Global Gas Market and its Challenges

RO B ERTO AR ENAS LAR A , P HD

HEAD, DATA AND I NFO R MAT I O N SERV I C ES DEPARTMENT

GAS EX P O RT I NG C O UNTR I ES FO RUM

Santa Cruz de la Sierra, Bolivia

Contents

Introduction of the Gas Exporting Countries Forum (GECF)

Global Abundance of Natural Gas Resources

The Stable Supply of NG Needs Sufficient Investment

Global Energy Demand

Global Natural Gas Demand

The Glut in LNG market: From forecast to reality

The role of Natural Gas in a sustainable energy future

Challenges facing the Natural Gas industry

GECF Member and Observer Countries

Algeria

Bolivia

Egypt

Iran

Libya

Nigeria

Trinidad

and Tobago

Equatorial

Guinea

Venezuela

Russia

MEMBERS

Qatar

United Arab

Emirates

Oman

Netherlands

Norway

Kazakhstan

Iraq

Azerbaijan

OBSERVERS

Peru

GECF’s Vision and Mission

MISSION

“To suppor t t he sove re ign r igh ts o f Member Count r ies

ove r the i r na tu ra l gas resources , t o max im ize the i r

va lue f o r t he benef i t o f t he i r peop le , and to p romote

the i r coo rd ina t ion on g loba l ene rgy deve lopments w i th a

v iew to con t r ibu t ing to g loba l sus ta inab le deve lopment

and energy secur i t y. ”

VIS ION

“To deve lop and re f lec t common v iews and un i f ied

pos i t ions , pos i t i ve in f luenc ing d i rec t ion o f the global gas

marke t by p romot ing natu ra l gas as the fue l o f cho ice in

the globa l energy mix based on i t s ava i lab i l i t y, re l iab i l i t y,

ve rsa t i l i t y, a f fo rdab i l i t y and i ts inheren t na tu re as an

env i ronmenta l l y - f r iend ly sou rce o f energy. ”

PRIORITY OBJECTIVES

1) Max im iz ing Gas Va lue: t o pu rsue oppor tun i t ies tha t suppor t t he sus ta inab le max im iza t ion o f t he added va lue o f gas

f o r Member Count r ies .

2 ) Deve lop ing the GECF View on Gas Marke t Deve lopments th rough sho r t - , med ium- and long - te rm marke t ana lys is

and f o recas t ing .

3 ) Co -opera t ion : t o deve lop e f fec t i ve ways and means f o r coopera t ion amongst GECF Member Count r ies in va r ious

a reas o f common in te res ts .

4) P romot ion o f Na tu ra l Gas : t o con t r ibu te to meet ing f u tu re wor ld energy needs, ensur ing g loba l sus ta inable

deve lopment and respond ing to env i ronmenta l concerns , i n pa r t icu la r w i th rega rd to c l imate change.

5 ) I n te rna t iona l Pos i t ion ing o f t he GECF as a g loba l ly recogn ized in te rgovernmenta l o rgan iza t ion , wh ich i s a gas

marke t exper t ise re f e rence ins t i tu t ion and a benchmark f o r gas expo r t ing coun t r ies .

GECF Publications, Outputs & Collaborations Gas Daily News Briefs

Annual Short-Term Outlooks (presented to GECF Ministerial Meetings)

Annual Statistical Bulletin

Workshops on gas market developments and cooperation

JODI-Gas World Database

Reports (e.g. LNG shipping industry; digitalization in the gas industry;

unconventional gas developments; investments; country profiles; role of

natural gas in the global climate agenda).

Symposiums on Energy Outlooks

International Seminars

Conferences and international forums: e.g. IAEE, UNFCCC, UNECE

GECF Global Gas Outlook

A reliable source and reference for

insights into the gas industry

Based on the GECF Global Gas

Model (GGM), a uniquely granular

energy model developed in-house,

which encompasses:

o 113 country-level forecasts

o 4300 gas supply entit ies

o An infrastructure database with over 5000 pipeline and shipping routes

o A gas contracts database with more than 1000 company-to-company contracts

Total Natural Gas resources by type (bcm) Total Natural Gas reserves (%)7498416%

10447322%

5051211%

9659721%

13893130%

Conventional-Existing Projects Conventional-New Projects

Unconventional - Existing Unconventional - YTF

Conventional - YTF

65%5%

30%

GECF Members GECF Observers Non-GECF

The world possesses an ample amount of natural gas, total l ing 465 TCM.

More than 200 TCM are identi f ied as proven conventional reserves.

The current resource to production rat io is about 60 years for proven reserves

) including exist ing projects, new projects, and unconventional reserves ( . This

f igure represents 130 years for the total resource base (including YTFs ).

Abundance of Global Natural Gas Resources

Source: GECF Global Gas

Outlook 2040 (2017 edition)

• Suff icient investment in Natural Gas

industry wil l guarantee the stable

supply of this fuel and in long-term

will safeguard the interests of both

producers and suppliers .

• The decline in LNG FIDs can be

partly attr ibuted to the LNG buyers’

shift from tradit ional long-term

contracts.

Capacity and Year of FID of New LNG Projects

The Stable Supply of NG Needs Sufficient Investment

Source: GECF Workshop, May

2018 (IGU data)

Global energy demand is projected to grow by 1.1% per annum, amid

population and economic growth, as well as expanding middle class in

developing countries.

