GAS FROM ASIA CLEAN FUEL TO POWER THE PACIFIC DR DAVID ROBSON CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER TETHYS PETROLEUM LIMITED

Transcription

1 GAS FROM ASIA CLEAN FUEL TO POWER THE PACIFIC (WITH A FOCUS ON CENTRAL ASIAN SUPPLY) DR DAVID ROBSON CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER TETHYS PETROLEUM LIMITED the Sprit of Tethys

2 Disclaimer and Forward Looking Statements!"#$%&"'()* 84E?,/2.7*F+/8*G1.9*.9/*$ *7/E?015/7*0/H?+-.40=*-?.94015/7*AG91E9*-0/*-;-1+-:+/*-.*GGGI7/8-0IE4,D*-28*,?7.*:/*0/-8* 12*E42J?2E542*.9/0/G1.9I*<917*60/7/2.-542*84/7*24.*E4275.?./*-2*4K/0*.4*7/++*-2=*43*.9/*7/E?015/7*43*.9/*$4,6-2=I**&2=*4K/0*.4*7/++*,-=*42+=*:/*,-8/*12*-EE408-2E/*G1.9*.9/*./0,7*43*.9/*60476/E.?7*43*.9/*$4,6-2=*F+/8*?28/0*-66+1E-:+/*7/E?015/7*+-G7* -28*,-=*24.*:/*0/6048?E/8*12*G94+/*40*12*6-0.*40*604;18/8*.4*-2=*6/0742I* "2340,-542*Q40,*8-./8*'-0E9*RSO*TUSSI***V-00/+7*43*41+*/W?1;-+/2.*ABVX(7CD*,-=*:/*,17+/-812HO*6-05E?+-0+=*13*?7/8*12* I** &*VX(*E42;/07142*0-54*43*Y*'E3Z*S::+*17*:-7/8*42*-2*/2/0H=*/W?1;-+/2E=*E42;/07142*,/.948*601,-01+=*-66+1E-:+/*-.*.9/*:?02/0* 56*-28*84/7*24.*0/60/7/2.*-*;-+?/*/W?1;-+/2E=*-.*.9/*G/++9/-8I* * QX)[&)!*%XXL"\]*#<&<('(\<#* <917* 60/7/2.-542* E * 340G-08^+44N12H* 7.-./,/2.7*.9-.* -0/* H/2/0-++=* 18/25F-:+/* :=*./0,7* 7?E9* -7* -25E16-./8O* :/+1/;/O* :?8H/.O*12./28O*/75,-./O*/_6/E.O*4?.+44NO*6+-2*40*4.9/0*71,1+-0*G4087I* *<9/*0/-8/0*17*E-?542/8*.9-.*-77?,65427*?7/8*12*.9/* 60/ *43*7?E9*12340,-542O*-+.94?H9*E42718/0/8*0/-742-:+/*-.*.9/*5,/*43*60/ O*,-=*604;/*.4*:/*12E400/E.I**&E.?-+* 0/7?+.7*G1++*;-0=*304,*.9/*12340,-542*604;18/8*9/0/12*-7*-*0/7?+.*43*2?,/04?7*N24G2*-28*?2N24G2*017N7*-28*?2E/0.-125/7*-28* 4.9/0* 3-E.407I* * #?E9* 3-E.407* 12E+?8/*.947/* 8/7E01:/8* 12*.9/* $4,6-2=@7* &22?-+* "2340,-542* Q40,* 8-./8* '-0E9* RSO* TUSS* -28* 12E+?8/*:?.*-0/*24.*+1,1./8*.4Z*H/2/0-+*/E424,1EO*,-0N/.*-28*:?712/77*E `*a?E.?-5427*12*41+*-28*H-7*601E/7O*.9/*0/7?+.7* 43* /_ * -28* H* -28* 0/+-./8* -E5;15/7`* a?e.?-5427* 12* 340/1H2* E?00/2E=* /_E9-2H/* 0-./7`*.9/*?2E/0.-12.=* 43* 0/7/0;/* /75,-./7`* E9-2H/7* 12* /2;1042,/2.-+* -28* 4.9/0* 0/H?+-5427`* 017N7* -774E1-./8* G1.9* 41+* -28* H-7* 46/0-5427`* -28* 4.9/0* 3-E.407O*,-2=*43*G91E9*-0/*:/=428*.9/*E42.04+*43*.9/*$4,6-2=* *!"#$%!&#'()&)"$*$!+"#*,,#-!"*".!*,#-!/0()&#*()#!"#0&1#0",)&&#+$%)(2!&)#&$*$)3# 2

