changing asian gas markets (print) - u.s. department of … this changes further out indicating two...

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Delivering commercial insight

Changing Asian Gas MarketsChong Zhi Xin, Lead Gas Analyst, South East Asia Gas & Power Research

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Contents

1 Asia Pacific LNG outlook

2 Next sources of supply

3 Challenges facing South East Asia

© Wood Mackenzie 2

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

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Pacific Basin Atlantic Basin

Global LNG demand growth is forecast to be robust, driven by the Pacific Basin

Global LNG Demand Forecast

Source: Wood Mackenzie LNG Tool Q1 2013

CAGR: 6%

CAGR: 3%

Global CAGR: 5%

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Pacific Basin LNG demand is characterised by strong growth and increased diversity from emerging markets

Reduction in domestic gas production hampers market development as less gas is available to the power & fertilisersector

South East Asia demand for LNG will increase as they face the prospect of declining production post-2020.

Impact of Fukushima had drastically changed the demand outlook for LNG

Gas price reform will encourage increased LNG demand growth

South East Asia

India

China

Japan, South Korea,

Taiwan

Asian LNG Demand Demand Drivers

© Wood Mackenzie 4


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2012 2015 2020 2025

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Japan, Korea, Taiwan ChinaIndia South East AsiaOthers

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2012 2015 2020 2025m

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aJapan South Korea & TaiwanChina IndiaSE Asia Others

Some of this demand is already covered by ‘contracted’ supplies

Pacific Basin Contracted and Uncontracted LNG Demand

Japan has driven the current market

imbalance

Emerging markets drive future outlook


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Contracted LNG Demand Uncontracted Total

© Wood Mackenzie 5

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Contents




© Wood Mackenzie 6

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Operational Under Construction Possible Speculative Uncontracted LNG demand

Near-term there is limited uncontracted supply available in the Pacific Basin, however this changes further out indicating two distinct market windows

Pacific Basin Uncontracted LNG Supply/Demand Balance

Source: Wood Mackenzie LNG Tool, Q1 2013

Pacific Basin short of supply with various options for buyer to fill the gap:

Atlantic Basin ‘Portfolio’ suppliers

Qatari “diversion volumes”

Redirections & reloads

Significant potential volume within the Basin

Potential for US/Atlantic volumes to come to Asia

Could create some downward pressure on long-term pricing, but cost of supply remains a critical

stabilising factor

Excludes ‘flexible’ Qatari “diversion” volumes that are ‘allocated’ to the Atlantic Basin and any other Atlantic volumes

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Significant gas discoveries around the world are paving the way for new entrants into the LNG club

Source: Wood Mackenzie Global Gas Service

Emerging LNG Supply Plays

The Levant Basin has been prolific in terms of new discoveries

East Africa is potentially the next “big” LNG play

Shale gas in North America underpins numerous US and Canadian proposals

© Wood Mackenzie 8

100+ tcf gas in East Africa

30+ tcf gas in East Med

>250 mmtpa US LNG exports proposed

>50 mmtpa Canada LNG exports proposed

50+ tcf gas in East Siberia

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Contents




© Wood Mackenzie 9

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THAILAND

CAMBODIA

VIETNAM

MYANMAR

LAOS

INDONESIA

MALAYSIA

South China Sea

Natuna Sea

CHINA

Spra

tly Is

lands

PHILIPPINES

BRUNEI

MALAYSIA

MALAYSIA

100°E

100°E

110°E

110°E

120°E

120°E

130°E

130°E

10°S

10°S

0°N

0°N

10°N

10°N

20°N

20°N

30°N

30°N

0 200 400100km

Central and South Sumatra

Central and South Sumatra

Gulf of ThailandGulf of

Thailand

Majority of new gas discoveries in South East Asia are located far away from demand centres

Cu Long and Nam Con Son

Vietnam

Cu Long and Nam Con Son

Vietnam

Sabah & SarawakSabah & Sarawak

Kalimantan, Sulawesi and

PapuaEast Indonesia

Kalimantan, Sulawesi and

PapuaEast Indonesia

Offshore Peninsular Malaysia

Offshore Peninsular Malaysia

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South East Asia regasification terminals has taken off over the last few years

South East Asia Regasification Capacity


Source: Wood Mackenzie South East Asia Gas & Power Service

OperationalUnder constructionProposed

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2012 2015 2018 2021 2024

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Thailand IndonesiaSingapore MalaysiaPhilippines (Proposed) Vietnam (Proposed)

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Supply - Demand

Resulting in the region exporting and importing LNG at the same time

South East Asia Gas Balance


0

5,000

10,000

15,000

20,000

25,000

30,000

2012 2015 2018 2021 2024

mm

cfd

Source: Wood Mackenzie SE Asia Gas & Power Service

Indonesia SingaporeMalaysia ThailandVietnam Total domestic demand

Total Contracted Supply

Total SE Asia Demand

Supply - Demand Gap

0

5,000

10,000

15,000

20,000

25,000

30,000

2012 2015 2018 2021 2024m

mcf

d


Contracted pipeline Uncontracted pipelineNew gas discoveries Contracted LNGUncontracted LNG LNG Export ContractsTotal domestic demand

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South East Asia LNG Demand Forecast

South East Asia will emerge as a major LNG market but governments need to take steps to reform gas prices

Asia LNG Market Share in 2025


0%

25%

50%

75%

100%

View 18 monthsago

Current View

Source: Wood Mackenzie LNG Tool

Others

China

Japan, SouthKorea, TaiwanIndia

South East Asia

315 mmtpa290 mmtpa

0%

10%

20%

30%

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50%

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2012 2015 2020 2025

% S

hare

of S

E A

sia

to A

sia

Paci

fic

mm

tpa


Thailand IndonesiaMalaysia SingaporePhilippines Vietnam% Share of SEA to AP

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South East Asia’s dilemma

Governments will have to grapple with keeping prices affordable yet attracting investments in the energy sector

Cost ReflectiveGas Prices

Ele

ctric

ity P

rices

Cost Reflective

Fully Subsidise

Partially Subsidised

Partially Subsidised

Heavily Subsidised

Cost-Reflective Economy

Uses an average gas price mechanism that feeds into electricity tariffs

Subsidies in both power and gas sector will hamper foreign investment which are leading to problems in the future

Electricity prices are reflective of fuel costs but PETRONAS is selling gas below their cost of production

Singapore

Thailand

Malaysia

Vietnam

Strategies employed in South East Asia

Reformed gas prices to incentiviseupstream exploration and production

Source: Wood Mackenzie South East Asia Gas & Power Service

No subsidies in the gas and power sector. Government actively moves industries towards higher margin products


Indonesia

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Global LNG demand growth is led by the Pacific Basin

Supply tightness experienced this decade will be eased beyond 2019 especially as US supply delivers

South East Asia will emerge as a major LNG demand centre as governments develop the import-export model

Conclusions

Summary and Conclusions

However, countries will need to balance LNG demand with keeping prices affordable


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changing asian gas markets (print) - u.s. department of … this changes further out indicating two...

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