2. Table of Contents
Oil & Gas Market Trends ………………………………………………………………………………………………………3
Natural Gas – Renewable Energy Forecast …………………………………………………………………………………...4
LNG ……………………………………………………………………………………………………………………………..5
What is LNG?
Key Applications
State of LNG Industry & Forecast
LNG Pricing Overview
LNG Production – Economics
LNG Exports by Country
LNG Imports by Country
LNG Trade Volumes
Liquefaction Plants
Liquefaction Capacity by Country & Region
Liquefaction Technology
Emerging LNG Markets & Growth Potential
Receiving Terminals
Transportation
Unconventional Gas
Natural Gas Resources Around the World
Impact of Shale Gas
Appendix …………………………………………………………………………………………………………………………31
Key Commissioned LNG Projects Worldwide
3. Oil & Gas Market Trends
This overview projects annual growth in the world economy to
average 2.8% to 2040, roughly in line with the average growth
over the last 30 years.
Emerging economies will continue to lead the way, with China
and India expected to grow at 2.5-3 times the speed of the
OECD countries.
Continued progress is foreseen for energy efficiency, so that
growth in energy demand gradually will slow over the coming
decades, with an annual average of 1.1% from today to 2040.
Demand will increase for all types of energy, but with individual
growth rates ranging from 0.4% (coal and oil) to 7.4% (solar,
wind and geothermal) per year.
Overall, global oil demand is expected to peak around 2030. Key
uncertainty relates to future oil supply, with positive surprises in
US tight oil and the comeback of Libya as important signposts
the last year, but also with potential supply disruptions and
uncertain long-term recovery factors affecting the outlook
4. Natural Gas – Renewable Energy Forecast
Natural gas is still seen as a fuel of the future. Positive drivers
include significant new available supply at moderate costs and
environmental policies. Markets will continue to be regionally
differentiated, but with increasing integration due to LNG in
particular.
Annual global gas demand is projected to add 60% by2040,
growing by 1.6% per year.
Natural gas is expected to increase its share of global energy
demand from 21.3% to 24.4% over the same period.
Development of new renewable energy will contribute to
increasing the renewables share of total primary energy demand
from 13.5% to almost 20% in 2040.
This development is driven by climate and environmental policies,
by energy security concerns, and by price and cost developments,
and is linked to growth in electricity as a source of final energy
demand.
“The United States is projected to become a net exporter of
liquefied natural gas (LNG) in 2016, a net pipeline exporter in
2025, and an overall net exporter of natural gas in 2021. The
outlook reflects increased use of LNG in markets outside of
North America, strong domestic natural gas production,
reduced pipeline imports and increased pipeline exports, and
relatively low natural gas prices in the United States compared
to other global markets.” – EIA 2012
6. What is LNG?
Liquefied natural gas or LNG is natural gas (predominantly methane, CH4) that has been converted to liquid form
for ease of storage or transport.
Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It
is odorless, colorless, non-toxic and non-corrosive. Hazards include flammability, freezing and asphyxia.
During a typical LNG process. The gas is first extracted and transported to a processing plant where it is purified by
removing any condensates such as water, oil, mud, as well as other gases such as CO2 and H2S. An LNG process train
will also typically be designed to remove trace amounts of mercury from the gas stream to prevent mercury
amalgamizing with aluminium in the cryogenic heat exchangers. The gas is then cooled down in stages until it is
liquefied. LNG is finally stored in storage tanks and can be loaded and shipped.
The liquefaction process involves removal of certain components, such as dust, acid gases, helium, water, and
heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed into a liquid at close
to atmospheric pressure (maximum transport pressure set at around 25 kPa/3.6 psi) by cooling it to
approximately −162 °C (−260 °F)
8. State of LNG Industry
The Worlds LNG trade in 2011 grew by 8% primarily due to the sharp increase in demand from Japan arising from
the severe earthquake and tsunami which hit the country in March 2011.
The LNG spot market grew by almost 32%, just over a quarter of the overall LNG trade, with a majority of
transactions coming from the Atlantic Basin. By comparison, the spot market made up only 16% of LNG trade in
2006.
LNG trade has not only grown in volume, but in geographical reach as well. 15 new regasification terminals came
on-stream in 2011, including new facilities in the Netherlands, Norway, Sweden and Thailand, marking those
countries first regasification capacity. With these nations new capacity, 27 countries now have the ability to import
LNG, Angola is expected to join this list of exporters in 2012 with the start of its Angola LNG T1 development.
Global regasification capacity stands at 608 MTPA- a 64% increase over capacity in 2006
Most remarkable phenomenon is the number and geographic reach of countries that have started importing LNG.
