the new global gas market dynamic...share of lng in global long -distance gas trade (iea) 2014 685...
TRANSCRIPT
The New Global Gas Market Dynamic
Emmanuel Grand, FTI-CL Energy
May 2017
Contents
2
Key uncertainties on gas demand I.
Drivers of global LNG prices II.
Conclusion III.
Key uncertainties on gas demand I.
The strength of environmental policies is the #1 uncertainty on gas demand
4
Gas demand growth
Strength of environmental policies
1
Coal Natural gas Renewables
The access to emerging countries demand is the #2 uncertainty on gas demand
5
Gas demand growth
Strength of environmental policies
2 Access to emerging countries demand
The relative price of gas vs. coal is the #3 uncertainty on gas demand
6
Gas demand growth
Strength of environmental policies
Price of gas vs. coal
3
Gas is a regulatory play
1 Strength of environmental policies
7 Source: BP Energy Outlook 2017, p.84
The gas optimum between too soft and too strong environmental policies is also visible in Europe
8
1 Strength of environmental policies
0
20
40
60
80
100
120
FTI - Central case - CO2@5 EUR/t FTI - Central case - CO2@40 EUR/t ENTSOE - Strongrenewable/Medium demand
CCGT gas consumption, 2030, Europe
bcm
Low CO2 price High CO2 price High renewables
Source: FTI-CL Energy power market model, ENTSOE V3 supply combined with ENTSOE V2 demand
Despite environmental advantages, gas is not well positioned for lobbying in consuming countries
9
1 Strength of environmental policies
Some technical advantages over coal Low political footprint vs. other energies in consuming countries
57
294
31
0
50
100
150
200
250
300
350
Extraction of crudepetroleum and natural gas
Mining of coal and lignite
2015
, tho
usan
ds o
f em
ploy
ees
Natural gas
Crude petroleum
Source: European Commission - EU - 2016 pocketbook energy. Note: Breakdown between crude petroleum and natural gas taken from a 2010 study of Eurostat (Extraction of crude petroleum and natural gas statistics - NACE Rev. 2)
Source: Commission de coopération environnementale - Les émissions atmosphériques des centrales électriques nord-américaines - 2011, p,42
0%
20%
40%
60%
80%
100%
120%
CO2 NOX SOX PM10 HG
Coal Gas
Electricity Generation polluants with gas emissions as a % of coal emissions
x10
# of jobs in energy production, EU28
84% of gas demand increase is expected to come from emerging countries, where political barriers could hinder expected growth
10
2 Access to emerging countries demand
A large demand growth to capture… …with significant political barriers
Security of supply issue • Main consumers (India, China…) net importers • Limited appetite for further import dependency
Regulated price issue • Historic low regulated price a barrier to import • Hard to reform / High subsidy cost
OECD, 16%
India, 9%
China, 28% Middle-
East, 24%
Non-OECD - other,
24%
Breakdown of gas demand growth (IEA, 2014-2030)
Source: World Energy Outlook 2016, Annex A, IEA Note: TPED, New policies scenario
Non-OECD, 84%
As an example, Ghana’s LNG imports are stuck in political issues
11
2 Access to emerging countries demand
Source : LNG world news
Golar Tundra Case
GOLAR LNG signed a 5-year deal with West African Gas Ltd (local company) to charter 170,000 cbm FSRU from Q2 2016 in Tema
November 2015
FSRU arrival, operational set-up May 2016
Delays to start up because of logistical issues and political wrangling
Since may 2016
Parliamentary delayed approval to gas sales contract but major onshore construction (connecting pipeline, jetty,..) not completed
October 2016
GOLAR is awaiting outsanding charter payments for the vessel, and started legal action against West African Gas Ltd
Current situation
Coal has recently won over gas where it matters: Asia
12
3 Price of gas vs. coal
0
200
400
600
800
1 000
1 200
Gas Coal
2015
(USD
) mill
ion
0
10
20
30
40
50
60
70
Gas Coal
2015
(USD
) bill
ion
Subcritical
High efficiency
0
10
20
30
40
50
60
70
Gas Coal
2015
(USD
) bill
ion
Infrastructure investment cost for a 1 GW power plant in Asia Coal and gas-fired power investment in Asian markets (2015)
Source: International Energy Agency, World Energy Outlook 2016 presentation, 18 January 2017, p.19
