Global LNG Dynamics and South – East Mediterranean Hydrocarbons Potential

Athanasios Pitatzis ! Workshop of SPE Kavala Section activities and

EMaTTech research advances !! Global Oil&Gas:

Black Sea & Mediterranean Exhibition and Conference Athens,Greece,23/09/2015

Presentation’s Contents

• Global LNG Dynamics – Facts and Data • South – East Mediterranean Hydrocarbons

Potential • Connect East Mediterranean Producers with

International Gas Markets via: 1. CNG – FCNG Cargos 2. FLNG – LNG Cargos 3. Pipelines

Global LNG Dynamics

The chart above illustrates the dynamics of the global LNG prices from May 2013 to July 2015

Global LNG Dynamics

Global LNG Dynamics

• LNG trade reached its second historical high, totaling some 241.1 MT the last year, in comparison with the recent years has decrease only 0.4 MT

• Spot LNG prices in the Asia Pacific and the Atlantic for September 2015 delivery being concluded at approximately $8.00/MMBtu. Also according to the FGE Energy Consultants and Bloomberg LNG prices may sink as low as $4 per million British thermal units by 2017 because of a glut and probably won’t rise above $8 before 2020.

• Global LNG market dominated by oil-indexed import contracts (74% versus 26% GOG), GOG competition has been growing particularly in liquid Northwest European gas markets such as those of UK, Belgium, Denmark, Germany, Ireland and Netherlands

Global LNG Dynamics

• According to the international media US LNG export contracts linked to the Dutch TTF instead of the US Henry Hub due to the difference in the price, $6 – 7/MMBtu VS $2-3/MMBtu

• USA Shale gas output increased the last years with final outcome additional LNG volumes coming on market from the USA. In the same time Europe seems an emerging market for US LNG due to the decrease on European gas production due to the decrease from Groningen gas field in the Netherlands

Global LNG Dynamics

• According to the International Gas Union:

Global LNG Dynamics

• According to the International Energy Agency:

Global LNG Dynamics

• According to the International Energy Agency:

South – East Mediterranean Hydrocarbons Potential

• Greece upstream sector • Cyprus upstream sector • Israel upstream sector • Lebanon upstream sector • Egypt upstream sector

Greece

• Prinos oil Field is the only producing reservoir in Greece

• Recent oil and gas exploration blocks was acquired by Energean Oil and Gas and Hellenic Petroleum

• Further efforts to attract foreign investors to invest in Greece oil and gas sector

• Introduce national strategy for the exploration and exploitation of hydrocarbons of the Greek Exclusive Economic Zone

Cyprus

• Aphrodite gas field is the only proven gas reservoir in Cyprus

• First priority for the country must be the development of Aphrodite gas reservoir by the companies and the connection of this field with international gas markets

• Further efforts to attract foreign investors to invest in Cyprus oil and gas sector

• Introduce a national strategy for Cyprus to become in the future a regional natural gas hub

Lebanon

• Border Issues with Israel regarding their exclusive economic zones

• Security issues, the country is located near to Syria

• Delays on the offshore license round which had launched since 2013

• Improve the efficiency of oil and gas government and regulatory agencies

• Introduce national strategy for the exploration and exploitation of hydrocarbons of the Lebanon Exclusive Economic Zone

Israel

• Border I ssues w i th Lebanon regarding their exclusive economic zones

• Security issues, the country is located near to Syria

• Improve the efficiency of oil and gas g o v e r n m e n t a n d r e g u l a t o r y agencies, for instance the dispute between Noble Energy and Delek with antitrust authority of Israel

• Introduce national export strategy for Israel proved oil and gas reserves

Source: Offshore Energy Today

Egypt

• According to Oil and Gas Journal and to U.S Energy Information Administration (EIA) until 1th of January 2015 Egypt holds 77 trillion cubic feet (Tcf) or 2,188 trillion cubic meters of proved natural gas reserves

• New discovery of Zohr gas field (30 Tcf)

• Introduce national strategy for the development of Egypt’s proved natural gas reserves, the dilemma of allowing exports?

East Mediterranean gas producers –International gas markets

Geopolitical Issues

Security Issues

Commercial Issues

Political Issues.

Natural Gas Reservoirs ofEast Mediterranean

Leviathan gas field -

IsraelAphrodite gas field - Cyprus

Tamar gas field - Israel

Zohr gas field - Egypt

5 Tcf 10 Tcf 22 Tcf30 Tcf

East Mediterranean – LNG Option for Exports

• The following options were mostly discussed during the last years: 1. To combine the Leviathan and Aphrodite volumes and ship LNG from the

Vassilikos LNG facility in Cyprus 2. To transport gas to Egypt, Idku, and re-export it to the EU (liquefying it,

shipping to Europe and re-gasifying) • Main Markets to export East Mediterranean gas are Europe and Asia

Pacific region

East Mediterranean – Pipelines Option

• East Mediterranean proposal pipelines projects: 1. East Med, technical diff iculties regarding the

construction and operation due to deep depth of the sea in the region

2. Pipeline from Cyprus to Turkey, geopolitically almost impossible scenario

3. Connection via undersea pipelines Cyprus and Egypt and Israel with Cyprus, strategic investment, promotes the cooperation between the 3 countries

East Mediterranean – CNG Option

• The commercially viable and politically neutral solution to export small volumes of natural gas (>5tcf) from Cyprus to Turkey seems to be Floating Compressed Natural Gas (FCNG)

• As the construction of the Coselle CNG ship was recently approved by the American Bureau of Shipping, this technological solution does make CNG an economical and flexible option for seaborne transportation of natural gas for distances of maximum 2,500 km

• From the security point of view for FCNG vessels are fit exactly for East Med region because can be located far from the coastline and therefore are not exposed to the same risks of terrorist activity as onshore infrastructure

Source: Sea NG

East Mediterranean – CNG Option

• According to the Sea NG: • Offshore Gas Production using CNG Ships and/or FLNG • The production vessel (or platform) is conventional and can be used

for both CNG and FLNG • Instead of compressing gas into a pipeline, reservoir gas is

compressed into CNG ships on a continuous basis

East Mediterranean – CNG Option

East Mediterranean – CNG Option

Source: Sea NG

Regional net-backs CNG vs. LNG vs. FLNG vs. Pipeline

Source: Sea NG

East Mediterranean Business Gas Export Strategy

Evaluate the regional and

international market dynamics

Evaluate the regional geopolitical

landscape

Implementation of the Business Gas Export Strategy

Conclusion

• To unlock the full potential of East Mediterranean Hydrocarbons we need to use for the transportation of natural gas to regional markets the CNG technology and to international markets the LNG solution via Egypt or via Vassilikos Terminal on Cyprus (proposed for construction)

• East Mediterranean gas producers has an open window opportunity to develop the existing gas fields until 2020

• The topic energy security will play a significant role for countries like Israel and Egypt regarding their oil and gas policies

References

• Part of the information for this presentation derived from the article “Games Changers for LNG markets in the East Mediterranean: A New Market Environment for the Emerging Exporters in the Region” which was published on the website European Energy review on 9th of September 2015

• Article Coordinator: Daria Nochevnik is Chief Analyst Natural Gas and LNG for European Energy Review and Deputy Head for Greek Energy Forum on Brussels

• Coauthor: Athanasios Pitatzis, Industrial/Petroleum Engineer, Oil and Gas Analyst and member of Greek Energy Forum and SPE Kavala Section

Questions