3 Topics to be covered! Brief introduction to Tethys Petroleum! Why natural gas is a clean fuel?! Projections of energy demand and gas demand for China and the East Pacific rim! Sources of gas supply! Central Asia as a supplier! Potential of Central Asia to deliver gas! Competition for Central Asian gas! The 3 role of independents in gas supply to the Chinese market! Structural impediments to supply and how to address these! Summary 3

4 Who are Tethys Petroleum?! Oil & Gas Exploration & Production Company! Focus on Central Asia ONLY INDEPENDENT OPERATING IN THREE CENTRAL ASIAN REPUBLICS! Many years experience in the area! Public Company! Listed on the Toronto & London Stock Exchanges! Kazakhstan - Oil and Gas production potential for supply to China! Tajikistan - Large exploration area with huge potential for gas and oil possible export of gas to China! Uzbekistan - Oil production plus potential new fields! Well placed to be a major player in the sector 4

5 Tethys Central Asian Assets 5 5

6 Natural Gas THE Clean Fossil Fuel! Cleaner burning fuel than coal or oil! lower CO 2 emissions! lower sulphur dioxide emissions! lower nitrous oxide emissions! lower particulates and lower heavy metals! Increased usage of gas in the energy mix will be required in order to meet increasing energy demand without increasing CO 2 emissions and other pollutants! Much cleaner flame and absence of toxins such as heavy metals! Ideal domestic fuel source as compared to coal, oil or biomass! 6 Burning gas in the home has significant health advantages over oil, coal and biomass due to the lower particulate emissions 6

7 Natural Gas The East Pacific Rim s Low CO2 Fossil Fuel,0&$CD1771-;7$E1;8/4<1;F$D93J.;9K$L95$69;95.39<$M;13$N@$O-P95$>-4589$ :1;<=$>-/.5$.;<$?@<5-$ (&$ 248/9.5$ &($ /$6.7$ #'!$ 01/$ "%&$,-./$!"#$ )$ &))$ %))$ *))$ +))$ ')))$ '&))$ A1B9$,@8/9$,)&$CD1771-;7$EFG,0&HI:JK$ Source: CRIEPI, Evaluation of Power Generation Technologies based on Life Cycle CO2 Emissions (2000) 7

8 Natural gas vs. Coal for Electricity Generation - Pollutants Pollutants emmited by fuel type during electricity generation Nox (lbs/mwh) Pollutant SO2 (lbs/mwh) Coal Natural Gas 8 CO2 (lbs/mwh x 1000) lbs/mwh Source: Derived from EPA figures 8

9 Why we need Natural Gas! Cleanest of all fossil fuels! Abundant reserves at the right price! No real short-term alternative to fossil fuels which can supply the requirement and be economic! Nuclear power now in question after Fukushima! New technologies (e.g. Nuclear Fusion) may work in the future but still years away! Renewable 9 energy can play its part but cannot replace fossil fuels these technologies are IMPORTANT but:! WE NEED NATURAL GAS 9

10 Cost of Generating Electricity: Gas is one of the cheapest fuels (UK example) Gas Fired Power Generation 10 pence/kwh Source: Royal Academy of Engineering 10

11 Wind Power needs Thermal Back-up! Due to the unreliability of the weather, wind energy requires conventional backup to ensure uninterrupted supply of electricity! Additional backup capacity increases the overall cost of generating wind electricity, and reduces the environmental credentials of wind power! The 11 already high capital and operating costs of wind power are increased by the requirement to construct and maintain thermal capacity 11

