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Global Gas/North American LNG

Exports, and Gas/NGL/Crude

Flows and Consequences

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited

Houston Texas – February 19, 2015

© McKinsey & Company

Mike Juden, McKinsey & Company, Inc., Houston


A perspective on key structural trends in North American LNG, natural gas,

NGLs and crude markets – within a global context

B

D

Supply/demand: Gas production to 2020 is expected to

be driven by Appalachian gas; LTO is expected to

continue to grow even with lower oil prices

C

Natural Gas: Primarily, regional, incremental, gas

infrastructure is needed; with Marcellus moving quickly

to exports via reversals, but new build needed by ~2019

F Crude oil: Crude oil transportation needs continue, but

bottlenecks have recently improved with expansions and

new builds, and differentials have narrowed

E

Global gas/NA LNG exports: New supply coupled with a

potential demand slowdown, especially in China,

potentially moves the LNG market from balanced to

loosening from 2018 to 2021/2022; Tighter market

expected post 2022 as projects have difficulty “going

FID,” with ~7-10 years needed for new supply to come

on-line; North American FID’ed projects advantaged

NGLs: US ethane supply may change greatly, with lower

crude prices – potentially putting projects at risk

A Global oil: This time, the oil price shock is different;

$100/bbl is structurally difficult to support; potentially

dramatically different scenarios, moving forward


Different to other price collapse situations since 1990, there is no

supply or demand shock behind the current price collapse

Brent crude quarterly prices

USD per barrel

SOURCE: U.S. Energy Information Agency

Global finance

collapse

9-11

attacks Asian

financial

crisis

0

10

20

30

40

50

60

70

80

90

100

110

120

20

14

20

13

20

12

2011

20

10

20

09

20

08

20

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

19

99

19

98

19

97

19

96

19

95

19

94

19

93

19

92

19

91

19

90

-63%

+103%

-53% -37%

Iraq

invasion

of

Kuwait

▪ Prior price

changes

were led by a

supply or

demand

shock

▪ That is not

the case in

the current

situation

GLOBAL OIL

A


At $100 oil, the industry faced a difficult situation in which supply

growth was structurally exceeding demand growth

SOURCE: Bloomberg, Platts, Energy Insights

Global liquids supply and demand balance1 at USD 100/bbl

Estimated in September 2014

Spare

capacity

Million bpd

Supply &

demand

Million bpd

1.8

1.2

0

1

2

3

4

5

6

7

8

9110

105

100

95

0

2022 21 20 19 18 17 16 15 14 2013

Supply Demand Spare Capacity

CAGR

Percent

GLOBAL OIL

A


Based on this, we see three possible scenarios, moving forward

Leading indicators of scenario

Several drivers could occur to take

1.5Mbpd out of market

Supply

▪ OPEC members agree to jointly

curtail production

▪ Venezuela/ Russia/ Brazil economic

turmoil drives >0.5 Mill bpd out

▪ Mature assets globally (N Sea, GoM

Shelf) dramatically cut production

▪ LTO cuts of 250-300 rigs remove

>0.3Mbpd of potential 2015 growth


Continued supply growth, lack of

OPEC action and tepid demand

Supply

▪ Oil prices remain in ~$50/bbl range

for much of 2015

▪ OPEC production cut only after

several members on default brink

▪ Longer downturn cause delays to

mega projects (e.g., Deepwater)

▪ Most Tier 2/3 LTO cut activity (100-

200 rigs); growth down 0.1-0.2Mbpd


Non-OPEC supply adjusts to a lower

price; all continues to protect share

Supply

▪ Oil prices remain in ~$50-60/bbl

range for much of 2015

▪ OPEC members continue to

protect market share (e.g., Saudi

increases production levels if

prices trend up)

▪ Non-OPEC supply adjusts costs

down to be economic at $50-60/bbl

V-Shaped Recovery U Shaped Recovery No Recovery

Demand

▪ Low oil prices drive demand and

large SPR purchases, adding 0.5

Mill bpd to expected 2015 demand

Demand

▪ Global GDP and oil demand remain

tepid – (slow Chinese growth, Euro

demand remains low, etc.)