Argentina, Brazil, Canada, Chile, China, Kuwait, Mexico, and the United Arab Emirates have begun importing
LNG since 2006, joining the existing 15 importers which include Belgium, the Dominican Republic, France,
Greece, India, Italy, Japan, Portugal, Puerto Rico, the Republic of Korea (Korea), Spain, Taiwan, Turkey, the United
Kingdom and the United States.
9. State of LNG Industry - Forecast
Over the next few years, Qatar will be on of the beneficiaries of the market tightness due to potential delays to
greenfield Australian projects on the supply side and the fallout from Japan’s Fukushima disaster on the demand
side.
The market is expected to tighten towards 2016, by which time, several Australian projects should have started up,
along with, potentially, the Sabine Pass project in the US. Until then, few suppliers will be able to meet the expected
demand shortfall.
In response, Qatar has adjusted its strategy. It softened its hardline stance on full oil parity for pricing. In 2011, it has
offered long-term contracts effectively in a price more akin to Australian projects.
With softer prices from Qatar and the US and high construction costs, together with potential project delays in
Australia, most new buyers have less incentive to priorities LNG purchases from Australia's remaining projects.
While global LNG supply has not changed, Asian demand for LNG has risen by 13% year-over-year, driven by
strong growth in almost every major importer, including China (>21%), Thailand (>23%), Japan (>15%), and
India (>13%).
The reorienting of the LNG market towards Asia has been much commented upon in the market, and how the
market has balanced (Asian growth against stagnant supply) to move cargoes from Atlantic basin buyers and to Asia.
This is leading to a market for gas not sold under long-term contract. It appears that suppliers are now prepared to
offer more flexibility in pricing, although this may only happen on Qatari terms.
10. LNG Pricing Overview
Although gas is an increasingly global commodity, there is still no “global” gas market. Value is set by micro
rather than macro factors. In particular, location contract structure and timing are more influential in
determining value than the global balances.
Gas pricing systems can be organized into four main categories:
1. Hub-based systems- Supply and demand set prices at liquid hubs. In North America, the most
important price market is Henry Hub. At Present, US projects are offering LNG volumes to East of
Suez buyers linked in the domestic HH price instead of to the oil price.
2. Oil-Linked systems- Most of the gas traded in Europe and Asia, and specifically long-term LNG
contracts, falls in this category. Gas contract formulas vary in a number of ways based on the following
factors: Indexation, Slope/Coefficients of the indexation, presence of S-curves, Lag and Average
Mechanisms.
3. Regulated systems- In many parts of the world, prices are regulated. In this case the government sets
wellhead transportation and end-use prices
4. Subsidized systems- In most countries in the middle East and North Africa, gas prices barely suffice
to cover production costs. In Latin America, the former Soviet Union and much of Africa, gas prices
are similarly set with no linkage to oil or costs.
11. LNG Production – Economics
There are two ways for natural gas to be traded between countries that have a lot of natural gas to those that don't.
The first is building natural gas pipelines. The second is to build facilities to liquefy natural gas or to make LNG.
LNG has some fixed costs above and beyond the cost of the raw natural gas. These costs are typically amortized over
20 years. The most significant of those fixed costs are:
1. Liquefaction plant $1.1 per Mcf +/- $0.20
2. Shipping costs (LNG tankers and operating costs) $0.70 per Mcf +/- $0.30 depending on distance. Average
tanker costs $200 Mil.
3. Cost for regasification $0.35 per Mcf.
The costs come out to $2.15 per Mcf. This does not include the costs to develop the natural gas resource and get it to
the LNG facility.
For an LNG facility to be economical, the operator has to have a committed natural gas resource large enough that
there will be sufficient natural gas to ship for 20 years.
Typical LNG Time line in the US
12. LNG Exports by Country
By the end of 2011, 18 countries were exporting their
gas resources as LNG. In addition, five countries,
namely Belgium, Brazil, Mexico, Spain and the United
States, were re-exporting LNG previously imported from
another source.
Qatar is by far the largest LNG exporter. In 2011, the
countries supplied 75.5 MT of LNG to the market –
Nearly one third (31%) of global supply
Malaysia overtook Indonesia as the second largest LNG
exporter in 2011. together with Australia, these three
Pacific Basin exporters accounted for about 27% of the
worlds LNG supply.
Regionally, Middle Eastern exporters outpaced Asia-
Pacific exporters in total volumes exported in 2006 and
have continued to supply more volumes to the market in
the intervening years. This trend is likely to reverse in
the coming decades as new Australian projects come on
stream.
