Asia's energy outlook and LNG prices in the next decade. Presented at World Energy Security Forum 2014. www.squaredenergy.com

1. WORLD ENERGY SECURITY FORUM, WESF 2014
ASIA'S ENERGY
OUTLOOK AND LNG
PRICES IN THE NEXT
Squared Energy Presentation
DECADE
Abdul Jalil Jumriany
Principal, Squared Energy UK

2. AGENDA
Energy and Geopolitics
Asia’s Political Economy
LNG Markets and Transportation cost
Conclusion

3. Energy
and
Geopolitics

4. ENERGY MARKETS:
Challenging conventional
Paradigms
Source:
US
Energy
Informa3on
Administra3on,
2012
Annual
Energy
Outlook

5. WORLD LARGEST
IMPORTERS TRADING
PLACES
China is
overtaking
the U.S. in
OPEC-oil
imports,
daily
average 6
million
barrels a
day.
Source:
Wood
Mackenzie

6. EXPORTER
BECOMING
IMPORTER
Egypt, which until recently was exporting natural gas to Israel, now has several LNG
gasification terminals idling, and has reached a $30 billion agreement to purchase gas from
Israel’s new Leviathan field
Source:
Financial
Times,
Israel’s
Leviathan
Partners
Target
$30bn
Supply
Deal
with
BG29
June
2014

7. EXPORT
POTENTIAL
Australian gas is helping feed China’s
ever increasing demand as it develops
into one of the major suppliers to the
market.
Source:
Brookings
energy
forum
report
2014

8. Nord Stream, 761 miles
Capacity of the first line commissioned in 2011: 27.5 bcm (970.75 bcf)
Total capacity(two lines): 55 bcm (1.94 tcf) per year
POLITICAL CRISES
Yamal-Europe, Over 1,240 miles
Capacity: 33 bcm (1.16 tcf) per year
Crisis in Ukraine has started a debates about the security of
existing energy supplies to Europe from Russia.
Source:
www.rian.ru

9. FORMING
ALLIANCES
NEW GAS
NETWORK
DEAL
Russian energy giant
Gazprom’s 30 year, 400
billion dollar gas deal with
China is set to impact
global geopolitics
Source:
Ulson
Gunnar,
New
Eastern
Outlook
2014

10. REGIONAL POWER
AND DOMINANCE
Japan and China are fundamentally engaged in a long-term rivalry
for regional power and dominance.
Demand for natural gas is expected to double by 2040. There is a
potential rivalry expected over the new resources between large
consumers, such as China and India, when it comes to gas.
Source:
Economic
Times
India,
Brookings
energy
forum
report
2014,
IEA
Publica3ons,
2013

11. ASIA’S
POLITICAL
ECONOMY

12. GROWING DEMAND,INCREASING COSTS,
SUBSIDIES, POLITICAL ENVIRONMENT AND
ALTERNATIVE ENERGY
One cannot forget the role of politics when it comes to Economy and Energy sector.
PRICE QUANTITY
S-SUBSIDY

13. GROWING
DEMAND
World energy
consumption will rise
56% by 2040 led by
Asia.
Growing in a world
where 1.2 billion
people still have no
access to electricity,
securing energy
supplies tops the
political agenda for
many developing
countries
Source:
Bloomberg
Jul
25,
2013.
Brookings

14. Global Natural Gas Prices
(Monthly Averages)
Prices of Gas has gone much higher than expected in Asia. Gas
exporting countries are going to sell gas in regions where
market potential and profits are huge.
Source:
US
Department
of
Energy
and
Thomson
Reuters

15. SUBSIDIES
Subsidies is a major
political problem in Asia.
Sadly, with energy
subsidies are so large,
critical investments in
energy efficiency do not
occur.
Energy subsidies also
drive up demand and
result in wasteful use of
energy.

16. SUBSIDIES AND
POLITICS
Subsidies reform are politically
daunting and unavoidable.
Governments are scared of
uprising.
The growing size of subsidy bills
and the growth in fiscal deficits is
having a sobering impact on many
Asian economies.
Source:
Brookings
energy
forum
report
2014

17. POLITICAL
ENVIRONMENT &
ALTERNATIVE
ENERGY
Political environment can play
a big role in your energy cost.
Alternative energies to
expensive gas are available
but getting public support
would not be easy.

