Japan’s LNG PoliciesHenry-Hub linked pricing of non-US LNG(Trinidad and Tobago, Egypt) 2. May...
Transcript of Japan’s LNG PoliciesHenry-Hub linked pricing of non-US LNG(Trinidad and Tobago, Egypt) 2. May...
Japan’s LNG Policies and Japan-Argentina Cooperation
December 2014
Source: Compiled by METI through power company hearing etc
The nuclear power ratio in domestic power generation has decreased after the Great
East Japan Earthquake due to the long-term shutdown of nuclear power plants.
On the other hand, the thermal power ratio has increased to 90%. Currently, LNG
thermal power alone accounts for nearly 50% of domestic power generation.
Trend in Domestic Power Generation Ratio
High Dependency On Fossil Fuels For Power Generation
1
23%23%
25% 28% 27% 26% 27%
32%43%
48%48% 51% 52% 53%5%
12%16%
13% 11% 10% 9%
8%
9%
9% 9% 11% 12% 11%
32%
12%2% 1% 0% 0% 0%
32%
12%
2% 1% 0% 0% 0%
60%
79%
89% 90% 89% 88% 89%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY2010 FY2011 FY2012 FY2013 FY2014 April May June
Coal LNG Oil, etc Hydro, etc Nuclear Nuclear Thermal
0
1
2
3
4
5
6
2010FY 2011FY 2012FY 2013FY
Others
Nuclear
Hydro
Gas
Oil
Coal
Source: The Institute of Energy Economics, Japan
(1015 kcal)
2010FY to 2013FY
Increase by 20 M tons
71 MTA
Natural Gas price trend(US$ / MMBTU)
After the Great East Japan Earthquake, Japan’s LNG demand increased by 24% due to the shutdown of nuclear power plants.
(2010FY 71 MTA → 2013FY 88 MTA) In addition, Japan’s LNG import price, linked to crude oil import price, has soared. As a result, Japan recorded a trade deficit for the first time in 31 years.
83 MTA 87 MTA 88 MTA
Japan’s Energy Demand
Increase in LNG Demand and LNG prices
2
0
5
10
15
20
25Japan's crude oil import price (JCC)
Japan's LNG import price
EU Gas price (NBP)
US gas price (Henry Hub)
8.31$/MMBTU
18.0$/MMBTU
3.92$/MMBTU
15.6$/MMBTU
2010 2013 Difference
Trade Balance
6.6 - 11.5 - 18.1
Net Import Costs
LNG 3.5 7.1 +3.6
Crude Oil 9.4 14.2 +4.8
Petroleum Products
2.4 3.7 +1.3
Coal 2.1 2.3 +0.2
-15
-10
-5
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013
Trade balance
Current account balance
Trade deficit (2013)11.5 Trillion yen
Changes in trade balance and current account balance (trillion yen)
The overall cost of LNG imports to Japan has increased from 3.5 trillion yen (2010) to around
7 trillion yen (2013). ※1 trillion yen = $10 billion
Japan recorded a trade deficit for the first time in 31 years. Trade deficit for 2013 was 11.5
trillion yen, which is not a sustainable level for Japan.
Japan Suffers Huge Trade Deficit
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Japan has mitigated supply disruption and secured stable supply by diversifying supply
sources. In June, Papua New Guinea became a new supplier of LNG to Japan.
Japan has a diversified portfolio with the largest supplier only accounting for 20% of total
supply and the Middle East Dependency at 30%.
Enhancing Gas Security – Diversifying Supply Sources
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(Canada)
LNG Canada Project
Pacific Northwest LNG Project
Kitimat LNG Project
(U.S.A)
Sabine Pass Project
Freeport Project
Cove Point Project
Cameron Project
(Australia)
Ichthys LNG Project
Wheatstone LNG Project
(Mozambique, Tanzania, Nigeria)
Rovuma Area 1, Area 4 Project
Brass LNG Project
(Southeast Asia)
PNG LNG Project
Donggi Senoro Project
( Russia)
Vladivostok LNG Project
Far East LNG Project
(Alaska)
Alaska LNG Project
Paradigm Shift: Impact of the Shale Gas Revolution
The development of fracking technology and the rapid increase in
shale gas production in the US has brought drastic changes to the
supply-demand structure and the pricing mechanism in the global
LNG market.
Three Key Impacts of the Shale Gas Revolution are:
1. Abundant supply
2. Competitively priced LNG and Introduction of gas-link pricing
3. Emergence of Potential LNG Suppliers
Japan is taking proactive actions to fully enjoy the benefits of this
“Revolution”.
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Abundant LNG supply from the US to Asia
Currently approved projects amount to 80 MTA
=> Scheduled to be exported to Japan and other Asian markets as early as 2016
=> Equivalent to half of Asia’s current LNG demand (160 MTA)
Japan’s LNG claims from US projects totals 17 MTA
(Equivalent to 20% of Japan’s annual LNG imports).
