“changing market dynamics – challenges & opportunities” · 3. changing market dynamics...

27/01/2011

“Changing Market Dynamics –

Challenges & Opportunities”

By:

Datuk (Dr) Abdul Rahim Hashim

President

International Gas Union (IGU),

Malaysian Gas Association (MGA)

21st September 2010

Singapore

1

“The International Buyers and Sellers meet in Asia”

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1. Introduction – Brief on IGU

3

Worldwide and non–profit organisation established in1931

Promotes technical and economic progress of the gas industry

Emphasising sound environmental performance worldwide

Increased focus on strategic and policy issues

Cooperation with IEA, United Nations, World Bank, IEF and others

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74 Charter members

33 Associate members

11 Affiliated members

As of April 2010

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2. Global Energy Scenario until 2030

0

100

200

300

400

500

600

700

1980 2005 2030

Energy demand

Quadrillion BTUs

Average growth of 1.2% p.a.

2005 - 2030

0

2

4

6

8

1980 2005 2030

Population

Billions


01020304050607080

1980 2005 2030

GDP

Trillions in 2005 Dollars


World’s population to increase from 6.7 billion today to 8.0 billion by 2030

GDP to expand from USD 20 Trillion in 1980 to USD 80 Trillion by 2030

The world will use 35% more energy by 2030 than in 2005 level!

Source(s): ExxonMobil 2009

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Power Generation

38%

Transportation18%

Industrial27% Residential/

Commercial16%

Gas End Use by Sector 2009

Power Generation

40%

Transportation18%

Industrial28% Residential/

Commercial16%

Gas End Use by Sector 2030

Sector CAGR

1) Power Generation 1.7% p.a.

2) Industrial 1.5% p.a.

3) Transportation 1.2% p.a.

4) Residential / Commercial 0.8% p.a.

This is due to a radical shift to use less-carbon-intensive fuels such as natural

gas to generate electricity

By 2030, it will account for 40% of all energy demand, representing 55% of the

total growth in energy demand

Source(s): ExxonMobil 2009, EIA/IEO 2009, PETRONAS 2009

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Liquids 1.3%

Natural Gas 2.0%

Coal 2.1%

Nuclear 1.7%

Other 3.0%

CAGR Total World

Fuel Consumption,

2010-2030

0

100

200

300

400

500

600

700

800

19902005

20062010

20152020

20252030

Qu

ad

rill

ion

Btu

World’s Primary Energy Mix

Other Nuclear Coal Natural Gas Liquids

Fossil

fuels

Natural gas is the fastest growing energy source.

By 2030, global natural gas demand will be 55% higher than it was in 2005!

Source(s): EIA/IEO 2009, PETRONAS 2009, ExxonMobil 2009

% of natural gas

from total energy mix

1990-2030

1990 22%

2005 23%2010 23%

2030 24%

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0 20 40 60 80

Europe

S&C America

N America

Africa

Asia Pacific

Russia & CIS

Middle East

6.12

7.31

8.87

14.65

15.39

56.78

75.91

Proven gas reserves at end 2008

Trillion cubic metres (Tcm)

Top 3 gas producing

countries:

1) Russia = 43.30 Tcm

2) Iran = 29.61 Tcm

3) Qatar = 25.46 Tcm

Total 2008 world’s proven natural gas = 185 Tcm (~6,533 Tcf)

The global rise of LNG business is imperative to satisfy the world’s rising energy demand!

0

10

20

30

40

United States

Europe Asia Pacific

2010 Market Study

Billions of Cubic Feet

per Day

0

10

20

30

40

50

United States

Europe Asia Pacific

2030 Market Study

Billions of Cubic Feet

per Day

Source(s): BP Statistical Review, ExxonMobil 2009, Cedigaz

0

20

40

60

80

100

1995 2000 2005 2008

Africa

Americas

Asia Pacific

Europe

Middle East

Historical growth of LNG Export volumes (billion cubic metres)

Local

production: ,

Imports: ,

Growth of LNG

import volumes

for 3 key gas

markets in 2010

US 4.0 Bcfd

EU 7.0 Bcfd

AP 16.0 Bcfd

Growth of LNG

import volumes

in 3 key gas

markets in 2030

US 12.0 Bcfd

EU 12.0 Bcfd

AP 38.5 Bcfd

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• Kuwait

Total % change 0.7%

• Spain, France, Belgium,

Turkey, UK, Portugal,

Italy, Greece

Total % change 23.5%

10

3. Changing Market Dynamics

NWE

10.1 mtpa

Rest of

Europe

1.3 mtpa

N. America

2.0 mtpa

S. America

2.1 mtpa

Spain

-1.6 mtpa

M. East

0.7 mtpa

India

0.9 mtpa

China

2.2 mtpa

Jap, Korea,

Taiwan

-6.6 mtpa

2009 LNG Demand by key markets

Modest growth in total LNG imports of 5% was registered in 2009, notably in the Americas and Europe.

The U.S market was seen as a safe anchor for LNG. Despite the robust U.S shale gas production, LNG

cargoes still flowing notably in the north east enjoying a significant basis premium.

Middle East has became an LNG demand centre.

Spanish LNG demand has dropped significantly due to reduced consumption.

The relatively strong LNG import growth in China and India (+3.1 MTPA combined) were insufficient to

cushion the plunge in Japan, Korea & Taiwan (JKT) LNG imports.

