North America, South America and China’s standpoint on future Shale gas market
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- 1. 3rd Asia Energy Security SummitCo-operation for Security,
Stability and SustainabilityNorth America, South America and
Chinasstandpoint on future Shale gas marketFebruary 2013
- 2. The Changing Global Energy Mix and Demand Supply Scenario
World Primary Energy Demand (MTOE) Global energy demand expected to
increase by 5000 more that ~33% in next 25 years [IEA] 4000 Highest
growth in demand expected in China 3000 and India 2000 2008
Pronounced shift away from oil, coal and in 2035 1000 some
countries, nuclear, towards natural gas 0 and renewables Natural
Gas is projected to surpass coal in the primary energy supply mix
by 2035. WEO, 2011 (Gas Scenario) Unconventional gas accounts for
more than 40% of increase in gas production by 2035; major share
coming from North America and China WEO 2011 Unconventional
together to account for almost a fifth of the increase in global
energy supply to 2030.2 2013 Deloitte Touche Tohmatsu India Private
Limited
- 3. Global Shale Gas Reserves and PotentialSource: World Shale
GasResources, Technically recoverable Continent2011, EIA (Tcm)
North America 54.7 South America 34.7 China 36 Total 2193 2013
Deloitte Touche Tohmatsu India Private Limited
- 4. Shale Gas revolution in North America US, which currently
imports 20% of its energy is expected to be net exporter in the
long term because of Shale gas revolution Gas prices hit a 10 year
low Infrastructure related to export of gas being set-up in North
America Canada also has good reserve but relatively slower in
developing shale gas Shale gas expected to spur economic activity
due to low energy prices Competitiveness of nuclear energy is being
challenged by relatively cheap Natural Gas. Regulations requiring
more disclosure of environmental impact expected in US Natural gas
Production (tcf) 19.80 10.90 2.00 4.60 9.40 6.60 4.00 4.40 Canada
(2008) Canada (2035) US (2008) US (2035) Conventional
Unconventional Source: WEO: 2011 *Unconventional include shale, CBM
and Tight Gas4 2013 Deloitte Touche Tohmatsu India Private
Limited
- 5. Changing Global Dynamics and Energy Trade Flows Switch in
direction of international energy trade towards Asia Strategic
Trade Routes Security Decreasing dependence of US on Persian Gulf
Oil Exports to US from Saudi Arabia and Middle East (Thousand
Barrels per day) 2000 The US - historically a major power shaping
developments in ME/ Persian Gulf 1800 Changes expected in the
Geopolitical environment in the region 1600 Dispute over Iran
sanctions and the new 1400 balance of political influence Coal
consumption in Europe 1200 Domestic Coal Surplus in US because of
gas 1000 prices 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Coal flowing to Europe How long will this sustain? Source: IEA
Changing scenario for Russian Gas Exports Delayed production for
projects destined for US Russian Supplies in Europe Gazprom
supplies to Ukraine5 2013 Deloitte Touche Tohmatsu India Private
Limited
- 6. Economic Impact of Shale Gas on US Economy Significant price
difference Low energy/ feedstock between US & Europe/ Asia
prices expected to improve Producers may face financing
competitiveness of industry risk due to pricing; may affect
Petrochemicals, fertilizer, US Restrictions future investment steel
Energy, infrastructure, on Recent report submitted to US
manufacturing and Export of Gas Department of Energy suggests
transportation sector to Impact of Low Cost Shale Gas US expected
to benefit exports benefit the most on Economy in Strong domestic
production to Direct and indirect Job North America help reduced
volatility in prices creation and improve investment Reduced
pressure on US U.S. becomes able to produce with respect to
emission large quantities of gas from norms shale at low cost6 2013
Deloitte Touche Tohmatsu India Private Limited
- 7. Chinas natural gas consumption is expected to grow in the
future,reducing the share of coal from the Energy basket Chinas gas
consumption stands at 4% of its Energy mix, Energy Mix (2011) China
considerably lower than the world average. The demand supply gas of
gas in china is expected to 4% widen further owing to demand growth
rate 70% 18% Although conventional gas reserves/production is
limited, China is estimated to have ~36 tcm of shale gas deposits.
