Вы находитесь на странице: 1из 38
LNG Expansion in the Asia-Pacific Region: Prospects for LNG Trade and Implications for China A
LNG Expansion in the Asia-Pacific Region: Prospects
for LNG Trade and Implications for China
A Presentation for
2007 APEC Expert Group on Clean Fossil Energy Workshop
By
Shahriar (Shasha) Fesharaki
Vice Chairman, FACTS Global Energy
Kang Wu
Senior Fellow and Head of China Energy Project
East-West Center
Honolulu, Hawaii, USA
November 5-7, 2007 – China
1
Outline 1. Future Trends in LNG Markets 2. Evolution of LNG Pricing in the Asia-Pacific
Outline
1. Future Trends in LNG Markets
2. Evolution of LNG Pricing in the Asia-Pacific
Region
3. Projected Existing Price Formulas up to 2020
4. Implications for New Buyers
5. Implications for China
2
1. Future Trends in LNG Markets 3
1. Future Trends in LNG Markets
3
Asian LNG Markets Outlook Asia Pacific LNG Demand Forecasts Scenarios (mtpa) Base-Case Total Asia Pacific
Asian LNG Markets Outlook
Asia Pacific LNG Demand Forecasts Scenarios (mtpa)
Base-Case
Total Asia Pacific
Other
West
South
New
Mature
New
American
Total Asia
Japan
Korea
Taiwan
India
China
Markets
markets
markets
Coast
Pacific
2005
58.0
22.3
7.1
4.5
0.0
0.0
87.4
4.5
0.0
91.9
2006
62.1
25.3
7.7
6.2
0.7
0.0
95.0
6.8
0.0
101.9
2010
70.2
28.4
10.2
9.0
6.2
0.4
108.8
15.6
7.7
132.0
2015
77.0
34.6
13.0
14.0
15.3
6.8
124.6
36.1
11.4
172.2
2020
82.0
32.4
15.5
22.0
32.6
20.9
129.9
75.5
11.4
216.8
LNG Uncommitted Demand (mtpa)
120
6.7% average annual
growth for LNG demand until
2010, 5% afterwards.
100
India
80
China
60
Taiwan
New markets will develop
mostly after 2010-15 and will
be very sensitive to prices
Korea
40
Japan
20
LNG uncommitted demand:
-
2005
2006
2007
2010
2015
2020
12 mt in 2010, 57 mt in 2015,
113 mt in 2020.
4
Emerging Asian Markets Receiving Terminal Projects Volumes (mtpa) Country FGE’s Estimated Import Volumes 2012 2015
Emerging Asian Markets
Receiving Terminal Projects
Volumes (mtpa)
Country
FGE’s Estimated Import Volumes
2012
2015
Terminal Capacity
Thailand
-
-
5 mtpa targeting 2010 start-up. (unlikely)
Singapore
0.8
1.2
3 mtpa (2012-2017)
expandable to 6 mtpa (2018 -2035)
Contact Energy and Genesis Power project:
New Zealand
1.1
1.2
1.2 mtpa by the end of the decade
Mariveles Terminal by GN Power, 1.4 mtpa,
Philippines
1.2
1.5
2009-2010 start-up seems very difficult to achieve.
Other terminals pending.
Pakistan
1.5
3.5
Mashal LNG Project (Sui Southern Gas): 3.5 mtpa
Targeting 2010/11 for start-up
Hong Kong
0.1
1.3
CLP Project (up to 3 mtpa)
Targeting 2012 for start-up
Price will be an issue and a lot of projects are likely to be further delayed
5
Limited Supply Available in the Near Future In the Middle East, Yemen, Oman, and Abu
Limited Supply Available in the Near Future
In the Middle East, Yemen, Oman, and Abu Dhabi
are out of supply.
In Asia, Australian supply will emerge as the focal
point.
Qatar on path to be largest LNG exporter in the
world
Mistake to assume infinite supplies
Around 90-100 million tonnes might be the limit
About 77 million tonnes are already committed
For now, no new sales are contemplated
6
For Iran, we expect much smaller export volumes. We see 20-30 million tonnes as a
For Iran, we expect much smaller export volumes.
We see 20-30 million tonnes as a potential LNG
supply and some volume of pipeline gas. The
reasons are:
Large domestic grid-price $0.35/MMBtu.
Massive gas re-injection requirements of some +10
billion cf/d.
Massive gas-based petrochemical projects.
CNG projects to provide a major volume of gasoline
supplies as early as end of this decade.
Political opposition to gas exports by certain quarters
– such as the Iranian Parliament.