12 Denmark s experience of wind energy: case study! Denmark has the highest proportion of wind energy in the world, producing ~20% of the country s electricity! The intermittent nature of wind power means that the contribution of wind power averages around 12% and can be as low as 4%! The proximity of the Norwegian and Swedish hydro power systems allows Denmark to export surplus electricity when there is too much wind and re-import it when there isn t enough wind! This option is not available for countries such as Japan! Denmark has the most expensive electricity in Europe (Source: Eurostat)! Denmark has spent approximately $946 million in subsidies on wind power since In the UK, 2011 subsidies to the renewable industry totaled $1.76 billion Wind generation low yet demand high 12

13 Texas a case study! Texas has 10 GW installed wind capacity! For example in August 2011, demand for electricity was 68 GW, with wind supplying only 1.5 GW (15% of nameplate capacity)! Texas has spent $17 billion on wind farms and $8 billion on the transmission network to achieve 10 GW (theoretical) capacity! Same investment could have provided 5 GW of nuclear power or 25 GW of natural gas power capacity 13! Wind power generation tends to be highest at times of lowest demand and therefore requires thermal backup Wind output tends to fall during peak demand. Source: National Review 13

14 Worldwide Projected Energy Growth 14 Source: BP Energy Outlook 2030 (2011) 14

15 Projected Energy Demand Growth in Selected East Asian Markets Energy demand projected to significantly increase by 2030, with a 50% increase in 2010 energy demand China - bulk of the increase in energy demand - represents 87% 15 of total demand in 2030 Sources: APEC, ADB, Energy Outlook for Asia and the Pacific,

16 Historic Global Gas Consumption '%#!!" '%!!!" &%#!!",-."/ "67839:;<" &%!!!" $%#!!" $%!!!" #!!"!" $()#" $()*" $()(" $(*$" $(*'" $(*#" $(**" $(*(" $(+$" $(+'" $(+#" $(+*" $(+(" $(($" $(('" $((#" $((*" $(((" &!!$" &!!'" &!!#" &!!*" &!!(" =>-;" Source: BP Statistical Review of World Energy

17 Historic East Asian Gas Consumption '#!" '!!" &#!",-."/ "67839:;<" &!!" %#!" %!!" $#!" $!!" CA1D-40;>" EA>F1-3" G-AH-1" I-B-:.A-" J1K01>.A-" M-4-1" #!"!" %!!!" %!!$" %!!%" %!!&" %!!'" %!!#" %!!(" %!!)" %!!*" %!!+" %!$!" =>-;" Source: BP Statistical Review of World Energy

18 Projected Global Gas Consumption OECD demand growth has begun to plateau Non-OECD consumption projected to increase significantly and represent over 50% of global consumption by 2035 East Asia and the Pacific 18 rim represents a significant portion of the non-oecd growth in gas Consumption (bcmy) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Year Non-OECD OECD Source: Derived from EIA Energy Outlook

19 China s Primary Energy Mix Gas much less than in OECD but: CHINA OECD 4% 25% China already world s 4 th largest gas consumer China plans to increase the usage of gas in the energy mix to approximately 10% by 2015 Sources BP Statistical Review of World Energy 2010; China Gas All About Supply, Religáre, 29th September

20 East Asia Energy Mix to 2030 Gas 20 Source: APEC, ADB, Energy Outlook for Asia and the Pacific,

21 Power Generation Mix, East Asia* 2005 and 2030 Nuclear, 8% Renewable, 0% 2005 Renewable, 5% 2030 Gas, 4% Hydro, 13% Coal Oil Nuclear, 16% Coal Oil Oil, 3% Coal, 72% Gas Hydro Nuclear Renewable Hydro, 12% Coal, 60% Gas Hydro Nuclear Renewable Gas, 7% Oil, -1% Gas utilization projected to increase significantly by 2030 Total 21 energy demand will significantly increase, further underlining the importance of gas in meeting East Asia s energy needs China plans to increase the usage of gas in the energy mix to approximately 10% by 2015 Sources: Derived from APEC, ADB, Energy Outlook for Asia and the Pacific, 2009 * East Asia = China, South Korea, Taiwan, Hong Kong SAR & Mongolia 21

22 Increasing Gas Demand % change on 2009 figures 300% 250% 200% 150% 100% 22 50% Currently Indian sub-continent has same gas demand as China Europe has 5 times China s gas demand China India Europe 0% #4?0E/Z*"2./ *(2/0H=*X?.+44N*TUSU*A("&D* 22