2% 6% 1% In the 12th 5-year plan, Chinese government has shown
interest towards increasing the development of natural gas Oil
Natural gas Coal Nuclear energy Hydro electricity Renewables as a
preferred fuel and reduction in emissions Widening gap 7.47 5.72
5.05 4.62 4.19 2.99 3.16 3.61 2009 2011 2015 2020 Production (tcf)
Consumption (tcf)7 2013 Deloitte Touche Tohmatsu India Private
Limited
- 8. Despite large shale gas reserves, China is expected to
import majorshare of its gas requirement, owing to the rapid growth
in demand Supply drivers 1. Sino-US Shale Gas Resources Cooperation
Initiative Demand drivers 2. LNG Terminal capacity expansion 1.
Rapid urbanization 2.26 tcf planned by 2015 2. Promotion of gas
based 3. Acquisition of international transportation companies to
learn technical know- how and secure resources 3. Chinese
governments push to reduce carbon emissions 4. Focus on increasing
production of domestic unconventional fuels 4. Uncertainty over
nuclear power 5. Reduction of coal based power supply China
expected to play a key role in the Global Energy market: Persian
Gulf and Middle East as China is expected to be major buyer in
future Developing influence in Africa Diplomatic role with respect
to Iranian Crude and US oils sanctions Imports from Australia and
central Asia8 2013 Deloitte Touche Tohmatsu India Private
Limited
- 9. Most of the South American nations depend on oil and hydro
to meettheir primary energy requirements South and Central American
energy consumption is mainly concentrated in three countries, viz.
Argentina, Energy Mix (2011) South & Brazil, and Venezuela.
(accounting for almost 70% of Central America the regions energy
consumption in 2011) 2% Argentina produces 1.37 tcf of gas against
a demand of 1.64 tcf. 26% Argentina and Brazil are the only two
nations that 45% import large quantities of gas while the other
nations 1% either import small quantities or are net exporters 4%
Major share of imports are coming from Bolivia or Qatar 22% The
region is looking to reduce its dependence on Oil Natural gas Coal
hydel power because of its unreliable nature Nuclear energy Hydro
electricity Renewables Gas based power generation is expected to
increase in the region9
- 10. Discoveries of shale gas deposits in Argentina/ Brazil
offer the SouthAmerican nations an alternative to meet their energy
requirements Argentina has ~22 tcm of proven shale gas
reserves,South American Shale Deposits and Brazil, indicates a
potential of ~6.4 tcm of shale gas reserves. The shale gas reserves
are expected to have significant impact the economy, especially in
Argentina Argentina is taking steps towards harnessing the shale
gas potential Well-head gas prices by 44% (to $7.5 per mmBtu) in
order to attract private investment into the sector by Argentina
India and China are also looking at shale gas assets in South
America in an effort to secure supplies to their respective nations
Source: Schlumberger Oilfield Services10
- 11. Key Challenges faced by Shale Gas Gas Prices: Uncertainties
with respect to gas pricing and current low prices in North America
may affect the investment environment Managing costs and financing
risks are key concerns of investors because of low domestic prices
and restrictions on exports Accessibility to Technology and Capital
Availability of skill base Environmental issues, especially related
to water management and surface impact Geo-political environment
Reputation Risk and Public Opinion Select Countries where Shale Gas
Remarks Development was stalled France Temporary moratorium on
shale gas drilling through June 2011. Subsequently, ban on
hydraulic fracturing in 2011 Quebec (Canada) Shale gas production
and hydraulic fracturing put on hold. South Africa Temporary
moratorium in 2012 in certain regions United States Moratorium in
hydraulic fracturing in 2010 and 2011 in states of New York and
Maryland, respectively11
- 12. The future of Shale Gas and its dominance in Global Energy
mix may depend on hostof factors Policies/ Regulations Carbon
Emission Norms Technology Capital Adoption Requirement Future of
Shale Gas Demand and Gas Supply Pricing Environmental Issues Energy
Security Geo Politics Energy Strategy/ Diversification12 2013
Deloitte Touche Tohmatsu India Private Limited
- 13. Shale Gas Impact How will reputational risk/ public opinion
impact investments in shale gas? What environmental regulation will
it attract? How long will low prices in North America sustain? Will
global gas market/ pricing emerge? Will the U.S. become a long-term
exporter of LNG or it will remain restrictive to Exports? How will
Chinas unending energy appetite affect gas prices and Demand Supply
scenario? How will the global energy trade flows and Geo-politics
change in light of Shale gas developments?13 2013 Deloitte Touche
Tohmatsu India Private Limited
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Touche Tohmatsu India Private Limited 2013 Deloitte Touche Tohmatsu
India Private Limited