LNG Market in Asia - IBC€¦ · LNG Import Volume by Country The number of countries that import...

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LNG Market in Asia

- A Japanese Perspective on the LNG Industry -

October 14th, 2016

Industry Research Department

1

Copyright © 2016 Mizuho Bank, Ltd.

Contents

1 Energy Policies in Japan P. 2

2 LNG Market from a Japanese Perspective P. 9

3 Natural Gas Hub Development in Asia P. 15

2


0

100

200

300

400

500

600

Renewables

Nuclear

Coal

Gas

Oil

（Mtoe）

87%

92%92%

89%

85%

83%

82%

81%

82%

81%

88%

92%

92%

91%90%

88%

83%

80%

85%

90%

95%

Primary Energy Supply in Japan

In the past 40 years, Japan has gradually created a diversified energy portfolio in order to

strengthen its energy security.

Fossil fuels account for more than 80% of primary energy supply in Japan, playing an important role.

Primary energy supply in Japan

(Source) Compiled by Mizuho Bank Industry Research Department based on data from METI and IEEJ

(FY) (FY)

Energy Policies in Japan LNG Market from a

Japanese Perspective

Natural Gas Hub

Development in Asia

Fossil fuels’ share of primary energy supply in Japan

Oil crisis

Oil crisis Forecast Forecast

3


0

20

40

60

80

100

120

140

Oil

Coal

LNG

（Mtoe）

0

200

400

600

800

1,000

1,200

RenewablesNuclearOilCoalLNG

（TWh）

34%31% 29% 1%

26% 24%29%

44%

11%9% 9%

14%

11%

11%8%

9%

18%26%

25%

32%

Electricity Generation by Source in Japan

To make up for the lost power generation from nuclear plants, fossil fuel fired plants,

especially LNG plants, have carried the load.

(Source) Compiled by Mizuho Bank Industry Research Department based on data from IEEJ and FEPC (The Federation of Electric Power Companies of Japan)

(Note) Renewables include hydropower. Oil includes LPG and other oil products. Based on figures for Japan’s 10 major electric power companies.

Japan’s electricity generation by source Fossil fuel consumption for electricity generation

(FY)

Great East

Japan Earthquake

Great East

Japan Earthquake

(FY)



Natural Gas Hub

Development in Asia

4


TEPCO28%

Chubu15%

Kansai10%

Other EPCOs14%

TokyoGas16%

Osaka Gas9%

Toho Gas3%

Other gas utilities 1%

Other4%

10 EPCOs

66%

Gas utilities29%

Japan'sLNG imports

(FY2014)89 Mt

JERA

(TEPCO+Chubu)

43%

Japan’s LNG Import Breakdown by Country Source and Importing Company

Japan’s LNG imports by source country Japan’s LNG imports by company

(FY)

54 54 55 59 58 58

63 68 68 66

71

83 87 88 89

84

0

10

20

30

40

50

60

70

80

90

（Mt）

Australia23%

Malaysia19%

Qatar16%

Russia 9%Indonesia 8%

UAE 7%

Brunei 5%PNG 5%

Other 10%

(FY)

(Source) Compiled by Mizuho Bank Industry Research Department based on data from the Trade Statistics of Japan (FEPC; The Federation of Electric Power Companies of

Japan) and Tex Report

(Note) EPCOs: Electric Power Companies

Japan has gradually diversified its LNG import portfolio.

Australia is the largest LNG source for Japan, accounting for 23% of LNG imports in FY 2015.

Power companies and gas utilities are major importers of LNG in Japan.

JERA, the JV between TEPCO and Chubu, accounted for 43% of Japan’s LNG imports in FY 2014.



Natural Gas Hub

Development in Asia

5


Japan’s Energy Policy Developments

（Source） Compiled by Mizuho Bank Industry Research Department from government documents

“Basic Energy Plan”

（Cabinet decision）

Energy & Environmental Policy

announced by DPJ

The Policy on Electricity

System Reform (report)

Great East Japan Earthquake,

Fukushima Accident

Change in Government

(DPJ→ LDP)

Former basic energy plan

Discussions and announcements made under the DPJ

(Democratic Party of Japan) administration

→ Zero nuclear was one option for the energy mix.

Plans for full deregulation and unbundling of the

electric power sector announced.

4th Basic Energy Plan

(Cabinet decision)

Fundamental Principles of Energy Policy: 3E + S

Energy Security, Economic Efficiency, Environment + Safety

Submission of Intended Nationally

Determined Contribution (INDC) for COP21

Jun. 2010

Mar. 2011

Dec. 2012

Sep. 2012

Apr. 2013

Apr. 2014

Jul. 2015

The Policy on Gas

System Reform (Report) Jan. 2015

Plans for full deregulation and third party access to

LNG regasification terminals etc. are announced.