18. POLITICAL
ENVIRONMENT &
ALTERNATIVE
ENERGY
Japan has shut down its 54 nuclear plants following the
Fukushima accident in 2012.
Japan spent 27.4 trillion yen ($269 billion) on fossil fuels in 2013,
up 50 percent from 18.1 trillion yen the year before the Fukushima
disaster
Nuclear power in Japan, once Asia largest producer remain
unpopular after three years of worst civilian atomic disaster.
Source:
Bloomberg,
Japanese
Public
seen
as
biggest
obstacle
to
Nuke
restart.

19. POLITICAL
ENVIRONMENT &
ALTERNATIVE
ENERGY
Environmental pressures on coal consumption
are rising not only in Europe and North
America but also in Asia.
China’s leadership has made a policy decision,
where the government is aggressively
pursuing an “anything but coal”
development plan for the power sector
Source:
Financial
Times,
Thermal
coal
falls
vic3m
to
China’s
energy
policy

20. LNG MARKETS AND
TRANSPORTATION

21. LNG MARKETS
ASIA
Asia’s increasing populations, industrialization,
urbanization, motorization, and economic development
is increasing the demand for energy.
Significant growth in primary energy demand is
expected in China, India, Malaysia, Indonesia, and the
Philippines up to and beyond 2030
Asian and Middle Eastern energy demand growth is
likely to be met by new producers, aided by falling
imports to the newly energy independent United States
Source:
Brookings
energy
forum
report
2014

22. LNG MARKETS
ASIA
Turning to global markets, LNG demand will
grow at 5% to 2025, twice as fast as for gas
overall, is unchanged. In 2014 we expect
continued growth in demand for LNG from
Asia.
Asian economies are following China’s lead,
looking to gas, and to a lesser extent nuclear
power, to supplement coal-powered electricity
generation.
Source:
BG
Group,
Global
LNG
Market
Overview
2013-­‐2014,
Brookings
energy
forum
report
2014

23. LNG MARKETS
ASIA
This lack of global LNG cargo flexibility is
currently reflected in the regional price
divergence across Asia (tight market
post Fukushima)
Gas produc- ers are doing likewise, but
the high transportation costs of LNG has
created regional gas markets

24. LNG MARKETS
ASIA
Turning to global markets, LNG demand will
grow at 5% to 2025, twice as fast as for gas
overall, is unchanged. In 2014 we expect
continued growth in demand for LNG from
Asia.
Asian economies are following China’s
lead, looking to gas, and to a lesser extent
nuclear power, to supplement coal-powered
electricity generation.
Source:
BG
Group,
Global
LNG
Market
Overview
2013-­‐2014,
Brookings
energy
forum
report
2014

25. TRANSPORTATION
Transport cost consideration are likely to
drive renewed expansion of LNG sector.
LNG tankers and operating costs
depending on distance
Experts expects that more LNG will be
used to supplement bunkering fuel in
LNG vessels in order to cut down
shipping costs.
Source:
Brookings
energy
forum
report
2014

26. TRANSPORTATION
This lack of global LNG cargo flexibility is
currently reflected in the regional price
divergence across Asia.
Gas producers are doing likewise, but the
high transportation costs of LNG has created
regional gas markets.
Transporta)on
Source:
Tight
market
post
Fukushima

27. LNG PRICES
Supply diverted to Asia from Europe because of High Asian spot price levels & volatility
If the post-Fukushima tightness continues the LNG market will continue to be higher in
Asia.
Premium markets (e.g. in Asia and South America) will continue to attract flexible supply
with higher prices.
Additional supplies coming online will threatens the prices to be lower in the future.
Future pipelines.
US LNG may take longer than expected because of delays in the licensing project.
The new LNG projects will target Asia because of high prices.

28. CONCLUSION
Energy diversity has long been
considered a key component of
energy security, so it seems unlikely
that natural gas will become the one
and only dominant fuel source,
especially as other fuel sources will
become relatively cheaper.

29. LETS TALK
ajalil@squaredenergy.com