Asia LNG Supply Options May 2014 - Wood MacKenzie
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Transcript of Asia LNG Supply Options May 2014 - Wood MacKenzie
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Comparing Asias Future LNG Supply Options
Nicholas Browne
Senior Analyst, Asia Gas Research
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Trusted commercial intelligence www.woodmac.com
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There is increasing gas availability
But a lot of the supply remains distant from market
Woodmacs estimate of global remaining commercial gas reserves increased by
37% between 2007 to 2012
Global Gas Resource (by type) 2025 liquefaction capacity by location
US
Australia
Other
Russia
East Africa
Canada
US
Others
East Africa
Australia Canada
Russia
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2007 2012
tcf
Conventional Unconventional Source: Wood Mackenzie Global Gas Service
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The battle to provide the next wave of LNG supply will be fought
between the US, Canada, East Africa and Russia
US LNG, with flexible, HH+ priced volumes is captivating many buyers, but
its not a panacea and has its issues. The current lack of progress elsewhere creates potential upside
The proposed LNG export projects in Canada are moving slowly, but
crucially they do offer supply diversity to Asian buyers
Russia remains a real wildcard given the political and corporate situation
East Africa now has large volumes of discovered gas, but turning it into
LNG is proving far more challenging than many originally thought
While Australia dominates LNG capacity currently under construction, its
influence beyond that looks increasingly limited, not least by its prior
marketing success
FLNG appear to have momentum in some parts of the world but is not without technical delivery risk
With FLNG playing a niche role
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There is >100mmtpa of credible low-cost US LNG export potential
Market appetite and competitiveness will determine export volumes, but approvals
impact project credibility and speed to market
Post FID
Sabine Pass T1-4
Potential non-FTA second movers
Freeport T1/2, Cameron
Cove Point, Freeport T3, Corpus Christi, Lake Charles
FTA Pushers
Southern
Low cost options
Sabine Pass T5
Golden Pass
Source: US DoE, FERC, Wood Mackenzie
Notes:
1. Tick ( ) indicates the project has received scheduling notice from the FERC
2. SP stands for Sabine Pass
* FLNG project(s) that will be applying to MARAD instead of FERC
P
US LNG Export Proposals - DOE and FERC Status Frontrunners (100mtpa)
In order of DOE non-FTA processing
0
20
40
60
80
100
120
140
160
180
200
220
240
260
mm
tpa
6 bcfd
FERC received
FERC main filed
12 bcfd
FERC pre-filed
1 2
4 3
5 6
9
7
10
8
13 11 12
14 15
17
No FERC filing
16
P
P P P
P
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The Canadian LNG export play is building momentum, but it remains
complex and no FIDs are expected until 2015 at the very earliest
An ever growing number of projects have been
proposed / mooted confusing Buyers and complicating things for Government
Three common sites have emerged
Kitimat: BC LNG, Kitimat LNG (Chevron), LNG
Canada (Shell)
Price Rupert: Pacific Northwest (Petronas),
Prince Rupert LNG (BG, and now CNOOC)
Grassy Point: CNOOC (Aurora), Woodside
From a corporate perspective it looks like a
game of musical chairs M&A is rife and the picture will change
Projects are complex to develop all greenfield, major pipelines, First Nations, tax uncertainty,
access to power, pricing debates
but relative stability (politically) and ability to diversify portfolios appeals to buyers
Petronas is emerging as a front-runner, but still
has hurdles to clear
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Russia has demonstrated the political will to develop new capacity
Source: Wood Mackenzie LNG Service, see Yamal LNG project review
Yamal LNG Offtake
After Yamal LNG, what next in Russia?