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Progress has been made in developing an array of different LNG pricing formulas in Asia.
The emergence of US LNG projects has played a key role in this movement:
1. Gas-linked pricing formulas (Henry-Hub link) will be introduced for the first time
to the Asia-Pacific Market.
=> Asia will be able to enjoy the fruits of the Shale Gas Revolution
US LNG to Asia are expected to be 20-30% lower than current LNG import prices
=> Non-US LNG contracts to Asia are being signed using HH link pricing formulas
2. Hybrid pricing which blends both oil-linked and gas-linked pricing are emerging
Japanese Government strongly supports this trend to diversify pricing formulas with the hope
that having a range of different formulas could help lower LNG prices and reduce volatility
Long term contracts remain an important role for the continuous growth of the LNG market
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1. Nov 2012, Kansai Electric and BP
Henry-Hub linked pricing of non-US LNG(Trinidad and Tobago, Egypt)
2. May 2014, Kansai Electric and Cheniere
3. June 2014, Chubu Electric and Cheniere
Start of US LNG exports to Japan to be moved up from 2017 to 2016
4. Sep 2014, Tokyo Electric and BP
Henry Hub linked pricing
Example of new trends
Diversification of LNG Pricing Formulas
Cooperation with Potential LNG Suppliers
US Gulf
Mexico
US West
Coast
Western Canada
Canada
• Sep 2013: Summit Meeting between Prime
Minister Abe and Prime Minister Harper.
• Oct 2013: Memorandum between METI
and NRCan
• Dec 2013: Memorandum between METI
and BC Government
Mexico
• July 2014: Summit Meeting between Prime
Minister Abe and President Nieto.
• MOU between PEMEX and JOGMEC
Argentina
?
Rank Country Tcf
1 China 1,115
2 Argentina 802
3 Algeria 707
4 U.S. 665
5 Canada 573
6 Mexico 545
The development of fracking technologies will provide new opportunities for countries with
shale gas reserves like US, Canada, Mexico and Argentina.
Japan will work to further enhance the security and stability of its supply sources through
cooperation with such potential LNG suppliers.
Technically Recoverable
Shale Gas Reserves (EIA 2013)
Cooperation Between
Japan and Argentina
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Metals Strategy &
Exploration, and
Technology
Development
Mine Pollution
ControlStockpilingOil & Gas Upstream
Investment and
R& D
Mission
Securing Stable Supply of Oil, Natural Gas, Coal and Mineral Resources for
Japanese Industries and Citizens
Japan Oil, Gas and Metals National Corporation (JOGMEC)Established: February 29, 2004 [succeeded the functions of Japan National Oil Corporation(JNOC)]
President: Hirobumi Kawano
Capital: 689 Billion Yen (As of July, 2014) = around 5.8 Billion US$ (118US$/Yen)
Activities
Coal Strategy &
Exploration, and
Technological
Support
Geothermal
Resources
Development
What is JOGMEC?
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As of December 1, 2014
Liability Guarantee (13 companies)Equity Capital (45 companies)
Oil Sands
Methane
HydrateDeep-Sea
Heavy Oil
Shale Gas
IOR / EOR
Deep-Sea
Arctic
Oil & Gas Exploration & Production supported by
JOGMEC
E&P Projects WorldwideE&P Projects Worldwide
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4 projects
in the west of Canada
JOGMEC’s Current Activities in Shale Gas Development
Mitsubishi Corp.
Cordova Basin
Mitsubishi Corp.
Cutbank Dawson Land
INPEX
Horn River, Cordova, Liard
JAPEX
North Montney Land
Financial
Support
Increase of the asset
values
• Cost reduction
• Productivity
optimization
• Core Analyses
• Geomechanics
• Seismic
Joint
Research
100 um
SEM image of shale sample3D Model of shale pores
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Towards Japan-Argentina Cooperation in unconventional resources
Integrated Shale Study
Project Optimization
Geomechanical studyIntegrated G&G studySeismic and Related Study
Laboratory study Deep understanding of shale
properties.
Frac Design Optimization Sweet Spot Mapping
12
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METI説明世界地図
G&G / Core / Frac
(on-going)
Canada MontneyCore Analysis (2012)
Shale Core at
Horonobe in Japan
Core Analysis (2012)
Onnagawa in Japan
Core analysis (2012)
Cooper Basin
Core Analysis
(on-going)
Marcellus
Frac Simulation +
Reservoir Simulation
(Cordova)
Core Analysis
Horn River
Well Stimulation
(2012-14)
Onnnagawa in Japan
Frac Simulation
(on-going)
Eagle Ford
Plan
Done / On-going
Study Area of JOGMEC’s Shale R&D
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