GHG emission reduction of 26.0% by FY 2030

compared to FY 2013

Energy Mix in 2030

Long-term Energy Supply and Demand

Outlook (METI decision) Jul. 2015



Natural Gas Hub

Development in Asia

6


29%

43%

27%

25%

30%

26%

8%

15%

3%

29%

1%

20-22%

10% 11%22-24%

0%

20%

40%

60%

80%

100%

FY2010(Actual)

2013(Actual)

2030(Target)

Renewables

Nuclear

Oil

Coal

LNG

Electricity demand:

966.6 TWh

Electricity demand:

980.8 TWh

Energy conservation:196.1 TWh

0

200

400

600

800

1,000

1,200

FY2013(actual)

FY2030(target)

（TWh）

Power Generation Mix in FY 2030

To achieve 3E+S, the government will promote energy conservation, the increase in

renewable energy, and the improvement in thermal power efficiency.

（Source）Compiled by Mizuho Bank Industry Research Department from government documents

Generation mix targeted in FY 2030 Electricity demand in FY 2030

Economic growth:

＋1.7% per annum -17%

compared to

BAU



Natural Gas Hub

Development in Asia

7


Japan’s Intended Nationally Determined Contribution (INDC) for COP21

（Source） Compiled by Mizuho Bank Industry Research Department from the government’s “Submission of Japan’s Intended Nationally

Determined Contribution (INDC)”

Japan’s INDC for FY 2030 is to reduce total GHG emissions by 26.0% compared to FY 2013.

Energy-originated CO2, which accounts for approximately 90% of GHG emissions in Japan, will be reduced by

25.0% compared to the FY 2013 level.

GHG reduction target in Japan’s INDC Overview of Japan’s INDC

Base years

• FY 2013 and FY 2005

– FY 2013 is the base year mainly used

for presenting Japan’s INDC

Target year • FY 2030

Total GHG emission • -26.0% compared to FY 2013

• -25.4% compared to FY 2005

Energy-originated

CO2



Non-energy-

originated CO2



Methane • -12.3% compared to FY 2013


Nitrous oxide • -6.1% compared to FY 2013


Fluorinated gases (HFCs, PFCs SF6,and NF3)


• +4.5% compared to FY 2005

0

250

500

750

1,000

1,250

1,500

1,750

Other GHGs

Energy-originated CO2

（Mt-CO2eq）

0

250

500

750

1,000

1,250

1,500

1,750

Energy conversionTransportResidentialCommercialIndustry

（Mt-CO2eq）

(FY) (FY)

【Total GHG emission】【Energy-originated CO2】

Target

Target

-25% -26%



Natural Gas Hub

Development in Asia

8


Deregulation of the Power and Gas Industry in Japan

（Source）Compiled by Mizuho Bank Industry Research Department from government documents

（Note）OCCTO: Organization for Cross-regional Coordination of Transmission Operators

Through electricity and gas system reform, the Japanese power and gas utility sectors will be

gradually deregulated.

2014 2015 2016 2020

Electricity

system

reform

【Jun.2014】

Publication of

Amended

Electricity

Business Act

【Apr.2015】

Establishment

of the OCCTO

【Apr. 2016】

Full retail

competition

2022 ・・・ 2017 ・・・

【Apr. 2020】

Unbundling of

T/D business

and full

liberalization of

retail rates

Chronology for Japan’s power and gas industry deregulation

Gas

system

reform

【Jun.2015】

Publication of

Amended Gas

Business Act

【Apr. 2017】

Full retail

competition

【Apr. 2022】

Unbundling of

pipeline

business



Natural Gas Hub

Development in Asia

9


LNG and Natural Gas Prices

Japan’s LNG import price has been higher than the natural gas prices in Europe and the U.S.

In particular, the natural gas price in the U.S. remains at a low level due to the production increase of shale gas.

The LNG spot price has seen a downtrend since 2014, and decreased to less than $5/MMBtu in March and April 2016.

One of the reasons for this decline may be looser demand/ supply conditions due to the start of production at new LNG projects.

LNG, natural gas and crude oil prices Japan’s LNG Import Price and Spot Price



Natural Gas Hub

Development in Asia

4

6

8

10

12

14

16

18

20

Japan LNG import price

Platts JKM

METI LNG spot price survey

（USD/MMBtu）

（Monthly）

0

5

10

15

20

25

(USD/MMBtu)

Crude oil price

（JCC）

Japan LNG import price

Europe

（NBP）

US（Henry Hub）

(Source) Compiled by Mizuho Bank Industry Research Department based on

data from EIA, the Trade Statistics of Japan, Platts and the METI’s

LNG spot price survey

(Source) Compiled by Mizuho Bank Industry Research Department based on

data from EIA and the Trade Statistics of Japan

（Monthly）

Canada

(AECO)

10


LNG Import Volume

Global LNG import volume has increased with growing natural gas demand.

