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Asian LNG Market Outlook
Shasha Fesharaki Principal Consultant & COO
FGE
Platts 12th Annual LNG Conference February 12, 2013
Hilton Post Oak, Houston
This presentation material contains confidential and privileged information intended solely for Platts 12th Annual LNG Conference attendees. The dissemination, distribution, or copying by any means whatsoever without FACTS Global Energy’s prior written consent is strictly prohibited.
www.FGEnergy.com
Who is FGE? For more than 30 years FGE has delivered strategic advice on the oil and gas markets to clients around the
world. The company was the first consulting firm to specialize in the downstream oil and gas markets with a focus on the East of Suez region.
Over the past decades, FGE has provided studies and advisory services to national governments, national oil and gas companies, major oil and gas companies, independent oil and gas companies, financial institutions, international and intergovernmental organizations, utilities, consultancies, and engineering design firms.
FGE’s global presence enables it to service clients around the world.
Over 230 Clients Around the Globe
Please visit our website, www. FGEnergy.com for more information.
Beijing
Singapore
Perth
Honolulu Dubai
London
Main Offices
Rep/Branch Offices
Global/Asian Headquarters
Tokyo California New York
2
www.FGEnergy.com
Hub vs. Oil Indexation for Asian Buyers
Asia’s Unconventional Gas Outlook
Asian LNG Demand/Supply
Overview
Concluding Remarks
3
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25
50
75
100
125
150
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225
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275
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
mm
t
Asia Europe Americas Middle East
Global LNG Trade: 2000-2012
2%
Global LNG Trade: Asia is Still King
72%
23%
5%
2000
64%
27%
8% 1%
2011
Note: 2000-2011 data are actual, 2012 is forecast. 4
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Regional LNG Import Outlook (mmtpa)*
Europe
Middle East
Asia Americas
*Base-case scenario
87 123 152
2015 2020 2030
193 245 314
2015 2020 2030
18 20 19
2015 2020 2030
6 14 30
2015 2020 2030
5
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(8.0)
(6.0)
(4.0)
(2.0)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020
mm
tpa
Asia Pacific LNG Imports by Country (Year-on-Year Change)
JKT CN+IN New Markets*
* Indonesia, Malaysia, Singapore, and Thailand.
Rising LNG price; ramping-up of alternative pipeline
gas imports
Longer-Term Outlook: Who Leads the Growth?
‘Shrinking’ demand
Recovery in LNG demand →↑
Industrial sector gas demand; cost competitiveness;
seasonality drivers
New terminals startups; domestic gas supply deficits
6
Nuclear shutdowns
New terminals startups
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10
20
30
40
50
60
70
2013 2014 2015 2016 2018 2020
mm
tpa
LNG Uncontracted DemandNew Markets Uncontracted DemandIndia Uncontracted DemandChina Uncontracted DemandTaiwan Uncontracted DemandKorea Uncontracted DemandJapan Uncontracted Demand
Likely uncontracted demand including contract renewals.
Asia Overview: Imports and Uncontracted Demand
*Includes Indonesia, Malaysia, Singapore, and Thailand (started importing LNG in 2011). ** Other Potential Markets include Pakistan, Vietnam, Bangladesh, and Philippines.
7
Asia Pacific LNG Base Case Import Forecasts Scenarios (mmtpa)
Year Japan South Korea Taiwan India China New
Markets*
Total Asia
Mature Markets
Emerging Markets
Other Potential
Markets**
Total Asia Pacific
Potential
2009 64.6 25.8 8.6 9.1 5.5 0.0 99.0 14.6 0.0 113.6
2010 70.1 32.6 10.8 8.9 9.4 0.0 113.5 18.3 0.0 131.8
2011 78.5 36.7 12.0 13.5 12.2 0.7 127.2 26.4 0.0 153.6
2012 87.3 36.3 12.5 13.9 14.7 1.0 136.1 28.6 0.0 164.7
2015 85.5 39.5 13.1 18.3 25.8 10.8 138.1 54.9 0.0 193.0
2020 89.3 43.5 14.6 24.5 42.0 23.0 147.4 89.5 7.7 244.6
Besides Japan and Korea, who will be under pressure to secure additional supplies, new demand is emerging from Southeast Asian importers.
www.FGEnergy.com
Who Will Surpass Qatar?
In Operation Under Construction Announced Total
Qatar 77.1 - - 77.1
Australia 24.5 61.8 62.0 148.3
Nigeria 22.3 - 40.5 62.8
Russia 9.6 - 47.4 57.0
United States - 9.0 232.0 241.0
Canada - - 55.0 55.0
East Africa - - 45.0 45.0
Liquefaction Capacity (mmtpa)
• North America and East Africa emerging as new LNG export provinces. • Shale gas driving force in North American gas supply while East African reserves
mostly offshore in Mozambique & Tanzania.
• Will LNG price be linked to oil or a Hub basis?
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Asia’s Unconventional Gas Outlook
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North AmericaUSA 482Canada 388Mexico 681 150 - 459Total 1551** Recently downgraded by Geoscience Australia
EuropeOriginal EIA
Estimates (tcf)Non-EIA
Revisions (tcf)France 180Germany 8Netherlands 17Norway 83UK 20Denmark 23Sweden 41Poland 187 12 - 27Turkey 15Ukraine 42Lithuania 4Others* 19Total 639* Bulgaria, Hungary and Romania.
