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Natural Gas & Sustainable Development
4th November 2015
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Environment and sustainability
Responsibility
Demand
Flexibility
Regulation/Energy policy
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Some experts and key players publicly consider the Sulphur emission limitation is unavoidable and undelayable...
Natural Gas: Growth forecast
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• 1,8% anual NG growth vs 1,2% total energy growth (until 2035)
• Natural Gas = 24% of total energy demand 2035
Source IEA
Cedigaz ; IEA Forecasts
6Source GIIGNL
LNG flows 2014
U.S.A.
Sabine Pass – Q4-15/16/17 trains 1-4: 21.6bcm2018 train 5:5 bcm
Corpus Christi: 2018/19 trains 1-3: 18.2 bcmCameron LNG: 2018 trains 1-3: 16:2 bcm
Cove Point: End 2017: 7.8 bcmFreeport LNG: 2018/19: 18.6 bcm
INDONESIADonggi-Senoro: End 2015: 2.7 bcm
AUSTRALIAQueensland Curtis: Y16 full capacity: 11.5 bcmAustrialia Pacific LNG: OCT.2015: 12.2 bcmLNG Gladstone: Sep2015: 5.3 bcmGorgon Project: Apr16?: 20.3 bcmOthers: - Wheatstone: 2017: 12 bcm- Ichthys: 2017: 5.7 bcm- Prelude: 2017: 4.9 bcm
MALASYAPETRONAS FLOATING LNG1: 2015: 1.6 bcm
PETRONAS FLOATING LNG2: 2018: 2 bcmBintulu Plan: End 2015: 4.9 bcm
RUSSIAYamal LNG: 2016/17/18: 22.3 bcm
From Q4 2015 to 2017: 125 bcm From 2018 to 2019: 67,4 bcm Coming back players: Angola?, Yemen?
New LNG ProjectsProvisional data and forecast
Historical Natural Gas Prices: International Markets
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Natural Gas Prices Forecast: International Markets
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10
.
TTF
AsiaBrent 603
PVBMarginal Cost (Brent )+ Opportunity Cost (Asia)
Margin
Scenario A: Bullish
PVBMarginal Cost (Brent) + Opportunity Cost equals zero
Margin
Scenario B: Bearish
TTF
AsiaBrent 603
2013-2014
Asia
PVB
Brent 603
TTF
2015
Opportunity cost
Marginal cost
Scenario B: Bearish
Perfect Storm
Brent 603
Asia
TOP
.
Asia
TTF
Brent 603
PVBLower than marginal cost.
(Floor = TOP)
MarginTTF
Case Study: Commercialization of natural gas in Spain
4th November 2015
Evolution
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• First LNG import out of the monopoly (December 1999)
Evolution
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• Lack of procedures/IT
• Excel as a tool for invoicing
• Light organizations
• Pricing: Brent Formula “Cost Plus”
Evolution
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• Natural Gas demand growth
• Sales growth on the liberalized market
• Network Code
• ENAGAS SL-ATR
• Pricing: Brent Formula “Cost Plus”
Evolution
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Important demand fall between 2008-2015
Narrowing commercial margins
Increasing liquidity on wholesale market
Commercialization companies with different risk profiles
Increase of flexibility from gas infrastructures
Different strategies for commercialization
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Short‐Term Strategy
Trading
Key factor: Opportunity Cost of LNG
Long Term Strategy
Commercialization
Flexible Management of Gas Balance
Present and Future
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May-2015
Nov-15
Oct-16
2018?
Hydrocarbon Law: Organized Gas Market
Implementation of Balancing Network Code at European level
Upgrade interconnection PEG Nord-Sud
Retailing Reference PVB ?New Balancing rules
Impact on gas commercialization?
Consequences for end customers?
Towards a Single European Gas Market: Gas Target Model
Organized Gas Market in Spain (PVB)
New model of Balance Sheet Management
New markets and technologies
Spanish Hub
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¿Could a change in the Contracting scheme be foreseeable?
Basis Risk : ‘Brent vs. PVB’ Spread No Hedging alternative
Supply: Long-Term Brent contracts
Selling price to customers =
Brent Formula “Cost Plus”No Price arbitrage between Spain (PVB) and spot European market (NBP, TTF, PEG Nord, …)
Bottleneck on the interconnection capacity between PEG Nord y PEG Sud
FID Capacity Increase: 2018?
• Significant uncertainty of Price drivers
• Significant uncertainty of Price drivers
• High market concentration on the Spanish market
• High market concentration on the Spanish market
True or False
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• Excessive margins
• There is already a “liquid” gas hub
• Commercialization Companies do not want price transparency.
NO. There are physical swaps with no market price involved
NO. At least not all of them. Cepsa supports a liquidmarket that ensures transparency and reduces price risk
NO. Last year commercial margins hardlyallowed break-even.
Natural Gas Commercialization Evolution
Global economy
Long‐Termculture
Emergingmarkets.Newtechnologies,newcountries
Global economy
Long‐Termculture
Emergingmarkets.Newtechnologies,newcountries
SignificantdemandfallinSpainandPortugal
Tryingtomaintainanequilibriumbetweenflexibilityandcontrol
Customerservice
SignificantdemandfallinSpainandPortugal
Tryingtomaintainanequilibriumbetweenflexibilityandcontrol
Customerservice
Growingmarket.Quickgrowthoftheliberalizedmarket.
Newsystemsandcapacities.
Managementsystemsandcontrolimprovement
Growingmarket.Quickgrowthoftheliberalizedmarket.
Newsystemsandcapacities.
Managementsystemsandcontrolimprovement
Lackofprocedures.
Quickgrowth
Lackofprocedures.
Quickgrowth
Beginningofcommercialization(nearly16yearsinSpain)
Beginningofcommercialization(nearly16yearsinSpain)
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International Focus
Continuous improvement, efficiency and responsibility are the three pillars on which we base everything we do, with a strong international focus and utmost respect for the environment
Sustainable Energy
Our main priorities are to supply society with safe, reliable and sustainable energy and to contribute to the economic and social development of the communities where we operate
Innovative Spirit
Our innovative spirit enables us to stay competitive and is the key to successfully addressing and overcoming future challenges
Customer Satisfaction
Our commitment to quality in our products and services and to consumer satisfaction is the cornerstone of our relationship with our customers
CEPSA focusing on new markets and technologies (LNG Bunkers)
