It’s a gas, gas, gas… - ocw.tudelft.nl€¦ · June 29, 2011 3 Gas Markets: From Wholesale to...
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It’s a gas, gas, gas… SPM 9541, November 2010 Aad Correljé TU Delft Economics of Infrastructures / CIEP
Transcript of It’s a gas, gas, gas… - ocw.tudelft.nl€¦ · June 29, 2011 3 Gas Markets: From Wholesale to...
It’s a gas, gas, gas…
SPM 9541, November 2010Aad Correljé
TU Delft Economics of Infrastructures / CIEP
June 29, 2011 2
World primary energy consumption
BP, 2010 Statical review of world energy
June 29, 2011 3
Gas Markets: From Wholesale to Retail…
1. Introduction
2. The value chain
3. Changes in the world energy and gas markets
4. Two economic perspectives: SCP
5. Two economic perspectives: SCP
6. Gas markets as a globalizing system
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2) The value chain
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Another value chain...
UTC, 2011 The energy value chain
June 29, 2011 6
And another value chain...
UTC, 2011 The energy value chain
June 29, 2011 7
Characteristics of the gas value chain……….• Long distance
• Seasonal and daily patterns
• Specific Lumpy Investment, Long lead times, high up-front cost
• Fixed v. variable cost
• Scale Economies
• Capacity utilization
• Volume Risk
• Price Risk
• Essential facilities
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Gasunie
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100 - 120
Norway
15 - 40 Central Asia
85 - 115
Algeria
IEA/OME 2004
Supply Capacities for Western Europe2010-2020(billion m³/year)
EU
Production
145
June 29, 2011 10
Characteristics of the gas value chain……….• Long distance
• Seasonal and daily patterns
• Specific Lumpy Investment, Long lead times, high up-front cost
• Fixed v. variable cost
• Scale Economies
• Capacity utilization
• Volume Risk
• Price Risk
• Essential facilities
June 29, 2011 11
Seasonal Variation
0
2000
4000
6000
8000
10000
12000
Netherlands Norway Total Former Soviet Union Algeria Germany Libya
Aad Correlje
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Characteristics of the gas value chain……….• Long distance
• Seasonal and daily patterns
• Specific Lumpy Investment, Long lead times, high up-front cost
• Fixed v. variable cost
• Scale Economies
• Capacity utilization
• Volume Risk
• Price Risk
• Essential facilities
June 29, 2011 13
Capital cost
Energie Delta Institute, 2007
June 29, 2011 14
Characteristics of the gas value chain……….• Long distance
• Seasonal and daily patterns
• Specific Lumpy Investment, Long lead times, high up-front cost
• Fixed v. variable cost
• Scale Economies
• Capacity utilization
• Volume Risk
• Price Risk
• Essential facilities
June 29, 2011 15
Economics of scale
Energie Delta Institute, 2007
June 29, 2011 16
Economies of Scale
Energie Delta Institute, 2007
June 29, 2011 17
Characteristics of the gas value chain……….• Long distance
• Seasonal and daily patterns
• Specific Lumpy Investment, Long lead times, high up-front cost
• Fixed v. variable cost
• Scale Economies
• Capacity utilization
• Volume Risk
• Price Risk
• Essential facilities
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Integration and coordination of the value chain in the past
• Production: Oil Companies’ Long term Take or Pay/Destination Clause Net Back contracts
• Transmission and LNG: National Joint Ventures Operators’ Cost plus
• Storage: National Joint Ventures’ Cost plus
• Distribution: Public Local Municipal Firms’ Cost plus
• Retail trade: Oil parity pricing, market segmentation
Long term planning and supply/demand coordination
June 29, 2011 19
Natural gas production by area
BP, 2009 Statical review of world energy
June 29, 2011 20
Natural gas consumption by area
BP, 2009 Statical review of world energy
June 29, 2011 21
Natural gas consumption per capita
BP, 2010 Statical review of world energy
June 29, 2011 22
3) Changes in the world energy and gas markets: Uncertainties
• Changes in the Oil Market
• CO2 Emission Reduction
• Changes in the Gas industry
─ Growth in Consumption?
─ The Power Sector?
─ LNG Trade?
─ External Dependence of Main Markets
─ Liberalization of Markets
─ Integration of Regional Markets
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Reference Scenario: World Primary Energy Demand
Global demand grows by more than half over the next quarter of a century, with coal use rising most in absolute terms
Oil
Coal
Gas
BiomassNuclear
Other renewables
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
1970 1980 1990 2000 2010 2020 2030
Mto
e
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EU Gas demand forecast
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Major gas trade movements 2004
BP, 2005 Statical review of world energy
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Major gas trade movements 2008
BP, 2009 Statical review of world energy
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Proved natural gas reserves and dependence
BP, 2009 Statical review of world energy
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Reserves-to-production (R/P) ratios
BP, 2010 Statical review of world energy
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100 - 120
Norway
15 - 40 Central Asia
85 - 115
Algeria
IEA/OME 2004
Supply Capacities for Western Europe2010-2020(billion m³/year)
EU
Production
145
June 29, 2011 31
EU and Russia
CIEP
June 29, 2011 32
New Gas supplies: Investments & Timing??
• What will bring the new supplies to market and when
Security of supply for EU
Security of demand for suppliers
Available capitalPace and mode of liberalisationGeopolitical and other risks
