china gas market
TRANSCRIPT
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ICIS China Gas Market Webinar
13 November 2014Ricki Wang, Senior Industry Analyst ICIS China
Ben Wetherall, Head of Gas ICIS Energy
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ICISMarket intelligence forthe energy, chemical
and fertil izerindustries
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You can rely on ICIS to stay up to date with the latestdevelopments in China natural gas
Reliable pricing informationThe ICIS China Gas Markets Report enables you to understand
price drivers and fluctuations and settle your contract prices more
confidently by giving you access to delivered and import LNG prices
as well as information on shipping information, market moving
news, operating rates and turnaround schedules.
Comprehensive supply and demand data and analysis The ICIS China LNG Supply/Demand & Investment Opportunities
Report provides detailed information on the LNG demand outlook
for China broken down by 24 key provinces, autonomous regions
and municipalities. In addition, it provides important information ondomestic policies, infrastructure developments and other key factors
for consideration when making investment-related decisions.
Request a samplereport >>
Enquire about thereport >>
http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKl -
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Content
Overview of Chinas Gas Market
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Chinas Energy Mix (2006-2020)
68 68 69
63
56
19 19 18
18
17
4 5 5
8
12
8 8 811
15
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010 2011 2012 2015E 2020E
Coal Petroleum Natural Gas Non-fossil Energy
Source: NBS, ICIS C1 Energy
Chinas Energy Mix
Under environment pressure,
Chinese government is
encouraging clean energy
usage.
Natural gas consumption is
going to reach 15% of total
primary energy mix by 2020.
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Chinas natural gas Supply and Demand
67
123
170
25
26
43
14
62
148
20%
13%12%
0%
5%
10%
15%
20%
25%
0
100
200
300
400
2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E
Net Import Export Production Consumption Growth Rate
bcm
Source: ICIS
13
Forecast of Chinas Natural Gas(2007-2019E)
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Gas Consumption by region in 2012
7
Xinjiang Uygur
autonomous region
Tibet autonomous
region
Qinghai
Gansu Inner Mongoliaautonomous region
Ningxia
Sichuan
Yunnan
Guizhou
Guangxi
Hainan
Guangdong
MacaoHong Kong
Hunan
Chong
qing
Hubei
Jiangxi
Fujian
Zhejiang
AnhuiJiangsuHenan
Shaanxi
Shanxi
Hebei
Shandong
Tianjin
BeijingLiaoning
Jilin
Heilong
jiang
Shanghai
Consumption
volume Large Small
Source: ICIS C1 Energy
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LNG Consumption by region in 2013
Large
Small
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Gas Distribution
CityGas
Industry
FertilizerGas
PowerPlant
29% 35%
22%14%
Forecast of China's Natural Gas Consumption by Sector(2013-2017E)
0%
20%
40%
60%
80%
100%
2013E 2014E 2015E 2016E 2017E
City gas Industrial/Commercial fuel
Chemical feedstock Fuel for power plantsSource: ICIS C1 Energy
2013 Chinas NG consumption by Sector
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Domestic Gas Supply
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PetroChina is the largest gas supplier
Most of the conventional gas belongs
to PetroChina, Sinopec, CNOOC
Domestic Natural Gas Supply
66.6
123.2132.1
169.7
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
20
40
60
80
100
120
140
160
180
2 00 7 2 00 8 2 00 9 2 01 0 2 01 1 2 01 2 2 01 3 2 01 4E 2 01 5E 2 01 6E 2 01 7E 2 01 8E 2 01 9E
Production Growth RateSource: ICIS
bcm