South AmericaOriginal EIA
Estimates (tcf)Non-EIA
Revisions (tcf)Venezuela 11Colombia 19Argentina 774Brazil 226Chile 64Uruguay 21Paraguay 62Bolivia 48Total 1225
AfricaOriginal EIA
Estimates (tcf)Non-EIA
Revisions (tcf)South Africa 485Libya 290Tunisia 18Algeria 231Morocco 11Western Sahara 7Mauritania 0Total 1042
Asia (incl. AU)Original EIA
Estimates (tcf)Non-EIA
Revisions (tcf)China 1275 886India 63Pakistan 51Australia 396**Total 1785
Non-Conventional Supply: Global Technologically Recoverable Shale Gas Resources (tcf)
Total Recoverable Resource: 6,242 tcf
1
12 Already banned!
2
11
10
5 7 3
6 4 8 9
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EIA Shale Study: Outside the US Focus: Shale gas potential beyond the US
• EIA Shale Gas Study in 2011 estimates technically recoverable shale in 32 countries outside the US
• China holds the largest reserves of 1,275 tcf FGE’s forecast: China
… but this still lags behind CBM production:
China’s production limited by: 1. Industry still in initial stages of
development with a wait-and-see approach by investors
2. Geological challenges—fundamentally different from the US
3. Scarcity of water & other environmental concerns
4. Limited technical know-how 5. Infrastructural constraints (e.g.,
pipeline access) 6. Lack of competitive
independent developers 7. Potential acreage access
conflicts with coal miners
11
Total resource* 4,747 2012 0.0Recoverable^ 886 2020 1.8Proven geological reserves nil 2030 4.4
China Shale Resources (tcf) Production** (bscf/d)
Total resource* 1,300 2012 1.3Recoverable 385 2020 2.7Proven geological reserves 10.2 2030 3.9
* Within depth of 2,000 m** 2012 productions are preliminary, 2020 & 2030 are forecasts.^Estimate from China's Ministry of Land and Resources
China CBM Resources (tcf) Production** (bscf/d)
www.FGEnergy.com
Outlook for China’s Unconventional Gas Production
12
0%
5%
10%
15%
20%
25%
30%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2012* 2015 2020 2025 2030
Shale Gas Output CBM Output Share in Domestic Production(bscf/d) Share
*2012 data are estimates.
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Hub vs. Oil Indexation for Asian Buyers
13
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JCC
• Major price indexation for Asian buyers • Hard to manipulate
Brent
• Observed in some long-term deals and several short-term deals • To hedge against price volatility
JLC/JKM?
• To ensure contract formulae are close to Japanese benchmark prices • JLC: translates to a slope of over 12 for the past five years • JKM: a new marker
HH/NBP
• Pre-Japan disaster: Several short-term deals observed • Long-term contracts isolated to recent US deals • Recently attracted buyers’ interests as long-term price components
East of Suez–Emerging New Price Indexations
14
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Direct Purchases From the US …not always cheaper but does provide some savings at high oil prices
15
6
8
10
12
14
16
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20
50 60 70 80 90 100 110 120
DES
Pric
e, U
S$/m
mBt
u
Oil Price Scenario (US$/bbl)
Hypothetical US LNG Price (FOB HH @ $4-8/mmBtu)*
14.5% + Shipping LNG Price (assumed to Japan)
13% + Shipping
* FGE forecast HH prices for period 2015-2030 Note: Liquefaction + Shipping assumed around US$6.50/mmBtu
Range of HH prices + cost to land in Asia
www.FGEnergy.com
Pacific Region to Stay Mostly Oil-Linked
16 *Supplies targeting East of Suez, up to Speculative Projects
100
200
300
400
500
2012 2015 2016 2017 2018 2019 2020 2025 2030 andbeyond
Incremental supplies* (mmtpa)
Oil-Indexation Hub-Indexation
Incremental volumes sold mainly on oil-indexation are driven by new Australian projects
Incremental volumes will be driven by new USGC/Canada/East Africa projects.
While, Most USGC volumes = Hub-Indexation Canada/East African projects => Small % Hub-Indexation; Majority % Oil-Linked => Due to high development costs.
Existing
www.FGEnergy.com
Take-Away Points
• Asia will still account for the majority of global LNG imports in 2020. Incremental growth stems from China and India but Japan and Korea under the most pressure to contract further supplies.
• Asia’s unconventional gas production is primarily a post 2020 story with China offering the greatest potential though a repeat of what is happening in North America is unlikely.
• New LNG supply centers in North America and East Africa will give Asian buyers increased flexibility and price diversification.
• US exports could be equivalent to 15% of Asian demand in 2025 though all wont go to Asia. South America and Europe likely to be attractive destination for US exports.
• Many buyers now seek hub-related pricing. Some are under the impression that this guarantees lower prices. FGE believes that the price impact of US LNG exports on Asian prices will be marginal.
17
Asian Headquarters: 8 Eu Tong Sen Street, #20-89/90 The Central, Singapore 059818 Tel: +(65) 6222-0045 Fax: +(65) 6222-0309 [email protected]
Global Offices: Honolulu, US +1 (808) 944-3637 Dubai, UAE +971 (4) 439-0451 Beijing, PRC +86 (10) 8480-2701/02 Perth, Australia +(61) 402-000-565 Tokyo, Japan [email protected] New York +1 (714) 593-0603 California +1 (646) 733-7571
London – Singapore – Honolulu – Dubai – Beijing – Perth – Tokyo – New York – California
Thank You
Global Headquarters: FGE House 133 Aldersgate Street London, EC1A 4JA United Kingdom Tel: +44 (0) 20-7726-9570 [email protected]