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420 W 118th St, New York, NY 10027 | http://energypolicy.columbia.edu | @ColumbiaUEnergy
Pacific Rim Impacts of US Shale Boom
Jason Bordoff 2013 EIA Energy Conference
June 17, 2013
1
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Global Gas Demand Forecast
Bcf/d
Source: IEA WEO2012 0
100
200
300
400
500
600
2010 2015 2020 2025 2030 2035
Non-OECD Asia
OECD Asia
Africa
Middle East
Non-OECD Europe/Eurasia
Europe
Non-OECD Americas
OECD Americas
2
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Asia Pacific Pipeline vs. LNG Demand
Bcf/d
Source: IEA
0
5
10
15
20
25
30
35
40
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Observed IEA 2012 Forecast
Pipeline trade Asia-Pacific LNG trade Asia-Pacific
3
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Asia Country Level Forecast
Bcf/d
Source: IEA WEO2012, EIA, Jim Jensen
3.6 4.1 4.4 5.2
2010 2015 2020 2035
Korea
10.06
11.61 11.80 11.90
2010 2015 2020 2035
Japan
4
1.2 3.8 6.9 9.1
0.3 2.1 6.0
13.4 9.2
13.0 16.9
30.8
2010 2015 2020 2035
China China LNG Imports
China Pipeline Imports
China Production
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Japanese Power Generation Billion kWh (left) and trillion BTU (right)
Source: Federation of Electric Power Companies (FEPC) via Bloomberg
POWER GENERATION BY SOURCE (BN KWH)
FOSSIL FUEL CONSUMED FOR POWER (TRILLION BTU)
58 55 56 66 61 57
264 242 260 278 157
18
514 539 458 473
559
677
0
100
200
300
400
500
600
700
800
900
1000
2007 2008 2009 2010 2011 2012
Fossil FuelNuclearHydro
1,551 1,599 1,430 1,512 1,500 1,503
2,123 2,156 2,035 2,107
2,533 2,920
734 879
389 379
678
1,188
0
1000
2000
3000
4000
5000
6000
2007 2008 2009 2010 2011 2012
OilLNGCoal
5
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0
500
1,000
1,500
2,000
2,500
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
COAL
NAT. GASOIL
HYDRO
NUKE
WIND
SOLAR
BIOMASS
Chinese Power Generation by Type
IEA Projections, Gigawatts
Source: IEA’s “New Policies Scenario” from the 2012 World Energy Outlook
6
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9.2
9.8
10.7
12.1
12.1
12.6
12.7
12.9
14.2
14.8
15
100
San Francisco
Seattle
Washington, DC
Atlanta
Detroit
Houston
New York
Chicago
Phoenix
Los Angeles
Pittsburg
Beijing
China’s Acrid Air PM 2.5 microns per cubic meter
Source: WHO, Steven Q Andrews and RHG estimates
7
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Global Gas Supply Forecast
Bcf/d
Source: IEA WEO2012
8
0
100
200
300
400
500
600
2010 2015 2020 2025 2030 2035
Latin America
Africa
Middle East
Non-OECD Asia (incl.China)Non-OECDEurope/EurasiaOECD Asia Oceania(incl. Australia)OECD Europe
North America
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Rank Country Shale Gas (tcf)
1 China 1,115
2 Argentina 802
3 Algeria 707
4 U.S. 1 665 (1,161)
5 Canada 573
6 Mexico 545
7 Australia 437
8 South Africa 390
9 Russia 285
10 Brazil 245
World Total 7299 (7,795)
1 EIA estimates used for ranking order. Advanced Resources International estimates in parentheses
Top 10 countries with technically recoverable shale gas resources
Source: EIA
9
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Global Gas Trade 2013-2017
Source: IEA Medium Term Gas Report 2012
19
21
2
27
2013
2017
11
13
27
23
0
1
2013
2017
68
74
5
5
199
236
2013
2017
4
11
132
131
12
10
9
9
2013
2017
70
73
34
39
2013
2017
14
14
190
244
2013
2017
30
63
26
50
2013
2017
51
67
67
77
6
11
2013
2017
162
178
29
77
6
6
2013
2017
LNG Imports LNG Exports Pipeline Exports Pipeline Imports
10
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Global Gas Supply Forecast
Source: IEA Medium Term Gas Report 2012
11
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Impact of US Shale Boom
• LNG Exports • Coal Exports • Displaced LNG Imports
Economic
• Russia • Qatar • Australia • Other
Geostrategic
• Substitution of gas for coal? • Substitution of gas for renewables and nuclear? • Impact of lower gas prices on consumption?
