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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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
Impact of Qatari and other expansion in last ten years
60
50
40
30
20
10
0
-10
-20
Qatar
Australia
Russia
Nigeria
Yemen
Peru
Malaysia
Norway
Trinidad
Eq. Guinea
PNG
Net other
Egypt
Algeria
Indonesia
Mtpa
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
US/Canada
Other Europe
Middle East
S.E. Asia
Mexico
UK
India
LatAm
China
60
50
40
30
20
10
0
-10
-20
Change in LNG imports 2005-14
JKT
Mtpa
These ten years have also seen Asia able to call on
flexible Atlantic LNG supply
•
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
Wide Pacific-Atlantic price arbitrage enabled interbasin trade flows in recent years
20
18
Japan average LNG import price
US$/mmbtu
16
14
US LNG to Asia
12
10
8
6
4
2
US LNG to Europe
UK NBP
US Henry Hub
0
Source: ICE, NYMEX, BP analysis
Spot & short term LNG sales* now account for almost
30% of the global market
70
35%
Mt per annum
60
50
40
30%
Spot & short term
LNG sales (LHS)
25%
Share of global
Market (RHS)
20%
30
15%
20
10%
10
5%
0
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
* 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
Isle of Grain
Alaska LNG
GATE
Rovigo
Cove Point
Costa Azul
Freeport LNG
Dominican
Republic
Bilbao
Reloads
SEGAS
Trinidad
ADGAS
IGS
3rd party DES
Asia
Japanese
Terminals
Taiwan Terminals
Fujian
Tangguh
Bontang
Angola
Gorgon
Existing Supply Resource
Future Supply resource
Korean
Terminals
Kuwait
Browse
NWS
Argentina
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