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Asia-Pacific | Europe | North America
Trends in Global Oil and Gas
Prices:
Impacts on the Outlook for GTL
May 2014
www.ceg-europe.com 2
GTL: Background
• Gas-to-Liquids sounds great, but
– It is expensive;
– Is in effect an arbitrage play between two different feedstock markets;
– Has been applied occasionally in certain circumstances; but
– Unconventionals will make GTL harder to justify
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Gas
oli
ne
pro
du
ctio
nC
on
ver
sio
n
Co
kin
g
Re
sid
ue
con
vers
ion
Deep conversion
Va
cuu
m
dis
till
ati
on
Flu
idis
ed
cata
lyti
c cr
ack
ing
Iso
me
risa
tio
n
Alk
yla
tio
n
MT
BE
Vis
bre
ak
ing
Complex
De
sulp
hu
risa
tio
n
Re
form
ing
HydroskimmingC
rud
e d
isti
lla
tio
n
Topping
Refining: Conversion involves reducing
the size of molecules
www.ceg-europe.com
Fu
els
and
lu
bes
GasificationFischer-Tropsch
SynthesisDistillationGas-to-Liquids
GTL: Requires increasing the size of
molecules
• You can’t escape the chemistry:
www.ceg-europe.com 5
The Majors and Refining: For Most, a
Tale of Painful Exit
• The major oil companies have a track record of selling refineries whenever margins are low, usually to:
– National oil companies
– Niche refiners; or more recently
– Trading companies
• These poorly timed sales have transferred significant capital value to the buyers
• Therefore don’t expect major oil companies to jump into GTL
www.ceg-europe.com 6
Unconventional Gas: What is the
Outlook?
• We recently prepared a review of the global outlook for unconventional hydrocarbons and the likely impact on UK gas prices. Key results were:
Scenario Key events Impact on UK gas prices (real)
Base •No significant unconventional production in Europe•LNG exports from North America•China becomes a major unconventional producer•Surplus LNG is available
Prices decline until 2020, then increase linked to the cost of
LNG imports from NA
Optimistic •As above, except:
•Significant shale gas in the UK and Central
>1% real decrease in gas prices
Pessimistic •No significant unconventional production in Europe•No significant LNG exports from North America•China remains a major buyer of LNG
1% real increase in gas prices
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0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2013 $/mmbtu
Gas Price Projections (2013 Prices)
NBP DECCCentral Case
Henry Hub EIAReference
Henry Hub +LNG Premium
US LNG exports: Will set the minimum
price support level in Europe
High uncertainty
www.ceg-europe.com
Gas: Understanding supply/demand
trends
Changes in gas balance by region, 2011-2020, bcm / year
+18
+0
+38
+38
+54-40 -101
+10
-23
-11
Source: IEA World Energy Outlook 2103
-2
www.ceg-europe.com
Changes in gas balance by region, 2020-2035, bcm / year
+4
+24
+97
+26-102 -82
+3
-49
-85
Gas: Understanding supply/demand
trends
Source: IEA World Energy Outlook 2103
+67
+89
www.ceg-europe.com
US GTL arbitrage
gap
US crude oil prices are now disconnected from other markets
GTL: Uses F-T to Arbitrage Between Gas
and Oil Markets
US natural gas prices became disconnected from oil due to shale gas
Source: CEG analysis
-
200
400
600
800
1,000
1,200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$/toe
WTI Brent Henry Hub Diesel (ULS NY Harbor) * Gasoline 93 (USGC)
* 2001-2005 estimated
Oil and gas prices used to be highly correlated
Sasol got GTL right
in both Qatar and the USGC
www.ceg-europe.com 11
Large Scale GTL: Some Numbers
Location Configuration GTL capacity
(bbls / day)
Bitumen capacity (bbls /
day)
Ethylene productio
n(mtpa)
Capex($ billion)
Cost($ / bbl
capacity)
Shell Pearl Qatar
Large scale GTL 140,000 - - 20 $140,000
Sasol USGC •Large scale GTL
•Ethane cracking
96,000
-
-
-
-
1.5
11 – 14
5 - 7
$114,000 -145,000
n/a
Sasol Oryx Qatar
Large scale GTL 35,000 - - 1.2 – 1.5 $35,000 -$44,000
Kitimat,British Columbia
Oil sands: proposed deep conversion refinery
- 395,000 - 13 $33,000
Alberta Oil sands: deep conversion, partial oxidation and ethylene production
- 300,000 1.0 10 $33,000
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• The ban on oil
exports from the US
has caused a surge
in refining margins
• It is US-specific
phenomena
• High shale oil
production
elsewhere would
have much different
effects
• It would shrink the
gas / oil arbitrage
gap, upon which
large scale GTL
depends
Unconventionals: The Impact on US
Refining Margins
www.ceg-europe.com 13
Edward Osterwald: Contact details
• Email: [email protected]
• Office: +44-20-3440-5780
• Mobile: +44-7770-584-696