Natural gas challenges and drivers for the future Betsy Spomer Senior Vice President, BG Group 20 February 2013 Energy Institutes IP Week, London, UK
BG Group snapshot A world leader in natural gas UK FTSE 15 company Circa 60 billion market cap Operates in over 20 countries Leading LNG position Track record of LNG project delivery: Trinidad and Egypt set industry…
Natural gas challenges and drivers for future Global gas market recent evolution Future challenges and opportunities Supply US exports Canada East Africa Markets UK 4
Strong gas demand growth World gas demand (bcma) CAGR 2010 2020 China 11.2% Asia (excluding China) 3.3% Russia and Central Asia 0.8% Middle East and Africa 4.4% South America 2.9% North America 2.1% Europe 0.1% TOTAL…
LNG outpacing gas industry growth 2011 global gas consumption LNG as a share of global gas 16% 14% 10% International trade 30% 12% LNG 10% 22% Pipeline 8% Domestic 68% consumption 6% 4% 2% 0% 1970 1975 1980 1985…
LNG today 2012 trade = 240 mt* A global trade 18 exporters 27 importers 365 ships An increasing dynamism; Short-term trade** = 25% of total (2011) AB to PB = 22.4 mt* (2012) But still far from commoditized *Source: BG Group…
Gas pricing mechanisms by region Market price (NBP/TTL/ Zeehub) NW. Europe N. America Asia / Middle Market price (HH) S&E. Europe East Indexed to Indexed to Crude Crude Oil / FO / GO Oil (JCC) (or Brent) Coal switching in…
Industry context Three paradigm shifts: Crude oil price 2001 = 20 / bbl (Brent) 2012 = 112 / bbl (Brent) US shale gas 2003* = US as LNG importer 2012 = US as LNG exporter Fukushima +17 mtpa since 2010 Future of nuclear…
Global price divergence 25 20 JCC 0.1485*JCC US/mmBtu 15 Asia spot LNG NBP 10 5 HH 0 2006 2007 2008 2009 2010 2012 2013 2011 JCC HH NBP 0.1485 JCC (3 mo avg) Asia Spot (DES)…
Challenges and opportunities
Global gas supply challenge (2010-20) (bcma) 2.6% pa 9.5% pa Sources: BG Group, BG Group interpretation of Wood Mackenzie 12
LNG importing markets Germany Denmark Netherlands Poland Finland UK Lithuania/Belarus/Latvia Ireland Canada Belgium Croatia Romania France Ukraine Turkey S. Korea Portugal Italy Lebanon US Israel Japan Canary Is. (Sp) Spain…
Asian LNG imports (2000 to 2025) 350 CAGR CAGR 2000 2010 2010 2025 300 6.2% pa 5.9% pa 250 New China mtpa 200 India 150 100 JKT 50 0 2000 2005 2010 2015 2020 2025 Source: BG Group interpretation of Wood…
The LNG supply challenge 500 LNG trade 450 forecast 400 Supply- demand 168 mtpa 350 gap 300 mtpa 250 Australia 200 Supply: Qatar existing and 150 under construction 100 50 0 2000 2005 2010 2015 2020 2025…
A rapidly changing supply perspective US LNG exports Mozambique Cumulative DOE filings (mtpa) Reserves announced* (tcf) 250 140 2010 2011 2012 2010 2011 2012 19 120 200 16 100 14 150 12 80 8 1st appraisal well 60 100 BG…
Western Canada shale gas basins Canada has large undeveloped shale gas resource base Shales make up largest portion (38%) of rock volume in WCSB The resource (gas in place) is massive, over 1,200 Tcf Much of this is stranded at…
Canada LNG exports geography Dev area 1 Horn River Dev area 2 Montney Prince Rupert Kitimat LNG 18
Long-term supply challenges 800 Supply prospects for Supply prospects for 2020 (mtpa) 2025 (mtpa) -% 600 -17% Speculative US exports Possible 105 mtpa* 400 Probable Under construction 200 Onstream On-stream capacity…
Supply observations US exports Volume will be project and market limited irrespective of Govt. policy Policy delays will act to extend current market tightness Western Canada Traditional resource play very different from US…
Asia LNG demand gap vs. US exports Asia supply-demand gap 140 mt 2025 by 2025 140 Research house views suggest 120 40 to 60 mtpa US exports credible by 2025 100 Additional conventional supply 80 mtpa also needed 60 40…
Liquefaction costs 1600 Pluto Gorgon T1 T1/2/3 1400 PNG T1/2 1200 EPC unit cost (/tpa) 1000 Costs have quadrupled 800 in a decade 600 Trinidad RasGas Egypt T1 T3/4/5 T1/2 400 200 0 1999 2003 2005 2012 2014 2015…
UK energy consumption (1980 / 2011) 250 204.5 Bioenergy & waste 203.0 200 Primary electricity* Coal mtoe 150 37% (52% excluding 22% 100 Gas oil for transport) 50 Oil for Oil transport (53.7 Mtoe) 0…
UK trade in natural gas 700 600 LNG Imports 500 Pipeline Imports 400 Exports 300 Net Imports TWh 200 100 - -100 -200 -300 1980 1985 1990 1995 2000 2005 2010 Source: DECC UK Energy In Brief 2012 24
The UK and LNG Imported 10.5 mt in 2012 Seventh largest market (third in 2011) Four import terminals, 38 mtpa total capacity Liquid and transparent hub market global swing market for LNG LNG flows to UK will be influenced by:…
UK as a global balancing market Japanese earthquake/tsunami 9 8 Qatari supply to 7 Middle East and 6 Asia bcfd 5 4 3 Other UK LNG Qatari 2 imports supply to (total) UK 1 Qatar 0 2008 2009 2010 2011 2012 Source:…
Conclusions LNG has driven globalisation of the natural gas trade LNG flexibility increasing but trade far from commoditized Looking forward supply is the key challenge New opportunities emerging but still early days: US exports…
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