Coal maintains a cost advantage over natural gas in Asia
13
3 Price of gas vs. coal
0
10
20
30
40
50
60
70
80
90
100
Natural gas Coal
Levelised Cost of Electricity in China
2013
USD
/MW
h
-16%
Source: International Energy Agency, Projected Costs of Generating Electricity 2015 Edition, p.49 [7% discount rate]
However this could be reversed if gas becomes sustainably more competitive than coal (1/2)
14
3 Price of gas vs. coal
Europe OECD gas gross consumption 2010 - 2016
Source : International Energy Agency, monthly gas statistics
400,000
420,000
440,000
460,000
480,000
500,000
520,000
540,000
560,000
580,000
2010 2011 2012 2013 2014 2015 2016
Mcm
However this could be reversed if gas becomes sustainably more competitive than coal (2/2)
15
3 Price of gas vs. coal
Source: FTI-CL Energy analysis. Forwards as of February 2017
Average annual gas demand from power generation in 2017 – 2020 compared to 2016, according to gas price levels [EU28 + NO + CH]
TTF in Winter 2006/2007
Current TTF forwards
Current Henry Hub forwards + variable transatlantic transport
( 200)
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Chan
ge in
cons
umpt
ion
(TW
h)
Price €/MWh
NetherlandsItalyUKFranceSpainGermany
Other Europe
KEY
Top 6 countries:
1,773 1,697
1,601
1,501
1,399 1,313
1,233
1,138
1,028
904
764
592
424
256
104
4
-34 -53 -72
2016 gas consumption
The price of gas will be to a large extent defined by the LNG market
16
Share of LNG in global long-distance gas trade (IEA)
2014 685 bcm
2040 1 150 bcm
2000 525 bcm
LNG 53% Pipeline Pipeline LNG
42% Pipeline
LNG 26%
Source: International Energy Agency, World Energy Outlook 2016 presentation, 18 January 2017, p.10
3 Price of gas vs. coal
Drivers of global LNG prices II.
The LNG market is reconfiguring
18
Supply: A bust for now • Oversupply coming to the market • Collapse of investments, likely to lead to boom and bust cycle
2
Demand: An increasing volatile world • After decades of Take-Or-Pay contracts… • …An increasingly volatile world
1
Industry structure: Taming the explosion of risks • Shorter commitments and more flexible assets • New risk bearing intermediaries
3
The level of LNG demand will be determined by emerging countries’ credit risk and demand uncertainty, and its relative price vs. coal
19
Source: Cheniere Analyst Day 2017, p.90 ; FTI analysis
A
B
Emerging countries: Credit risk issues and demand uncertainty
Switching countries: Relative price issues
1 Demand
New LNG demand from emerging countries carries demand volatility and higher credit risk
20
0%
5%
10%
15%
20%
25%
30%
35%
40%
2011 2012 2013 2014 2015
Non credit rated companies as % of buyers in new LNG contracts [2] Standard deviation of YoY change in gas consumption, 2005 – 2014 [1]
2.8% 2.2%
8.9%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Natural Gas
Old LNG countries Middle LNG countries New LNG countries
1. Source: US EIA, International Energy Statistics, downloaded 30 December 2016; 2005 GIIGNL AR, page: 6; 2010 GIIGNL AR, page: 10; and, 2015 GIIGNL AR, page: 20. 2. Non-rated companies as % of buyers in LNG contracts starting each year. Source: 2016 GIIGNL Annual Report, page: 8 - 11; and Moody's.
x4
36% x3/x4
9%
First cargo up to 2005 First cargo 2006 – 2010 First cargo after 2010
1 Demand – Emerging countries A
Europe has a large switching potential supported by import overcapacity – Utilisation dropped from 60% to 40% since 2010
21
1 Demand – Switching countries B
0
100
200
300
400
500
600
700
800
2010 2011 2012 2013 2014 2015 2016
bcm
Total net imports Total import capacity
Source: IEA European gas flows database (https://www.iea.org/gtf/#, accessed 27/12/2016), ENTSOG Transmission Capacity Maps for 2010, 2011, 2012, 2013, 2014, 2015, 2016.
62% 56% 50% 46% 42% 45% 41% Utilisation factor
EU import capacity and net imports
European storage overcapacity further supports the region’s global LNG balancing role
22
1 Demand – Switching countries B
Storage capacity and demand for storage products (Base 100% in 2009)
Source: Eurostat monthly gross inland consumption of natural gas (accessed 27/12/2016), GSE Storage Map Databases 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016.
