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A REVIEW OF
DOWNSTREAM NATURAL
GAS PORTFOLIO
SELECTION CRITERIA IN
TRINIDAD AND TOBAGO
Edward Bahaw and Sherry-Ann S. Ganase
Conference on the Economy
October 13th -14th 2016
The University of the West Indies
St. Augustine
AGENDA
Background to downstream industries
Review of downstream portfolio selection criteria
New realities facing the natural gas industry
Historical analysis of downstream sub sectors:
Efficiency – Output per bcf
Employment – Headcount per bcf
Value – Output value per bcf
Conclusions/Recommendations
2
BACKGROUND TO
DOWNSTREAM INDUSTRIES
Upstream Gas discoveries
State led downstream investments
Technical and marketing challenges
Structural adjustments and privatization
FDI led downstream investments
Financial incentives
3
UPSTREAM NATURAL GAS
Discoveries
Late 1960s
1970s
1990s
Early 2000s
4
NATURAL GAS MONETIZATION
Previously vented/flared – no value
Government policy - create value
Development of markets – export oriented
Investments in infrastructure
5
BEST USE OF OUR
PETROLEUM RESOURCES, 1975
Government conference
Expansions/Upgrades to:
Power Generation
Ammonia and urea production
Petroleum refining
Cement production
Establishment of export based plants for:
Alumina
Iron and steel
Methanol
LNG 6
Source: Boopsingh et al, 2014
DOWNSTREAM SELECTION CRITERIA
Energy efficiency
Local content
Employment
Value added
Environmental Impact
See Baisden (2002), Julien (2005), Baisden
(2007), Jobity (2013) and Boopsingh (2014) 7
STATE PROJECTS IMPLEMENTED
Electricity expansion
Production of DRI (ISCOTT, 1980)
Ammonia (1977, 1981, 1984, 1988)
Urea (1983)
Methanol (1984)
Cement (1984)
8
SUBSEQUENT DOWNSTREAM
DEVELOPMENTS
State Divestments (Late 1980s to early 1990s)
Product related price formula (1987)
Methanol (1993, 1996, 1998, 1999 & 2004)
Ammonia (1996, 1998, 2002, 2004 & 2005)
LNG (1999, 2002, 2003 & 2005)
9
PROPOSALS BY GCA 2002
Methanol & Ammonia - no additional expansion
LNG - continued expansion
Gas-to-liquids - limited state support
Iron ore reduction & Aluminum - employment
Power - Price electricity to recover costs.
Ethylene and polyethylene - world-scale plant
LPG - Continue Caribbean sales expansion
CNG - development of Caribbean markets
Added value products: private investment
10
Source: Oil and Gas Journal, 2004
RECENT PRIVATE SECTOR PROPOSALS
11
Downstream Output Company
Methanol, propylene & polypropylene Lurgi/Basell
Ethylene & Polyethylene Westlake
Ammonia, UAN, Melamine MHTL, AUM I (2010)
Ammonia, urea, ammonia sulfate MHTL, AUM II
Steel Essar
Bitumen to Synthetic Crude Reliance Industires
Limited
Aluminum Smelter ALCOA
Aluminum Smelter Alutrint
Calcium Cholride Carisal
Maleic Acid Isegen
UPSTREAM NATURAL GAS –
NEW REALITIES
No major gas discovery since early 2000s
Depleted larger fields
Declining natural gas production in T&T
Higher cost of upstream production
Smaller fields
Aging infrastructure
Lower condensate yields
12
UPSTREAM NATURAL GAS –
NEW REALITIES
Needs relative higher gas prices for feasibility
• Availability of cheap natural gas in other
countries
• Investments in primary petrochemicals globally
• Not business as usual
13
14
1200
1250
1300
1350
1400
1450
1500
1550
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual Natural Gas
Production (BSCF)
15
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Natural Gas Utilisation in T&T
LNG Ammonia and Ammonia Derriavative Methanol Power Other
16
0
100
200
300
400
500
600
700
800
900
1000 Ja
n-0
6
Au
g-0
6
Mar
-07
Oct
-07
May
-08
Dec
-08
Jul-
09
Feb
-10
Sep
-10
Ap
r-1
1
No
v-1
1
Jun
-12
Jan
-13
Au
g-1
3
Mar
-14
Oct
-14
May
-15
Dec
-15
Ammonia and Methanol Prices
Price of Ammonia (US$/Tonne) Price of Methanol (US$/Tonne)
GAS UTILIZATION EFFICIENCY
Output capacity – tonnes per annum
Throughput capacity – bscf per annum
Efficiency - tonnes per bscf
17
18
16,500
17,000
17,500
18,000
18,500
19,000
19,500
20,000
20,500
L1 L2 L3 L4
LNG Gas Utilisation Efficiency
tonnes/bscf
19
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11
Ammonia Gas Utilization Efficiency
tonnes/bscf
20 0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
M1 M2 M3 M4 M5 M6 M7
Methanol Gas Utilization Efficiency
tonnes/bscf
EMPLOYMENT/UNIT OF GAS
Number of employees
Throughput capacity – bscf per annum
Employment per bscf
21
22
0.0
1.0
2.0
3.0
4.0
5.0
6.0 L
1
L2
L3
L4
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
M1
M2
M3
M4
M5
M6
M7
Employment per bscf
OUTPUT VALUE/UNIT OF GAS
Value of output – based on average destination
price
Natural gas utilization
Output value per bscf
23
24
0
2
4
6
8
10
12
14
16
18
L1
L2
L3
L4
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
M1
M2
M3
M4
M5
M6
M7
Output Value
(US$M per bscf)
25
0
500
1000
1500
2000
2500
Ethylene Maleic anhydride
Melamine resins
Propylene Propylene polymers and other
Olefins
Anhydrous Ammonia
Methanol
Price Trends of Natural Gas Derivatives
2011 2012 2013 2014 2015
CONCLUSIONS
Declining domestic natural gas production
Evolving international market conditions
Varying – efficiency, employment and
value per unit of resource
Several projects have been cancelled
26
RECOMMENDATIONS
Further downstream – greater value in terms of
employment and revenue
Plant conversion vs new plants
Opportunities – gas supply contract renewals
Risks - High price correlations
Product based natural gas pricing
Risks – to midstream, and upstream
27
Thank You!
28
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