Pacific Rim Impacts of US Shale BoomAfrica. Middle East. Non-OECD Europe/Eurasia. Europe. Non-OECD Americas. OECD Americas

420 W 118th St, New York, NY 10027 | http://energypolicy.columbia.edu | @ColumbiaUEnergy

Pacific Rim Impacts of US Shale Boom

Jason Bordoff 2013 EIA Energy Conference

June 17, 2013

1


Global Gas Demand Forecast

Bcf/d

Source: IEA WEO2012 0

100

200

300

400

500

600

2010 2015 2020 2025 2030 2035

Non-OECD Asia

OECD Asia

Africa

Middle East

Non-OECD Europe/Eurasia

Europe

Non-OECD Americas

OECD Americas

2


Asia Pacific Pipeline vs. LNG Demand

Bcf/d

Source: IEA

0

5

10

15

20

25

30

35

40

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Observed IEA 2012 Forecast

Pipeline trade Asia-Pacific LNG trade Asia-Pacific

3


Asia Country Level Forecast

Bcf/d

Source: IEA WEO2012, EIA, Jim Jensen

3.6 4.1 4.4 5.2

2010 2015 2020 2035

Korea

10.06

11.61 11.80 11.90

2010 2015 2020 2035

Japan

4

1.2 3.8 6.9 9.1

0.3 2.1 6.0

13.4 9.2

13.0 16.9

30.8

2010 2015 2020 2035

China China LNG Imports

China Pipeline Imports

China Production


Japanese Power Generation Billion kWh (left) and trillion BTU (right)

Source: Federation of Electric Power Companies (FEPC) via Bloomberg

POWER GENERATION BY SOURCE (BN KWH)

FOSSIL FUEL CONSUMED FOR POWER (TRILLION BTU)

58 55 56 66 61 57

264 242 260 278 157

18

514 539 458 473

559

677

0

100

200

300

400

500

600

700

800

900

1000

2007 2008 2009 2010 2011 2012

Fossil FuelNuclearHydro

1,551 1,599 1,430 1,512 1,500 1,503

2,123 2,156 2,035 2,107

2,533 2,920

734 879

389 379

678

1,188

0

1000

2000

3000

4000

5000

6000

2007 2008 2009 2010 2011 2012

OilLNGCoal

5


0

500

1,000

1,500

2,000

2,500

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

COAL

NAT. GASOIL

HYDRO

NUKE

WIND

SOLAR

BIOMASS

Chinese Power Generation by Type

IEA Projections, Gigawatts

Source: IEA’s “New Policies Scenario” from the 2012 World Energy Outlook

6


9.2

9.8

10.7

12.1

12.1

12.6

12.7

12.9

14.2

14.8

15

100

San Francisco

Seattle

Washington, DC

Atlanta

Detroit

Houston

New York

Chicago

Phoenix

Los Angeles

Pittsburg

Beijing

China’s Acrid Air PM 2.5 microns per cubic meter

Source: WHO, Steven Q Andrews and RHG estimates

7


Global Gas Supply Forecast

Bcf/d

Source: IEA WEO2012

8

0

100

200

300

400

500

600

2010 2015 2020 2025 2030 2035

Latin America

Africa

Middle East

Non-OECD Asia (incl.China)Non-OECDEurope/EurasiaOECD Asia Oceania(incl. Australia)OECD Europe

North America


Rank Country Shale Gas (tcf)

1 China 1,115

2 Argentina 802

3 Algeria 707

4 U.S. 1 665 (1,161)

5 Canada 573

6 Mexico 545

7 Australia 437

8 South Africa 390

9 Russia 285

10 Brazil 245

World Total 7299 (7,795)

1 EIA estimates used for ranking order. Advanced Resources International estimates in parentheses

Top 10 countries with technically recoverable shale gas resources

Source: EIA

9


Global Gas Trade 2013-2017

Source: IEA Medium Term Gas Report 2012

19

21

2

27

2013

2017

11

13

27

23

0

1

2013

2017

68

74

5

5

199

236

2013

2017

4

11

132

131

12

10

9

9

2013

2017

70

73

34

39

2013

2017

14

14

190

244

2013

2017

30

63

26

50

2013

2017

51

67

67

77

6

11

2013

2017

162

178

29

77

6

6

2013

2017

LNG Imports LNG Exports Pipeline Exports Pipeline Imports

10


Global Gas Supply Forecast

Source: IEA Medium Term Gas Report 2012

11


Impact of US Shale Boom

• LNG Exports • Coal Exports • Displaced LNG Imports

Economic

• Russia • Qatar • Australia • Other

Geostrategic

• Substitution of gas for coal? • Substitution of gas for renewables and nuclear? • Impact of lower gas prices on consumption?

