analysis to help you understand the future of...
TRANSCRIPT
1 October 2, 2018
Analysis to help you understand the future of energy
Clean energy Advanced transport
Commodities Digital industry
Solar Wind Storage Impact on power & utilities
Frontier power
Electrified transport
Autonomous driving
Shared mobility
Impact on transport
Impact on oil & power
LNG & gas
Oil & products
Power
Decentralized energy
Internet of things
Automation & advanced analytics
Impact on industrials and energy
Carbon
Advanced materials
2 October 2, 2018
500 Bloomberg research professionals in 19 locations
San Francisco
Washington DC
Sao Paulo
Cape Town Sydney
Singapore
Zurich Munich
New Delhi
Hong Kong
Beijing New York
North America 210
South America 6
Europe 160
Africa 30
Asia Pacific 95
Tokyo Milan
Shanghai
London
Mumbai
Dubai
Seoul
Houston
* Part of the Bloomberg LP network of 19,000 employees in 176 locations.
3 October 2, 2018
Contents
Power markets
Demand – Global 3
Demand – APAC 9
Demand – Europe 24
Demand – Middle East & Africa 31
Demand – Latin America 33
Supply – Global 36
Supply – North America 40
Supply – Rest of the world 44
Contracts & Pricing 51
4 October 2, 2018
Source: ANEEL, ONS, CCEE, XM, BloombergNEF
Brazil installed capacity
Colombia installed capacity
Power markets at a glance
Large hydro65%
Natural gas15%
Coal8%
Oil & diesel6%
Small hydro5%
Biomass & waste1%
17GWLarge hydro
61%Biomass &
waste9%
Wind8%
Natural gas8%
Oil & diesel5%
Small hydro4%
Coal3% Nuclear
1% Solar1%
158GW
5 October 2, 2018
0%10%20%30%40%50%60%70%80%90%
100%
Colombia Brazil Venezuela Peru Argentina Chile Mexico
Large hydro Natural gas Oil & diesel Coal Nuclear Wind Small hydro Biomass & waste Geothermal Solar
Source: XM, ANEEL, MPPEE, Peru Ministry of Energy and Mining, CAMMESA, CNE, PRODESEN, BloombergNEF
Power market structure
158GW 17GW 34GW 13GW 37GW 23GW 76GW
Seven largest regional markets, ranked by large hydro share
6 October 2, 2018
0
100
200
300
400
500
600
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
MMtpaWest AfricaRussiaAustraliaEast AfricaQatarNorth AmericaRussiaNorth AmericaAustraliaOtherWest AfricaNorth AfricaIndonesiaMalaysiaQatarDemand - BaseDemand - HighDemand - Low
Hig
hly
likel
y an
d 'li
kely
' pr
e-FI
D
Ope
ratio
nal,
unde
r co
nstr
uctio
nor
pos
t-FID
Demand: Global supply surplus is brief over 2020-21. Long-term demand growth is steady, South and Southeast Asia are key drivers. By 2030, 450MMtpa of the fuel is needed, driven by Asia (86%).
Supply: With two new FIDs taken in 1H 2018, global post-FID supply capacity peaks in 2021 (392MMtpa). 7 projects take FID in mid-term, potentially adding 172MMtpa of supply capacity by 2030.
Contracts: Selling new LNG term contracts continues to be challenging, only 7.1MMtpa of supply signed in 1H 2018. Of this, 41% was short-term, buyers increasingly prefer short tenure.
Spot prices: Winter spot prices surge higher due to resistant oil prices, peaking heating demand and the U.S. – China trade war, but anticipated overcapacity brings downward pressure in 2020-21.
Source: Bloomberg NEF, Poten & Partners, Customs. For data on individual projects and country-level demand figures click web/ terminal. Note: The likelihood of a project being built by 2030 is assessed based on the project’s regulatory stage, project size, infrastructures, developers’ financial strength, offtake contracts, and sovereign risks.
Strong demand in China and South Asia boost LNG trade in 2018-19
Global LNG demand/supply-capacity balance
308MMtpa Global LNG demand in 2018 (up 8.5% year-on-year)
86% Average utilization rate of LNG export plants in 2020-21
450MMtpa Global LNG demand by 2030
Forecast
7 October 2, 2018
Demand – Global Asia accounts for 86% of global LNG demand growth in 2017-30
8 October 2, 2018
Source: Bloomberg NEF, Poten & Partners, customs data. Note: Only includes net importing countries.
