The Road to Competitiveness for East Coast LNG: Are We ... Presentation East Coast LNG...
Transcript of The Road to Competitiveness for East Coast LNG: Are We ... Presentation East Coast LNG...
The Road to Competitiveness for East Coast LNG: Are We There Yet?
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Canadian Energy Research Institute
Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered
charitable organization specializing in the analysis of energy economics and related environmental
policy issues in the energy production, transportation, and consumption sectors.
Our mission is to provide relevant, independent, and objective economic research of energy and
environmental issues to benefit business, government, academia and the public.
CERI publications include:
• Market specific studies
• Geopolitical analyses
• Quarterly commodity reports (crude oil, electricity and natural gas)
In addition, CERI hosts a series of study overview events and an annual Petrochemicals Conference.
Overview
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Core Funders:
Donors:
In-kind:
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Presentation Outline
Supply and
Demand in the
Atlantic basin
East Coast LNG:
Specifics and
Competitiveness
Sourcing and
Transportation of
Natural Gas
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Atlantic Basin
Consumers:
• Europe
• South America
• Central America and Mexico
• India
LNG EXPORTER PERSPECTIVE
Suppliers:
• US and Canada
• Norway and Russia
• Middle East
• Africa
• Central and South America
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Atlantic Basin
SECOND LARGEST GAS MARKET
0%
5%
10%
15%
20%
25%
30%
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Demand Growth 2000-2017, bcf/d
Europe Latin, Central America and Mexico India % of world
Last 17-y 5-y
+20 +4.3Demand,
bcf/d
% of world
demand-4% -1%
Gas % in
energy supply23%
Sectors’
growth
Power,
Buildings,
IndustrySource: BP Statistical Review 2018, CERI
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Atlantic BasinMARKET OPEN FOR IMPORT
82 bcf/d
+5%
Demand Supply
47 bcf/d
-7%
Net Import
35 bcf/d+10%
Reserves life
25 years0%
Domestic Balance:
2017 And Change for the Last 5 Years (%)
Source: BP Statistical Review 2018, CERI
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Atlantic BasinTRADE FLOWS 2017
Europe Russia, CIS
Africa
USA
Middle East
Other
27.7 bcf/d
8.6 bcf/d
Pipeline
LNG
Central America
and Mexico
1.9
South AmericaIndia
17.4 0.5
0.7
0.2
0.4
53%
20%
14%
12%
1%
Share
Source: BP Statistical Review 2018, CERI
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Atlantic BasinDEMAND OUTLOOK 2040
Europe: 6.5 bcf/d
India: 5.9 bcf/d
Central, South
America and
Mexico: -2.6 bcf/d
+19 bcf/d
Demand
growth
10 bcf/d
Supply
Opportunity
75 mtpa
Source: IEA World Energy Outlook 2018, CERI
0
10
20
30
40
50
60
2017 2025 2030 2035 2040
Demand Outlook
Europe demand Central, South Amercia and Mexico India
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European Market In Focus WELL SUITED FOR MORE LNG
Total
regasification
22 bcf/d
Planned
regasification
+8 bcf/d
Lack of supply:
6.5 bcf/d
~50 mtpa
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European Market in FocusCOMPETITION AT THE MARKET
Importsbcf/d
LNG3-y
growth bcf/d
Russia 18.3 0% +4
Norway 11.0 4% +1
Netherlands 4.2 0% -0.1
Africa 6.3 42% +1.8
Other Europe (inc. UK)
2.7 3% -
Qatar 2.3 100% -
Other (inc. Iran) 1.7 1% +0.3
South and Central America
1.0 100% +0.1
USA 0.3 100% +0.3
87%
41 bcf/d
13%
6.3 bcf/d
Source: BP Statistical Review 2018, CERI
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European Market In FocusKEY DEVELOPMENTS SHAPING THE FUTURE
• Energy transition to renewables
and lower carbon fuels
• Geopolitical risks of increased
energy dependence from Russia
• Declining supply from Europe
North
Policy and Issues Supply
• Existing import: 47 bcf/d
• Potential expansion: 6.5 bcf/d
Supplier’s plans in the near future:
• Russia: + 7.8 bcf/d
(Nord Stream 2, Arctic LNG 2)
• USA: + 5 bcf/d (LNG)
• Africa: + 3 bcf/d (LNG)
• Qatar: + 2 bcf/d (LNG)Source: EIA, IGU, LNG Journal, CERI
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East Coast LNG Projects
Bear Head LNG
Goldboro LNG
Saguenay LNG
5-10 mtpa
0.7-1.3 bcf/d
8-12 mtpa
1.1-1.6 bcf/d 11 mtpa
1.5 bcf/dAC LNG
4.5-13.5 mtpa
0.6-1.8 bcf/d
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Key DifferentiatorsWest
Abundant WCSB /
