The creation of an
Asia- Pacific Natural
Gas Trading Market
Presenter:
Andrew (Zhang Hanzhou)
Anny (Gong Huaping)
Taijie (Zhang Taijie)
Peter (Zhu Zheren)
Mark (Kong Zichao)
Date: 31 July 2015
1
1. Overview of the World Natural Gas Market
2. World Main Natural Gas Market Pricing Mechanism
3. Research regarding the Asia-Pacific NG Trading Market
4. Conclusions and Recommendations
2
1.1 World Natural Gas Reserves
1.2 Natural Gas Production and Consumption (Bcm)
1.3 World Natural Gas Market Trading Outline
Source: BP Statistical Review of World Energy 2015
3
1645 1642
2112 2133
2789 2775
3461
3393
4408 4400
5069 5059
0
1000
2000
3000
4000
5000
6000
1.2 Natural Gas Production and Consumption (Bcm)
North America S & C America Europe & Eurasia
Middle East Africa Asia Pacific
Total Natural Gas Production Total Natural Gas Consumption
1985 1995 2005 2014 2025 2035
4
Henry Hub
NBP
JCC
1.3 World Natural Gas Market Trading Outline
5
Number pricing methods Main factors of
influencing price
Main application
area proportion
1 Gas-on-oil S curve
pricing method Oil price Europe ,Asia 20%
2 Gas-on-gas Regional supply and
demand conditions
North America,
Britain, Australia
and Europe
40%
3 The regulated
pricing method Government Asia 35%
Sources:IEA,Shen Wan Research(SWR)
2.1 Three main natural gas pricing methods
6
2.3 European market
2.4 Asia Pacific Market
2.2 North American market
Gas-on -oil Gas-on -gas
7
The Asia-Pacific NG market relies heavily on the LNG trade
and lacks “Gas -on- gas" competition.
The imported LNG pricing mode in Asia is singular.
The Natural Gas market is controlled in most Asian countries .
2.5 Characteristics of the Asia-pacific Natural Gas market
8
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Prices $/Mmbtu
Japan LNG cif
UK NBP
US Henry Hub
Sources: BP Statistical Review of World Energy 2015
3.1 Competitive markets and price
3. Research regarding the Asia-Pacific NG Trading Market
World LNG Receiving Capacity
Sources: IGU(International Gas Union)-World LNG Report-2015 Edition
3.2 Natural Gas infrastructure
3. Research regarding the Asia-Pacific NG Trading Market
FID -Final Investment Decision
0
50
100
150
200
250
300
350
400
MTP
A
Existing FID Pre-FID
3.3 The number of market participants
3. Research regarding the Asia-Pacific NG Trading Market
Country Producers/Importers Local gas utilities
China CNPC,CNOOC and SINOPEC Around 1800 companies
Japan 7 power companies; 8 gas companies; and several industrial importers
Around 200 local gas utilities
Singapore 5 gas importers when SLNG comes into operation
-
South Korea
KOGAS 30 city gas companies; and 14 power companies
11
Institutional/structural requirement Japan Korea China Singapore Australia
Hands-off government approach - - - +/- +/- Separation of transport and
commercial activities - - +/- + +
Wholesale price deregulation + - +/- + +/- Sufficient network capacity and non-
discriminatory access - - +/- + +
Competitive number of market
participants +/- - +/- +/- -
Facility and infrastructure + + + +/- + Involvement of financial institutions +/- - +/- + + Market potential for gas-to-gas
trade (HH) - - + - -
Geographic location - - + + -
3.4 Comparison of the selected countries
3. Research regarding the Asia-Pacific NG Trading Market
12
Note:+ Positive; - Negative; +/- Neutral
Advantages
Can be a physical or virtual location
Provides on-going price reference
Enhances regional energy security
Concerns Location - Each country desires their own trading market Rules - Trading/financial regulations
Liquidity - Acceptable as price reference? Geopolitical issues
Reality and foresight Two regional markets in operation: the Singapore market opened in 2013,the Shanghai market formally opened early July 2015, plus existing JCC institution, chance or challenge? Long term LNG contracts will still dominate in the next decade, therefore a multiple price system will exist for a longer period of time
3.5 Discussion about Asia-Pacific Natural gas trading market
3. Research regarding the Asia-Pacific NG Trading Market
13
3.6 China’s LNG terminals and Natural gas pipelines
3. Research regarding the Asia-Pacific NG Trading Market
14
Natural Gas
Supply
Market Revolution
Natural Gas
Demand
Policy: Environment/Water Nuclear Power Renewable Energy Coal Use
Asia Pacific Economic Growth
Unconventional Development:
Tight Gas, CBM, Hydrates New
Pipeline: China-Russia
ASEAN
Floating Technologies
New LNG Capacity: Australia,
Russia, USA,
Canada, Africa
Policy: Environmental Export Limits
3.7 NG Market Drivers, Relationships
3. Research regarding the Asia-Pacific NG Trading Market
15
Asian economic growth is the key driver of global natural gas market development
Trading market is the trend for the Asia-pacific NG business development Several NG trading hubs are emerging in Asia-Pacific region
The roadmap for the Asia-pacific NG trade market development
3.8 The key findings
3. Research regarding the Asia-Pacific NG Trading Market
16
Reform benchmark integration cooperation
The global natural gas market is growing and the prospect is promising
We can learn from the US and EU market development experience
The Asia-Pacific natural gas market is developing dramatically, but there is still a long way to go
Natural gas market issues should be put on the list of concerns for discussion by regional institutions
4. Conclusions and Recommendations
17