Forecast of Chinas Gas Production(2007-2019)
PetroChina
Yanchang
PetroleumGroup
Sinopec
CNOOC
C. China
NW. China
N. China
S. China
SW. China
E. China
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Unconventional Gas Development
Conventi
al Gas
57%
ImportPipeline
18%
Import
LNG
14%
SNG
4%
CBM
Shale Gas
3%
2015
Conventional Gas
ImportPipeline
Gas
ImportLNG
SNG CBM Shale Gas
2015 138.5 45 34.7 10 9 6.52017 165 65 47.2 32 17 10
0
20
40
60
80
100
120
140
160
180
billion cubic meters
Source: ICIS C1 Energy
Supply target set by China government(2015, 2017)
49%
19%
14%
10%5% 3%
2017
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Unconventional Gas Distr ibut ion
Northern China
North East China
East ChinaSouthern China
Central China
South West China
North West China
ShaleGas
Shale Gas
ShaleGas
ShaleGas
CBM
SNG
SNG
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Gas Import in China
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Chinas Gas Import
Forecast of Chinas Gas Import(2007-2019E)
Chinas Gas Import(2006-2014E)
0%
50%
100%
150%
200%
250%
300%
350%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2006 2007 2008 2009 2010 2011 2012 2013 2014 E
NG Import LNG Import Annual Growth Rate
10,000 tonne
Source: GAC
3.9
64.2
76.1
152.6
323.9%
21.2% 18.6% 18.8%
0%
50%
100%
150%
200%
250%
300%
350%
0
20
40
60
80
100
120
140
160
180
2 007 2 00 8 20 09 2 010 2 01 1 20 12 2 01 3 2 01 4E 20 15E 2 016 E 2 01 7E 20 18E 2 019 E
Import Growth RateSource: ICIS
bcm
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Shanghai
Putian
Ningbo
Qingdao
Tangshan
Dalian
Shenzhen
JOVO
Hainan
Tianjin
Guangxi
Zhoushan
Rudong
East-west P II
East-West P III
China Russia GasPipeline
Myanmar GasPipeline
East-West P IV
Import LNG
Zhuhai
Gas Import Infrastructure
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Gas Import by Source
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2006 2007 2008 2009 2010 2011 2012 2013 2014 E
Qatar LNG Australia LNG IndonesiaLNG Malaysia LNG
Other Countries LNG Turkmenistan Others
10,000 tonne
Source: Gac
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Import Gas Price
0
2
4
6
8
10
12
14
16
18
20
2006 2007 2008 2009 2010 2011 2012 2013 2014 E
Qatar Import LNG price
Australia Import LNG price
Indonesia Import LNG price
Malaysia Import LNG price
Other Countries Import LNG
price
Turkmenistan Pipeline
Import price
Other Pipelien Import price
$/MMBtu
Source: GAC
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Content
Price Reform
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Evaluation of Chinas Gas Pricing Mechanism
Base on Cost
Base on Cost
Before 2005 2010 2012 2013-2015 After 2020
Price ReformTwo Tier
Pricing +Base on Cost
Two TierPricing
Hub Price
Government Set and
Guide the Price
Market Orientation
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Price Formula
Coefficient
Import Price Import Price
VATThermal Value
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Regional Gas Price
Government-capped City-gate Prices of Natural Gas by Province/Municipality/Region
Province/Municipality/Region
Price for existing consumption Price for outstanding consumption
RMB Yuan/cbm USD $/MMBtu RMB Yuan/cbm USD $/MMBtu
Beijing 2.660 11.68 3.140 13.79
Tianjin 2.660 11.68 3.140 13.79
Hebei 2.640 11.59 3.120 13.70
Shanxi 2.570 11.29 3.050 13.40
Inner Mongolia 2.000 8.78 2.480 10.89
Guangdong 2.860 12.56 3.320 14.58
Guangxi 2.690 11.81 3.150 13.83
Heilongjiang 2.420 10.63 2.900 12.74
Shanghai 2.840 12.47 3.320 14.58
Jiangsu 2.820 12.39 3.300 14.49
Zhejiang 2.830 12.43 3.310 14.54
Anhui 2.750 12.08 3.230 14.19
Jiangxi 2.620 11.51 3.100 13.62
Shandong 2.640 11.59 3.120 13.70
Note: The price is inclusive of value-added tax (VAT).