East Russia
Vladivostok Sakhalin 2
Expansion
Far East
LNG
Partners
Reserve clarity Liquids at
Sakhalin-3
Insufficient
reserves
Insufficient
non-
associated
gas for 2
trains
Other
Dependencies
China
pipeline
Clarity on
Vladivostok
Ukraine
crisis
More challenging More straightforward
0
2
4
6
8
10
12
14
16
18
mm
tpa
CNPC GNF TOTAL Novatek Yamal LNG
Yamal LNG still
marketing 3.5
mmtpa
Wood Mackenzie
estimates 6.5 mmtpa
portfolio offtake by
Total and Novatek G&P
Publically announced
offtake of 5.5 mmtpa
with CNPC and GNF
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East Africa has more than enough gas to support significant LNG
exports, but progress towards project sanction is slow
Partner alignment
Multiple monetisation
proposals appear to reflect
stakeholder misalignment:
government, Area 1, Area 4
participants
And M&A activity and potential FLNG adds uncertainty
0
2
4
6
8
10
12
14
0
10
20
30
40
50
60
70
Area 1 Area 4 Blocks 1,3
& 4
Block 2 N
o o
f tr
ain
s
tcf
Reserves May 2013
Additional proven
reserves
Mozambique Tanzania
Regulatory certainty
Mozambique -
Presidential election
due October 2014
with implications for
Decree Law timings
Tanzania - Natural
Gas Act passed in
2013
Proven reserves keep growing
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8
10
25
13
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30
60
90
120
150
180
2010 2011 2012 2013
Ave
rag
e O
il &
Ga
s S
ala
ry U
S$
'00
0
Australia Canada US
Australian costs need to decrease before additional capacity can be
developed with confidence
Development of backfill and conventional expansions relatively low cost
Expansions
Gorgon
Wheatstone
CSG
Arrow LNG
AP LNG Expansion
QC LNG Expansion
FLNG
Browse
Bonaparte
Cash/Maple
Greater Sunrise
Scarbourough
Source: Hays salary survey 2010-2013
Backfill by 2025
Darwin
North West Shelf
Increasing
cost
Average Industry Salaries by Location Proposed projects capacity mmtpa
Anecdotal suggestions that costs may be declining in 2014
Development
hurdles include:
- partner
alignment
- reserve
adequacy
- 3rd party gas
access
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Its too early to call FLNG a game-changer and the involvement of portfolio players will be key to successful developments
Douglas Channel (0.9)
LNG PARTNERS B
B
B
B Barge mounted
^FLNG 2 (1.5)
^ La Creciente (0.5)
^Prelude (3.6)
Browse (3 * 3.6)
Scarborough (6)
Bonaparte (2-3)
Cash/Maple (2) ^ Under construction
Abadi (2.5)
Equatorial zone
Leviathan (2 * 4.5 )
Lavaca Bay (4)
Brazil Pre-Salt (3)
^FLNG 1 (1.2)
(3 * 3.6 ) Multiple vessels
EG (1.5)
Developers
Leveraging FSRU experience
Utilities
Looking for LNG supply
Shipbuilders
Pushing technology
Majors / Super-Majors
Monetising stranded gas
Area 4 Moz.
(Up to 3 TBC )
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Our analysis suggests that multiple LNG supply sources could be
competitive into Asian markets
Cost control through project execution is a major risk, for some projects in particular
Notes: US projects assume 115% HH (with HH assumption of US$5.2/mmbtu)and liquefaction of US$3.00-4.50/mmbtu and Panama Canal shipping. Canadian projects based on AECO
assumption of US$4.3 /mmbtu plus project specific pipeline and liquefaction costs.
Source: Wood Mackenzie GGS, LNG Tool H114
Canadian costs
uncertainty
Delivered Cost of LNG to Japan
0
2
4
6
8
10
12
14
16
18
20
East Russia US GC East Africa Canada Aus pre-FID FLNG Aus CSG post-FID
US
$/m
mb
tu (
20
14
re
al)
Range
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Conclusions
The pace of US FIDs looks set to grow as projects benefit from the lack of
progress elsewhere
A project front runner is emerging in Canada, but more to be done before we
see FID on a large project
With Yamal LNG, Russia has demonstrated the political will to develop
new capacity and attention is now focused on east Russia
In East Africa, progress has been slow
A number of FLNG projects are now progressing, but it's too early to call
the technology a game changer
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Speaker Biographies
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Nicholas Browne
Nicholas joined the Gas & Power research team in 2012, covering the gas markets of Japan, South Korea and Taiwan. His primary focus is on understanding the impact of changing policy on these energy
markets and in assessing the corporate dynamics. Nicholas joined Wood Mackenzie in 2007, firstly
working in the Gas & Power consultancy team based in London. He has advised on several major
international infrastructure transactions and project financing engagements, together with completing
projects across the gas value chain such as gas monetization options, transport economics and market
entry strategies.
Nicholas joined Wood Mackenzie from Total, where he worked on the European Gas & Power trading floor. His role involved managing the physical gas position across Europe through prompt trading and
optimising assets such as pipelines, storage, swing contracts and fields. Prior to that he worked as a
marketing analyst in Totals UK Gas & Power division.
Nicholas holds a B.A. from Trinity College Dublin and an M.Sc. from the London School of Economics.
Senior Analyst, Asia Gas Research
T +65 6518 0803
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Disclaimer
This presentation has been prepared for Wood Mackenzie Global Gas Forum at the
Peninsula Hotel, Tokyo on 21st May 2014 by Wood Mackenzie Limited. The
presentation is intended solely for the benefit of attendees and its contents and
conclusions are confidential and may not be disclosed to any other persons or
companies without Wood Mackenzies prior written permission.
The information upon which this presentation comes from our own experience,
knowledge and databases. The opinions expressed in this report are those of Wood
Mackenzie. They have been arrived at following careful consideration and enquiry but
we do not guarantee their fairness, completeness or accuracy. The opinions, as of this
date, are subject to change. We do not accept any liability for your reliance upon them.
Strictly Private & Confidential
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