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27/01/2011
“Changing Market Dynamics –
Challenges & Opportunities”
By:
Datuk (Dr) Abdul Rahim Hashim
President
International Gas Union (IGU),
Malaysian Gas Association (MGA)
21st September 2010
Singapore
1
“The International Buyers and Sellers meet in Asia”
27/01/20112
27/01/2011
1. Introduction – Brief on IGU
3
Worldwide and non–profit organisation established in1931
Promotes technical and economic progress of the gas industry
Emphasising sound environmental performance worldwide
Increased focus on strategic and policy issues
Cooperation with IEA, United Nations, World Bank, IEF and others
27/01/20114
1. Introduction – Brief on IGU
74 Charter members
33 Associate members
11 Affiliated members
As of April 2010
27/01/20115
1. Introduction – Brief on IGU
27/01/20116
2. Global Energy Scenario until 2030
0
100
200
300
400
500
600
700
1980 2005 2030
Energy demand
Quadrillion BTUs
Average growth of 1.2% p.a.
2005 - 2030
0
2
4
6
8
1980 2005 2030
Population
Billions
Average growth of 0.9% p.a.
01020304050607080
1980 2005 2030
GDP
Trillions in 2005 Dollars
Average growth of 2.7% p.a.
World’s population to increase from 6.7 billion today to 8.0 billion by 2030
GDP to expand from USD 20 Trillion in 1980 to USD 80 Trillion by 2030
The world will use 35% more energy by 2030 than in 2005 level!
Source(s): ExxonMobil 2009
27/01/20117
2. Global Energy Scenario until 2030
Power Generation
38%
Transportation18%
Industrial27% Residential/
Commercial16%
Gas End Use by Sector 2009
Power Generation
40%
Transportation18%
Industrial28% Residential/
Commercial16%
Gas End Use by Sector 2030
Sector CAGR
1) Power Generation 1.7% p.a.
2) Industrial 1.5% p.a.
3) Transportation 1.2% p.a.
4) Residential / Commercial 0.8% p.a.
This is due to a radical shift to use less-carbon-intensive fuels such as natural
gas to generate electricity
By 2030, it will account for 40% of all energy demand, representing 55% of the
total growth in energy demand
Source(s): ExxonMobil 2009, EIA/IEO 2009, PETRONAS 2009
27/01/20118
2. Global Energy Scenario until 2030
Liquids 1.3%
Natural Gas 2.0%
Coal 2.1%
Nuclear 1.7%
Other 3.0%
CAGR Total World
Fuel Consumption,
2010-2030
0
100
200
300
400
500
600
700
800
19902005
20062010
20152020
20252030
Qu
ad
rill
ion
Btu
World’s Primary Energy Mix
Other Nuclear Coal Natural Gas Liquids
Fossil
fuels
Natural gas is the fastest growing energy source.
By 2030, global natural gas demand will be 55% higher than it was in 2005!
Source(s): EIA/IEO 2009, PETRONAS 2009, ExxonMobil 2009
% of natural gas
from total energy mix
1990-2030
1990 22%
2005 23%2010 23%
2030 24%
27/01/20119
2. Global Energy Scenario until 2030
0 20 40 60 80
Europe
S&C America
N America
Africa
Asia Pacific
Russia & CIS
Middle East
6.12
7.31
8.87
14.65
15.39
56.78
75.91
Proven gas reserves at end 2008
Trillion cubic metres (Tcm)
Top 3 gas producing
countries:
1) Russia = 43.30 Tcm
2) Iran = 29.61 Tcm
3) Qatar = 25.46 Tcm
Total 2008 world’s proven natural gas = 185 Tcm (~6,533 Tcf)
The global rise of LNG business is imperative to satisfy the world’s rising energy demand!
0
10
20
30
40
United States
Europe Asia Pacific
2010 Market Study
Billions of Cubic Feet
per Day
0
10
20
30
40
50
United States
Europe Asia Pacific
2030 Market Study
Billions of Cubic Feet
per Day
Source(s): BP Statistical Review, ExxonMobil 2009, Cedigaz
0
20
40
60
80
100
1995 2000 2005 2008
Africa
Americas
Asia Pacific
Europe
Middle East
Historical growth of LNG Export volumes (billion cubic metres)
Local
production: ,
Imports: ,
Growth of LNG
import volumes
for 3 key gas
markets in 2010
US 4.0 Bcfd
EU 7.0 Bcfd
AP 16.0 Bcfd
Growth of LNG
import volumes
in 3 key gas
markets in 2030
US 12.0 Bcfd
EU 12.0 Bcfd
AP 38.5 Bcfd
27/01/2011
• Kuwait
Total % change 0.7%
• Spain, France, Belgium,
Turkey, UK, Portugal,
Italy, Greece
Total % change 23.5%
10
3. Changing Market Dynamics
NWE
10.1 mtpa
Rest of
Europe
1.3 mtpa
N. America
2.0 mtpa
S. America
2.1 mtpa
Spain
-1.6 mtpa
M. East
0.7 mtpa
India
0.9 mtpa
China
2.2 mtpa
Jap, Korea,
Taiwan
-6.6 mtpa
2009 LNG Demand by key markets
Modest growth in total LNG imports of 5% was registered in 2009, notably in the Americas and Europe.
The U.S market was seen as a safe anchor for LNG. Despite the robust U.S shale gas production, LNG
cargoes still flowing notably in the north east enjoying a significant basis premium.
Middle East has became an LNG demand centre.
Spanish LNG demand has dropped significantly due to reduced consumption.
The relatively strong LNG import growth in China and India (+3.1 MTPA combined) were insufficient to
cushion the plunge in Japan, Korea & Taiwan (JKT) LNG imports.