23 Sources of Gas Supply! Domestic Gas Production! Conventional! Unconventional & CBM! LNG! Middle East! Russia! Australasia! Other! Gas Hydrates! Offshore deep water! Pipeline 23 Gas Imports! Central Asia! Siberia! Myanmar 23

24 Chinese Gas Supply Russia Central Asia Domestic Unconventional South East Asia A#4?0E/Z*>01E12H*-28*!/,-28*340*%\]*12*$912-O*X_3408*"275.?./*340*(2/0H=*#.?81/7O*TUUbD* LNG 24

25 China Domestic Production Estimates! Although Chinese domestic production projected to increase it can not meet rising demand! Estimated15% of total China supply from pipeline gas by 2015! Unconventional gas projected to increase but not as much as USA! By 2020 domestic production will only meet 50% of demand with unconventional gas only making up 14% Trillion Cubic Feet Source: EIA China s Pipeline Gas Imports: The Current Situation to 2025, Petromin Pipeliner, Jan Mar

26 Pacific Rim LNG Imports China's LNG Imports by Source 2010 Japan's LNG Imports by Source 2010 Other, 4% Russia, 4% Nigeria, 1% Other, 4% Malaysia, 13% Malaysia, 20% Russia, 9% Indonisia, 19% Qatar, 13% Yemen, 5% Indonesia, 18% Qatar, 11% UAE, 7% Oman, 4% 26 Australia, 41% Australia, 19% Brunei, 8% Source: BP Statistical Review of World Energy

27 Asian Pipeline Gas v. LNG! Asian Pipeline Gas! Onshore production and exploration! Relatively cheap drilling and operating costs! Numerous untapped and underexplored areas! Opportunities for independent companies! Direct supply to the market no special facilities required! Reliance on long distance pipelines upfront capital investment but lower operating costs! Multiple market possibilities becoming available! LNG! Offshore supplies are expensive and difficult to develop! Require extremely high capital investment and operating costs in extraction, processing, transport and offloading, re-gasification facilities! Requires NOC s and majors for most projects! Flexible in terms of delivery and possible customers! No reliance on single transport route! Market stranded gas 27

28 New Gas Sources! Gas Hydrates! Methane hydrates locked up in ocean sediments! Technology being developed to extract these! High cost but big potential! Substantial deposits offshore Japan & Korea! Deep Water Offshore! South China Sea! Expensive drilling and production! Offshore LNG logical export route Source: USGS 28

29 Siberian Reserves! Gazprom estimate Eastern Russian gas resources as 54.2 Tcm onshore and 14.9 Tcm offshore! Sakhalin II has over 600 Bcm gas reserves! Sakhalin III currently has 137 Bcm gas reserves, with 500 Bcm forecast! The Chonsk group of fields has over 175 Bcm gas reserves! Additional undiscovered reserves, with much of the region being unexplored East Siberia East Siberia Pacific Ocean Pipeline (EPSO) Sakhalin Sakhalin LNG Terminal Map Source: Petroleum Economist 29

30 Siberia - China Pipelines! A proposed pipeline running from Siberia to Xinjiang would deliver approximately Bcm/y of Siberia s gas reserves to China! Pipeline and gas sale has been agreed in principle by China and Russia! Negotiations underway and likely the pipeline will be completed as Russia looks to diversify its exports and China seeks additional gas to meet demand! A second pipeline is planned from Sakhalin Source: Gazprom 30

31 East Siberia Exports Russia s LNG Exports 2010 (Bcm) - Sakhalin Kuwait China 3.9 Japan Taiwan South Korea 8.23! Russia currently exports around 13.4 Bcm/y LNG to Asia! The size of Sakhalin & Siberian projects means that a much higher figure could be supported! Russia s contribution to China and Japan s LNG imports is currently relatively low! Pipelines could be constructed to China to supply very significant volumes of gas Source: BP Statistical Review of World Energy