7
Radical Change in LNG Equation Gas/LNG prices have risen for five distinct reasons: 1. Higher
Radical Change in LNG Equation
Gas/LNG prices have risen for five distinct reasons:
1. Higher oil prices mean higher natural gas prices directionally,
though gas prices are capped by competition from coal and
nuclear at the burner tip, especially in the longer term.
2. Construction costs have risen significantly!
3. The United States has entered the LNG market from virtually zero,
early in the decade, and is very likely going to become the second
largest LNG importer next to Japan after 2010. Japan, will
continue to be the largest importer of LNG through 2020.
4. Indonesia, once the world’s largest LNG exporter is heading for a
massive decline of exports (except for Tangguh) due to a
combination of resource problems and political pressure to divert
resources to the domestic market.
5. Qatar holds most of the cards in the near term…and they know it!
8
2. Evolution of LNG Pricing in the Asia-Pacific Region 9
2. Evolution of LNG Pricing in the
Asia-Pacific Region
9
Buyer’s Market vs. Seller’s Market The Asian LNG market has gone through 3 distinct phases
Buyer’s Market vs. Seller’s Market
The Asian LNG market has gone through 3 distinct phases over
the last 20 years:
Legacy Contract Phase (Pre-2000):
Legacy contracts were signed between Japan, Korea, and
Taiwan, and key Asian and Middle East suppliers before
2000.
Low Price Phase (Post-2002):
Post-2002 with very low prices, lower oil linkages and more
flexibility for buyers.
Tight Energy Market Phase (Post-2005):
Recently emerging, with prices well above the ‘low price’
phase, coupled with tougher seller attitudes.
10
The Switch to a Seller’s Market in 2006 Sellers have started to regain the upside
The Switch to a Seller’s Market in 2006
Sellers have started to regain the upside and renegotiate prices. We have seen
the abandonment of ‘S’-curves for straight lines and an increase in the
relationship to crude oil.
Qatar is setting the standards and has become the price setter with some 48
mt directed to the West which can be diverted to the highest paying market;
thus creating a real linkage between the markets.
In the East, two new markers have emerged since mid 2006:
NWS allocation process at around $8/MMBtu at $60/barrel JCC price.
Qatar’s proposed long-term diversion eastward at around $10.5/MMBtu at
$60/barrel JCC price.
Most sellers are now attempting to position themselves in between these two
markers, while referencing directly or indirectly to HH or NBP prices.
11
Analysis of Recent Contracts to Japan and Korea (DES) 14 December 06 12 Sellers positioning
Analysis of Recent Contracts to Japan and Korea (DES)
14
December 06
12
Sellers positioning between these markers
10
April - May 06
8
Mar - May 06
6
Oct 05 - Mar 06
4
2
JCC ($/bbl)
10
15
20
25
30
35
40
45
50
55
60
65
70
NWS
Traditional to Japan
NWS-T1-3
Bilateral Renewals
Gorgon to Japan (HOA)
NWS Allocation Process
RasGas to KOGAS
from 2007
Crude Oil Parity
12
LNG ($/MMBtu)
3. Projected Existing Price Formulas up to 2020 13
3. Projected Existing Price Formulas up to 2020
13
Living in a High Oil Price World We have moved to a higher oil/gas price
Living in a High Oil Price World
We have moved to a higher oil/gas price world. This is an
irreversible change.
Still, we will have cycles, but from a higher price base.
A global demand growth of say, 1.5 million b/d, cannot be supported
too long by incremental oil supplies. Prices will rise to reduce the
growth in demand.
Our scenarios point to a base price of around $80/b in real terms by
the middle of the next decade, resulting in a demand loss, which
then settles to a price in the range of $60/b for Dubai crude.
14
Changes in Non-OPEC Output 2005-2015 mb/d 4 3.5 3 2.5 2 1.5 1 0.5 0
Changes in Non-OPEC Output 2005-2015
mb/d
4
3.5
3
2.5
2
1.5
1
0.5
0
-0.5
-1
-1.5
2005
2010
2015
North America
Europe
Latin America
Africa
Middle East
Asia Pacific
FSU
15
OPEC Coming to Fill the Supply/Demand “Gap”? After a short-term spike, non-OPEC supply growth will
OPEC Coming to Fill the Supply/Demand
“Gap”?
After a short-term spike, non-OPEC supply growth will slow and most
likely reach a plateau sometime in the middle of the next decade.
OPEC faces a natural decline of some 1.2 million b/d. Adding
capacity is very difficult as much new capacity is needed just to stay in
the same place.
OPEC may have trouble adding some 1 million b/d of additional
capacity annually, which may be required once non-OPEC plateaus.