The middle East & North Africa region faces several
issues which impact development from country to
country, these include rising domestic demands,
regulatory or energy policy clarity, economic and political
stability, and reserves which are more difficult to recover.
13. LNG Imports by Country
LNG imports by Far East nations increased by 14% in 2011.
Chinese import rose by 48%, while Japan’s rose by 12% and
South Korea’s increased by 9%. A continuation of this rising
trend in 2012, coupled with an increase in LNG exports, is
likely to keep short-term freight rates firm in the near future.
Slackening demand for LNG imports was largely a function
of energy needs being met from other sources.
In Europe, Spanish demand fell because of the country’s
increased reliance on the renewable energy and domestically
produced coal.
In the United States, rising unconventional gas supply kept
gas prices low and made LNG unattractive.
In developed and emerging markets, gas is increasingly a fuel
of choice to supply electricity, provide heating and cooling
and support economic growth. During the last five years, 10
new countries started to import LNG, namely: Argentina,
Brazil, Canada, Chile, China, Kuwait, Mexico, the
Netherlands, Thailand and the UAE.
Three additional markets that do not currently import LNG
are also building regasification capacity to satisfy growing
demand in the face of uncertain piped supplies: Singapore
and Israel expect to bring their terminals on-stream by 2013;
and Poland expects to bring its terminal on-stream in 2014
16. Liquefaction Plants
At the end of 2011, global liquefaction capacity stood at 278.7 MTPA from 96 trains in 18 countries.
Two more liquefaction projects are expected on-stream in 2012; the 4.3 MTPA Pluto LNG in Australia and the
5.2 MTPA Angola LNG T1 in Angola.
The Angola project, which is the countries first, will bring the number of countries with liquefaction capacity to
19.
Global liquefaction capacity of 278.7 MTPA at the end f 2011 marks 52% growth in capacity since 2006. With
84 MTPA of liquefaction capacity under construction, global capacity is expected to increase to 334.9 MTPA
by 2016 (However, not all of the capacity under construction are expected to come on-stream by 2016)
17. Liquefaction Capacity by Country
• At the end of 2011, 18 countries had liquefaction capacity for exporting LNG, Three countries hold 48% of
that capacity; Qatar, Malaysia and Indonesia
18. Liquefaction Capacity by Region
• The Pacific Basin continues to dominate the
LNG export business, with 38% of 2011
liquefaction capacity located there and the
majority of capacity expected on-stream by
2016.
• The Qatari projects have led to a significant
rise in liquefaction capacity in the Middle
East, but with little room for growth, capacity
in the region is expected to remain flat in the
medium term.
• Though the Atlantic Basin has seen slow
growth, 101.3 MTPA of capacity has been
proposed or is in some stage of FEED in the
US Gulf of Mexico.
• Though Australian capacity is expected to
eclipse the rest of the world in the medium
term, a number of other Pacific Basin
projects – including those in Canada, Russia
and Mozambique – have the potential to add
significant liquefaction capacity in the Asia-
Pacific region in the long term.
19. Liquefaction Technology
• New processes are being employed at several projects.
• Shell’s Dual Mixed Refrigerant (DMR) process
is being used at Sakhalin LNG in Russia, this
process uses two Mixed Refrigerant cycles in series
and the process is air cooled for process and
environmental reasons.
• APCI’s AP-X technology is used for the Qatari
mega-trains
• Linde Mixed Fluid Cascade (MFC) process is
in use at Snohvit LNG in Norway
• APCI-AP X technology was first employed by
ExxonMobil and Qatar Petroleum.
• Floating liquefied natural gas (FLNG) are facilities float
above an offshore gas field, and produce, liquefy, store
and transfer LNG at sea before carriers ship it directly to
markets. The first FLNG facility is now in development
by Shell, due for completion in around 2017
• As Shell and PETRONAS took final investment
decisions on their respective FLNG project, the world is
eagerly anticipating other companies that will do the
same, while also paying close attention to the progress
that these two companies are making
20. Emerging LNG Markets & Growth Potential
Emerging LNG markets accounted for 10.9 MT, or about 4.5% of the world LNG trade in 2011. This
volume is expected to grow further as these countries acquire more volumes and new emerging markets start
to import LNG.
The wave of emerging LNG importers continues to grow for a number of reasons, In some markets (e.g
Malaysia and Indonesia), countries look to match geographically diverse reserves with demand centres as
basins near demand centres mature
For markets such as Argentina and Chile, which are facing insufficient production – and oftentimes
reserves, imports are needed to satisfy domestic gas demand
Finally, other markets (e.g. Thailand, Poland) have embraced LNG imports as a method to diversify gas
supply originations.
