NZ Energy Sector AWE · Amendment Act passes 12 energy months to remember OMV+Shell settles...

2020 Vision

Gas NZ Industry Forum

October 2019

1enerlytica | 2019 Gas Industry Forum

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Agenda

1. In the mirror 2. Out the windscreen


NOV

Gas+electricity

market

distress

8 Rivers goes

public

Methanex WV

t/a completed

Pohokura

offshore

wells

reinstated

CMA

Amendment

Act passes

12 energy months to remember

OMV+Shell

settles

Pohokura inlet

compression

FID

Block Offer 2018

opens

Contact-Todd

TCC gas tolling

agreement

FEB MAR APR MAY JUL AUG SEP

Todd-Ahuroa

storage

agreement

announced

Just Transition

Summit

Zero Carbon

Bill introduced

into House

Waipipi wind

farm FID

Kupe inlet

compression

FID

Government

“Resources

Strategy”

draft release

Block Offer

2018 closes

Tamarind

programme

suspended

Mangahewa

development

completion

OMV issued

consents for

GSB programme

Block Offer

2019 launch

Tamarind/TAG

deal completes

JAN JUN

2019 reserves

release

OMV-Maui

GSA

COSL

Prospector

arrives into NZ

Refining NZ

solar+H2

project FID

Kupe outage

Tamarind

situation

deteriorates

OMV issued

consents for

outer

Taranaki

programme

DEC OCTOCT

2018

Gas NZ

Forum

Turitea wind

farm FID

Pohokura

COSL Boss

intervention

programme

Upstream

Downstream

NZ Inc. coal

import

programme

Kohatukai-1

well P&A

TAG Oil

announces

sale of NZ

assets to

Tamarind

Ballance

wind+H2

project

announced

Contact

“Decarbonising

New Zealand”

statement

Refining NZ

solar+H2

project

announced

Archer Emerald

confirmed for

2020 Maui-A

programme

OGOG farm-in

to Canterbury

Basin

2019

Gas NZ

Forum

Government

EPR

response

Tiwai

“strategic

review”

Zero Carbon

Bill deal


Gas = electricity market distress

0

20

40

60

80

100

-

50

100

150

200

250

300

J F M A M J J A S O N D J F M A M J J A S

TJ/day PJ pa

2018 2019

Pohokura dispatchDaily export sales, 2018-19

Source: OATIS, EA, Enerlytica

0

50

100

150

200

250

MJ SDMJ SDMJ SDMJ SDMJ SDMJ SDMJ SDMJ SDMJ SDMJ SD

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TJ/day

Avg monthly prdn 12 mth moving average

Source: OATIS, Enerlytica

Pohokura dispatchAverage monthly export sales, 2010-19


0%

20%

40%

60%

80%

100%

120%

140%

-

50

100

150

200

250

300


TJ/day Hydrology (RHS)

TJ/day Hydro

2018 2019


Pohokura dispatch vs NZ hydro storage2018-19



0

5

10

15

20

25

30

35

-

50

100

150

200

250

300


TJ/day Spot gas (RHS)

TJ/day $/GJ

2018 2019


Source: OATIS, emsTradepoint, Enerlytica

Pohokura dispatch vs spot gas price2018-19

0

50

100

150

200

250

300

350

400

450

500

0

5

10

15

20

25

30

35


Spot gas Spot electricity OTA (RHS)

$/GJ $/MWh

2018 2019

Spot gas vs spot electricity2018-19



The marginal fuel unit is an expensive unit. As it should be.

Source: Enerlytica

-

50

100

150

200

2014

2015

2016

2017

2018

2019

$/MWh

Coal (import parity) Gas

NZ domgas vs import parity coalFuel-only SRMC


Thermal fill at substantial additional NZ Inc. cost

-

200

400

600

800

1,000

1,200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Tho

usan

ds

kt

Sub-bit coal imports30 June years

Source: EA, Enerlytica


Thermal fill at substantial NZ Inc. cost

■ Gas, coal & water domfuel shortage

during 2018 drove Genesis as the

market’s marginal generator import

>600 kt of Indo sub-bit coal

− Direct CO2e import +1.1 mt / $30m.