Marcellus gas
Conducive
temperature regimeCompetitive
operating costs
Proximity to
Markets
Securing
transportationHigh transportation
costs
Moderate
capital costs
Lack of domestic experience
in LNG Plant delivery
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Supply Cost
THREE MAJOR COMPONENTS
• Transport
• Feed gas
• Capital costs
Source: CERI
USD CAD
Supply cost 11.01$ 13.77$ Captial cost 2.65$ 3.31$
Feed Gas cost 3.67$ 4.59$
Transportation cost 3.33$ 4.16$
Operating cost 0.69$ 0.86$
Corporate taxes 0.50$ 0.62$
Carbon tax 0.18$ 0.23$
Total taxes 0.68$ 0.85$ Sensitivity analysis:
Key metrics (billion USD, nominal):
CAPEX 7.7$ CAPEX/tpa ($) 962$
OPEX 8.3$ Corporate taxes 9.2$
Natural Gas
and Transportation 85.7$ Carbon and LNG Income tax1.9$
Supply Cost, Eastern Canada LNG, 8 mtpa, Greenfield, Merchant, AECO-C natural gas
24%
33%
30%
6%5%
2%Captial cost
Feed Gas cost
TransportationcostOperating cost
Corporate taxes
Carbon tax
$11.2
8.0
9.0
10.0
11.0
12.0
13.0
14.0
-75% -50% -25% -10% 0% 10% 25% 50% 75%
OPEX CAPEX TRANSPORT GAS PRICE
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Jurisdictional comparison with the US GoM
TAX DIFFERECES
• 6% in total supply cost
• Approximately twice as
in GoM
0
0.1
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0.3
0.4
0.5
0.6
0.7
0.8
East Coast LNG Lousiana LNG Texas LNG
Taxes, $/mmbtu
Corporate tax Carbon Tax
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Transportation options and costs
Transport route and cost Total cost, $/mmbtu
1
2
3
NIT to DawnDawn to NS
New 1,600 km, $5.5 bln
CAPEX pipeline$1
$2.3
Source
WCSB
Marcellus
Horton
Bluff, NS
PA to Dawn
$0.8
$0.42
New 340 km $1 bln
CAPEX pipeline
$3.3
$0.42
$3.1
4 WCSBMainline -> TQMS -> PNGTS (Dracut) -> M&NP
$2.4 $1 $3.4
Key issue
Building
interprovincial
pipeline
Fracking ban /
proving resource
Available
capacity /
Expansion costSource: CERI
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Natural Gas Cost
COMPETITIVE CANADIAN GAS
• Canadian gas edges
US Henry Hub gas
prices
• EIA Outlook 2019
suggests a steeper
Henry Hub growth:
to $10 dollars nominal by 2050
Source: CERI
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Capital Costs
-
1,000
2,000
3,000
Qatar NigeriaLNG
AngolaLNG
Africa,GolarFLNG
AU PreludeFLNG
AU QCLNG AU NorthWest Shelf
AU Gorgon WestCanada
EastCanada
US GoMGreenfield
US GoMBrownfield
Yamal,Russia
Capital costs, $ per tpa(with pipeline costs except for Qatar and Nigeria)
AT THE HIGHER END OF NEW PROJECTS
Pipeline costs (gray)
Source: CERI
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Change -25%
DISCOUNT
12%
8%
Change +25%
Change -25%
GAS PRICE
25%
-25%
Change +25%
Change -25%
0
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12
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US, brownfield, LA US, greenfield, TX Eastern Canada,Marcellus, NS
Eastern Canada,AECO, NS
Eastern Canada,Horton Bluff Shale,
NS
Qatar Russian pipelinegas
Landed LNG cost at UK, $ per mmbtu
CAPEX Feed gas Transport OPEX Corporate taxes Carbon Tax Shipping
$60
$70
$50
HH*115% + 3.5 + 0.75 = $9.44
HH*115% + 2.5 + 0.75 = $8.44$80
$90
$100
Oil-
linked contract
Competitiveness
Source: CERI, Rystad Energy, LNG Journal
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Path to Competitiveness
$70
$50
$80
$60
Oil-linked
contract
$90
$100
Taxes:
Fiscal incentives
Gas cost:
Integrated gas
Transport cost:
Shared pipeline cost
Reaching toll
reductions
Capital cost:
Plant expansion
Efficient technology
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Are We There Yet?
1. European market and India present supply opportunities for East
Coast LNG
2. Competition is strong and comes from Russia, Africa, Qatar, and
the US, and Australia
3. Quebec, New Brunswick and Nova Scotia have attractive large
shale gas resources, but they are inaccessible for current
proponents aiming at LNG delivery by 2025
4. Costs can be cut to be competitive in the European there but not
without a coordinated effort, specifically on the midstream side
Thank You for Your TimeWWW.CERI.CA
CANADIAN ENERGY RESEARCH INSITUTE
@CERI_CANADA
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Additional slides
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Atlantic BasinTRADE FLOWS CHANGE - LAST 3 YEARS
Europe Russia, CIS
USA
Africa
Other
Middle East
+7.6 bcf/d
+1.8 bcf/d
Pipeline
LNG
Central America
and Mexico
+0.2 0
South AmericaIndia
+0.5 +0.2
-0.5
-0.1
+0.4
+4.3
+2.9
+2.4
+0.3
-0.6
Bcf/d