Source: National Development and Reform Commission
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Impact of Price Reform
Upstream
Middle stream
Downstream
Gas Power PlantIndustry Vehicle Fertilizer
Supplier
LNGterminal
Domestic LNG plant Pipeline
Import LNG
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Government PoliciesPipeline Gas
Commercial
Gas Field Purify Pipeline City Gate Pipeline
Fertilizer
City Gas
Gas Power Plant
Industry
Vehicle
Citizen
Upstream Transportation
Downstream
LNG trucks
Vehicle
Gas refill station
Domestic LNG plant
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Content
Chinese gas market reforms ina regional context
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Chinese import requirements uncertain but wil l impact wider region
Chinese domestic shale gas productionuncertain. Government cuts targets
30Bcm by 2020 down from 60-100Bcm
in original 2011-2015 development plan.
Imports from Turkmenistan set to reach
30Bcm in 2014, up to 65Bcm by 2021.
Russia-China pipeline agreement via
Eastern Route up to 38Bcm/year .
Gazprom-CNPC sign framework
agreement in Nov 14 for 30Bcm/year via
Altai (Western Route).
Chinese buyers have signed SPAs to
import more than 50mtpa of LNG in
2020
38%
5%6%
24%
6%
17%
4%
China holds more than 50mtpa in LNG SPAsin 2020
Australia
Indonesia
Malaysia
Qatar
Russia
Portfolio Supply
Papua New Guinea
Chinas LNG imports compared wi th NE
Asia08 09 10 11 12 13 14
endSept
ChinaLNGimports (mt)
3.37 5.74 9.6
0
13.1 14.65 18.6 14.67
Chinese LNG imports as percentage of regional
demand
NEAsia
3.05 5.47 7.72 9.4 9.62 11.65 12.35
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New Russian pipeline imports competitive with LNG
10.00
11.00
12.00
13.00
14.00
15.00
16.00
LNGP
ric
es-$/MMBtu
Selected LNG and pipeline impor t prices to China on forward curve (12 Nov 2014)
US liquefaction DES Asia (Cheniere)* Qatar/China DES
Russia-China (Shanghai delivery estimate) Australia/China 2011/12
Australia/China CSG S-Curve* from Corpus Christi statement - March 2014
source: ICIS, CME and NYMEX
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Japan tr ies to align liberalisation and lower price goals
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Chinese price reform raises questions for new contestable LNGsupply
Eni and Anadarko developing multi-trainproject in Mozambique. Eni also plan 2.5mtpa
FLNG project offshore Area 4 CNPC holds a 30% stake in Eni-led
consortium developing Area 4.
East Africa
Nine liquefaction projects at various stages ofdevelopment in Western Canada have been given
export approval PetroChina and Sinopec stakeholders in two LNGprojects
Cost challenges and uncertainty over royalty tax
Regulatory issues over Western US greenfield projects
North America
Australian greenfield and FLNG projects undercosts pressure Browse, Bonaparte,
Scarborough Russian LNG (Sakhalin
expansion/Vladivostok, Yamal LNG) questionsover financing, technology.
Australia/Russia
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You can rely on ICIS to stay up to date with the latestdevelopments in China natural gas
Reliable pricing informationThe ICIS China Gas Markets Report enables you to understand
price drivers and fluctuations and settle your contract prices more
confidently by giving you access to delivered and import LNG prices
as well as information on shipping information, market moving
news, operating rates and turnaround schedules.
Comprehensive supply and demand data and analysis The ICIS China LNG Supply/Demand & Investment Opportunities
Report provides detailed information on the LNG demand outlook
for China broken down by 24 key provinces, autonomous regions
and municipalities. In addition, it provides important information on
domestic policies, infrastructure developments and other key factors
for consideration when making investment-related decisions.
Request a samplereport >>
Enquire about thereport >>
http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8http://www.icis.com/contact/request-free-sample-price-reports/?commodity=gas&channel=energy®ion=china&cmpid=EMC|ENER|CHONE-2014-GLOBAL-webinar-naturalgas-preevent&sfid=701w0000000vlKlhttp://www.icis.com/contact/enquire-about-china-lng/?region=china&channel=energy&commodity=liquefied-natural-gas&cmpid=PLC|ENER|CHHNT-2014-GLOBAL-china-EL-LNG-supplydemand-research&sfid=701w0000000vTw8 -
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