Global LNG demand rose 6.3% in 1H 2018, led by China LNG import changes by country
1H 2017 versus 1H 2016
-4 -2 0 2 4 6 8
EgyptDubaiSpain
UKJapan
ArgentinaGreecePoland
SingaporeMexico
PakistanIndia
TaiwanSouth Korea
China
MMt
Demand – Global
● The world consumed 149MMt of LNG in 1H, 6.3% (8.9MMt), higher than a year ago.
● China led the way with LNG imports surging 7.7MMt. New environmental policies push its annual LNG demand to a record high.
● South Korea imported 2.2MMt more LNG to increase gas power generation with much of its nuclear capacity under maintenance.
● Egypt made the biggest cut in LNG imports thanks to fast ramp-up of production at Zohr.
● Spain and the U.K. reduced LNG imports as both increased pipeline gas imports.
9 October 2, 2018
Source: Bloomberg NEF. Note: *India included in South Asia on this slide, whereas in other slides in this report South Asia only includes Pakistan, Bangladesh, and Sri Lanka.
86% of future LNG demand growth in 2017-30 is from Asia
Demand - Global
South Asia*
-7.4MMtpa +44MMtpa
+9.5MMtpa +53MMtpa
+61MMtpa
+14MMtpa
Asia 143MMtpa
+7.1MMtpa
Japan, Korea, Taiwan
China Southeast Asia
Middle East Europe Latin America LNG bunkering
ROW total 24MMtpa
Global demand growth 167MMtpa
● Global LNG demand to grow from 284MMtpa (2017) to 450MMtpa (2030), adding 167MMtpa (CAGR 3.6%).
● Asia is the core growth driver, buying an additional 143MMtpa of LNG, accounting for 86% of the world’s growth.
206
143
35078
23100
0
100
200
300
400
500
2017 2030
MMtpa
RoW
Asia
10 October 2, 2018
16%
30%
13%6%
14%
7%
2%2%
6% 6%
284MMtpa
Source: Bloomberg NEF, Poten & Partners, customs data. Note: South Asia includes Pakistan, Bangladesh and Sri Lanka.
Demand growth to slow but will stabilize from 2022
Incremental changes in LNG demand 2017 2030
13%
12%
10%
6%
20%
9%
10%
11%
2%4%
1% 2%
450MMtpa-15-808
152330
2018 2020 2022 2024 2026 2028 2030
MMtpa
Japan China South Korea Taiwan India South Asia Southeast Asia Europe Middle East Africa Latin America LNG bunkering
Demand – Global
● Global demand grows in 2018 by 24MMtpa, reaching 308MMtpa. Growth slows over 2019-20, rebounding in 2021 and will remain steady until 2027 before accelerating again.
● 2019 sees a 12MMtpa increase to global demand, driven by China. After that, Japan nuclear restarts pushes down average utilization of export plants to 86% over 2020-21, the lowest in history.
● Europe’s LNG demand will be modest until the Groningen gas field retires toward the end of 2020s.
● Shrinking power gas demand due to fast-growing renewables and batteries will restrict the growth of European LNG imports throughout 2030.
11 October 2, 2018
80%85%90%95%
100%105%110%115%
2018 2019 2020 2021 2022 2023 2024 2025
Utilization
High case
Base case
Low case
Utilization of post-FID supply capacity based on demand scenarios
Annual upside (+) and downside (-) potential over base-case scenario
Demand uncertainty increases over time
Source: Bloomberg NEF.
-70
-50
-30
-10
10
30
50
70
2018 2020 2022 2024 2026 2028 2030
MMtpa
EuropeSri LankaBangladeshPakistanIndiaJapanSouth KoreaChina
Demand – Global
● Key variables: The strength of environmental policies and economic growth in China and South Korea, China domestic gas production, power demand growth and lead time of infrastructure build-out in South Asia, pace of renewables penetration in various markets.
● Through 2025, there is more upside potential in South Asia. With market in modest surplus (average utilization of export plants ~86% during 2020-21) LNG prices will see downward pressure, in turn likely to drive up demand in price-sensitive markets India and South Asia.
12 October 2, 2018
Demand – APAC China to become the world’s biggest LNG importer in 2022
13 October 2, 2018
Source: National Development Reform Commission via Bloomberg Terminal, China customs, Bloomberg’s LNG Berth Visit (BV) database.