Environmental
12
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0
2
4
6
8
10
12
14
16
18
20
Henry Hub Spot
EIA USProjectionJapan LNGImport
Regional Gas Price Forecast $/MMBTU
Source: IEA WEO2012
13
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Study (year) Volume
CRA (2013) 20 bcf/day*
ICF (2013) 8 bcf/day**
Moody’s (2013) 6 bcf/day
Navigant (2012) 5-6 bcf/day
Ken Medlock (2012) No more than 1.2 bcf/day
NERA (2012) 0 bcf/day***
* Likely case. High case = 35 bcf/day. ** Middle case. Low case = 4 bcf/day. High case = 16 bcf/day. *** In its analysis of global markets, NERA found that the U.S. would only be able to market LNG successfully with higher global demand or lower U.S. costs of production than in the Reference cases.
14
Summary of Projected US LNG Exports
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Market-based Pricing in Gas Trade by Region
Source: BP Statistical Review, IEA
15
0
100
200
300
400
500
600
2005 2007 2009 2010
bcm
North America
2005 2007 2009 2010
Europe
Gas-to-gas competitionOil indexation
2005 2007 2009 2010 w/ USLNG
Asia Pacific
2005 2007 2009 2010
Europe
Gas-to-gas competitionOil indexation
94% 84% 77% 67%
95% 84% 88% 88%
Additional 42 bcm/year or 4 bcf/day of North American LNG exports into Asia Pacific could increase volume of gas traded on gas-to-gas basis from 12% to 27%
420 W 118th St, New York, NY 10027 | http://energypolicy.columbia.edu | @ColumbiaUEnergy
Asia Pacific Pricing Mechanism
LNG Trade versus Pipeline
Source: BP Statistical Review, IEA
0
50
100
150
200
2005 2007 2009 2010
bcm
Pipeline
020406080
100120140160180200
2005 2007 2009 2010 w/ US LNG
LNG
Gas-to-gas competition Oil indexation
95% 86% 81% 87%
16
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Global LNG Majors Export quantity and revenue as a share of GDP in 2011
Source: IMF, WITS, BP, Rhodium Group estimates
EXPORTS IN BILLION CUBIC METERS EXPORTS AS A SHARE OF GDP
0
50
100
150
200
250
Algeria Australia Indonesia Malaysia Qatar Russia Trinidad*
Pipeline LNG
0%
5%
10%
15%
20%
25%
30%
Algeria Australia Indonesia Malaysia Qatar Russia Trinidad*
Pipeline LNG
17
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Rising Australia LNG Construction Costs $/tonne
Source: Press reports
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Darwin Pluto Gorgon Gladstone APLNG Wheatstone Ichthys
2006
2012
2015
2014 2015
2016
2017
18
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Source: IEA 2011, WEO 2012, “Golden Age of Gas Report
Gas Substitution Effect on Emissions
19
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Concluding Thoughts
• LNG exports can lower costs in Pacific and boost competition, but transportation costs mean regional price differential will persist.
• Oil linkage to remain, although with more flexible indexation clauses, but entering a period of more gas-on-gas competition in latter half of decade
Economic
• Ramp up in LNG export capacity to continue pressuring Russia gas terms • Huge Qatari surplus capacity has been absorbed; question is how they
respond to surge in new export capacity. • Keep an eye on Australian LNG project costs.
Geostrategic
• Low-cost natural gas tends to lower GHG emissions, but not a lot • Still need climate policy; gas makes policy cheaper, doesn’t solve climate • Need better information about lifecycle emissions (fugitive methane)
Environmental
20
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Thank you For more information: Jason Bordoff Professor of Professional Practice in International and Public Affairs Director, Center on Global Energy Policy Columbia University Jbordoff@columbia.edu (212) 851-0193
420 W 118th St, New York, NY 10027 | http://energypolicy.columbia.edu | @ColumbiaUEnergy
Appendix
420 W 118th St, New York, NY 10027 | http://energypolicy.columbia.edu | @ColumbiaUEnergy
U.S. LNG Export and Price Impact Forecast
Study Average Price without Exports ($/MMBtu)
Average Price with Exports ($/MMBtu)
Average Price Increase (%)
EIA* $5.28 $5.78 9%
Deloitte $7.09 $7.21 2%
Navigant (2010)** (2 bcf/day of exports) $4.75 $5.10 7%
Navigant (2012)*** $5.67 $6.01 6%
ICF International*** $5.81 $6.45 11%
* Price impact figure for EIA study reflects the reference case, low-slow export scenario.
** The Navigant study did not analyze exports of 6 bcf/day.
*** Navigant (2010 and 2012) and ICF International studies are based on Henry Hub price.
Source: EIA, Deloitte, Navigant, ICF International 23
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