Source(s): PETRONAS 2010, FACTS 2010, Wood Mackenzie 2010

Total LNG Imports in

Asia (2008 – 2009)

• Japan, Korea, India

Taiwan, China

Total % change -2.9%


Europe (2008-2009)Total LNG Imports in

Middle East(2008-2009)

•U.S, Mexico, Argentina,

Puerto Rico, Dominican

Republican, Brazil,

Canada, Chile

Total % change 36.5%


Americas (2008-2009)

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Source(s): Wood Mackenzie 2010, Cedigaz, BP Statistical Review of World Energy

The long-term view of the LNG industry especially in the LNG demand side looks more bearish than bullish!

Could the LNG industry be classified as a cyclical business that has a habit of changing?

Market is soft due

to significant new

supply and

weaker demand

Some supply may

be held back

Liquid markets

likely to absorb

the surplus

(notably the US)

Market tightens

through 2012/2014

because of limited

FIDs in 2006 to

2008

Long term potential excess capacity

Significant competition for demand

More perception of over-supply

could adversely impact prices via

supply connection

Development of some capacity will

be deferred

0

100

200

300

400

500

600

1995 2000 2005 2007

World Total Pipeline Trade (in billion cubic metres)

Historical

Key legend:

Projection

0

200

400

600

800

1000

1200

2012 2017 2020

World Total Pipeline Trade (in billion cubic metres)

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1 Indonesia, Malaysia and Singapore2 Includes pipeline imports to China; excludes gas from Malaysia and Indonesia dedicated to intra-ASEAN LNG export

0

100

200

300

400

20102020

Regional LNG Demand Growth

Europe 8.3% Asia 4.9%

S. America 5.6% N. America -3.8%

MTPA

Asia LNG Incremental Demand Growth

(2010 – 2020)

0%

25%

50%

75%

100%

Asia

China 31% India 11%

Japan 20% Others 19%

S. Korea 19%

% Demand Growth

Emerging Asia is likely to be the main growth market for gas

globally, notably India and China with growth rate of 8% and

9% respectively.

Asia is expected to remain the largest LNG consumer while

Europe will experience the fastest pace of LNG growth.

Source(s): BP Statistical Review, IEA, McKinsey analysis, Wood Mackenzie, PETRONAS

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2009 2010 & beyond

LNG markets

Supply flow

LNG markets

Supply flow

Clear linkage between American, European,

Middle East & Asian gas markets.

Starting to open up access to LNG

worldwide

Greater overlap between global LNG markets

with ample LNG supply

Wider access to gas market through LNG

established

Source(s): RWE 2010

27/01/201114


Interest of importing LNG has increased significantly. Current regas capacity is about 470 MTPA.

To date, a number of 75 projects which are located in 22 countries, exist and are in operation.

If all project proposals come online, the figure could go as high as 780 MTPA by 2020 with an

overall import terminals of 176 projects that are located in a total of 36 countries.

Source(s): PETRONAS 2009, LNG Review 2010 – Petroleum Economist, Cedigaz 2010

1) Chile 7) Japan

2) China 8) Netherlands

3) France 9) Spain

4) India 10) Thailand

5) Italy 11) UK

6) Mexico 12) US

• Total under

construction = 19 projects

• Total capacity = 118.90 MTPA

• Total speculative = 33 projects


1) Canada 7) Italy

2) China 8) Mexico

3) Cyprus 9) Spain

4) France 10) UK

5) India 11) Uruguay

6) Ireland 12) US

• Total planned = 47 projects


1) Bahamas 11) Japan

2) Canada 12) Netherlands

3) China 13) Pakistan

4) Croatia 14) Philippines

5) France 15) Poland

6) Germany 16) Singapore

7) India 17) South Korea

8) Indonesia 18) Spain

9) Italy 19) UK

10) Jamaica 20) US

Potential import total:

• Number of projects = 176

• Import capacity = ~780 MTPA

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4. Challenges & Opportunities: Mitigating risks & challenges

Unprecedented demand growth and import needs are greater than expected.

Potential impact from the unconventional gas development in key gas

importing countries especially Asia and Europe.

Unsure on the pace of LNG projects coming online.

Uncertainty over the supplier’s behaviour in channelling gas/LNG volume to

end-customers

Source(s): GAIL (India) Limited, FICCI , McKinsey & Company – 2010, FACTS 2010

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4. Challenges & Opportunities: Harnessing potential opportunities

Opportunities to become LNG volume offtakers that may bolster supply position.

Enhance capabilities towards unconventional gas sector through selective

pursuit of regional opportunities.

Continuously build and enhance technical know-how in stranded gas

technologies (particularly FLNG) to broaden global gas portfolio

Source(s): PETRONAS 2010, GAIL (India) Limited, FICCI , McKinsey & Company – 2010

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5. Closing Remarks

It is abundant, affordable and acceptable

Clean, efficient, versatile and environmental friendly fuel

Continue to play a substantial role in global energy demand

Basis for sustainable economic growth

Natural gas

– major part of the long term energy solution

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5. Closing Remarks

“GAS : SUSTAINING FUTURE

GLOBAL GROWTH”

Kuala Lumpur Convention Centre

4 to 8 June, 2012

CHARMING COUNTRY, COLOURFUL CITY

“changing market dynamics – challenges & opportunities” · 3. changing market dynamics...

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