China’s quarterly LNG imports
China: strong growth in shoulder season sets a higher base
Monthly gas consumption
5.1 4.4 4.6 5.5 6.0 5.5 6.48.2 7.8 8.1
9.7
12.7 12.911.6
02468
101214
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017 2018
MMt
Australia Qatar Malaysia Indonesia United States Other101214161820222426
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Bcm
2018
2017
2016
2015
Demand – APAC
● Sustained economic growth, advancing environmental policies, and a strong recovery in power demand growth have boosted gas usage.
● China imported a record 24 MMt in 1H2018, a 50% surge compared to 1H 2017. In our base-case scenario, we expect China to import 51MMtpa of LNG for the full year, 13MMtpa higher than 2017.
● Improving air quality continues to be a critical driver of the gas market. Regulator released a Blue Sky Defense Three-Year Action Plan (2018-2020) in July 2018.
14 October 2, 2018
Source: Bloomberg NEF, China Customs via Bloomberg Terminal. Note: For the proposed LNG receiving terminals, we put the expected startup time all as 2023.
China: LNG terminals are critical to unlock China’s LNG demand
Demand – APAC
0
20
40
60
80
100
120
140
160
180
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Commissioned Under construction Approved ProposedLNG demand forecast Historic LNG demand Contracted volume
ForecastMMtpa
● Some 82.3MMtpa of LNG import capacity has been proposed to come online post 2022, but not all can get government approvals.
● China has a total of 66.4MMtpa of commissioned LNG import capacity to date.
● The average terminal utilization rate is expected to climb to 77% in 2018, an increase from 68%.
● Many LNG storage tank expansion projects are under construction or planned, will help existing terminals to quickly ramp up capacity to offload cargoes.
15 October 2, 2018
Source: Bloomberg NEF Source: Bloomberg NEF, Ministry of Finance Japan. Note: As some level of volume flexibility is available in term contracts, Japan can still buy from the spot market if prices are cheaper there.
Japan: oil-to-gas switch will support short-term LNG demand Japan’s LNG demand by sector
Demand – APAC
0102030405060708090
100
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
MMtpa
Other
City gas
Power
High case
Low caseBase case
Forecast
● Japan’s LNG imports declined just 2.7%, or 1.2MMt in 1H 2018 compared to a year earlier despite a 38% increase in nuclear generation with four nuclear reactors restarted in the period.
● In 2H we expect demand to rise 13% from 1H to an annual total of 87MMtpa. Fuel switching from oil to gas due to cost concerns in the power and city-gas industrial sectors will be the core driver.
16 October 2, 2018
0
20
40
60
80
100
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
MMtpa
Destination-restricted contracts Destination-flexible contracts Spot volume
High case
Low caseBase case
Forecast
Source: Bloomberg NEF
Japan: the battle begins between contracted LNG and coal Japan’s LNG demand versus contracts
Demand – APAC
● As nuclear power continues to return, Japanese buyers face a challenge in how to deal with the over-contracted volumes which are in some cases destination restricted.
● From 2018, Japanese buyers’ contracted LNG volumes will rise as they start to receive volumes from newly commissioned supply projects that they invested in years ago (Ichthys, Wheatstone).
● From 2019, completion of new U.S. supply projects will provide more contracted volumes to Japan.
17 October 2, 2018
-4-3-2-101234567
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
GW
Nuclear
Coal
0
10
20
30
40
50
60
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
MMtpa
Power generation City gas - residentialCity gas - Industrial City gas - commercialCity gas - transport & others Other
HighcaseBase caseLowcase
Forecast
South Korea: lower fuel tax gains dwarfed by new coal and nuclear
South Korea’s LNG demand and contracts
Source: Bloomberg NEF, K-stats
Term contracts
Net additions of nuclear and coal capacity Planned by government
Demand – APAC
● Fuel tax cut on gas and raised on coal in July 2018 to promote LNG-fired power generation, but expected to have limited impact on LNG demand
● South Korea’s future LNG demand will still largely hinge on the availability of non-gas baseload power.
● Over 2020-23, appetite for gas power will fall due to 8.3GW of net addition of coal and nuclear capacity coming online before bouncing back as aged nuclear and coal plants start to retire.
18 October 2, 2018
Source: Bloomberg NEF. Petroleum and Natural Gas Regulatory Board.
