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Current status and future prospects of natural gas markets in Asia

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IEEJ : December 2014. All rights reserved
Current status and future prospects of
natural gas markets in Asia
Japan-China Joint Symposium on Asian Oil & Gas
The 8th IEEJ/CNPC Research Meeting
Meeting-The
November 21
21, 2014
The Institute of Energy Economics, Japan
Tetsuo Morikawa
All Rights Reserved
IEEJ : December 2014. All rights reserved
Natural gas supply and demand
North America
Asia Oceania
Former Soviet Union
Af rica
Latin America
Middle East
Europe
North America
Asia Oceania
Former Soviet Union
Af rica
201
12
201
10
200
08
0
200
06
0
200
04
500
200
02
500
200
00
1,000
199
98
1,000
199
96
1,500
199
94
1,500
201
12
2,000
201
10
2,000
200
08
2 500
2,500
200
06
2 500
2,500
200
04
3,000
200
02
3,000
200
00
3,500
199
98
3,500
199
96
4,000
199
94
4,000
199
92
Bcm
199
90
Bcm
199
92
Demand
199
90
Supply
Latin America
Middle East
Europe
Source: Cedigaz
 Rapid supply and demand growth in Asia Oceania and Middle East
 Shale gas revolution pushing up the supply in North America
 Sluggish demand continuing in Europe
All Rights Reserved
1
IEEJ : December 2014. All rights reserved
LNG trades
Exports
Imports
Bcm
B
Bcm
350
350
300
250
200
150
Angola
Yemen
Russia
Equatorial Guinea
300
Singapore
Malyasia
Israel
Thailand
Netherlands
UAE(Dubai)
Kuwait
Chile
Canada
Brazil
Argentina
Mexico
Dominica
Puerto Rico
USA
Turkey
Norway
Peru
T i id d and
Trinidad
dT
Tobago
b
USA
Egypt
Nigeria
Libya
Algeria
Greece
Belgium
Italy
Portugal
Oman
Qatar
Spain
France
U.K.
India
UAE(Abu Dhabi)
Australia
China
Taiwan
S・Korea
Japan
M l
Malaysia
i
B
Brunei
i
250
200
150
Indonesia
100
100
50
50
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
0
1990
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
0
Source: Cedigaz
 Strong demand in Asia, but demand decrease in Atlantic led to little global demand
growth in 2013
 PNG LNG and QC LNG as new LNG projects in 2014
All Rights Reserved
2
IEEJ : December 2014. All rights reserved
Monthly LNG imports in Northeast Asia and Europe
Northeast Asia
Europe
Million Tonnes
18
Million Tonnes
9
16
8
14
7
12
6
Netherlands
UK
Turkey
Spain
China
10
Portugal
Italy
5
Greece
Taiwan
8
Korea
6
Japan
4
France
4
Belgium
3
2
1
2
0
0
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4
2010
2011
2012
2013
2014
8
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4
2010
2011
2012
2013
8
2014
Source: Custom statistics, IEA
 Imports in Jan-Aug 2014: 106.56MT in Northeast Asia (+2.26MT y/y),
23 55MT in Europe ((-2.70MT
23.55MT
2 70MT y/y)
 European imports still slow due to weak competitiveness of natural gas
All Rights Reserved
3
IEEJ : December 2014. All rights reserved
LNG export projects in North America
Cordova
Liard
三菱商事、中部電力 、 東京ガス、大阪ガス、
石油天然ガス・金属鉱物資源機構 (JOGMEC)
国際石油開発帝石 (INPEX)、
日揮
Cutbank Ridge
Pacific Northwest LNG
(石油資源開発(JAPEX))
国際石油開発帝石 (INPEX)、
日揮
三菱商事
Aurora LNG
(国際石油開発帝石 (INPEX)、日揮 )
LNG Canada
(三菱商事)
Triton LNG
(出光興産)
Cove Point LNG
2017年稼働予定
(液化加工:住友商事、
買主:東京ガス、関西電力)
買主:東京ガ
、関西電力)
伊藤忠商事
丸紅
White River mine
三井物産
住友商事
三井物産
住友商事
東京ガス
Permian Basin
住友商事
Freeport LNG
2018年稼働予定
(液化加工:中部電力、大
阪ガス、東芝)
Cameron LNG
2017年稼働予定
(液化基地:三井物産、JLI(日本郵船・三菱商事)
液化加工:三菱商事、三井物産、GDF Suez
買主:東京電力、東邦ガス、関西電力、東北電力)
 DOE authorized 9 projects
(about 80 MT/y) for export to
non-FTA countries
 Out of those, FERC approved
4 projects (53MT/y) for
construction
 Streamlined authorization
process being
b i implemented
i l
t d
 LNG export projects in North
America important in terms of
supply
l and
d pricing
i i
diversifications
日揮
三井物産
丸紅
大阪ガス
石油資源開発
(JAPEX)
日本企業が関与する
LNG輸出プロジェクト
シェールオイル・ガス
(確認済)
シェールオイル・ガス
コールベッドメタン
コ
ルベッドメタン
コールベッドメタン
All Rights Reserved
Source: IEA and company websites
4
IEEJ : December 2014. All rights reserved
Europe and Russia