However, world LNG imports have remained fairly flat the past few years.

Global LNG import volume Change in LNG import volume (2015 vs 2014)

(Source) Compiled by Mizuho Bank Industry Research Department based on data from

GIIGNL

(Source) Compiled by Mizuho Bank Industry Research Department based on data from

GIIGNL and Cedigaz

0

50

100

150

200

250

Middle East

Americas

Europe

Asia and Oceania

（Mt）

（CY） -6 -4 -2 0 2 4 6

Thailand

Pakistan

China

Taiwan

Japan

South Korea

Other Asian countries

Asia total

Americas

Europe

Middle East

World

（Mt）



Natural Gas Hub

Development in Asia

11


LNG Import Volume by Country

The number of countries that import LNG has

more than tripled in the past ten years.

The top 5 LNG importing countries are all in Asia.

Combined LNG imports to Japan, Korea, China,

India and Taiwan accounted for 68% of global LNG

demand in 2015.

（Source） Compiled by Mizuho Bank Industry Research Department based on data from GIIGNL, BP and Cedigaz

Country Volume Share

Japan 35.2 66.4%

France 6.8 12.9%

Spain 3.3 6.2%

Belgium 2.9 5.4%

South Korea 2.3 4.3%

US 1.8 3.4%

Taiwan 0.7 1.3%

UK 0.04 0.1%

Italy 0.02 0.04%

Total 53.0 100.0%


Japan 53.4 52.9%


France 7.3 7.2%

Spain 6.1 6.0%

US 4.7 4.7%

Taiwan 4.4 4.4%

Italy 3.6 3.5%

Belgium 3.1 3.0%

Turkey 3.1 3.0%

Greece 0.3 0.3%

Puerto Rico 0.3 0.3%

Portugal 0.2 0.2%

Total 100.8 100.0%


Japan 70.9 32.2%


Spain 20.6 9.4%

UK 14.2 6.4%

Taiwan 11.2 5.1%

France 10.4 4.7%

China 9.6 4.4%

India 9.0 4.1%

US 8.2 3.7%

Italy 6.7 3.0%

Turley 5.6 2.6%

Belgium 4.4 2.0%

Mexico 4.3 1.9%

Chile 2.2 1.0%

Portugal 2.2 1.0%

Brazil 2.1 1.0%

Kuwait 2.0 0.9%

Argentina 1.3 0.6%

Canada 0.9 0.4%

Greece 0.7 0.3%

Dominican Rep. 0.6 0.3%


UAE 0.1 0.05%

Total 220.2 100.0%

【1990】【2000】【2010】【2015】

（Mt）

68% of

world LNG

imports


Japan 85.1 34.7%


China 20.0 8.2%

India 14.6 6.0%

Taiwan 14.5 5.9%

UK 10.1 4.1%

Spain 8.8 3.6%

Turkey 5.4 2.2%

Mexico 4.9 2.0%

Brazil 4.8 1.9%

France 4.4 1.8%

Italy 4.3 1.8%

Argentina 4.1 1.7%

Kuwait 3.0 1.2%

Chile 2.7 1.1%

Thailand 2.7 1.1%

Egypt 2.6 1.1%

UAE 2.2 0.9%

Indonesia 2.2 0.9%

Singapore 2.1 0.8%

Belgium 1.9 0.8%

Jordan 1.9 0.8%

US 1.7 0.7%

Malaysia 1.5 0.6%


Portugal 1.1 0.4%

Pakistan 1.1 0.4%

Dominican Rep. 0.9 0.4%

Netherland 0.6 0.3%

Canada 0.5 0.2%

Greece 0.5 0.2%

Lithuania 0.3 0.1%

Sweden 0.3 0.1%

Israel 0.1 0.0%

Total 245.2 100.0%

LNG import volume by country



Natural Gas Hub

Development in Asia

12


13,559

17,934

-157

+1,133

+983

+709

+558

+482

+667

12,000

14,000

16,000

18,000

(Mtoe)

Global primary energy demand outlook

World primary energy demand is forecast to increase mainly due to growth in Asia.

Global natural gas demand is forecast to grow at 1.4% per annum through 2040.

Growth in natural gas demand is expected to be highest amongst fossil fuels.

予測



Natural Gas Hub

Development in Asia

World primary energy demand by region (IEA)

India

Non-OECD Asia

+2,825 Mtoe

OECD

Other

(Source) Compiled by Mizuho Bank Industry Research Department by IEA “World Energy Outlook 2015”

(Note) TPED: Total Primary Energy Demand

Forecasts in New Policies Scenario

(CY)

South-

east

Asia etc

China Africa

Middle

East

World primary energy demand by source (IEA)

0

1,000

2,000

3,000

4,000

5,000

(Mtoe) CAGR (2013-40)TPED +1.0%

Oil +0.4%

Coal +0.4%

Natural gas +1.4%

Renewables+2.2%

Nuclear+2.3%

Forecast

(CY)

13


Global electric power demand outlook

Asia’s electricity consumption expansion will contribute to global power demand growth.