India: LNG demand supported by weak domestic gas supply
LNG demand in India 1H sector gas supply change 2018 vs 2017
45%
48%
51%
54%
0
4
7
11
1H 2
016
2H 2
016
1H 2
017
2H 2
017
1H 2
018
MMtpaPower
City gas
Fertilizer
Industries
% of LNG in totalgas supply
-0.4-0.1
0.2 0.30.7
0.30.3
0.3
-0.8
-0.4
0.0
0.4
0.8
Fertilizer Power City gas Industrial
Bcm
LNG imports
Domestic gas
+1.6Bcm
no change
Demand – APAC
● India’s LNG imports soared 11%, or 1.3MMt, in 1H 2018 to 10.3MMt compared to 1H 2017.
● Higher gas demand across all sectors and stagnating domestic supply contributed to imports growth.
● The fertilizer sector, the second-largest LNG consumer in India, drove the growth in imports, as its gas supply from domestic sources was cut by 0.4Bcm or 12%.
19 October 2, 2018
Source: Bloomberg NEF.
India: infrastructure expansion is critical to increase LNG demand India’s LNG demand, contracts and import terminals
Demand – APAC
0102030405060708090
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
MMtpa
Operational Under construction PlannedProposed Demand Total contracts
Low-case demand ($8-10/MMBtu)
Forecast
High-case demand ($4-6/MMBtu)
MMtpa
● India’s long-term LNG demand depends on its industrial growth, city gas network expansion, and domestic gas production outlook.
● Some 37MMtpa of import terminals are set to come online in 2019-22, but downstream infrastructure such as pipelines are yet to be developed to enable high utilization of these terminals.
● LNG demand reaches 42MMtpa by 2030.
20 October 2, 2018
South Asia (ex-India) LNG demand
South Asia: declining gas reserves to boost LNG demand
Source: Bloomberg NEF.
Demand – APAC
0
10
20
30
40
50
60
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
MMtpa
Pakistan Bangladesh Sri Lanka
High case
Low case
Forecast
● Pakistan’s LNG imported surged 40% in 1H 2018 from a year earlier, as the BW integrity FSRU started operation in November, 2017.
● Bangladesh received its first LNG cargo in April 2018, delivered by Excelerate Energy’s 3.8MMtpa FSRU from Qatar.
● South Asia demand reaches 43MMtpa by 2030 as domestic gas reserves decline in both Pakistan and Bangladesh while gas demand continues to grow
21 October 2, 2018
Southeast Asia: Thailand and Singapore to drive the growth
Source: Bloomberg NEF
Southeast Asia LNG demand
Demand – APAC
0
10
20
30
40
50
60
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
MMtpa
Myanmar
Vietnam
Philippines
Indonesia
Singapore
Thailand
Forecast
● Southeast Asia’s LNG demand was 22% higher in 1H 2018 than 1H 2017, primarily because Singapore imported more LNG to fuel its power plants. Thailand, the largest importer in the region at present, saw its demand stay relatively flat in the period.
● SE Asia LNG imports will see a substantial increase post 2020, driven by Thailand and Singapore. By 2030, imports reach 50MMtpa, or 10% of global demand.
22 October 2, 2018
Cilacap FSRU Benoa FRU+FSU Gresik
Java FSRU Lampung FSRU
Jurong Island 1-3 Pengerang
Melaka FSU Arun
EGAT FSRU Map Ta Phut I & II
Nong Fab Son My
Thi Vai
Batangas
Batam
Existing Under construction
Pagbilao Kanbauk FSRU
Ahlone FSRU
Mee Laung Gyaing FSRU
Planned or announced
Map Ta Phut I extension
Source: Bloomberg NEF
Southeast Asia: regasification project updates LNG import terminals in Southeast Asia
Planned areas for small-scale terminals in Indonesia
Jurong Island 4
Demand – APAC
● Developing LNG import infrastructure will be the key to unlocking demand in SE Asia.
● Planned and announced regasification capacity in the region can equip the region with 77MMtpa by 2030, triple the 2018 level.
● However, headwinds are strong in developing these projects.
23 October 2, 2018
Demand – Europe Renewables and batteries to eat into LNG demand in the long run
24 October 2, 2018
European gas supply European gas demand (base case)
Lower gas-to-power demand reduces imports
Source: Bloomberg NEF, Eurostat. Other is other EU-28 production. Source: Bloomberg NEF, Eurostat
074148222296370444
0100200300400500600
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
MMt/yearBcm/year LNGAzerbaijanNorth AfricaRussiaNorwayOtherU.K.Netherlands
074148222296370444
0100200300400500600
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
MMt/yearBcm/year PowergenerationResidential &CommercialTransport
Industry
Other sectors
Forecast Forecast
Demand – Europe
● Our base-case scenario expects 38MMtpa of LNG imports to Europe (excluding Turkey) in 2019, 40MMtpa in 2025 and 50MMtpa in 2030.