Demand

▪ Global GDP and oil demand slow

down or decline further (Greece

exits Eurozone; US slows down)

Cyclical Structural

GLOBAL OIL

A

SOURCE: McKinsey & Company, Inc.


Global gas/LNG summary – and North American LNG export issues CRUDE OIL TRANSPORTATION NEEDS

SOURCE: Energy Insights, a McKinsey Solution; McKinsey experts; Industry sources

B

Global gas/

LNG demand

▪ High natural demand growth in Asia, with modest ~3% growth in North

America and flat demand in Europe

▪ Highest LNG growth markets are expected to be China and Southeast Asia,

although expected demand growth is slowing in China

▪ Tight LNG market, until recently with a mild, prior winter in Europe and Asia

LNG supply ▪ Australian and US LNG volumes coming on-line over the next several

years, coupled with a slower growth rate of Chinese demand is expected to

move the long-term LNG market from a balanced to a potentially loosening

market from 2018 through 2021/2022

▪ A dramatically tighter LNG supply market is expected post 2022 as project

are have trouble “going FID1” – and new supply is delayed, with traditional

LNG pricing mechanisms unable to support needed, marginal projects

▪ Current, approved US projects are proceeding with some signs of

accelerated progress; most US brownfield projects are still economic

North

American

issues

▪ Canadian projects have had difficulty “going FID” with contract pricing

pressures, environmentalist opposition, and “green-field” cost issues

▪ New pipeline infrastructure to the Gulf Coast, beyond pipeline reversal, will

be needed at about the time LNG projects come online; approved US

projects – both FOB and tolling arrangements – appear unlikely to support

long-distance pipeline construction with long-term Firm contracts

▪ Potential, regional bottlenecks appear likely as project are fully operational

Note: “FID” – notes “Final Investment Decision” - To “go FID” – in to make the final investment decision for proceed


Asian LNG price at $75/bbl oil price $/mmbtu

With a sustained oil price of $75/bbl, for example, Asian LNG prices

may drop to $10-11/mmbtu by 2020 – lower sustain prices a potential. . .

SOURCE: Worldbank, McKinsey

0

10

20

15-16

10-11

Brent

price

Asian LNG price as function of the oil price1 $/mmbtu

1 Asian LNG price = 1.25 + brent price * 0.127, with a R2 of 0.75.

0

4

8

12

16

20

2020201520102005

10-11

Asian LNG price forecastJapan LNG

$75/bbl $110/bbl

B

GLOBAL GAS/NA LNG EXPORTS

Potentially, significantly

lower pricing with lower,

sustained crude prices

McKinsey & Company | 7 SOURCE: Energy Insights

. . . making it more difficult to support needed LNG projects,

especially beyond 2022 B


500

10

3

5

7

9

200150100500

1

8

13

6

4

2

0

18

16

11

450400350300250

14

12

17

15

750700650600550

Volumesbcma

AustraliaAsia AfricaMiddle EastNorth AmericaSouth AmericaRussiaOther

EXCLUDING PROJECTS UNDER CONSTRUCTION DELIVERY TO ASIA

Project economics

Break even delivered LNG prices for future LNG supply

US$/mmbtu

$10-11/mmbtu

$15-17/mmbtu

▪ Near/mid-term new supply, coupled with slower demand growth – potentially moves

market from a balanced to a potentially loosening market from 2018 through 2021/2022

▪ A dramatically tighter LNG supply market expected post 2022 as projects are “unable”

to “go FID,” with around 7-10 years needed for incremental supply to come on-line


