Will LNG Exports from North America / East Africa Drive ... · ON LIQUEFIED NATURAL GAS (LNG 17)...
12
MONTH 2008 © POTEN & PARTNERS 2008 CONFIDENTIAL <Title of Presentation> By: <Author Name>, <Organization> <Date> <Title of Presentation> By: <Author Name>, <Organization> <Date> 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17) Will LNG Exports from North America / East Africa Drive Global Price Integration? By: Kyoichi Miyazaki Majed Limam Poten & Partners, Inc. 17 April 2013 17 th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17)
Transcript of Will LNG Exports from North America / East Africa Drive ... · ON LIQUEFIED NATURAL GAS (LNG 17)...
MONTH 2008
© POTEN & PARTNERS 2008
CONFIDENTIAL
<Title of Presentation>
By: <Author Name>, <Organization>
<Date>
<Title of Presentation> By: <Author Name>, <Organization>
<Date>
17th INTERNATIONAL CONFERENCE & EXHIBITION
ON LIQUEFIED NATURAL GAS (LNG 17)
Will LNG Exports from North America / East
Africa Drive Global Price Integration?
By: Kyoichi Miyazaki
Majed Limam
Poten & Partners, Inc.
17 April 2013
17th INTERNATIONAL CONFERENCE & EXHIBITION ON
LIQUEFIED NATURAL GAS (LNG 17)
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 1
Gas prices worldwide continue to diverge
Oil linked
LNG
prices
Gas on
gas
market
prices
Shale gas revolution has driven down Henry Hub prices
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012
$/M
MB
tu
JCC
Japan
LNG Price
NBP
Henry Hub
Source: Poten & Partners
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 2
Will LNG exports from North America / East Africa
drive global price integration?
Oil Product
Henry
Hub/
NBP / Brent
JCC/Brent
NBP
Oil-linked markets Gas-on-gas markets
? ?
?
?
Shale gas
driven Henry
Hub
East
Africa
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 3
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
HH NBP WTI Brent
Vo
lati
lity
Asian buyers more comfortable with decreasing HH
price volatility… Volatility of Henry Hub, NBP, WTI, and Brent Prices
Source: Poten & Partners Note: Volatility=Standard deviation of natural log.
Decreasing HH volatility
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Vo
lati
lity
2000 2002 2004 2006 2008 2010 2012
NBP
HH
WTI
Brent
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 4
…but remember large historical variations
2004 2005 2006 2007 2008 2009 2010 2011 2012
10
5
(15)
(10)
(5)
-
$/M
MB
tu
Shale gas revolution impact
Hurricanes Katrina & Rita
HH/oil price surged but S - curve damping effect on Asian LNG contracts
Calculation : Historical Asian LNG price minus hypothetical Henry Hub linked price JLC > HH H
JLC < HH H
Source: Poten & Partners
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 5
Increasing new supply sources but still limited share in
the growing Asian LNG market
LNG Supplies into Asia – New Australian supplies remain
the major contributor to Asian market
Source: Poten & Partners
0
50
100
150
200
250
300
2010 2015 2020 2025
North America (US+Canada)
East Africa
New Australia
Others
MM
t/y
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 6
Challenging cost structures for green field projects in
Asia Pacific
Australia
US Gulf/East
Source: Poten & Partners
Mounting construction
resource requirement
Ever increasing EPC costs
especially in Australia
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 7
Increased competition for the Asian market lowers long
term contract price
Year of finalization of
LNG sale
Poten projected Asian long-
term contract slope
Year of first production
-
1
2
3
4
5
2019 2020 2021 2022 2023 2024 2025
Poten Asia
Pacific Market
Competition
Index
Oil Parity
5 year lag
Source: Poten & Partners
2014 2015 2016 2017 2018 2019 2020
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 8
Can local Asian gas-on-gas market develop?
Critical factors:
An interconnected gas
transmission system
Deregulated markets
Transparent market with
limited gov. intervention
A short term and futures
market
Other important factors:
Growing domestic production
Growing pipeline imports and
exports
Substantial storage capacity
LNG trade
High liquidity
+
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 9
It took 20 to 30 years for US/UK to develop gas-on-gas
markets
US
UK
1970s 1980s 1990s
1970s 1980s 1990s
Natural Gas
Policy Act -
FERC
US
eliminates
take-or-pay
clauses
Open Access.
NYMEX started
Henry Hub trade
Natural Gas
Act in 1986
British Gas split into
Centrica and BG plc
in 1997, Lattice
transmission in
2000. NBP started in
1996
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 10
New pricing mechanisms emerging but no material de-
linkage from oil indexation in Asia
• Even if all North America LNG were to be gas-hub linked, it
represents no more than 10% of the total Asian demand in
2020
• Increased competition will drive down oil indexed prices
• New pricing mechanisms – anywhere between a traditional
oil-linkage and a Henry Hub linkage – are emerging
MONTH 2009
© POTEN & PARTNERS 2009
CONFIDENTIAL
© POTEN & PARTNERS
APRIL 2013 Page 11
LNG & NATURAL GAS CONSULTING CONTACTS:
AMERICAS
Contact: Jim Briggs
Email: [email protected]
Tel: +1 212 230 2000
EUROPE, MIDDLE EAST, AFRICA
Contact: Graham Hartnell
Email: [email protected]
Tel: +44 207 493 7272
ASIA PACIFIC
Contact: Steve Thompson
Email: [email protected]
Tel: +61 8 6468 7942