● A more pessimistic view of gas demand in the power sector in the long term reduces Europe’s overall need for imports and lowers our forecast of LNG import requirements. In BNEF’s 2018 New Energy Outlook, renewables and batteries are expected to play a greater role in the power system in the long term compared to prior forecasts
● Faster-than-expected phase out of the Groningen field will boost demand for imports in the 2020s.
25 October 2, 2018
Demand – Latin America Rising local gas supply and renewables reduce longer-term LNG demand
26 October 2, 2018
Americas: LNG imports down 3.8% from a year earlier LNG demand in Americas by country
Source: Bloomberg NEF.
Demand – Latin America
0
5
10
15
20
25
2010 2014 2018 2022 2026 2030
Colombia
Puerto Rico
Dominican Republic
Chile
Mexico
Argentina
Brazil
MMtpa Forecast
● Longer term, rising gas production in Brazil and Argentina, the expansion of renewables in Brazil and Chile, and increasing pipeline imports of U.S. pipeline gas in Mexico produce a bearish outlook for LNG imports to the region.
● Latin America imported 7.5MMtpa of LNG in 1H 2018, down 3.8% from a year earlier. Increased imports by Mexico were not enough to offset the big fall in peer countries led by Brazil and Argentina.
27 October 2, 2018
Americas: Brazil and Argentina, the diminishing LNG importers
Source: Bloomberg NEF.
Brazil natural gas balance
0%
10%
20%
30%
40%
50%
60%
0
20
40
60
80
100
120
2013 2014 2015 2016 2017 1H 2018
Mcm/day
Domestic gas production Pipeline importsLNG imports LNG % of imports
Demand – Latin America
● In 1H 2018, Brazil imported just 0.25MMt of LNG, or less than half 2017’s level over the same period.
● Contributions from wind energy have grown sharply since 2013, rising from virtually nothing to 7.4% of total generation in 2017.
● Power supply from wind energy has eaten into gas’s role in meeting swing demand during low-hydro output during the southern hemisphere’s winter months.
28 October 2, 2018
Supply – Global 171MMtpa of new supply will likely come online by 2030
29 October 2, 2018
Source: Bloomberg NEF, Poten & Partners. Note: Re-exporting countries are excluded.
LNG export change – 1H 2017 vs 1H 2018
Global supply: Australia, U.S. and Russia added new capacity
-2 0 2 4 6
Papua New GuineaAlgeriaNigeria
MalaysiaPeru
QatarAbu Dhabi
Equatorial GuineaBrunei
IndonesiaCameroon
OmanNorwayAngola
TrinidadRussia
USAustralia
MMt
Supply – Global
● 1H 2018 exports totaled 150MMt, up 6% from the same period last year as new trains added supply to market.
● Australia’s exports increased 4.9MMt largely due to ramp up at Gorgon and Wheatstone.
● U.S. exports added 2.7MMt as Cove Point LNG came online in March 2018 to become the second U.S. LNG export facility.
● Russia had a 39% increase in exports as Yamal LNG Train 1 loaded first cargo in December 2017 and T2 came online in 2018.
● Trinidad & Tobago’s Atlantic LNG improved exports with newly developed supply.
30 October 2, 2018
0
2
4
6
8
10
12
14
16
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2020 2021 2022 2023
MMtpa
2
3
1
43
2
1
3
24
54
Source: Bloomberg NEF. Note: Projects include only those under construction. Small-scale LNG projects excluded. Start up dates are based on BNEF’s assumption and nameplate capacity is shown.
Incremental supply additions
Supply additions: two FIDs in 1H 2018 to add supply by 2021
1 2 3
Elba Island Cameron LNG Freeport LNG
4 5
Corpus Christi Sabine Pass
Australia
Asia
Russia
Africa
United States
Total new supply of 78MMtpa
Supply – Global
● Of the existing project construction pipeline of 78MMtpa, 50MMtpa is from the U.S.
31 October 2, 2018
U.S. LNG exports since February 2016 total 1,443Bcf
Korea and Mexico are the top buyers of U.S. LNG in 2018
Source: Department of Energy, Bloomberg NEF Note: Data through August 2018.
Source: Bloomberg NEF. Note: Map made with Tableau. Data through August 2018.