700

600

500

400

300

200

100

0

2013 2015 203020252020

Current Capacity

Post FID

Less than $12

$12-13

Greater than $13 Reference case demand

Impasse

on project

FIDs

Project

delivery

constraints

Cost

escalation

Even with previous high LNG prices in Asia the LNG market has

been expected to be tight, beyond 2022, given market dynamics B


Mpta

▪ A large number of Post FID projects coming on line to 2021/22

▪ Downward pressure on demand – balance to potentially loosening Dramatically tighter

market post ~2022


West Canada

Montney

Horn River

Powder River

Wind River Gas

Green River Gas

Hilliard Baxter

Mancos

Uinta Piceance

Raton

San Juan

Anadarko

Permian

Barnett

Eagle Ford

Tex La

Haynesville

East Texas

Antrim

New Albany

Marcellus

Utica

Black warrior

Floyd Neal

Miss Alabama

Fayetteville

Arkoma Tight gas

Woodford

Granite Wash

Most incremental gas production is expected out of Appalachia MODELED

Cumulative incremental production – “sufficient

infrastructure case” – Bcfd growth vs. 2014

C

NATURAL GAS SUPPLY/DEMAND; CRUDE SUPPLY

Appalachia Area

0

2

4

6

8

10

12

14

16

18

20

22

2020 2019 2018 2017 2016 2015

-2

0

2

2020 2019 2018 2017 2016 2015

Midcon Area

Southern Supply

-4

-2

0

2

2019 2015 2018 2016 2017 2020

0

0.5

1.0

2020 2019 2018 2017 2016 2015

WCSB

0

1

2019 2020 2018 2017 2016 2015

Bakken

Rockies Area

-4

-2

0

2017 2016 2015 2020 2019 2018

SOURCE: Energy Insights


Boom in North America oil could bring ~5-7 Bcfd of

incremental associated gas production by 2020 vs. 2014

US associated gas production

Bcfd


MODELED

SOURCE: McKinsey Energy Insights North American Supply Model; EIA Annual Energy Outlook 2014

US oil production under different scenarios

Million bpd

0123456789

1011121314

2020 07 2005 13 09 11 14 16 18

Lower 48 conventional

GOM

Alaska

8.1

7.1

6.3

5.5

2020 LTO production x 16.3

9.6

5.5

2020

production

LTO at

5.5 Mill

bpd

2014

0.6 0.4

LTO at

7.1 Mill

bpd

0.3

LTO at

6.3 Mill

bpd

LTO at

8.1 Mill

bpd

C


To 2020 our reference case outlook for NA demand is for modest growth,

increasing from 90 Bcfd (2014) to 109 Bcfd (2020), driven by LNG exports

SOURCE: EIA April 2013 with team adjustments for LNG exports, transportation, power and industrial demand

US natural gas demand outlook – EIA reference case

Bcfd

0

10

20

30

40

50

60

70

80

90

100

110

90

2013

89

2012

87

2011

84

2010

80

Commercial

Industrial

Electric power

Transportation

Other

Exports to Mexico

Canada

LNG Exports

2020

109

2019

105

2018

101

2017

100

2016

98

2015

95

2014

Residential

2.5%

▪ Ave GDP growth at 2.6% / year Overall:

▪ EE improvement of 1% p.a.

▪ Population growth of 0.8% p.a from

2012-20

▪ EE improvement of 0.4% p.a.

▪ Offsetting sq. footage growth of 1.2% p.a.

till 2020

▪ Steel production to grow by 21 mil. tonnes

▪ Ammonia production to increase by 2 mil.

tonnes

▪ Methanol production to see an at least 10x

increase till 2020

▪ 52 GW of coal retirements by 2020

based on current age of plants + lifetime

assumption of 40 years

▪ 16.6% renewable market share by 2020

▪ Begins 2016, 0.6 Bcfd; 6.9 Bcfd by 2020


▪ Lease & plant fuel, pipeline fuel

▪ 10% scenario of gas in fleet vehicles

C


-2

02

4

4

2

0

-2

4

2

0

1

0

2

0

2

1

Marcellus gas production is displacing imports to the Northeast –

flows on pipelines to Northeastern markets are starting to reverse

SOURCE: Ventyx Energy Velocity; McKinsey

TGP (Tenn) – OH/PA Border

TETCO - Berne compressor

Transco – Station 180

Columbia Gulf – Leach KY

TGT (Texas Gas) – Dillsboro compressor

-77%

-12%

-38%

52%

34%

16%

49%

16%

22%

-24%

Flows at key points (Bcfd flows and average Bcfd/year)

