psc william derbyshire (formatted)

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  • 1. Gas Development Master PlanDomestic Gas Market and PricingConsensus Building WorkshopPresented by:William Derbyshire - DirectorEconomic Consulting Associates, UKShangri-La Hotel, Jakarta21 June 2012

2. Overview Domestic gas market 1. Current market structure 2. Power sector demand forecast 3. Industrial demand forecast 4. Indonesia Gas Balance 5. Comparison of forecasts 6. Other factors Domestic gas pricing and regulation 1. End-user pricing 2. Transmission and distribution pricing 3. Network planning and expansion2 3. Domestic Gas Market3 4. 2010 gas supply and demandmmscfd 737 PLN (7.9%)788PGN (8.4%) Domestic4509 1436Other (15.4%) (48.3%) Own usePSCs 1042(11.2%) 8290(88.8%)Supply 507 Losses (5.4%)9336 3912LNG (41.9%) Export4827 (51.7%)Pertamina(11.2%) 1046 915 Pipeline (9.8%)Source: MIGAS (5th International Indonesia Gas Conference, January 2011) 4 5. 2010 domestic sales by userCommercial andhouseholds 0%Power 35%Otherindustrial 41% Fertiliser 21%Petrochem 3%Sources: Calculated using data from MIGAS (non-PGN, non-power sales), PLN (gas sales to PLN)and PGN (other sales). There are inconsistencies between data sources and these figures should beseen as indicative only.5 6. 2010 contracted industrial demand by type OtherGlassware 4% industries9%Ceramics 4% Fertiliser - feedstock 42%Metal 12%Pulp and paper 13% Petrochem -Petrochem -energy 6%feedstock 10%Source: FIPGB. This figure shows contracted demand rather than actual sales and is, therefore, notdirectly comparable with the preceding figures. 6 7. Summary of 2010 sales mmscfd %Exports 4,827 51.7%Own use and losses1,548 16.6%PLN7768.3%Fertiliser (direct)6196.6%Petrochemical (direct)921.0%Refining780.8%Based on contracted demand, the mostLPG 570.6% significant Other Industrialusers are Pulp and PaperKrakatau Steel550.6% and Iron and Steel (Metal)Other Industrial1,266 13.6%Commercial and Household180.2%7 8. Electricity generation by fuel (2011-2020) GWh Coal is the dominant400,000fuel, increasing its Hydro, biomass, wind and solar350,000Geothermal share of the fuel mix HSD + MFO from one-half to300,000 Gas (inc. LNG)two-thirds250,000Coal The share of gas in200,000total generation remains fairly150,000 constant at ~20%100,000 Total gas-fuelled 50,000generation is 0 forecast to double2011 2012 2013 20142015 2016 2017 2018 2019 2020 over the period, in line with the growthSource: RUPTL 2011-20 in total output 8 9. Capacity and capacity factors (2011-2020)Installed capacityAverage capacity factorsMW90,000100%Hydro, biomass, wind and solarCoal Gas (inc. LNG)80,00090%GeothermalHSD + MFO 80%70,000Gas (inc. LNG)70%60,000Coal60%50,00050%40,00040%30,00030%20,00020%10,00010%00% 2011 2012 2013 20142015 2016 2017 2018 2019 20202011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Gas-fuelled capacity is primarily running as mid-merit and peaking plant,with capacity factors ~50% Average thermal efficiency of gas-fuelled capacity is forecast to rise from33% in 2011 to ~43% from 2012 onwards, with commissioning of new largecombined cycle gas turbines (CCGTs / PLTGUs)Source: RUPTL 2011-20 and consultant calculations 9 10. Power sector gas demand (2005-2020)mmscfd Demand for gas1,600 increases by 75% LNG1,400over 2010 levels or Gasby 570 mmscfd (6%1,200 2010 PLN gas of 2010 gas1,000 consumptionproduction) 800 Demand grows byless than output, due 600to increasing average 400power plant 200efficiency 0 LNG is expected to2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020meet 50% of gasdemand by 2020Source: PT PLN (Persero) RUPTL. 