energy demand
Linear
optimization of
the global
refining system
and petroleum
trade flows
Global LNG trade
North
America
Europe/
Mediterranean
Asia incl.
India
Russia
Arab Gulf
Sub-
Saharan
Africa
Latin
America
North AfricaEast
Asia1
Made by Energy Insights. Released May 2014
Rig fleet
utilization and
day-rate outlook
per rig type,
region and water
depth
Rig utilization and day-rates
Bottom up
forward looking
cost curve by
country and
resource type
Global oil cost curve
N. American oil
and gas
pipeline flows
& bottlenecks
N. America Midstream
Warren
Platteville
Gallup
Newell
SlaughterArtesia
KO
CH
Lake Charles
El Paso
Sunray Tulsa
McPherson
El Dorado
Cushing
Longview
El Dorado
Freeport
Three Rivers
Midland
WTG
Borger
Los Angeles
Bakersfield
Denver
CheyenneSalt Lake City
Billings
Great Falls
Cutbank
Kamloops
Edmonton
Hardisty
Kerrobert
Regina
Cromer
Mandan
Memphis
Robinson Catlettsburg
Lima
Toledo
Flanagan
Superior
Clearbrook
St. Paul
KE
YS
TO
NE
Canton
Detroit
Sarnia
Nanticoke
Montreal
Portland
Quebec City
Saint John
Halifax
Port Arthur/Beaumont
Come-by-chance
Minot
Colorado CityMESA Krotz springs
Westover
West Seneca
Gardendale
MULTIPLE
Steele City
Linden
Delaware City
Paulsboro
Trainer
Chicago
Philadelphia
Stockbridge
Tuscaloosa
Saraland
PascagoulaSt. James
Houma
Odessa
Helena
Crane
Holdrege
Tacoma
Anacortes
VancouverSumas
Wahsatch
Prince George
Taylor
Elk Basin
Rangely
Karnes
SE
AW
AY
Patoka
Ponca City
San Francisco
Big Spring
Sinclair
OK MAINLINE
Vicksburg
SE
AW
AY
Tyler
Cuero
EXXONMOBIL
Berthold
CasperGuernsey
Milk
River
KE
YS
TO
NE
Houston
Edgar
Plentywood
Outlook
McKenzie
Sundre
JayAmite
Lincoln
Duncan
Bretch
Pettus
Hooker
Laurel
Wichita
Falls
Wortham
PO
PLA
R
Baker
WynnewoodArdmore
Corsicana
Gaines
Corpus Christi
Coffeyville
Bottom up
breakeven
costs of all
proposed LNG
projects
LNG infrastructure build up LNG cost curves
Analytics of
LNG projects
around the
world
McKinsey & Company | 27
Input Model Output
McKinsey’s Global Gas Model schematic description
Global
Gas
model
Global trade
flows
Delivered
cost curve
Infrastructure
utilization
Global gas
outlook
Synthesis of
▪ Primary
research
▪ Expert
practitioners
▪ Global
perspectives
▪ External data
LNG liquefaction
LNG regasification
Gas demand
Gas Production
Gas Pipelines
Shipping cost
Pipeline transport
cost
New LNG projects
perspective
Production cost
Contracts
▪ Current Gas Model until 2030
but can be extended to 2040
SOURCE: Energy Insights, a McKinsey Solution
The global gas model incorporates the latest views on demand, supply
and infrastructure trends
McKinsey & Company | 28
Energy Insights Global Gas Model is composed of five separate gas
models
SOURCE: Energy Insights, a McKinsey solution
Global Gas & LNG analytics
Example offerings and
capabilities
Description
LNG
flow
model
LNG flow model for
main regions globally
▪ Forecasts main LNG flows globally
based on a combination of bottom-up
supply – demand outlooks, economics
and political considerations
Global
Gas
data-
base
Integrator of all other
gas & LNG models to
ensure consistency
▪ Integrates all domestic supply –
demand outlooks with views on pipe
and LNG infrastructure to ensure
global consistency across the different
input databases
ASEAN Gas and
LNG outlook by
country (part of
global demand
outlook)
Gas
Demand
model
Bottom-up fuel
demand model by
sector
▪ Forecasts fuel consumption globally
across up to 10 sectors and regions,
resulting in a gas demand outlook
which is consistent with overall
regional energy consumption
across fuel types
Global Gas supply
demand balances
by country
North
America
unconv
model
Unconventional gas
production model for
North America by
basin
▪ Forecasts basin-level unconventional
gas supply and production cost
LNG sourcing
strategy approach Global
LNG
model
LNG supply capacity
and economics by
plant
▪ Maintains a project-by-project view on
LNG supply globally including the
break even prices by future project
based on bottom up calculations
Generates a mix of
countries supply
portfolio and
resulting cost curve
Report on global
gas and LNG
market outlook
McKinsey & Company | 29
Our research and analytics allows us to publish a detailed report on the oil
& gas markets
SOURCE: Energy Insights
June
2014
Oct
2014
Feb
2015
McKinsey & Company | 30
Recent global gas publication and contacts
SOURCE: Energy Insights
• December 4, 2014 publication: “Another radical shift in the global gas
market? The implications of a sustained $75/bbl scenario”
• Link: http://www.mckinseyenergyinsights.com/media/63674/Another-radical-
shift-in-the-global-gas-market.pdf
• Questions concerning the Gas/Electric Partnership presentation:
• Questions concerning McKinsey Energy Insights:
[email protected] (Global Gas Manager)
[email protected] (VP Market Analytics)