Political, legal, and management problems are unlikely to allow for
new capacity additions large enough to respond to the demand
growth.
At the very least, OPEC will have a comparatively easy time
sustaining price levels.
16
A New Price Plateau? Price Forecast Scenarios for Dubai, $/bbl 85 80 Most Likely "base-case"
A New Price Plateau?
Price Forecast Scenarios for Dubai, $/bbl
85
80
Most Likely "base-case" Scenario:
75
Robust demand, supply constraint.
70
65
60
55
50
45
40
35
30
Possible Scenario:
25
Modest demand growth, supply response.
20
* Actual up to 2006, 2007$ thereafter.
17
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
LNG ($/MMBtu) Oil ($/bbl) Projected Asian Long-Term LNG Prices (DES) $2007 16 90 80 14
LNG ($/MMBtu)
Oil ($/bbl)
Projected Asian Long-Term LNG Prices (DES) $2007
16
90
80
14
70
12
60
10
50
8
40
6
30
4
20
2
10
0
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Existing Australia to Japan*
NWS Renewals (Average)
RasGas to India
Crude Oil Parity ($/MMBtu)
Average DES Price to Traditional Markets
Australian New Projects to Japan
KOGAS Tender-Average Price
Average China
Average New Qatari Contracts to Japan and Korea
Crude Oil ($/b) Right Scale
*NWS Trains 1 to 4 and Darwin
18
4. Implications for New Buyers 19
4. Implications for New Buyers
19
New Buyers: Where Will They Get Their Supply? New buyers will find it difficult to
New Buyers: Where Will They Get Their Supply?
New buyers will find it difficult to obtain supply unless they are willing to
pay higher prices for the gas. Even so, there will be limited supply
volumes to spare.
With the exception of Qatar, the Middle Eastern suppliers are all booked.
In Asia Pacific, the realistic potential suppliers by 2015 are Russia’s
Sakhalin II (Train 3), Indonesia’s Tangguh (Train 3), Australia’s Northwest
Shelf (NWS), Gorgon, Pluto, etc.
The LNG market remains very tight and prices will be high. Buyers will
need to pay high prices for shorter-term cargos…there is no choice and
they will have to deal with this reality.
20
Window of Opportunity Has Closed Realistically the window of opportunity to sign relatively low-priced LNG
Window of Opportunity Has Closed
Realistically the window of opportunity to sign relatively low-priced LNG
supply contracts has passed. Buyers seeking to sign long-term
contracts for deliveries 3-5 years in the future will face the following
market realities:
Negotiation Period
2007-08
Over the next 1-2 years, Qatar holds all the cards and it will seek to
maximize returns by isolating desperate buyers. Others (e.g.,
Tangguh) will follow on Qatar’s coattails.
2009-2011
The market will loosen somewhat as Qatari supply ramps up and it
becomes clearer when other ME/Asia projects will come on line.
Qatar will move beyond targeting only the most desperate buyers,
as Asian netbacks and Asia’s relatively stable prices are attractive
vis-à-vis HH and NBP.
21
Window of Opportunity Has Closed 2012-15 Market eases somewhat as new projects come on line
Window of Opportunity Has Closed
2012-15
Market eases somewhat as new projects come on line and
deliveries into US and Europe are well established.
Large Asian premiums to HH/NBP will diminish due to
increased competition amongst sellers, as there are many
opportunities for diversions to the East. However, HH/NBP
and oil prices are projected to remain high. Contracts will
reflect this fact.
Some Asian contracts may be linked to HH, but most will
retain oil linkage. However, HH will have an increasingly
large bearing on contract negotiations.
22
Supply Will Remain Tight World Liquefaction Capacity and LNG Demand 600 Middle East Planned Med.
Supply Will Remain Tight
World Liquefaction Capacity and LNG Demand
600
Middle East Planned
Med. Basin Planned
Atlan. Basin Planned
500
Asia Pacific Planned
Middle East Under Construction
Med. Basin Under Construction
Atlan. Basin Under Construction
400
Asia Pacific Under Construction
Middle East In Operation
Med. Basin In Operation
Atlan. Basin In Operation
300
Asia Pacific In Operation
LNG Demand Low Case
LNG Demand High Case
LNG Demand Base Case
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
23
mtpa
5. Implications for China 24
5. Implications for China
24
Natural Gas Demand and Supply in China (bscf/d) Outlook for Natural Gas Production and Consumption
Natural Gas Demand and Supply in China
(bscf/d)
Outlook for Natural Gas Production and
Consumption in China
25.0
Production
20.0
Consumption
15.0
10.0
5.0
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2010
2015
2020
Note: 2000-2006 are actual except for 2006 consumption which is preliminary; 2007 data are estimates; 2010-2020 are projections.