The share of gas in the overal l energy mix wil l increase strongly by

2040. Natural gas wil l occupy second place in the global energy mix,

overtaking coal. 9

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2000 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040

Global energy demand by fuel type (Mtoe) Global energy mix in 2016 and 2040

22%

32%

27%

5%

2%

12%

2016

13.8 Gtoe

26%

29%20%

6%

2%

17%

2040

17.8 Gtoe

Natural Gas Oil Coal Nuclear Hydro Renewables

Global Energy Demand: to rise by 29% between 2017 and 2040

Source: GECF Global Gas

Outlook 2040 (2017 edition)

Developing and emerging economies, including non-OECD Asia (3.5%), Africa

(2.5%), and the Middle East (2.2%), wi l l lead gas demand growth by 2040.

Power generation wil l remain the largest natural gas consuming sector. I t wi l l

consume 2329 bcm, or 43% of global gas demand in 2040.

10

Natural gas demand by region (bcm) Natural gas demand by sector (bcm)

0

1000

2000

3000

4000

5000

6000

2000 2010 2016 2020 2030 2040

Domestic Sectors Industry Feedstocks

Transport Power Generation Heat Generation

Hydrogen Generation Refinery Other Uses

0

1000

2000

3000

4000

5000

6000

2000 2005 2010 2016 2020 2025 2030 2035 2040

Non-OECD Asia North America Middle East

CIS OECD Europe South America

OECD Asia-Pacific Africa Non-OECD Europe

Global Natural Gas Demand: increases to 5395 bcm in 2040

Source: GECF Global Gas

Outlook 2040 (2017 edition)

LNG price (US$/MmBtu) 2016 2017 % change

Average North East Asia spot LNG price 5.8 7.23 25%

Average South West Europe spot LNG price 5.0 6.50 30%

Long Term Japan LNG 6.77 8.098 20%

• Around 110 mil l ion tons (Mt) of LNG

capacity is expected to come on-

stream between 2017 and 2020.

• The glut in global LNG supply was not

observed in 2017 as LNG market was

balanced both in higher quanti ty of

traded volumes and competi t ive

prices.

• I f the pretended oversupply by some

forecasters combined with lower

prices, has to happen and persist for

a long period, the market wi l l react

through postponement of projects’

FIDs, lower plant ut i l izat ions or even

shut-down of l iquefaction plants.

• From the investment perspective, any

project that can come on-stream after

2024, would meet favourable

economic condit ions to be feasible.

9.6516.95

9.00

6.75 44.30 5.50 5.50

5.50

2.40

3.80 1.50

0

10

20

30

40

50

60

2017 2018 2019 2020

Australia U.S. Russia Cameroon Indonesia Malaysia

The Glut in LNG market: From forecast to reality LNG Short Term Forecasting 2017-2020 (Mt)

Source: ICIS & Argus

The role of Natural Gas in a sustainable energy future

22%26% 28% 29%

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2016 2040 Base Case Scenario 2040 Carbon Mitigation Scenario 2040 Technology AdvancementScenario

Mto

e

Natural Gas Primary Consumption Oil Primary Consumption Coal Primary Consumption Non-Fossil Fuel Consumption

80%75%

72% 70%

Source: GECF Global Gas

Outlook 2040 (2017 edition)

Concerns surrounding security of gas demand, stemming from unclear policies

Unclear support to natural gas in the transition to low carbon economies (e.g. NDCs do not refer explicitly to natural gas;

uncertainties regarding the role of gas vs. coal in some key markets)

Policy hesitation on nuclear decommissioning, despite ageing fleets and increasing safety costs ( the Fukushima effect

appears to be weakening in some regions)

Natural gas suffers from the erroneous perception that there is a lack of supply security (natural gas improves security of

supply because of its abundance, affordability and diversification of supply sources with growing LNG)

Lack of visibility in gas revenues

Emergence of new gas transaction approaches with increasing pressure on long-term contracts and oil based indexation

New gas pricing approaches expose gas project developers to large market fluctuations

Funding issues

Difficulties to secure funding for capital-intensive projects due to high risks (e.g. visibility on gas revenues, increasing

complexity of projects in some areas)

Financial institutions are moving away from funding oil and gas projects (e.g. the World Bank)

Geopolitics and sanctions

Geopolitical tensions in key supply regions (e.g. the Middle East)

Increasing sanctions restrain sponsors from accessing markets and investing in valuable gas opportunities

Challenges facing the Natural Gas industry

Sustainable development means achieving a balance between environment, social

and economic dimensions… Natural gas can be a solution

Economic advantages of gas

Social advantages of gas

Environmental

advantages of gas

• Support Improved accessibility and affordability of energy

• Support energy comfort• Support the development of local

activities

• Lower CO2 emissions (more than half compared to coal)

• Less air pollution (SOX, NOX..)• Particles (very negligible

emissions)

• Abundance of natural gas• Energy efficiency of gas

technologies • Less carbon penalties• FlexibilitySustainable

Development

Economy

SocietyEnvironment

Natural Gas can be a solution towards sustainable development (SD)

MUCHAS GRACIAS

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