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Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Presentation
Bob Ineson, Executive Director, +1 281 364 9364, [email protected]
Global LNG markets:Asian demand leads the wayOctober 2018
Global Gas
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Northwest Europe’s LNG imports are at the end of a long chain of uncertainties
2
19
10
0 2 4 6 8 10 12 14 16 18 20
NW Europe LNG imports: Forecast
Exports: Southeast Asia below forecast
Exports: Pacific below forecast
Exports: Atlantic Africa below forecast
Exports: Middle East above forecast
Exports: Other Atlantic above forecast
Imports: South Korea above forecast
Imports: China above forecast
Imports: Other Asia above forecast
Imports: Latin America below forecast
Imports: North America below forecast
Imports: Other Europe below forecast
Imports: MENA below forecast
NW Europe LNG imports: Actual
Factors affecting NW Europe’s LNG imports in 2018 Jan-July (compared with IHS Markit forecast from December 2017)
Note: JKT = Japan, Korea, Taiwan; NW Europe = Northwest Europe; SE Asia = Southeast Asia; MENA = Middle East/North Africa.
Source: IHS Markit © 2018 IHS Markit
Million metric tons (MMt) of LNG
Exports:2 MMtbelow
forecast
Other imports:
7 MMtabove
forecast
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
9
36
48
45
37
0
20
40
60
80
100
120
2018 2019 2020 2021 2022
Incremental LNG demand outside northwest Europe from 2017
Source: IHS Markit © 2018 IHS Markit
MM
tpa
Incremental LNG supply growth expected to outpace demand outside northwest Europe—how will the market balance?
3
0
20
40
60
80
100
120
2018 2019 2020 2021 2022
Incremental LNG available supply from 2017
Source: IHS Markit © 2018 IHS Markit
MM
tpa
Existing
Australia
United States
Under construction
Russia
Other
Pre-FID
Potential extra LNG supply, absorbed by:i) Northwest Europe importsii) Lower LNG utilization
China
Pakistan
India
New importers
Other
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Global LNG oversupply expected to peak in 2020
4
250
300
350
400
450
2017 2018 2019 2020 2021 2022 2023 2024 2025
Global LNG supply and demand balance: Outlook
Source: IHS Markit © 2018 IHS Markit
MM
t
Global LNG demand -Base case
No additional projects sanctioned
Including forecast of additional projects
Unconstrained global LNG supply
Global LNG demand -Russia pipeline
maintains 35% of European market
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
US expected to be the marginal supplierReduced US utilization levels during peak of oversupply
5
0
15
30
45
60
75
0%
20%
40%
60%
80%
100%
2017 2018 2019 2020 2021 2022
Capacity (right axis) Base case utilization Utilization if Russia maintains market share
US Lower 48 utilization and capacity
Source: IHS Markit © 2018 IHS Markit
Util
izat
ion
rate
(%)
Cap
acity
(MM
tpa)
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
In the power sector, gas continues to struggle on cost – policy drivers are needed to allow gas to continue to grow
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0
2
4
6
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20
Back-updiesel
LNG Solarauction
Windauction
SmallHydro
Coal
India power wholesale tariff range and comparison
© 2018 IHS Markit
Rup
ees
/ KW
h
Source: IHS Markit
Janu
ary
Febru
ary
March
April
May June
July
Augus
t
0
1
1
2
2
3
3
4
4
5
0
10
20
30
40
50
60
70
Average power prices
Netback @ average prices
Pow
er p
rices
(US$
per
MW
h)
LNG
net
back
(US$
per
MM
Btu
)
India power price and theoretical netback LNG price (2018)
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
South Korea: new government’s fuel tax revision to improve economics of gas relative to coal in power generation
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0%
20%
40%
60%
80%
100%
40 50 60 70 80 90 100
Coal (new taxes) LNG (new taxes)Coal (current taxes) LNG (current taxes)
Impact of fuel tax revisions on generation cost
Source: KPX, IHS Markit © 2018 IHS Markit
Generating cost (US$/MWh)
Gen
erat
ion
Cap
acity
Cum
ulat
ive
0
20
40
60
80
100
2018 2019 2018 LNG
Coal Gas
Special Consumption Tax Import Charge Import Duty
South Korea’s fuel tax revisions (effective April 2019)
Source: MOTIE, IHS Markit
Notes: CV of coal is assumed 5,500 kcal/kg. Import Duty of LNG is assumed 7.2 KRW/kg.
© 2018 IHS Markit
KR
W/k
g
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Gas continues to be favored clean fuel, but affordability and reliability are both taken into consideration in the energy policies
8
0
40
80
120
160
SO2 NOx Particulate
China 2012
China ULE standard
US 2012
EU 2016
Current and planned air pollutant emission standards in China, Europe, and the US
Con
cent
ratio
n lim
its (μ
g/N
m3)
Notes: ULE = ultra-low emissions, to be retrofitted for all China coal units by end-2018. The 2012 US standards are based
on the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) issued in their final form in
December 2011. The 2016 EU standards are based on the new Industrial Emissions Directive. Source: IHS Markit, China MEP, China NEA, US EPA, European Commission © 2017 IHS Markit
0
5,000
10,000
15,000
20,000
25,000
2016 2021Notes:
The Clean Winter Heating Plan for Northern Provinces covers all of north China’s 14 regions.
“Dispersed coal” refers to coall boilers that do not meet latest emissions standards. “Clean coal” refers to large coal units that meet ULE standards. "Others" include electricity, biomass, geothermal, solar, and waste heat.
Source: IHS Markit
Tota
l hea
ting
floor
spa
ce(b
illio
n s
quare
mete
rs)
China’s new Clean Heating Plan (issued Dec 2017) now focuses on replacing “dispersed coal” with “clean coal”
Dispersed
Coal
Gas
Clean Coal
Others
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Emerging Asia LNG imports outlooks: 5.4% annual average growth to 2050While global LNG demand grows at 3.5% per year
9
0
50
100
150
200
250
300
350
400
450
500
2000 2010 2020 2030 2040 2050
Non-OECD Asia Pacific LNG imports
Source: IHS Markit © 2018 IHS Markit
MM
t
2030 2040 2050225 325 440
Outlooks (MMt)
Mainland China
India
New Asian importers
0
20
40
60
80
100
120
140
160
180
200
220
2000 2010 2020 2030 2040 2050
BangladeshHong KongIndonesiaMalaysiaMyanmarPakistanPhilippinesSingaporeSri LankaThailandVietnam
LNG demand, newer Asian importers
Source: IHS Markit © 2018 IHS Markit
MM
t
• 6 current importers • 5 more emerging
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Across Asia: Favorable economics of coal continue to drive investment in new coal-fired power plants
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Main markets developing coal-fired power in Asia (2017) • Asia currently has ~300 GW of coal plants under construction that will come online in the next few years, poised to increase the region’s coal-fired power by 15-20%.
• The pipeline of proposed coal projects is even bigger. Coal could also continue to expand beyond those projects already under construction.
Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
How much capacity can the North American resource base support?• North America can support a large wave of new capacity. But will it?
• Policy risks:
• Resistance to pipeline build-out
• Hydraulic fracturing ban?
• Sanctions, trade war
• Steel tariff
• Chinese tariff on US LNG imports
• Result: Opportunity for non-US developers.
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IHS Markit Customer [email protected]: +1 800 IHS CARE (+1 800 447 2273)Europe, Middle East, and Africa: +44 (0) 1344 328 300Asia and the Pacific Rim: +604 291 3600
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