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
Disclaimer This presentation and its contents are provided for informational purposes only. This information is not advice on or a recommendation of any of the matters described herein or any related commercial transactions. BP makes no representations or warranties, express or implied, regarding the accuracy, adequacy, reasonableness or completeness of the information, assumptions or analysis contained herein or in any supplemental materials, and BP accepts no liability in connection therewith. BP deals and trades in energy related products and may have positions consistent with or different from those implied or suggested by this presentation. To the extent the presentation contains statements that are not historical facts, including statements about the BP's beliefs or expectations, these forward-looking statements are made based on the presenter s understanding of BP s current assessment. These statements are based on the presenter s knowledge of plans, estimates and projections and you should not place undue reliance on them. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast, suggested or implied in any forward-looking statements due to a variety of factors. BP disclaims any intention or obligation to publicly or privately update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The recipient s use of the information contained in this presentation is at their own risk, and BP expressly disclaims (to the extent permitted by applicable law) any liability for any errors, omissions or representations and for the use or interpretation thereof by others. The information contained in this document shall not be modified, reproduced, distributed or otherwise disseminated in whole or in part in any manner by any party without prior written permission from BP. The information within this presentation creates no legal rights for the recipient or obligations for BP, and all rights, including copyright, confidentiality and ownership rights, are reserved.
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
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
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
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
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
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
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 60 50 40 30 20 10 0-10 -20 Change in LNG exports 2005-14 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
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 60 50 40 30 20 10 0-10 -20 Change in LNG imports 2005-14 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
US$/mmbtu Wide Pacific-Atlantic price arbitrage enabled interbasin trade flows in recent years 20 18 16 Japan average LNG import price 14 12 10 8 6 US LNG to Asia US LNG to Europe 4 2 0 UK NBP US Henry Hub Source: ICE, NYMEX, BP analysis
Mt per annum Spot & short term LNG sales* now account for almost 30% of the global market 70 35% 60 50 40 Share of global Market (RHS) Spot & short term LNG sales (LHS) 30% 25% 20% 30 15% 20 10% 10 5% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0% * Spot sales and sales under contracts < 4 years in length Source: GIIGNL
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
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
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