As demand expands, natural gas-fired power generation is expected to increase at +2.1% per annum

through 2040.



Natural Gas Hub

Development in Asia

予測 World electricity demand by region (IEA)

(CY)

(Source) Compiled by Mizuho Bank Industry Research Department by IEA “World Energy Outlook 2015”

(Note) Forecasts in New Policies Scenario

20,144

34,457

+1,872

+4,716

+2,391

+1,899

+1,170+883

+1,382

15,000

20,000

25,000

30,000

35,000

(TWh)Other

World electricity generation by source (IEA)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

RenewablesNuclearOilNatural gasCoal

(TWh)

CAGR (2013-40)Total generation

+2.0%

Coal +0.8%

Natural gas +2.1%

Oil -2.5%

Nuclear +2.3%

Renewables +3.6%

(CY)

Forecast

China

South-

east

Asia etc.

India Africa

Middle

East

Non-OECD Asia

+9,006 TWh

OECD

14


700

600

500

400

300

200

100

0

+100

2013 2025 2040

Other AsiaSoutheast AsiaIndiaChinaJapan and KoreaTotal Asia

（Bcm）

(CY)

Asia total

Natural Gas Demand in Southeast Asia

Global natural gas demand is expected to increase 1.4% per annum until 2040.

Non-OECD Asia is expected to be a center of this demand growth.

In Asia, natural gas net import volume is going to increase.

Southeast Asia, which is currently a net gas exporter, is expected to become a net gas importer by 2040.

Asian natural gas net trade outlook (IEA)

(Source) Compiled by Mizuho Bank Industry Research Department from the

IEA’s “World Energy Outlook 2015” report

LNG regasification plant projects in Southeast Asia

Pagbilao

Son My

Thi Vai

Map Ta Phut

（expansion）

Pengerang

Batangas

Bojonegara

East Java

Central Java

(Cilacap)

Yet-unnamed

Lumut

North Java

Central Java

（Semarang)

Yet-unnamed

Lahad Datu

(Source) Compiled by Mizuho Bank Industry Research Department from IR and

JOGMEC materials



Natural Gas Hub

Development in Asia

15


Actions for Natural Gas Hub Development in Asia

• At LNG Producer-Consumer Conference 2012,

Minister of Economy, Trade and Industry brought up

concept of LNG futures market

• From Nov 2012 to Mar 2013, Ministry of Economy, Trade

and Industry held “Conference for LNG futures”

• In Sep 2014, Japan OTC Exchange launched LNG

Non-Deliverable Forward Market

• At Energy Ministerial Meeting in May 2016, Japanese

government released “Strategy for LNG Market

Development”

– Goal: to give Japan status of an internationally

recognized hub by the early 2020s.

Japan

• In May 2013, SLNG received its first

commercial cargo and commenced

business operations

• In Jan 2016, SGX launched futures and

swaps linked to its index of spot LNG

prices “SLinG”

Singapore

Actions for natural gas hub development in Asia

Recently, natural gas hub development has been discussed in Asia.

The discussions have centered on Japan, the largest LNG importer, and Singapore, a commodity trading hub.

(Source) Compiled by Mizuho Bank Industry Research Department from IR materials



Natural Gas Hub

Development in Asia

16


Conclusion

Last year, the Japanese government released its Long-term Energy Supply

and Demand Outlook. In the target “Energy Mix” therein, natural gas and

LNG remain positioned as strategically important sources for Japan.

Global LNG demand is expected to grow from a medium- to long-term

perspective, led by Asian countries’ demand growth.

With various LNG trade flows and LNG transaction types expected to

emerge, international collaboration is necessary to create a healthy LNG

market in the future.

Japan will cooperate with both LNG consumers in Asia and LNG producers

worldwide, in order to deal with the potential structural changes in the LNG

market.

17


Disclaimer

© 2016 Mizuho Bank, Ltd. This document has been prepared solely for the purpose of providing financial solution information. This document is not a recommendation or solicitation for sales. Nor does it constitute an agreement to enter into transactions with any Mizuho Financial Group company. This document has been prepared based on information believed to be reliable and accurate. The Bank accepts no responsibility for the accuracy or appropriateness of such information. Upon using this document, if considered appropriate, or if necessary, please consult with lawyers, CPAs and tax accountants. © Mizuho Bank, Ltd. All Rights Reserved. This document may not be altered, reproduced or redistributed, or passed on to any other party, in whole or in part, without the prior written consent of Mizuho Bank, Ltd.

LNG Market in Asia - IBC€¦ · LNG Import Volume by Country The number of countries that import...

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