Conflicts
Ukraine
Crisis
Asia
Shift
Source: Added on JOGMEC
All Rights Reserved
Conflict already
evident in terms of
the
h Thi
Third
dE
Energy
Package and pricing
of natural gas for
Europe (de-oil
indexation)
 Diplomatic relations
aggravated by
Ukraine Crisis
 Encouraging
E
i R
Russia
i
to shift to Asia
 EU controlling
gg
gas
demand, diversifying
supply sources
5
IEEJ : December 2014. All rights reserved
Natural gas demand/supply in China
Domestic production and imports
Gas infrastructures
Bcm
30bcm
18
38bcm
16
Domestic production
Pipeline gas imports
LNG imports
14
12
10
8
6
4
2
0
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4
2010
Source: JOGMEC
2011
2012
2013
8
2014
Source: China OGP
 Russian pipeline gas will contribute to control China’s
China s LNG
imports
All Rights Reserved
6
IEEJ : December 2014. All rights reserved
LNG spot and short-term deals
Spot imports/exports (2013)
Spot and short-term deals
Million Tonnes
70 Share of Spot and short-terms deals
27%
Middle East
60 Exported cargoes
Asia ,
Oceania, 9
Unknown
Unknown, Other 21
Other Middle Africa, 31
East, 4
30%
Latin America25%
North America
Europe
Other Asia 20%
China
h
India
15%
Taiwan
50 40 Americas (incl
(incl. Reload), 11
Other Europe (Reload), 69
30 Korea
10%
20 Nigeria, 57
Norway, 12
Japan
10 Trinidad Tobago, 113
Qatar, 34
5%
Imported cargoes
Source: GIIGNL
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0%
1996
0
0 Other Asia, 16
Unknown, U
k
65
Middle East, 3
Argentina, 102
Other Americas, 10
Americas
10
 64.98MT traded by spot and shor-term contracts in
2013 (+4.58MT y/y).
 Japan imported 21
21.69MT,
69MT sharing 33% of the total
total.
 Nuclear restart will push down spot imports
significantly.
All Rights Reserved
Europe, 8
Taiwan, 10
Brazil, 57
Thailand, 11
Mexico, 15
Korea, 19
Japan, 45
Source: ICIS Heren
7
IEEJ : December 2014. All rights reserved
Natural gas demand outlook in Asia
Mtoe
1500
AAGR
1980-2011
2011 2040
2011-2040
Ch in a
7.3%
6 3%
6.3%
In dia
12.6%
5 5%
5.5%
Japan
5.1%
0 2%
0.2%
Kore a
-
0 8%
0.8%
Taipe i Sin gapo r e
7.5%
-
2 7%
2.7%
1 7%
1.7%
Indonesia Malaysia Phi l i ppi nes Th ailan d Vie tn am Other A s i a
6.5%
3.4%
-
4.6%
8.9%
2.7%
-
4.1%
-
5.4%
6.2%
3.6%
1000
7%
500
China
India
Japan
Korea
Taipei
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Singapore
Hong Kong
Other Asia
Tech. Adv.
Japan
16%
India
21%
China
42%
11%
23%
0
1971
1980
1990
2000
2011
2020
2030
2040
Source: IEEJ
 China and India will lead the Asian demand growth.
All Rights Reserved
8
IEEJ : December 2014. All rights reserved
LNG supply/demand outlook
World
Asia and Middle East
Million Tonnes
1 000
1,000
Million Tonnes
600
Divertable capacity from Atlantic
Under planning
900
New projects with HOA/SPA signed
Under plannning
500
800
New projects with HOA/SPA signed
Existing
gp
projects
j
700
Hight demand
600
Existing projects
400
Low demand
High demand
500
300
Low demand
Low demand
400
200
300
200
100
100
0
2012
2015
2020
2025
0
2030
2012
2015
2020
2025
2030
Source: IEEJ
 New projects will ease LNG market towards 2020.
 Timely investment is the key to realize ample supply potential post 2020.
All Rights Reserved
9
IEEJ : December 2014. All rights reserved
International natural gas prices
$/MMBtu
25
20
15
10
5
0
Jan-00
Japan
Jan-02
Jan-04
Jan-06
Jan-08
LNG spot assessment price for Northeast Asia
Jan-10
UK
Spain
Jan-12
Germany
Jan-14
USA
Source: Energy Intelligence, EIA
 Asia premium of LNG still significant, yet spot prices dropped significantly in
this summer
All Rights Reserved
10
IEEJ : December 2014. All rights reserved
LNG pricing options for Asia
Hub pricing
Henry Hub,
NBP
Advantages
Disadvantages
Hubs
in Asia
Spot LNG pricing
• Already
available
• Lower
prices (for
now)
• Possible to
reflect
regional
market
balance
• Already
available
• Higher
volatility
• Asia market
balance not
reflected
• Not yet
available
• Higher
volatility
• Higher volatility
• Limited liquidity
(so far)
Adjustment within
pricing
g
oil-linked p
Link with other
fuels (Electricity,
Coal)
• Possibly the
quickest solution
• Rational for
power utilities
•Gas market
balance not
reflected
• Lack of power
market liquidity
 Rationality of oil-linked pricing being questioned
 Sustainable and rational p
pricing
g needs to emerge
g for mutual benefit between
sellers and buyers
All Rights Reserved
11
IEEJ : December 2014. All rights reserved
LNG Producer-Consumer Conference 2014
 Held on November 6th
 About 1,000 attendee from more
than 50 countries
Program
* Yoichi Miyazawa, Minister of
Economy, Trade and Industry
* Mohammed Bin Saleh Al-Sada,
Minister of Energy and Industry,
Q t
Qatar
Keynote
speeches
* Ian Macfarlane, Minister for
Industry, Australia
* Greg Rickford, Minister of
Natural Resources, Canada
* Maria van der Hoeven,
Executive Director, International
Energy Agency
All Rights Reserved
Session 1
LNG supply outlook & Actions
by producers
Session 2
LNG demand outlook & Actions
by consumers
Session 3
New movement towards
developing flexible LNG market
and change in LNG trade
Session 4
LNG technology developments
12
IEEJ : December 2014. All rights reserved
LNG Producer-Consumer Conference 2014
 Participants shared view on weakening Asian LNG market