32 Where is Central Asia? Central Asia! Six Republics! Kazakhstan! Kyrgyzstan! Tajikistan! Turkmenistan! Uzbekistan! (Afghanistan)! Borders China! Almost half land area of China! Only 7% of China s population! Borders Indian subcontinent! 116% China s population (India, Pakistan, Bangladesh) 32

33 Central Asian Gas underpins Chinese Pipeline Gas Imports Source: Petromin Pipeliner, China s pipeline gas imports: current situation and outlook to

34 Major Central Asian Sedimentary Basins!"##$%&' ($&)*+',#-.$/&+' ' 34 34

35 Natural Gas Reserves (2010) '#" '!" South Yolotan Field Turkmenistan (GCA figures)!"#$%&'!()*+,#*-(.*/(0&/&#%&/(1+#2--2$'(3,423(5&+#&/6( &#" &!" %#" %!" $#" $!" Central Asia #"!" ()**+,-"./0/1,23-" 41,-" 5,6,1" 73)68" 93:36,-" ;/-61,:"<*+," 7,)0+"<1,=+," 4-03-/*+," <)*61,:+," ;8+-," A,:,B*+," #4?0E/Z*V>*#.-575E-+*)/;1/G*43*[40+8*(2/0H=*TUSS* /_E/6.*#4?.9*c4+4.-2*d*]$&*TUSS*A24.*7-,/*0/7/0;/*8/F21542D* 35

36 Natural Gas Production (2010) )!!" (!!"!"#$%"&'(")'*%+,$-.+/'012&&2+/'3$42-'56#%6)'76%'86"%9' '!!" &!!" %!!" $!!" Central Asia #!!"!" *+",-../01" " " 9501" 831:50;"<./0" =0:05" 8A/10" +0-4/"<50B/0" /0" #4?0E/Z*V>*#.-575E-+*)/;1/G*43*[40+8*(2/0H=*TUSS* 36

37 Central Asia Gas Export Potential!/01;/8*304,*("&O*"2./ *(2/0H=*#.-575E7*^**\-.?0-+*]-7*'48/+*ATUSUD*-28** V>*#.-575E-+*)/;1/G*43*[40+8*(2/0H=*TUSU* 37

38 Where will the gas go?! Energy hungry economies around! China! India! Europe! Limited local consumption therefore significant export potential! What will determine the export market?! Infrastructure! Price! Demand 38

39 Central Asia Centre for Energy Getting the value to market the energy silk route KAZAKHSTAN UZBEKISTAN KYRGYSTAN TURKMENISTAN TAJIKISTAN AFGHANISTAN CHINA! Key Pipelines! Russian export system oil & gas! Kazakhstan China oil pipeline! CA-China & Kaz-China gas pipeline! TAPI! NABUCCO Pipeline Routes Schematic only Tethys Projects 39

40 Central Asian Gas Export Infrastructure Russia & Europe China Europe 40!"##$%&' ($&)*+',#-.$/&+' ' India & Pakistan 40

41 Current & Planned Central Asian Gas Pipeline Routes! "#$%&#'%! ()$)*#+,! (-'./0#'1! 5+)+/.! 2)34%+!!"#$%&'()*+&( 67!8!79!:*0;,! A9!B!69!:*0;,! -&.&/,*$&#(0(!,+#&( D9!B!D7!:*0;,! (C#')! E'F%3! *-'.+3/*+#-'=! G9DG;DA! 12%/3"#+*$&#(0( 7!:*0;,! 4%&#( 5&62778( 41 AG!:*0;,! >/3-$%! "3-$-.%F! 1)94( AG!:*0;,! H'F#)!;!")4#.+)'! "3-$-.%F!! Sources: Various 41

42 Amu-Darya Basin one of the world s most prolific basins Uzbekistan!"#$%& '()&*+,&-./& 0+12& 0@546I& K<A54&LA5"D?$"7& kazakhstan ;<7=?,"$"7& :9(&*+,&-E.&0+12& $456789:# $8:6L5# ;9NP578Q# RN>5R8CST8# N85>;NC85# tajikistan turkmenistan 34"5$67& 89(&*+,&-::& 0+12& 3;5649<8# C"?$@5"D"=& EF'((&*+,&&& -G(&0+12& EFGH#$CIJK# H"I4$"A& /&+,& &-E'G0+12J& afghanistan ;4<=#">!?@A="B& /'&*+,&-.&