Bcfd Capacity utilization

Grand Island

Niagara Falls

Waddington

Calais

East Hereford

Champlain

Highgate Springs

Massena

2014

0.35

2010

1.39

2009

1.85

2013

0.46

2012

0.88

2011

1.20

NE US receipts from Canadian pipelines (Ave. Bcfd)

NATURAL GAS TRANSPORT

D

2

1

0

-1

Jul-

14

Jan-

14

Jul-

13

Jan-

13

Jul-

12

Jan-

12

Jul-

11

Jan-

11

Jul-

10

Jan-

10

REX (Rockies Express) – Lebanon to Chandlersville

21% -8% 38%

56%

73%

23%

1%

34%


0

0.5

1.0

1.5

2.0

2.5

3.0

Feb-

14

Aug-

14

Aug-

13

Feb-

13

Aug-

12

Feb-

12

Aug-

11

Feb-

11

Aug-

10

Increased Bakken

associated gas

volumes have begun

displacing Western

Canadian volumes . . .

. . . driving down

Bakken prices towards

Canadian price levels

Up to ~1.5 bcfd of

incremental Bakken

associate gas could

displace additional

Western Canadian

volumes . . .

. . . further pressuring

Western Canadian gas

prices; but recently

marginal Canadian

volumes have been in

demand to fill

Canadian storage

Capacity

12.0

2.0

0

-2.0

Empress

Watford City

AECO

Ventura

Cheyenne

Canada

Rockies Bakken

Canadian volumes

displacing Rockies

volumes from Bison

Associated gas

from LTO

displacing volumes

from Alberta

Receipts from Bakken are starting to displace Canadian volumes, and as

Bakken LTO grows, displacements could reach an additional 1.5 Bcfd


Basis differentials to HH

USD/MMBtu

SOURCE: Ventyx Energy Velocity; SNL; North Dakota Department of Mineral Resources, Oil and Gas Division;

team analysis

Northern Border Receipts Upstream of Ventura

Bcfd

W. Can. Storage fill

diverts AECO volumes

D


Proposed1 natural gas, interstate pipeline projects –

are now expanding beyond regional projects to reversals to the GoM

SOURCE: Ventyx Energy Velocity, EIA; Company websites and presentations; Trade press; team analysis

1 Includes projects under construction, approved, filed and proposed in all regions. Reversals included as expansions. Does not include any pipeline conversion projects

2 Laterals to storage, LNG, terminals, power plants, other pipelines, LDCs, etc 3 Where capacity ranges are given used largest

55

19

21

3

Expansion

Regional

Laterals2

Trunklines

Number of

projects

98

Proposed1 natural gas pipelines

Miles

6,357

542

3,033

966

1,816

69

8

19

Bcfd3

36

6

PRELIMINARY NATURAL GAS TRANSPORT

B

▪ Appalachian

regional focus

▪ Reversals to

the Gulf Coast

▪ ~50% y-o-y

increase in

projects

▪ ~70% y-o-y

increase in

project miles

AIM (Algonquin)

ANR East

Atlantic Coast (Dominion)

Atlantic Sunrise (Transco)

Constitution (Williams)

Leach Xpress (Columbia

Mountain Valley (EQT/NextEra)

Dakota Pipeline (MDU)

Eagle Ford NET Mexico

Nexus Gas (Spectra)

Northeast Energy Direct (TGP)

Pacific Connector (Northwest)

PennEast (TETCO)

Rover (Energy Transfer)

Sabal Trail / SE (Spectra/NextEra)

Washington Exp. (Northwest)

Proposed Natural Gas Pipeline Projects


Indicatively, export capacity expected to be full by ~2018 – requiring

new pipelines to the Gulf Coast (area of incremental demand)

Appalachia Area Production –

“sufficient infrastructure case”