Source(s): PETRONAS 2010, FACTS 2010, Wood Mackenzie 2010
Total LNG Imports in
Asia (2008 – 2009)
• Japan, Korea, India
Taiwan, China
Total % change -2.9%
Total LNG Imports in
Europe (2008-2009)Total LNG Imports in
Middle East(2008-2009)
•U.S, Mexico, Argentina,
Puerto Rico, Dominican
Republican, Brazil,
Canada, Chile
Total % change 36.5%
Total LNG Imports in
Americas (2008-2009)
27/01/201111
3. Changing Market Dynamics
Source(s): Wood Mackenzie 2010, Cedigaz, BP Statistical Review of World Energy
The long-term view of the LNG industry especially in the LNG demand side looks more bearish than bullish!
Could the LNG industry be classified as a cyclical business that has a habit of changing?
Market is soft due
to significant new
supply and
weaker demand
Some supply may
be held back
Liquid markets
likely to absorb
the surplus
(notably the US)
Market tightens
through 2012/2014
because of limited
FIDs in 2006 to
2008
Long term potential excess capacity
Significant competition for demand
More perception of over-supply
could adversely impact prices via
supply connection
Development of some capacity will
be deferred
0
100
200
300
400
500
600
1995 2000 2005 2007
World Total Pipeline Trade (in billion cubic metres)
Historical
Key legend:
Projection
0
200
400
600
800
1000
1200
2012 2017 2020
World Total Pipeline Trade (in billion cubic metres)
27/01/201112
3. Changing Market Dynamics
1 Indonesia, Malaysia and Singapore2 Includes pipeline imports to China; excludes gas from Malaysia and Indonesia dedicated to intra-ASEAN LNG export
0
100
200
300
400
20102020
Regional LNG Demand Growth
Europe 8.3% Asia 4.9%
S. America 5.6% N. America -3.8%
MTPA
Asia LNG Incremental Demand Growth
(2010 – 2020)
0%
25%
50%
75%
100%
Asia
China 31% India 11%
Japan 20% Others 19%
S. Korea 19%
% Demand Growth
Emerging Asia is likely to be the main growth market for gas
globally, notably India and China with growth rate of 8% and
9% respectively.
Asia is expected to remain the largest LNG consumer while
Europe will experience the fastest pace of LNG growth.
Source(s): BP Statistical Review, IEA, McKinsey analysis, Wood Mackenzie, PETRONAS
27/01/201113
3. Changing Market Dynamics
2009 2010 & beyond
LNG markets
Supply flow
LNG markets
Supply flow
Clear linkage between American, European,
Middle East & Asian gas markets.
Starting to open up access to LNG
worldwide
Greater overlap between global LNG markets
with ample LNG supply
Wider access to gas market through LNG
established
Source(s): RWE 2010
27/01/201114
3. Changing Market Dynamics
Interest of importing LNG has increased significantly. Current regas capacity is about 470 MTPA.
To date, a number of 75 projects which are located in 22 countries, exist and are in operation.
If all project proposals come online, the figure could go as high as 780 MTPA by 2020 with an
overall import terminals of 176 projects that are located in a total of 36 countries.
Source(s): PETRONAS 2009, LNG Review 2010 – Petroleum Economist, Cedigaz 2010
1) Chile 7) Japan
2) China 8) Netherlands
3) France 9) Spain
4) India 10) Thailand
5) Italy 11) UK
6) Mexico 12) US
• Total under
construction = 19 projects
• Total capacity = 118.90 MTPA
• Total speculative = 33 projects
• Total capacity = 58.85 MTPA
1) Canada 7) Italy
2) China 8) Mexico
3) Cyprus 9) Spain
4) France 10) UK
5) India 11) Uruguay
6) Ireland 12) US
• Total planned = 47 projects
• Total capacity = 136.90 MTPA
1) Bahamas 11) Japan
2) Canada 12) Netherlands
3) China 13) Pakistan
4) Croatia 14) Philippines
5) France 15) Poland
6) Germany 16) Singapore
7) India 17) South Korea
8) Indonesia 18) Spain
9) Italy 19) UK
10) Jamaica 20) US
Potential import total:
• Number of projects = 176
• Import capacity = ~780 MTPA
27/01/201115
4. Challenges & Opportunities: Mitigating risks & challenges
Unprecedented demand growth and import needs are greater than expected.
Potential impact from the unconventional gas development in key gas
importing countries especially Asia and Europe.
Unsure on the pace of LNG projects coming online.
Uncertainty over the supplier’s behaviour in channelling gas/LNG volume to
end-customers
Source(s): GAIL (India) Limited, FICCI , McKinsey & Company – 2010, FACTS 2010
27/01/201116
4. Challenges & Opportunities: Harnessing potential opportunities
Opportunities to become LNG volume offtakers that may bolster supply position.
Enhance capabilities towards unconventional gas sector through selective
pursuit of regional opportunities.
Continuously build and enhance technical know-how in stranded gas
technologies (particularly FLNG) to broaden global gas portfolio
Source(s): PETRONAS 2010, GAIL (India) Limited, FICCI , McKinsey & Company – 2010
27/01/201117
5. Closing Remarks
It is abundant, affordable and acceptable
Clean, efficient, versatile and environmental friendly fuel
Continue to play a substantial role in global energy demand
Basis for sustainable economic growth
Natural gas
– major part of the long term energy solution
27/01/201118
5. Closing Remarks
“GAS : SUSTAINING FUTURE
GLOBAL GROWTH”
Kuala Lumpur Convention Centre
4 to 8 June, 2012
CHARMING COUNTRY, COLOURFUL CITY