43 Theoretical contribution of Central Asian Gas to Chinese Gas demand! Assuming current Chinese gas demand! BP Statistical Review figures 125 years! GCA South Yolotan field only 232 years! Assuming estimated Chinese gas demand in 2035! BP Statistical Review figures 42 years! GCA South Yolotan field only 79 years Figures based on assumption that all production piped to the Chinese market! Turkmenistan recently stated that it expects gas production to triple by 2030 this being almost equal to projected Chinese gas demand at that time*! Turkmenistan 43 & China planning for increased supply of Turkmen gas to meet 60% of China s current demand (22% of projected 2030 demand)* e*)/?./07o*xe.4:/0*tuss** Sources: BP Statistical Review of World Energy 2011, GCA, 2011,International Energy Statistics database (as of November 2009 Projections: EIA, International Natural Gas Model (2010) 43

44 Gas Export The Competition! CHINA! Already connected with the Central Asia China gas pipeline! Pipeline system being expanded! Chinese companies involved in exploration and production! EUROPE! Most supplies currently from Russia! Planned NABUCCO pipeline for direct exports! INDIAN SUB-CONTINENT! TAPI pipeline now becoming a reality IGA signed! Planned completion

45 Gas Demand The Competition )""## (""##,-..-/0#123-4#567869#:68#;6<8# '""## &""## %""## $""## 45!"#$%& '($)#%$&*+,&!-$.$/$0'& 1%2%$& *&3-4/%& 5+4-2/&!/$04%6&78#%&592-40&:-0/$.%6& ;+88#%$&592-40&:-0/$.%6&!""## *"!$# *"!*# *"!"# *"*(# *"*&# *"*$# *"**# *"*"# *"+(# *"+&# *"+$# *"+*# *"+"# =6<8# Derived from : IEA International Energy Outlook 2010 Reference Case, BP Statistical Review of World Energy

46 Dynamics of Central Asian Gas Pricing Chinese LNG Import Price Alternative Routes TAPI European Gas Demand Chinese Gas Demand Heavy Fuel Oil Price Chinese Pipeline Tariff GazProm Tariff Other Pipeline Gas to China & Domestic Supply Central Asian Gas Price Other Gas Supply to Europe NABUCCO 46

47 Strengths of Independents! Smaller and therefore more focused on specific areas! Tend to be prepared to take greater risks! More rapid decision making! Have more to lose from not making a project work! Flexible approach! Prepared to adapt to local environment - often pioneers! Lower cost operators with lower overhead burden can develop smaller fields economically! Incentive driven companies attract and motivate staff through success 47! Utilise phased approaches to developments! Can use the best available modern technological solutions 47

48 Independent supply to the Chinese Market The Challenges 48! Third party access to gas trunkline system! Never happened before! However not been such external supply available in the past! Should be able to solve with simple tariff formula! How to guarantee capacity - Priority for State gas?! Access to potential Chinese buyers! Gas distribution companies! Industrial users! Possible sale to pipeline company for resale! Competition with other gas suppliers! Independents can often undercut on costs and therefore prices! If there is demand and flexibility which makes good commercial sense for all sides! A DEAL WILL BE DONE!! Independents are often pioneers! 48

49 Central Asian Gas to Power the Pacific - Conclusions! The Pacific Rim needs natural gas to power its economies there is no other realistic short term alternative! Central Asian Oil and Gas can provide the engine to power China s and the Pacific rim s economic growth! Central Asia has enormous potential on China s doorstep! There is competition from other markets for this fuel! China must ensure that! Market forces are allowed to control pricing! Infrastructure is available to import such gas and that this is available for third party commercial usage! Needs private investment in Central Asian oil & gas from East Asian markets commodities for the regional market! Otherwise the gas will go to other markets! 49

50 Summary! The Pacific needs natural gas! Central Asia can provide this clean fuel to power the Pacific! The potential is enormous! Tethys hopes to be part of the 50 solution! 50

51 !!!"#$#%&'($#)*+$,-".*-/ 012*3#$#%&'($#)*+$,-".*-/