>500,000 TCYEs*

− Indirect additional costs 5-10% due to

supply chain & inferior CV

− Acquired near top of market cycle,

importing high global prices, contributing

to high w/s electricity prices

* Toyota Corolla Year Equivalents


0.95

0.96

0.97

0.98

0.99

1.00

0 5 10 15 20 25 30 35 40 45

Index

-3.3%

Days

Security of supply increasingly challenging


■ All major fields now nearing or are past

plateau and into deliverability decline

■ Maui final delivery year currently

mapped as 2021. Yes, 2021.

■ Ongoing reinvestment critical to ensure

continuing security of dom-fuel supply:

- Pohokura & Kupe inlet compression

- Maui life extension

- Onshore Eocene development

- Exploration

Kupe dispatch50-days post-plateau


0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70

Index

Days

Security of supply increasingly challenging


■ All major fields now nearing or are past

plateau and into deliverability decline

■ Maui final delivery year currently

mapped as 2021. Yes, 2021.

■ Ongoing reinvestment critical to ensure

continuing security of dom-fuel supply:

- Pohokura & Kupe inlet compression

- Maui life extension

- Onshore Eocene development

- Exploration

Kupe dispatch70-days post-plateau


NOV

Kupe outage

30 Oct –

27 Nov

2020: Delicate. Very delicate.

HVDC outages

7 Jan-9 Apr

FEB MAR APR MAY JUL AUG SEPJAN JUN

2020

Gas NZ

Forum

DEC OCTOCT

2019

Gas NZ

Forum

Pohokura outage

11-24 Mar

Maui-A Archer

Emerald

programme

commences

Ahuroa outage

8-23 Feb

Tauhara vs

TCC FID

Pohokura

pipeline survey

1Q-2Q

Tawhaki-1

result

Tiwai “strategic

review” outcomes

Gladstone-1

result

Toutouwai-1

resultMaui-8

result

Election

2020

Swaption

renegotiation

outcomes

Rankine-2

certification

lapses

Pohokura inlet

compression

completion

Upstream

Downstream

HVDC rolling

outages

7 Jan-9 Apr


Forward markets signalling stress

60

70

80

90

100

110

120

130

140

150

160

Jan

18

Feb

18

Mar

18

Apr

18

May

18

Jun

18

Jul 1

8

Aug

18

Sep

18

Oct

18

Nov

18

Dec

18

Jan

19

Feb

19

Mar

19

Apr

19

May

19

Jun

19

Jul 1

9

Aug

19

$/MWh

2020 2021

ASX OTA futures 2020 & 2021

Source: EA, Enerlytica

■ Forward risk premia factoring:

- Gas scarcity pricing

- Scheduled gas plant outages

- Risk of unscheduled disruptions

a la 2018

- Thermal cover cost positioning

including wind-firming on new build

- ETS risk loading >$25t/CO2e


New build now squarely in the money ... but its complicatedO

PT

ION

S

Build

• Waipipi wind

+130 MW

• Turitea North

wind +119 MW

• Junction Rd

peakers

+100 MW

• Rankine x1

reinstatement

+250 MW

Pla

n

• Wairau hydro

+70 MW

• Central wind

+130 MW

• Tauhara

+≤250 MW

• Wairakei

reconsent

optionality

• Turitea South

wind +100 MW

• Puketoi wind

+250 MW

• Otorohanga

peakers

+≤360 MW

• Castle Hill wind

+860 MW

Abandon • TCC CCGT

-377 MW

• Rankines x3

-750 MW

Build decision conviction / timing

Source: Enerlytica


COSL Prospector Todd Big BenArcher Emerald

Maui exploration (OMV)

Outer Taranaki exploration (OMV)

Great South Basin (OMV)

Maui-A side-track & bypass gas programme 2020 Kapuni development programme 2020-

Mangahewa development programme TBD

Upstream E&P entering major reinvestment phase


Offshore Taranaki Basin programmes

Maui PML 381012

Maui-8 exploration well 1H 2020

Maui-A Archer programme 2020

Outer TaranakiCOSL Prospector programme

2019-20

Pohokura PMP 38154

Inlet compression

2H 2020 completion

Kupe PML 38146

Inlet compression

Mid-2021 completion


Onshore Taranaki Basin programmes

0

200

400

600

800

1,000

1,200

1,400

1,600

Poh

okur

a

Mau

i

Kup

e

Kap

uni

Man

gahe

wa

Tu

ran

gi

Kow

hai

McK

ee

Oth

er

PJ

2C

2P

1P

Offshore-Umbilical

Onshore

Source: MBIE, Enerlytica

2P+2C resources by major field

Mangahewa PMP 38150

P2D

Drilling 2021-

Kapuni PML 38839

P2D

Drilling 2020-


Great South & Canterbury basin programmes

GSB PEP 50119

1x exploration well

Wherry PEP 38264

1x exploration well

20enerlytica | 2019 Gas Industry Forum 20

Is NZ Inc. thinking like a good global citizen?