0

2

4

6

8

10

12

14

16

18

20

22

2020 2019 2018 2017 2016 2015

Cumulative incremental production –

Bcfd growth vs. 2014

2.0

3.0

2.5

1.2

1.4

1.6

1.61.0

1.5 12.2

2.4

1.5

Transco Col-

umbia

Gulf

Net TETCO TGP Trunk-

line

TGT ANR NGPL Conver-

sions

-3.0

TGP to

TCPL

0.5

Adjust-

ments

for 80-

90%

capacity

~Pipelines full at

80% utilization

~Pipelines full at

90% utilization

Appalachia Area Pipeline Export Capacity

Potential pipeline export capacity out of Appalachia –

Bcfd

VERY PRELIMINARY

ESTIMATE


D

Out of region

exports – 2014

SOURCE: McKinsey Energy Insights North American Supply Model; Energy Insights, a McKinsey Solution; Conversions/

repurposed pipelines are estimates of pipelines out of service in ~2018 during conversion

Note: REX in upstream of export pipelines (e.g., Trunkline, ANR, NGPL) – and is not included is estimate; pipelines to Dawn are regional


U.S. (lower 48 states) ethane supply vs potential capacity to consume (CTC) ethane1

SOURCE: IHS; Goldman Sachs, ICIS; Hodson; literature search; McKinsey analysis

Existing capacity to consume

The outlooks for US ethane demand and supply are likely going

to greatly change – potentially putting projects at risk

Kbpd

ESTIMATE

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

16 15 14 13 2012 2025 24 23 22 21 20 19 18 17

2012 CTC ethane

Feedstock flexibility

Greenfield being built

Mariner East ethane export

Enterprise ethane export

Potential new greenfield

Expansion

Low end outlook

Middle case

High end outlook

Historical ethane supply

Estimated feed to crackers2

1 Based on crackers feeding ethane at design limits ("normal yields") and at 93% utilization

2 Ethane is forced into crackers despite lower yields or throughput rates due to its low price relative to alternative feeds. Ethane supplies not put into

crackers are generally left in the natural gas (i.e., rejected) or is removed and injected into drier gas streams

Ethane

consumption

at risk of

cancellation

▪ The second wave of new crackers and

some ethane export plans are at risk of

being implemented

▪ Crackers under constructions are likely

to be completed

▪ Will ethane supply remain in excess?

Forecast range

before crude oil

downturn

NGLs

E

McKinsey & Company | 17 SOURCE: Industry press; team analysis

Hardisty

Chicago

Wood River

- Patoka Cushing

Houston

Enbridge

Transcanada (Keystone)

Kinder Morgan (Express)

(Pegasus)

Sarnia

Oil Sands

Bakken

W Texas

Centurion

Edmonton

Burnaby/ Anacortes

Trans Mountain

GULF OCS

Major bottlenecks

– 2013

xxx Crude supply

sources

Pipeline bottlenecks between the Midwest and the Gulf Coast have

been improving with pipeline expansions and builds

CRUDE OIL TRANSPORTATION NEEDS

F

▪ 520 kbpd capacity

additions

▪ Rail marginal out of the

Bakken – with periodic

pipeline capacity limits

▪ Seaway reversal

and twin looping

▪ Cushing to Houston

bottleneck relieved

for now

McKinsey & Company | 18 SOURCE: Platts, McKinsey analysis

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

2010 2005 2014

Canadian Sweet

LLS

WTI

Bakken

Traditionally, all NA

light crudes were

at a premium to

Brent reflecting

import economics

Inter-regional

pipeline bottlenecks

led to deep

discounts for all

inland grades

despite very similar

qualities More-localized

bottlenecks led to

additional discounts for

Canadian light sweet

and Bakken

New pipeline

capacity and

tight USGC

market led to

narrower

discounts

As a result, North American inland crude differentials have

compressed

North American light sweet crude prices – differential to Brent

$/bbl

CRUDE OIL TRANSPORTATION NEEDS

F


Pipeline and Midstream Operations Roundtable guiding questions

2

1

Natural Gas: What is the expected impact of the

projected, dramatic increases in Marcellus and Utica

production on the regional and interstate pipeline

grids? Other basins (e.g., Permian/MidContinent)?

4 Crude oil: How to you see crude pipelines developing

vs. rail transport for crude? Operational issues?

3

LNG exports: Do you see flow or operational issues

associated with North American exports as export

facilities come on-line?

NGLs: Will there be sufficient NGL pipeline capacity in

the Marcellus to maintain pipeline quality gas for the

gas pipeline grid, or will drilling be restricted by lack of

liquids take-away capacity? Other basins (e.g., Eagle

Ford, Bakken, and Permian)? Operational issues?

