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ERIA Research Project: Natural Gas Master Plan for Myanmar


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Mr Yoshikazu Kobayashi, the leader of the research project 'Natural Gas Master Plan for Myanmar' from the Institute of Energy Economics, Japan (IEEJ), delivered this presentation in the launching ceremony of the publication. The ceremony was held in Nay Pyi Taw, Myanmar on 11 December 2018.

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ERIA Research Project: Natural Gas Master Plan for Myanmar

  1. 1. 1 ERIA Research Project “Natural Gas Master Plan for Myanmar” 11 December 2018 Thingaha Hotel, Nay Pyi Taw Yoshikazu Kobayashi The Institute of Energy Economics, Japan (IEEJ) IEEJ © 2018
  2. 2. 2 IEEJ©2018  ERIA Research Project “Natural Gas Master Plan for Myanmar - Supply and demand outlook - Natural gas import - Required investments - Roadmap - Conclusions  Outline of LNG Producer Consumer Conference - Overview - Major discussion issues Contents of presentation
  3. 3. 3 IEEJ©2018 Natural Gas Master Plan for Myanmar
  4. 4. 4 IEEJ©2018 1. Introduction - Background, Objectives, and Assumptions 2. Trends in the global LNG market - Natural gas and LNG demand and supply in the world - Natural gas and LNG prices 3. Myanmar gas policies and strategies - National energy policies - Policies related to oil and gas 4. Natural gas supply outlook - Current production - Production outlook Table of content 5. Natural gas demand outlook - Natural gas demand by sector and by region - City gas development in Yangon and Mandalay 6. Natural gas infrastructures - Existing natural gas infrastructure - Required investments to restore north-south pipeline connection - LNG import 7. Roadmap until 2040 - Required actions in upstream and downstream 8. Conclusions
  5. 5. 5 IEEJ©2018  Domestic natural gas production is forecasted to decline. - While several fields are being developed, the growth will only partially offset the decline in production from existing fields.  Natural gas shortage will need to be met by LNG, reduction of export, or both. Natural gas supply outlook IEEJ estimate of domestic production outlook Natural gas export outlook Sources: IEEJ. MoEE
  6. 6. 6 IEEJ©2018  Natural gas demand in Myanmar has grown rapidly in recent years. - Major growth driver is power generation sector.  Yangon is by far the largest gas consuming region. - Power and transportation are the major demand segments in Yangon. - Most of the gas in Yangon is supplied from offshore fields while the gas supply to northern regions are supplied from onshore fields. Natural gas demand in Myanmar Natural gas consumption in Myanmar* *Because of the difference of sources, the figures of the graphs may be different. Sources: IEA; IEEJ estimate Natural gas consumption by sector as of FY 2017*
  7. 7. 7 IEEJ©2018  Demand is forecasted to grow by 2.5 times until 2040. - Demand will increase from 454 mmcfd in 2017 to 1,142 mmcfd in 2040. - Demand from the power sector will continue to lead the demand growth. - Demand from the industrial sector is also expected to grow significantly. - Consumption for energy industry is likely to decrease in the upstream sector, but the demand for downstream (refinery) will grow as the new refinery will be in operation. - Demand for transportation sector will also grow at moderate rate as CNG bus will continue to be used in Yangon. - Growth of in residential / commercial sector depends on policy initiative. Natural gas demand outlook Natural gas demand outlook in Myanmar Sources: IEEJ estimate
  8. 8. 8 IEEJ©2018  The largest potential demand is in industrial sector. - Thilawah SEZ has a big potential of industrial demand.  Demand for a new refinery is forecasted emerge from the mid-2020s.  Transportation sector will see a moderate growth.  Required investment for additional infrastructure (mainly for industrial demand development) is USD 4.2 million. City gas demand in Yangon City gas (non-power) demand outlook in Yangon Sources: IEEJ estimate City gas demand locations in Yangon
  9. 9. 9 IEEJ©2018  While currently gas is not used in Mandalay, the demand is expected to emerge from the mid-2020s. - Most of expected demand is in Industrial sector; residential commercial demand will emerge from the 2030s.  Required investments for additional infrastructure is USD27.0 million.  Strong policy initiative is needed to realize city gas use in Mandalay. City gas demand in Mandalay City gas (non-power) demand outlook in Mandalay Sources: IEEJ estimate City gas demand locations in Mandalay
  10. 10. 10 IEEJ©2018  Myanmar has an extensive natural gas pipeline network.  However, pipeline networks in the north and the south is divided because the connecting pipeline is out of operation. - Leakage problem by corrosion  The restoration of the north-south linkage will bring great economic and supply security benefits - Demand creation along the restored line. - Flexible supply operation in case of emergency  Renovation of the interrupted parts will cost USD 77.4 milllion Pipeline connection Pipeline network in Myanmar Sources: MoEE
  11. 11. 11 IEEJ©2018  Because of the lack of international import pipeline, Myanmar will have to rely on LNG as an import source.  The study assumes Myanmar will need to import LNG from 2023. - Preparatory should be accelerated.  Three LNG import projects are being planned in the south. - All of them are Gas-to-Power projecbts Natural gas (LNG) import Expected LNG imports* *Import requirement is estimated at different rate of realization of onshore developments; Sources: IEEJ. MoEE Planned LNG receiving projects Project Import capacity (mtpa) Installed Generation Capacity (MW) Region Alone LNG to Power Project 0.4 356 Yangon MeeLongGyaing LNG to Power Project 1.6 1,390 Ayeyarwady Kanbauk LNG to Power Project 1.0 1,230 Tanyintharyi