25
Natural Gas Demand by Sector in China China's Sectorial Gas Consumption: Base-Case (mmscf/d) 9,000 Power
Natural Gas Demand by Sector in China
China's Sectorial Gas Consumption: Base-Case
(mmscf/d)
9,000
Power
8,000
Industry
7,000
Residential and Commercial
Transport
6,000
Others
5,000
4,000
3,000
2,000
1,000
0
02
03
04
05
06
07
10
15
20
26
Gas Price Issues in China Prices in China are regulated. For traditional fields, prices are
Gas Price Issues in China
Prices in China are regulated. For traditional fields, prices are low, ranging
from US$1.99/MMBtu for fertilizer production in Xinjiang to US$3.26/MMBtu
for residential use in Southwest China
However, new pipelines and fields commend higher prices. Below are
examples of newer fields, pipelines, and prices
Natural Gas Prices for Selected Pipelines in China
Length
Prices
Pipeline
km
miles
Type
yuan/m3
US$/MMBtu
West-East
Ordos-Beijing I
Ordos-Beijing I
Ordos-Beijing II
Pinghu-Shanghai
4,000
2,489
864
538
864
538
926
576
400
249
Baseline Price to Shanghai
Gov't Approved Price at City Gate
Actual Price at City Gate
Actual Price at City Gate
Price at City Gate
1.32
4.72
1.34
4.79
1.13
4.04
1.28
4.57
1.45
5.18
27
Gas Price Issues for China (cont’d) International Pipelines: Price is a big issue for any
Gas Price Issues for China (cont’d)
International Pipelines:
Price is a big issue for any international pipeline
project to China
Russian gas to China: price, along with resource
availability and the rising demand in Russia itself, are
some of the major reasons the negotiation stalled
Turkmenistan gas to China: The prices at the
Chinese border will be higher than $2.8/MMBtu to
Russia, and are likely in the range of US$4.4 to
5.0/MMBtu
28
Legend Location of China’s LNG Terminals E Existing C Under Construction A Approved P Planned
Legend
Location
of China’s LNG Terminals
E
Existing
C
Under Construction
A
Approved
P Planned
Legend
Initial Capacity
Yingkou (3 mtpa)
E
Existing
C
Terminal Under Construction Expansion
Dalian (3 mtpa)
A
Approved
Expansion planned: 3 mtpa
Planned
Qinhuangdao (2 mtpa)
Expansion planned: 1 mtpa
Liaoning
CNOOC
Qingdao (3 mtpa)
Beijing
PetroChina
Tangshan (3 mtpa)
Expansion planned: 3-7 mtpa
Sinopec
Hebei
Rudong (3.5 mtpa)
Caofeidian (3 mtpa)
XinAo Group
Expansion planned: 2.5 mtpa
Shandong
CLP
Shanghai (3 mtpa)
Rizhao (0.5 mtpa)
Expansion planned: 1 mtpa
EurOrient
Expansion planned: 3 mtpa
Jiangsu
Lianyungang
Zhejiang (3 mtpa)
Expansion planned: 3 mtpa
Zhejiang
Wenzhou (3 mtpa)
Fujian (2.6 mtpa)
Fujian
Expansion planned: 5 mtpa
Wenzhou
Guangdong (5 mtpa)
Guangxi Guangdong
E
Expansion approved: 6.6 mtpa
Hong Kong (up to 3 mtpa)
Zhuhai (3.5 mtpa)
Guangxi (3 mtpa)
Hainan
Hainan (2 mtpa)
Expansion Planned: 1 mtpa
29
LNG Supplies for China NWS Trains 4 and 5 There is no new supply from
LNG Supplies for China
NWS Trains 4 and 5
There is no new supply from these two trains that is available to
China
Gorgon LNG
In early September 2007, PetroChina signed a binding HOA with
Royal Dutch/Shell for 20 years of LNG supply at 1 mtpa. The
HOA covers the key terms of the transaction and the two parties
are aiming to conclude an LNG sales and purchase agreement
(SPA) before December 2008
MLNG
The Shanghai LNG SPA was signed on July 31, 2006 with
Malaysia LNG Tiga.
The contractual volumes will build-up from 1 mtpa to a plateau of
3.03 mtpa within three years of commencement of the contract.
The following table summarizes China’s supply and demand
balance until 2020
30
LNG Supplies for China (cont’d) Browse Basin Gas Project In September 2007, PetroChina signed a
LNG Supplies for China (cont’d)
Browse Basin Gas Project
In September 2007, PetroChina signed a non-binding
agreement including key commercial terms with Woodside
Petroleum for 15-20 years of LNG supply at 2-3 mtpa from
the proposed Browse Basin gas reserves. The agreement
is subject to conditions, including a final investment
decision on both Gorgon and the Browse project and
relevant government approvals.
