Trends in LNG Business Models in the APEC Region - Presentation to Conference on APEC Regional LNG Trade Facilitation

Transcription

1 Trends in LNG Business Models in the APEC Region - Presentation to Conference on APEC Regional LNG Trade Facilitation Alistair Smith Head of LNG Origination, Asia & Middle East BP Taipei, 16 July 2015

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3 Today s Presentation Introduction Development of LNG trade in and with Asia Key Asian supply and demand patterns in past 10 years Asia s increased linkage to Atlantic Basin Growth of spot and mid-term contracts Portfolio supply options Asian LNG outlook Summary of developments in business models and implications for Asia

4 Long-term contracts enabled modern LNG industry: LNG trade flows in 1970 LNG export 5 Mtpa (0.65 bcf/d) LNG import 10 Mtpa (1.3 bcf/d) Source: BP Internal

5 SE Asia to Japan and Algeria to Europe trades dominant by mid 1980s LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

6 Little change in the nature of global LNG trade by mid 1990s but still scaling up LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

7 By 2005, broader Atlantic Basin market evolving and Middle East suppliers beginning to play balancing role LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

8 LNG has now evolved into a global business: LNG trade flows in 2014 LNG export 5 Mtpa LNG import 10 Mtpa Source: BP Statistical Review of World Energy

9 Qatar Australia Russia Nigeria Yemen Peru Malaysia Norway Trinidad Eq. Guinea PNG Net other Egypt Algeria Indonesia Mtpa Impact of Qatari and other expansion in last ten years Change in LNG exports Qatar becomes the dominant supplier, adding more than half of 100 mtpa net supply increase and cementing its strategic position straddling the Atlantic and Pacific Multiple new supply sources emerge: Russia, Yemen, Peru, Norway, Equatorial Guinea, Angola and Papua New Guinea New projects in Australia: Darwin, Pluto Exports decline in Egypt, Algeria and Indonesia as upstream production fails to keep pace with rapid growth in domestic demand, helping to tighten the market LNG trade becomes much more flexible as a more liquid market emerges Source: BP Statistical Review of World Energy

10 JKT China LatAm India UK Mexico S.E. Asia Middle East Other Europe US/Canada Mtpa These ten years have also seen Asia able to call on flexible Atlantic LNG supply Change in LNG imports Japan/Korea/Taiwan (JKT) demand continues to grow strongly Major new demand centres emerge in China, India, Latin America, the United Kingdom, Mexico, South East Asia and the Middle East Emergence of smaller LNG markets is facilitated by maturing Floating Storage & Regasification (FRSU) technology Market tightens considerably following March 2011 Fukushima nuclear accident in Japan Emergence of shale gas in US releases LNG supply and promotes LNG export Asian market tightness exerts strong pull on Atlantic Basin supply, incentivising diversions and reloads from the US and Europe Source: BP Statistical Review of World Energy

11 US$/mmbtu Wide Pacific-Atlantic price arbitrage enabled interbasin trade flows in recent years Japan average LNG import price US LNG to Asia US LNG to Europe UK NBP US Henry Hub Source: ICE, NYMEX, BP analysis

12 Mt per annum Spot & short term LNG sales* now account for almost 30% of the global market 70 35% Share of global Market (RHS) Spot & short term LNG sales (LHS) 30% 25% 20% 30 15% 20 10% 10 5% % * Spot sales and sales under contracts < 4 years in length Source: GIIGNL

13 BP s global LNG portfolio makes it better able to meet buyers growing demand for flexibility Costa Azul Alaska LNG Dominican Republic Existing Supply Resource Future Supply resource Cove Point Freeport LNG Trinidad Argentina Isle of Grain Bilbao GATE Rovigo Reloads SEGAS Angola ADGAS Kuwait IGS Gorgon Korean Terminals 3 rd party DES Asia Bontang NWS Browse Taiwan Terminals Fujian Japanese Terminals Tangguh Existing Market Access Marketing Joint Venture Trading Hub LNG 4 x GEM 3 x Trader 1x Time Charter Source: BP Internal

14 Outlook for strong future growth of LNG, with Asia s share of global trade set to remain above 70% Source: BP Energy Outlook 2035 BP plc 2015

15 Changes in LNG business models in Asia have occurred alongside these new trade flows Regional markets now highly connected, even with new Asian supply Availability of spot and flexible volumes Long-term contracts taking a smaller share of global trade, though still >70% Long-term contracts are themselves exhibiting new types of flexibility Equity LNG lifting and marketing playing a greater role in Asian trade flows Portfolio sales increasingly used by Buyers Emergence of new players Strong growth expected across established and new Asian LNG markets Buyers looking for greater reliability and flexibility from LNG business models