5 Equipment: Do you see changes in near-term

equipment purchases now vs. this time last year (what

has changed or is expected to change and why)?


Global Gas/North American LNG

Exports, and Gas/NGL/Crude

Flows and Consequences

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited

Houston Texas – February 19, 2015

© McKinsey & Company

Mike Juden, McKinsey & Company, Inc., Houston


APPENDIX


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SOURCE: Energy Insights, a McKinsey Solution

Market

Analytics

▪ Analytical

services

▪ Market

Overviews –

reports &

subscriptions

Informs strategic decision making

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by delivering robust forecasting

and advanced market analytics

on global crude, refined product,

and natural gas markets

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Business

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(DBI)

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Enables fact-based decisions for

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Bench-

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A McKinsey Solution

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Energy Insights has 3 major hubs

SOURCE: Team analysis

Houston

▪ Conventional and unconventional oil &

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analysis (LNG)

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London

▪ Global gas market analytics

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▪ Proprietary data (in development)

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Singapore & Kuala Lumpur

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Market analytics: philosophy

▪ Analyse numerous sources

of available market data

▪ Collect and leverage significant

expertise and local knowledge

of McKinsey extended energy

practitioner group (200+ people)

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integrate available information

and help create future scenarios

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on feedstock for Asian refiner)

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different global hubs as a function

of global crude quality balances

and a market crude price

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of LNG by origin

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North America and impact on inland

crude or gas prices

▪ Impact of specific technological

breakthroughs on oil and gas

demand by region and sector

To deliver advanced insight

Combine large sets of insights

and information


EXAMPLES


Market Analytics approach includes a combination of five elements

performed in a distinctive way

Approach Description What is distinctive about “Market Analytics?”

A Bottom up

approach

▪ We build our models bottom up,

based on an understanding of what

drives demand and supply dynamics

rather than use statistical tools

▪ Not a mere extrapolation of latest trends

▪ Market outlook based on fundamentals

(SD balances, cost position and technology

trends)

B

Granular

understanding

across sectors

▪ We build our perspectives integrating

McKinsey’s industry knowledge from

other practices (e.g. automotive)

▪ We monitor trends before they

substantially impact the industry

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across global geographies and industry

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C Integrated

perspective

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D Expert

contribution

▪ Our market outlooks are reviewed in

detail by our foremost senior experts

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in the world E

Top

management

delivery


Primary models and advanced analytics: integration delivers

detailed and advanced insights

LTO production

scenarios for

North America

by basin, 4

scenarios

Light tight oil

Capability is

focused on research

and database

creation

Capability is

focused on

advanced analytics

and “big data”

updates

Sector by

sector demand

forecasts for

regions, out to

2030

China energy demand

Linear

optimization of

the global

refining system

and petroleum

trade flows

Global LNG trade

North

America

Europe/

Mediterranean

Asia incl.