Together with the Gorgon deal, PetroChina may target
either Rudong or Dalian LNG terminal for the combined
volumes of the two deals
31
LNG Supplies for China (cont’d) South Pars Phase 12 (Iran LNG) The capacity totals 10
LNG Supplies for China (cont’d)
South Pars Phase 12 (Iran LNG)
The capacity totals 10 mtpa. Sinopec signed an MOU
with NIOC in 2005 for 10 mtpa of LNG supply
Iran LNG has marketed more gas than the project can
supply and is facing serious delays
South Pars Phase 11 (Pars LNG)
Capacity totals 10 mtpa
PetroChina signed an HOA with Pars LNG for 3 mtpa over
25 years. The LNG supplies could be delivered to the
Dalian or Jiangsu terminals. Petronas/Total agreed to lift 6
mtpa and wish to make available 3 mtpa to PetroChina,
but PTTEP had an MOU for 3 mtpa
32
LNG Supplies for China (cont’d) China's Existing LNG Contracts (mtpa) Contract Start-Up Exporter Volume Date
LNG Supplies for China (cont’d)
China's Existing LNG Contracts (mtpa)
Contract
Start-Up
Exporter
Volume
Date
2006
2007
2010
2015
2020
NWS
3.3
2006
0.7
2.0
3.7
3.7
3.7
Tangguh
2.6
2009
-
-
1.5
2.6
2.6
MLNG
3.0
2010
-
-
1.0
3.0
3.0
Total
8.9
0.7
2.0
6.2
9.3
9.3
FACTS Base-Case LNG Demand
Forecast
0.7
2.0
6.2
15.3
32.6
China Uncommitted Demand
-
-
-
6.0
23.3
33
Is China Ready for High Priced Gas Imports? Evolution of Chinese Contractual Prices (DES) 6.0
Is China Ready for High Priced Gas Imports?
Evolution of Chinese Contractual Prices (DES)
6.0
July 2006
5.5
5.0
4.5
4.0
Sept 2006
3.5
Oct 2002
3.0
2.5
2.0
10
15
20
25
30
35
40
45
50
55
60
Crude Oil ($/bbl)
NWS to Guangdong
Tangguh to Fujian Renegotiated
MLNG to Shanghai
34
LNG ($/MMBtu)
Is China Ready for High Priced Gas Imports? (cont’d) What are the implications for PetroChina’s
Is China Ready for High Priced Gas Imports? (cont’d)
What are the implications for PetroChina’s two deals with
Royal Dutch/Shell for LNG supply from Gorgon LNG and with
Woodside Petroleum supply from the proposed Browse Basin
gas reserves in early September 2007?
Is China ready for high priced gas imports?
The answer is maybe, but there is a cap!
PetroChina’s deals are based on “resources pooling” and
“price pooling” strategies, which expensive LNG imports are
mixed with cheaper pipeline gas from domestic fields
CNOOC can use the same strategy to leverage against its
low-priced Guangdong and Fujian LNG, but only for short-
term trade and spot cargos
35
Is China Ready for High Priced Gas Imports? (cont’d) As such beyond the “pooling,” there
Is China Ready for High Priced Gas Imports? (cont’d)
As such beyond the “pooling,” there is a limitation to how far
China can go to accommodate higher prices of imported LNG
After all, powerplants in China cannot afford prices of
more than US$4/MMBtu
However, China has been accepting higher prices gradually
US$3.2/MMBtu for Guangdong LNG
US$3.5/MMBtu for Fujian LNG
US$5.9/MMBtu for Shanghai LNG
And now US$10/MMBtu for PetroChina deals
The mindset has changed. After all, the NDRC approved the
Shanghai LNG prices and PetroChina deals
However, the US$10/MMBtu cannot be sustained for most
China deals
36
Concluding Remarks for China China will rely on three sources to meet its future gas
Concluding Remarks for China
China will rely on three sources to meet its future gas
demand: domestic resources, imported LNG, and
imported pipeline gas
The biggest challenges facing the Chinese natural gas
markets and the sector as a whole lie in four areas:
prices, market development, distribution networks, and
foreign investment in China
For gas imports, with the Shanghai LNG deal and
PetroChina’s two HOAs, there is a signal that China is
moving towards a higher gas price environment.
However, China still cannot afford prices that are too
high on a permanent basis!
37
Thank You 38
Thank You
38