  12. 12. 12 IEEJ©2018 Roadmap 2018 2020 2025 2030 2035 2040 Upstream development Development of M-3 Start production of M-3 Development of A-6 Start production of A-6 Development of new onshore fields Start production of onshore fields Exploration Discovery Appraisal Development Start production of newly discovered fields Pipeline network Comprehensive pipeline Development Plan Renovation .development of pipeline based on the Plan FS for North-South pipeline Connection Construction of North-South Pipeline Pipeline network expansion in southern states LNG Gas to Power Negotiation of the three proposed project Installation FSRU-1 Installation FSRU-2 Installation FSRU-3 Installation FSRU Kyaukpyu City gas network Accumulation of Demand in Thilawah Construction Gas power plant in Thilawah Development network in Thilawah Demand development in Northwestern Yangon Planning of New Yangon City Build pipeline network for New Yangon City Industrial demand development in MIZ and Myotha Industrial Park Build Pipeline network to downtown Mandalay Abbreviation: LNG = Liquefied Natural Gas, FS = Fesibility Study, MIZ = Mandalay Industrial Zone, FRSU = Floating Storage and Regasification Unit Table: Roadmap for the Development of Myanmar’s Natural Gas Market Sources: IEEJ
  13. 13. 13 IEEJ©2018  Enhance the role and capacity of government. - The government should lead the effort to create demand by initiating and coordinating the infrastructure development projects.  Encourage and accelerate domestic upstream development. - Domestic production is the most reliable supply source. - All projects at the development stage should be developed in a timely manner and exploration efforts should be continued.  Improve the resilience of the pipeline network. - Myanmar’s pipeline network is in a vulnerable condition. - A comprehensive review of the domestic pipeline network and renovation of critical parts of the existing network should be undertaken.  Reform the energy pricing system. - Gradual but steady reform of the pricing system will be required to ensure investments.  Grow human capital to utilize LNG. - Training the country’s experts will facilitate the future LNG imports. Conclusions
  14. 14. 14 IEEJ©2018 Overview of LNG producer Consumer Conference
  15. 15. 15 IEEJ©2018  The 7th LNG Producer – Consumer Conference was held in Nagoya (central part of Japan) on 22 October 2018.  More than 1,000 participants from 28 countries  Ministerial session, CEO session, and four topical sessions - For the detail, see conference web-site ( Overview
  16. 16. 16 IEEJ©2018  “1st LNG revolution” - Expansion in liquefaction capacity in the U.S., Australia, and Qatar - Demand surge in emerging markets; demand recovery in traditional markets - The recent surge of LNG supply capacity brings revolutionary effect to the market.  LNG trade expands much faster than natural gas trade. - LNG evolves from a minor means of natural gas trade to a major one.  Air pollution control as another springboard for LNG demand - China’s Blue-sky policy has caused a significant LNG demand growth. - Other countries such as India will follow. “The First LNG Revolution” LNG supply in the world Source: IEA
  17. 17. 17 IEEJ©2018  Challenges in Asia LNG market - Huge upfront capital investments - Price competitiveness - Inflexible supply contract  Importance of Prod-Cons dialogue - Engagement with emerging buyers - Knowledge creation through dialogue  Japan’s initiative - Financial support for LNG facilities - Encouraging more flexible LNG trade by removing destination restriction  US efforts in Asian LNG market - Energy infrastructure development under Liberal and Open Indo-Pacific initiative - Declaration of no risk of export revocation How to develop LNG demand in Asia? LNG demand outlook in Asia Source: IEEJ
  18. 18. 18 IEEJ©2018  Need for a price benchmark to rationalize prices - Persistent linkage to crude oil price - Activated spot market is needed through removal of destination restriction  Review of the existing LNG trading custom by anti-monopoly authority to remove destination restriction  Standardization of LNG contract - Facilitating active cargo transactions  Growing roles of portfolio players - Provision of flexible supply by holding various supply and demand outlets - Arbitrage inter-regional price differentials More flexible and transparent market Natural gas prices in the world Source: METI, EIA
  19. 19. 19 IEEJ©2018  Diverging interests between sellers and buyers - Sellers want long-term contracts to secure revenue certainty and financing. - Buyers prefer shorter-term and more flexible contracts to adapt demand uncertainty.  Imperatives of continuous Producer – Consumer dialogue - Overcoming the gap of interests between sellers and buyers - Optimal risk allocation among parties involved in the LNG project  Providing a model project template for a downstream project - Typical pattern of risk allocation - Standard templates for required contracts / documents for LNG receiving project may facilitate investments  Several good news for supply capacity expansions - Qatari plan to expand its capacity to 110 mtpa; FID of LNG Canada How to promote investments?
  20. 20. 20 The IEEJ was ranked second in the field of energy research in the 2017 Global Think Tank Ranking conducted by the University of Pennsylvania. (ranked third in 2016 and first in 2015)