Imports of U.S. LNG by region
109 32 3
175
705
585
0
100
200
300
400
500
600
700
800
900
1000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2016 2017 2018 (YTD)
Total Exports (Bcf)
Other Asia
China
South Korea
Other Latin America Mexico
Middle East
Europe
Total
Supply – North America
● Dominion Energy began exporting LNG from its Cove Point terminal in April.
● Asia cemented its role as the primary destination for U.S. LNG cargoes in 1H, taking 52% of all exports, with the bulk going to South Korea (21%) and China (12%).
● Mexico has held its lead as the single largest importer of U.S. LNG.
32 October 2, 2018
0
50
100
150
200
250
300
350
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
MMtpa
Source: Bloomberg NEF. Note: Baseline capacity is projects currently operational and under construction. See all project details on web/ terminal.
North America LNG Supply
90MMtpa of FIDs likely to happen to double U.S. export capacity by 2030
Operational & Under construction
Unlikely FIDs
‘Highly likely’ & ‘Likely’ FIDs
Source: Bloomberg NEF. Note: Unit cost is total estimated project capex over proposed liquefaction capacity. Map created in Tableau.
Unit cost of capex of North America LNG projects
Alaska LNG
LNG Canada
Goldboro LNG Jordan Cove
15 projects on U.S. Gulf Coast
Calcasieu Pass Magnolia LNG Driftwood Rio Grande LNG Texas LNG Sabine Pass (Train 6) LNG Canada
Forecast
Supply – North America
● Unit costs for U.S. Gulf Coast projects range between $420/ton and $640/ton, making the region the main base for future FIDs. 250MMtpa of projects are considering taking FID in the coming decade.
● Some 15 projects in the U.S. are now targeting FIDs in 2018-19. Of this, seven projects amounting to 90MMtpa will likely reach their goal. With 75MMtpa of export capacity scheduled to come online by 2021, that will double U.S. LNG export capacity to 160MMtpa by 2030.
● These seven projects are also the only ‘highly likely’ and ‘likely’ FIDs for the coming decade in our view.
33 October 2, 2018
Contracts & Pricing Rise of short-term contracts
34 October 2, 2018
Source: Bloomberg NEF. Note: *Based on contracts signed up to August 2018, contracts with no specified tenure are excluded. ** Includes merchant terminal buyers, LNG bunker supply contracts and others. ***Portfolio buyers are those that buy LNG volumes from various projects and combine them together to sell to end-users. By optimizing their LNG supply portfolios, portfolio suppliers are able to offer flexible and competitive terms in their sales contracts and win over their rivals. Traders are the large commodity trading houses. Above charts have not included contracts signed for pre-FID projects.
Contract tenures getting shorter and more traders securing offtake LNG contracts signed each year by tenure
Types of LNG buyers in total contract sales
Contracts & Pricing
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018*
MMtpa
>20 years
11-20 years
5-10 years
1-4 years0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013 2014 2015 2016 2017 2018*
Industrial &others**
Utility
Gas supplier
Portfolio buyers& traders***
National oil &gas company
● Volumes of new LNG term contracts signed each year since 2015 have been stagnating. In the first eight months of 2018, 7.1MMtpa of supply contracts have been signed, the same as a year earlier.
● 41% of the contracts signed in 2018 thus far are short-term (1-4 years), evidence of the increasing trend showing preference for short tenure among buyers.
35 October 2, 2018
0246810121416182022
Jan-13
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Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-23
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0246810121416182022
Jan-13
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Jul-24
Jan-25
Source: Bloomberg NEF, CME, Singapore Exchange. Note: Brent and Henry Hub futures {CMBQ <GO>} on 27 August 2018 were used in calculations. A $3/MMBtu fixed charge and $2/MMBtu shipping cost are assumed in the U.S. LNG price scenario given a rising oil price. The JCC forecast is built on the correlation between JCC and Brent.
LNG price scenarios in Asia
Future scenario $/MMBtu
A 13% JCC-linked contract price Average of JCC-linked contract price and low end of U.S. LNG price (dashed line) SLInG
Price range for U.S. LNG to Asia (short-run vs long-run cost)
JKM
Contracts & Pricing
● Spot LNG prices shot over $11/MMBtu in Asia during shoulder seasons in 2018, due to rising oil prices and temporary supply outages. Winter spot prices will likely surge higher, due to peaking heating demand and the U.S. – China trade war.
● Our price scenario suggests average spot LNG prices taking out seasonality would be around $6.8-7.7/MMBtu until early 2025, if oil prices stay close to the current futures.
36 October 2, 2018
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