Source: Stuff

12 April 2018 …… meanwhile global NGOs say:

■ World population to grow 33% to 9.7 bln by

2050. Add 1x Germany every year.

■ China’s Five Year Plan plots gas demand

increasing from 9XJ to 15XJ by 2024

■ India mapped to overtake China as most

populous nation by 2022

■ 3 bln still cook over solid fuels

■ 4m die each year from the air they breathe

■ Urbanisation to reach 70% by 2050


Delhi

Beijing

Jakarta

Dhaka



Source: Carbon Brief, Enerlytica

Installed Asia-Pac coal fired generation■ >2 TW of coal-fired generation

operating globally, >60% of which is

in Asia.

■ Average plant life in Asia <10 years

vs US >40 years

■ >530 GW under development, of

which >225 GW under construction,

more than ½ of which is in China

■ New build continues to outpace

retirements

220 GW

973 GW

17 GW

24 GW

0.5 GW

25 GW

47 GW7 GW

5 GW

40 GW

9 GW

11 GW

16 GW



Source: IEA data, Enerlytica

Global primary energy demand → 2040■ Gas to overtake coal by 2030

to become second-largest

global primary energy source

■ Gas to overtake oil by 2040 to

become largest

■ Gas headed towards

commoditisation and price

convergence – a la crude

today

-30

-20

-10

-

+10

+20

+30

+40

+50

+60

+70

Adv

ance

dna

tions

Dev

elop

ing

natio

ns

Adv

ance

dna

tions

Dev

elop

ing

natio

ns

Adv

ance

dna

tions

Dev

elop

ing

natio

ns

Adv

ance

dna

tions

Dev

elop

ing

natio

nsRenewables Nuclear Industry Power Transport Petrochems Other

Low-carbon Gas Oil CoalXJ


NZ Inc’s ‘Energy Trilemma’ increasingly off-centre

0

25

50

75

100

125

150

175

200

225

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Pohokura Mangahewa Kupe Maui Kapuni Turangi Kowhai Other

PJ

BasU demand band

Actual | Forecast →

02468

10121416182022242628303234

Jan

19

Feb

19

Mar

19

Apr

19

May

19

Jun

19

Jul 1

9

Aug

19

Sep

19

Oct

19

Nov

19

Dec

19

Jan

20

Feb

20

Mar

20

$/GJ Forward →

60

70

80

90

100

110

120

130

140

150

160

Jan

18

Feb

18

Mar

18

Apr

18

May

18

Jun

18

Jul 1

8

Aug

18

Sep

18

Oct

18

Nov

18

Dec

18

Jan

19

Feb

19

Mar

19

Apr

19

May

19

Jun

19

Jul 1

9

Aug

19

$/MWh

2020 2021

Gas supply / demand outlook

ASX electricity futures Gas forward curve

0

2

4

6

8

10

12

14

16

18

20

J F M A M J J A S O N D

$/GJ

3 yr range 2015-17 2015 2016

2017 2018 2019

Gas spot prices

0

50

100

150

200

250

300

350

J F M A M J J A S O N D

$/MWh

2014 2015 2016 2017 2018 2019

Electricity spot prices

Sub-bit coal imports

-

200

400

600

800

1,000

1,200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Tho

usan

ds

kt


Bottom lines

■ Security of domestic energy supply:

− is earned, not won

− is both physical and economic in dimension

− is best managed locally

− is a potential exposure in 2020

− is a function of the scheduled and the unscheduled

■ Gas is indeed great – it is key to meeting decarbonisation and demand objectives

■ Election 2020 – energy could surprise to become a major political issue

John Kidd

Director, Head of Research

Level 2

318 Lambton Quay

Wellington 6011

P.O. Box 25 175

Wellington 6140

New Zealand

DDI: +64 (0)4 388 8324

Mob: +64 (0)21 543 448

[email protected]

www.enerlytica.co.nz

NZ Energy Sector AWE · Amendment Act passes 12 energy months to remember OMV+Shell settles...

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