21. Emerging LNG Markets & Growth Potential
• Along with the 32 countries that have existing regasification capacity or terminals under construction,
another 30 emerging LNG import markets have announced plans to build capacity, If all of these terminals
are built, these countries will have a combined capacity of 246 MTPA by 2018 – nearly half the total global
regasification capacity of 608 MTPA in 2012
22. LNG Receiving Terminals
There were 89 regasification terminals around the
world at the end of 2011, representing 608 MTPA in
regasification capacity.
Out of the 89 terminals, 29 started commercial
operations between 2006 and 2011, totaling 245
MTPA in new capacity,
Ten of these terminals are offshore facilities: nine of
those use floating regasification technology and one
(Adriatic LNG in Italy) employs a gravity-based
structure.
Regasification capacity continues to grow, especially in
new markets. Out of the 24 projects currently under
construction, 18 are completely new terminals.
Once these are completed, five new countries will have
LNG import capacity: Indonesia, Israel, Malaysia,
Poland and Singapore.
23. LNG Transportation
At the end of 2011, the global LNG fleet consisted of 360 vessels of all types, with a combined capacity of 53
mmcm, which was 150% higher than in 2006. Growth was largely the result of deliveries associated with the last
cyclical boom in orders for new built LNG vessels. The order book for LNG carriers rose sharply, up 63% to 73
Vessels equivalent to around a fifth of the current fleet.
Shell and Technip’s FPSO vessel, which took FID in conjunction with the Prelude LNG project in 2011, will be
the world’s largest vessel estimated at about 600,000 tonnes. Several other players are interested in pursuing FPSO
new builds, but non have thus far made as much progress as the Shell-Technip duo, except Malaysia’s FLNG
project offshore Sarawak.
Vessel Types
Conventional LNG vessels – refer to the Moss-type or membrane vessels, which are greater than 125,000cm
and less than 180,000cm.
Non-Conventional vessels include Q-Series types, which offer the largest capacities between currently available,
in addition to FSRUs
FSRU- are typically capable of both transporting LNG like traditional LNG carriers, and additionally offer the
onboard functionality of re-gasifying LNG, which is delivered to land usually via a buoy-connected pipeline.
24. Unconventional Gas
The growth in gas production has been driven chiefly by the
ability to produce unconventional resources at ever cheaper
rates
Unconventional gas includes shale, coal bed methane and
tight gas which are all characterized by low natural
permeability in the reservoir.
Using horizontal drilling and hydraulic fracturing, combined
with tighter well spacing and a higher rate of drilling versus
conventional gas fields, companies have been able to create
sufficient permeability to extract ever increasing commercial
volumes from these reservoirs.
Many are of the view that, in decades to come gas may take
the place of coal as the worlds second favorite fuel.
Environmental concerns may restrict the development of
shale gas, unless contemporary concerns about shale gas
drilling and “fracking” are properly addressed. But overall, the
future is likely to be one in which more gas will be traded
more freely.
26. Impact of Shale Gas on the LNG Industry
The growth in shale gas production has emerged as a shock to the LNG system for two reasons:
It has made clear that the US will not import significant volumes of LNG over the next decade, altered the
dynamic of both the Canadian and Mexican gas markets
There is growing uncertainty over whether other countries will be able to replicate the experience of the US
and hence, reduce their own needs for imports.
The implication of the “shale gas revolution” is that the US no longer needs as much LNG as previously forecasted.
Gas companies must reduce the environmental footprint and community impact, yet still exploit the full potential of
shale gas.
Need to evolve the brute force approach towards a technology package that will allow the optimization of completion
design, or completion quality, as a function of reservoir quality.
In time the industry will find ways to map shale reservoir quality and tie this directly to wireline, mud-logging or
logging-while-drilling measurements. This will enable the industry to optimize well design, completion design and
fracturing treatments. The result will be that only the best wells are drilled and fractured
There is no doubt that the world’s shale-gas resources are huge, but so many unknowns remain that is extremely
difficult to estimate any shale reservoir’s ultimate potential. We have insufficient data, and do not yet have a reservoir-
modeling capability that can lend credibility to reserve or recovery numbers.
28. World LNG Projects – Under Construction
Total: 22 terminals under construction
Capacity: 75.95m t/y
*Based on 2011 IGU Data
29. World LNG Projects – Planned & Proposed
Total: 38 terminals planned or proposed
Capacity: 101.10m t/y
*Based on 2011 IGU Data- Does not show planned Mozambique LNG