India

Russia

Arab Gulf

Sub-

Saharan

Africa

Latin

America

North AfricaEast

Asia1

Made by Energy Insights. Released May 2014

Rig fleet

utilization and

day-rate outlook

per rig type,

region and water

depth

Rig utilization and day-rates

Bottom up

forward looking

cost curve by

country and

resource type

Global oil cost curve

N. American oil

and gas

pipeline flows

& bottlenecks

N. America Midstream

Warren

Platteville

Gallup

Newell

SlaughterArtesia

KO

CH

Lake Charles

El Paso

Sunray Tulsa

McPherson

El Dorado

Cushing

Longview

El Dorado

Freeport

Three Rivers

Midland

WTG

Borger

Los Angeles

Bakersfield

Denver

CheyenneSalt Lake City

Billings

Great Falls

Cutbank

Kamloops

Edmonton

Hardisty

Kerrobert

Regina

Cromer

Mandan

Memphis

Robinson Catlettsburg

Lima

Toledo

Flanagan

Superior

Clearbrook

St. Paul

KE

YS

TO

NE

Canton

Detroit

Sarnia

Nanticoke

Montreal

Portland

Quebec City

Saint John

Halifax

Port Arthur/Beaumont

Come-by-chance

Minot

Colorado CityMESA Krotz springs

Westover

West Seneca

Gardendale

MULTIPLE

Steele City

Linden

Delaware City

Paulsboro

Trainer

Chicago

Philadelphia

Stockbridge

Tuscaloosa

Saraland

PascagoulaSt. James

Houma

Odessa

Helena

Crane

Holdrege

Tacoma

Anacortes

VancouverSumas

Wahsatch

Prince George

Taylor

Elk Basin

Rangely

Karnes

SE

AW

AY

Patoka

Ponca City

San Francisco

Big Spring

Sinclair

OK MAINLINE

Vicksburg

SE

AW

AY

Tyler

Cuero

EXXONMOBIL

Berthold

CasperGuernsey

Milk

River

KE

YS

TO

NE

Houston

Edgar

Plentywood

Outlook

McKenzie

Sundre

JayAmite

Lincoln

Duncan

Bretch

Pettus

Hooker

Laurel

Wichita

Falls

Wortham

PO

PLA

R

Baker

WynnewoodArdmore

Corsicana

Gaines

Corpus Christi

Coffeyville

Bottom up

breakeven

costs of all

proposed LNG

projects

LNG infrastructure build up LNG cost curves

Analytics of

LNG projects

around the

world


Input Model Output

McKinsey’s Global Gas Model schematic description

Global

Gas

model

Global trade

flows

Delivered

cost curve

Infrastructure

utilization

Global gas

outlook

Synthesis of

▪ Primary

research

▪ Expert

practitioners

▪ Global

perspectives

▪ External data

LNG liquefaction

LNG regasification

Gas demand

Gas Production

Gas Pipelines

Shipping cost

Pipeline transport

cost

New LNG projects

perspective

Production cost

Contracts

▪ Current Gas Model until 2030

but can be extended to 2040


The global gas model incorporates the latest views on demand, supply

and infrastructure trends


Energy Insights Global Gas Model is composed of five separate gas

models

SOURCE: Energy Insights, a McKinsey solution

Global Gas & LNG analytics

Example offerings and

capabilities

Description

LNG

flow

model

LNG flow model for

main regions globally

▪ Forecasts main LNG flows globally

based on a combination of bottom-up

supply – demand outlooks, economics

and political considerations

Global

Gas

data-

base

Integrator of all other

gas & LNG models to

ensure consistency

▪ Integrates all domestic supply –

demand outlooks with views on pipe

and LNG infrastructure to ensure

global consistency across the different

input databases

ASEAN Gas and

LNG outlook by

country (part of

global demand

outlook)

Gas

Demand

model

Bottom-up fuel

demand model by

sector

▪ Forecasts fuel consumption globally

across up to 10 sectors and regions,

resulting in a gas demand outlook

which is consistent with overall

regional energy consumption

across fuel types

Global Gas supply

demand balances

by country

North

America

unconv

model

Unconventional gas

production model for

North America by

basin

▪ Forecasts basin-level unconventional

gas supply and production cost

LNG sourcing

strategy approach Global

LNG

model

LNG supply capacity

and economics by

plant

▪ Maintains a project-by-project view on

LNG supply globally including the

break even prices by future project

based on bottom up calculations

Generates a mix of

countries supply

portfolio and

resulting cost curve

Report on global

gas and LNG

market outlook


Our research and analytics allows us to publish a detailed report on the oil

& gas markets


June

2014

Oct

2014

Feb

2015


Recent global gas publication and contacts


• December 4, 2014 publication: “Another radical shift in the global gas

market? The implications of a sustained $75/bbl scenario”

• Link: http://www.mckinseyenergyinsights.com/media/63674/Another-radical-

shift-in-the-global-gas-market.pdf

• Questions concerning the Gas/Electric Partnership presentation:

[email protected]

• Questions concerning McKinsey Energy Insights:

[email protected] (Global Gas Manager)

[email protected] (VP Market Analytics)

http://www.mckinseyenergyinsights.com/media/63674/Another-radical-shift-in-the-global-gas-market.pdf
















mailto:[email protected]



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