2005 to 2010 values are for PLN only 10 11. FIPGB industrial demand (2011-2025)mmscfd Industrial demand is 4,000 Other industries projected to grow by 3,500 Flat Glass Ceramicsaround one-third to Metal Pulp and paper2025 or by ~1,000 3,000 Petrochem - energy mmscfd (11% of Petrochem - feedstock 2,500 Fertiliser - feedstock 2010 gas production) 2,000 The majority of thisgrowth comes from 1,500the use of gas as a 1,000feedstock rather500 than for energy0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Source: FIPGB. The figure shows contracted or planned demand. Not all industrial gas users aremembers of FIPGB and these forecasts, therefore, will understate expected industrial demand11 12. Indonesia Gas Balance by use (2011-2025)mmscfd Only domestic12,000demand is shown (ie,Industrygas for export is notFertiliser10,000included)Electricity The forecast shows 8,000the sum of 6,000contracted,committed and 4,000potential demand This assumes no 2,000constraints on0natural gas supplies 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Source: Indonesia Gas Balance, 2010 12 13. Indonesia Gas Balance by status (2011-2025)mmscfd The robustness of12,000supply projectionsPotentialfall over timeCommitted10,000 We need to betterContractedunderstand how the 8,000gas balance is 6,000prepared In particular, we 4,000need to betterunderstand how the 2,000forecasts relate tothe RUPTL0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Source: Indonesia Gas Balance, 201013 14. RUPTL, FIPGB and Gas Balance comparedmmscfdGas Balance Demand forecasts in12,000contracted +committed +the Indonesia gaspotential balance are ~3x10,000higher than thoseGas Balancederived from 8,000contracted+ committedsumming the RUPTLand FIPGB forecasts 6,000 RUPTL + FIPGB The difference may 4,000be due in part to the Gas Balancedifferentcontracted 2,000assumptions onsupply constraints0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 and in part to recentchanges in PLNsRUPTL 14 15. Historic forecasts comparedmmscfd Historic forecasts12,000 Gas Balance (2010) - All Potentialappear to haveconsistently10,000overstated actual gas ADB (2003) -Low casedemand 8,000 The much lower 6,000growth forecastsNexant (2006) - Median caseobtained from theActual 4,000RUPTL and FIPGB arein line with actualRUPTL+FIPGB 2,000 (2010/2012)growth in demand Supply constraints0 2000 2004 2008 201220162020 2024 may mean there issuppressed (unmet)demand 15 16. Historic demand and forecasts by useElectricity demandOther domestic demandmmscfdmmscfd Gas Balance (2010) - All Potential6,000 6,000Gas Balance (2010)- All PotentialADB (2003) -5,000 5,000 Low case4,000ADB (2003) - 4,000Low case3,000 3,000ActualNexant (2006) - Median case2,000Actual 2,000 Nexant (2006) - Median case1,000 1,000 FIPGB (2012) RUPTL (2010) 0 0200020042008 2012201620202024 20002004 2008 2012 201620202024 The divergence between actual and forecast demand appears to be largelydue to much lower use of gas in electricity generation than was forecast This may be due to gas supply shortages limiting PLNs use of gas, and/orto a shift to increased use of coal by PLN16 17. Potential for gas in transportNGV penetration in SE Asia There is much interest in NGV penetrationreplacing subsidised fuels(vehicles)2.5%with Natural Gas Vehicles 2.23%(NGVs)2.0% Achieving the same1.5%penetration rate in 1.0%0.89%Indonesia as in Thailand0.61%would imply 685,000 NGVs0.5%0.27% 0.32% 0.001% 0.001% 0.003%0.0% The resulting gas demandwould be ~32mmscfd (0.3%of domestic production) Source: NGV Global This would be equivalent to displacing 360 Ml of Premium fuel (1.6% ofcurrent Premium use)17 18. Environmental considerations We understand there are no specific targets to reducegreenhouse gas emissions from the power sector Perpres 61/2011 (National Action Plan for GreenhouseGas Emissions Reduction) has some provisions onincreasing gas utilisation to reduce emissions by 2014, 29 mmscfd(?) used by public transport in Palembang,Surabaya and Denpasar by 2020, 629 mmscfd(?) used by public transport in Medan,Jabodetabek, Cliegon, Cirebon, Balikpapan and Sengkang by 2014, increasing natural gas distribution to 94,500 households monitoring of implementation of flare gas reduction policy18 19. Regional domestic demand and available supply (2011) Indonesia Gas Balance Available supply ( existing + projected production - exports)Domestic demand( contracted + committed + potential domestic demand Values in mmscfd 1631 13497332563 1400588 3463Domestic demand and available supply in regions not shown is