Japan’s
p
import
p p
price can be 20-30% lower ((Minister Miyazawa)
y
)
New capacity in Australia will weaken LNG market (Minister
Macfarlane)
 Appeal from the US west coast LNG projects




LNG buyers accessible to cost-base LNG
Relatively shorter transportation distance
No Panama canal risk
Existing
g infrastructure available
 Still searching for alternative pricing to replace oil indexation



Price level vs Pricing
Hybrid pricing as a transitional measure
How will we establish Asian benchmark prices?
All Rights Reserved
13
IEEJ : December 2014. All rights reserved
Multilateral joint study group on LNG
 Proposed by IEEJ at the LNG Producer-Consumer Conference
2013
 Participants
 Members: Research institutes from LNG
importing/exporting countries, International organizations
 Observers: Government agencies
 Workshops in February and September in 2014
 Policy recommendations at LNG Producer-Consumer
Conference 2014(http://eneken.ieej.or.jp/press/press141106a.pdf)
 Cooperation between sellers and buyers, governments and
companies
i
 Pricing diversifications
 Flexible and transparent market developments
All Rights Reserved
14
IEEJ : December 2014. All rights reserved
Conclusions
 Natural gas supply and demand
 Demand strong in Asia
Asia, still weak in Europe
 LNG market being weakened
 Decreased spot LNG prices
 Issues in major countries
 Expectation raising for North American LNG
 Russia’s shift to Asia
 Supply diversifications by China
 LNG Producer-Consumer
P d
C
C
Conference2014
f
2014




Shared view on weaker market
US west coast LNG
How can Asian benchmark prices be established?
Flexible and transparent
p
LNG market needed
All Rights Reserved
15
Contact : [email protected]
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