0%
20%
40%
60%
80%
100%
120%
140%
160%
2009 2010 2011 2012 2013 2014 2015 2016
Demand for storage products (=Winter-Summerspread in consumption)Storage capacity
+25%
-21%
An oversupply is coming to the market
23
2 Supply
0
50
100
150
200
250
300
350
400
450
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MPT
A
Qatar Indonesia Australia Algeria Malaysia Nigeria Trinidad Egypt Oman US Other countries
+9%/year
Source: 2004 GIIGNL AR, page: 20 - 21; 2005 GIIGNL AR, page: 20 - 21; 2006 GIIGNL AR, page: 24 - 25; 2007 GIIGNL AR, page: 24 - 25; 2008 GIIGNL AR, page: 20 - 21; 2009 GIIGNL AR, page: 22 - 24; IGU World LNG Report 2010, page: 15; IGU World LNG Report 2012, page: 22; IGU World LNG Report 2013, page: 18; IGU World LNG Report 2014, page: 18; IGU World LNG Report 2015, page: 21; and, IGU World LNG Report 2016, page: 20 and 64.
LNG liquefaction capacities
Possible delays in commissioning outside US
Supply investments have collapsed, leading to likely boom and bust cycle
24
2 Supply
0
5
10
15
20
25
30
35
4020
05
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
USD
(201
5) b
illio
n Australia
Africa
Middle East
North America
Russia
Europe
Others
LNG liquefaction terminals investment, according to IEA
Source: International Energy Agency, World Energy Outlook 2016 presentation, 18 January 2017, p.9
The industry is adapting to higher risks
25
A
B
Shorter commitments and more flexible assets • Significant share of short-term deals, Reliance on tendering
• Putting assets on boats to increase flexibility
New risk bearing intermediaries • Trading houses entering the LNG market, offering risk
intermediation
3 Industry structure
Short-term deals have become significant and can be relied upon
26
3 Industry – Shorter commitments and more flexible assets A
Source: Cheniere Analyst Day 2017, p.61
Increasing reliance on short-term supplies/sales Significant share of short-term volumes
Source: IGU 2016 World LNG Report, p.13
Development of tenders, 2016-2017: • ~500 cargos
bought via tender • ~200 cargos sold
via tender
As an example, Pakistan has secured a significant LNG supply through straight tendering
27
3 Industry – Shorter commitments and more flexible assets A
Source: PLATTS
Pakistan gas market forecast
• January 2017, 240 LNG cargoes tender secured, totalling 48 Bcf of gas (1.4 Bcm)
• Five-years tender of 60 cargoes • 15-years tender of 180 cargoes
• Offers submitted on a DES basis • Bank bond of $100,000 required for each
bid
• Pricing : indexation to the 90-day average price of the Brent crude benchmark
Pakistan tender
The industry is moving its assets on boats
28
3 Industry – Shorter commitments and more flexible assets A
Source: data from IGU 2016 World LNG Report, p.51
Golar Spirit FSRU
Floating Regasification Capacity by Status and Number of Terminals, 2005-2021
02468101214161820
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010 2011 2012 2013 2014 2015
Tota
l FSR
U
Mtp
a
Cumulated receiving capacity in Mtpa Existing FSRU
Trading houses have entered the LNG market, offering intermediation between producers and risky buyers
29
3 Industry – New risk bearing intermediaries B
Source: Trafigura Annual reports (2014, 2015 and 2016)
0
1
2
3
4
5
6
7
2013 2014 2015 2016
In m
mt
Trafigura volumes of trading of LNG
Conclusion III.
Gas demand growth will remain dependent on coal prices and national fuels policies
31
Gas demand growth
Strength of environmental policies
1
Coal Natural gas Renewables
2 Access to emerging countries demand
Price of gas vs. coal
3
Gas demand growth will remain dependent on coal prices and national fuels policies
32
Gas demand growth
Strength of environmental policies
1
Coal Natural gas Renewables
2 Access to emerging countries demand
Price of gas vs. coal
3
A narrow path, likely to differ from country to country
Helped by oversupply, industry adapting to new demand – but inefficient downstream pricing
More liquidity and transparency to lead to more efficient pricing, based on Henry Hub Cost cutting not yet happening on a large scale