Environmental

12


0

2

4

6

8

10

12

14

16

18

20

Henry Hub Spot

EIA USProjectionJapan LNGImport

Regional Gas Price Forecast $/MMBTU

Source: IEA WEO2012

13


Study (year) Volume

CRA (2013) 20 bcf/day*

ICF (2013) 8 bcf/day**

Moody’s (2013) 6 bcf/day

Navigant (2012) 5-6 bcf/day

Ken Medlock (2012) No more than 1.2 bcf/day

NERA (2012) 0 bcf/day***

* Likely case. High case = 35 bcf/day. ** Middle case. Low case = 4 bcf/day. High case = 16 bcf/day. *** In its analysis of global markets, NERA found that the U.S. would only be able to market LNG successfully with higher global demand or lower U.S. costs of production than in the Reference cases.

14

Summary of Projected US LNG Exports


Market-based Pricing in Gas Trade by Region

Source: BP Statistical Review, IEA

15

0

100

200

300

400

500

600

2005 2007 2009 2010

bcm

North America

2005 2007 2009 2010

Europe

Gas-to-gas competitionOil indexation

2005 2007 2009 2010 w/ USLNG

Asia Pacific

2005 2007 2009 2010

Europe

Gas-to-gas competitionOil indexation

94% 84% 77% 67%

95% 84% 88% 88%

Additional 42 bcm/year or 4 bcf/day of North American LNG exports into Asia Pacific could increase volume of gas traded on gas-to-gas basis from 12% to 27%


Asia Pacific Pricing Mechanism

LNG Trade versus Pipeline

Source: BP Statistical Review, IEA

0

50

100

150

200

2005 2007 2009 2010

bcm

Pipeline

020406080

100120140160180200

2005 2007 2009 2010 w/ US LNG

LNG

Gas-to-gas competition Oil indexation

95% 86% 81% 87%

16


Global LNG Majors Export quantity and revenue as a share of GDP in 2011

Source: IMF, WITS, BP, Rhodium Group estimates

EXPORTS IN BILLION CUBIC METERS EXPORTS AS A SHARE OF GDP

0

50

100

150

200

250

Algeria Australia Indonesia Malaysia Qatar Russia Trinidad*

Pipeline LNG

0%

5%

10%

15%

20%

25%

30%

Algeria Australia Indonesia Malaysia Qatar Russia Trinidad*

Pipeline LNG

17


Rising Australia LNG Construction Costs $/tonne

Source: Press reports

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Darwin Pluto Gorgon Gladstone APLNG Wheatstone Ichthys

2006

2012

2015

2014 2015

2016

2017

18


Source: IEA 2011, WEO 2012, “Golden Age of Gas Report

Gas Substitution Effect on Emissions

19


Concluding Thoughts

• LNG exports can lower costs in Pacific and boost competition, but transportation costs mean regional price differential will persist.

• Oil linkage to remain, although with more flexible indexation clauses, but entering a period of more gas-on-gas competition in latter half of decade

Economic

• Ramp up in LNG export capacity to continue pressuring Russia gas terms • Huge Qatari surplus capacity has been absorbed; question is how they

respond to surge in new export capacity. • Keep an eye on Australian LNG project costs.

Geostrategic

• Low-cost natural gas tends to lower GHG emissions, but not a lot • Still need climate policy; gas makes policy cheaper, doesn’t solve climate • Need better information about lifecycle emissions (fugitive methane)

Environmental

20


Thank you For more information: Jason Bordoff Professor of Professional Practice in International and Public Affairs Director, Center on Global Energy Policy Columbia University [email protected] (212) 851-0193

mailto:[email protected]

mailto:[email protected]


Appendix


U.S. LNG Export and Price Impact Forecast

Study Average Price without Exports ($/MMBtu)

Average Price with Exports ($/MMBtu)

Average Price Increase (%)

EIA* $5.28 $5.78 9%

Deloitte $7.09 $7.21 2%

Navigant (2010)** (2 bcf/day of exports) $4.75 $5.10 7%

Navigant (2012)*** $5.67 $6.01 6%

ICF International*** $5.81 $6.45 11%

* Price impact figure for EIA study reflects the reference case, low-slow export scenario.

** The Navigant study did not analyze exports of 6 bcf/day.

*** Navigant (2010 and 2012) and ICF International studies are based on Henry Hub price.

Source: EIA, Deloitte, Navigant, ICF International 23

Pacific Rim Impacts of US Shale BoomAfrica. Middle East. Non-OECD Europe/Eurasia. Europe. Non-OECD Americas. OECD Americas

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