gas markets committee study group 1

GAS MARKETS COMMITTEE

STUDY GROUP 1

The role of gas markets (demand) for the development of new sources of supply

TRIENNUM PLANNING 2015-2018

SUMMARY

1. TEAM MEMBERS & OBJECTIVES

2.METHODOLOGY

3.PLANNING FOR THE TRIENNUM 2015-2015

SUMMARY

1. TEAM MEMBERS & OBJECTIVES

2. METHODOLOGY


TEAM MEMBERS

MEMBER’S NAMERuss COUNTRY REGION ORGANIZATION STATUS

Nabila CHAFAI France EUROPE EDF Group leader

Bård Inge HAMRE Norway EUROPE

Statoil Member

Valery NEMOV Russia FORMER SOVIET UNION Gazprom Member

Ana Isabel PINTO Portugal EUROPE EDP Member

Robert BOSNJAK Croatia EUROPE Energy institute Hrvoje Pozar Member

Ali GOLARA Iran MIDDLE EAST NIGC Member

Julian BOWDEN UK EUROPE BP Member

Damir KOMERICKI Croatia EUROPE Gradska Plinara Company Member

Branimir MEDAN SERBIA EUROPE Srbijagas company Member

Denis LEONOV Russia FORMER SOVIET UNION Gazprom Member

Danni XIAO China Asia Shenzhen Gas Member

Kiril POLOUS Russia FSU Gazprom Mmeber

• At the beginning of this new triennium, the gas industry is facing high challenges versus severe

constraints: unconventional gas development like in North America (China, Argentina,

Australia, Algeria) and more link with renewables versus the strong decline of oil prices and

the reduction of investments in E&P.

• As of now, natural gas plays a major role in the power generation sector, covering up to 22% of

the total power output worldwide and it has to be considered, even in the long-term evolution

of the global energy mix, a destination fuel, and not just a transition fuel. The environmental

compatibility of natural gas and its highly flexible use should be fully recognized in the energy

mix and, most notably, in the power generation merit order.

• The aim of our future report will be to analyze the gas demand drivers globally and by

region, by sector up to 2040 and to face it to new sources of supply : LNG, gas pipelines as

compared with other energy sources

Study Group 1 Objectives

SUMMARY

1.TEAM MEMBERS & OBJECTIVES

2.METHODOLOGY


METHOD

As for former study groups, we can follow well-proven

strategy: a top-down approach which consists in :

– firstly , a brief analysis of energy demand drivers (globally

and regionally)

– and then secondly a focus on gas demand drivers with as a

first step a definition of gas demand drivers which will be

analyzed also globally and then regionally, as the scheme

shows it here after.

FIRST: WHAT WILL SHAPE THE FUTURE ENERGY DEMAND IN THE WORLD AND BY REGION?

Study Group 1 Objectives

Population growth, economic growth, energy uses, energy prices are the main drivers in shaping energy demand.

In the future:

• How will the energy mix have to adapt to satisfy this demand.

• How do the gas compete with other energy sources (Globally, by region) to satisfy the future energy demand?

• Which sector will be the main driver in shaping the demand of gas: power generation, residential, industry?

SECOND: WHAT ARE THE GAS DEMAND DRIVERS THAT WILL SHAPE THE NEW SOURCES (LNG, PIPES,

AND UNCONVENTIONAL SOURCES) GLOBALLY AND BY REGION?

• Analyzing the determinants of natural gas demand such as economic growth, uses of energy, as well as energy

prices.

• To concentrate on the main sectors that will affect natural gas demand the most per region (power sector,

residential, industry, and transport).

• To analyze the role of gas demand in energy transition and the reduction of CO2 emissions

Three axis for the study

FUELING THE FUTURE WITH GAS 9

GAS MARKET

+1,4% 2014-2040

(5160 tcm )

Sustainable Development

which supply

response can be

expected

Secure gas demand

• Increasing competition with REN and coal

• Energy-Climate 2030 Framework

• CO2 market reform

• New design of electricity markets

• Traditional supplies

(Conventional, US shale, LNG)

• New volumes (New

conventional, Shale US+out US,

Iran, China, ?)

• Power/sectorial demand

• Economic slowdown

• Energy prices

• Power plants capacities

and profitability (gas,

coal)

10 FUELING THE FUTURE

Target Describe the sources of supply (by type LNG, unconventional and conventional )

in 2040 according to the shift in gas demand in selected countries and regions

Describe and analyse gas demand drivers (economics, energetic, regulation) that will

shape the gas demand in the future

In order to see which response can come from the supply side?

• More LNG volumes thanks to unconventional gas (US, Australia) : for ex.

because of China gas increasing, …

• Need for more pipe investments in ME (evacuate news Iran volumes, …) : for

ex. because of domestic gas demand increasing, …

• Constrained by less investments in other projects (LNG plants, utilities more

vulnerable, oil price decline)

• …

Three axis for the study

PROPOSITION OF THE METHOD 2/4

THE GAS PLACE

IN THE ENERGY

MIX

GAS DEMAND

GLOBALLY REGIONALLY

A global and supra

regional analyze of

energy demand drivers

Establishing regional

demand trends based

on local or regional

expert knowledge (IGU

regions)

• Economic growth

• Energy prices (gas, coal,

renewables, oil)

• Coal-gas fired power

plants profitability

• Power demand (weather)

• Power mix

• Gas uses (heating, transportation)

• Geopolitics (energy independence, more/less

gas imports)

• Interconnexions (gas pipelines, reverse flows)

• Energy transition:

complementarity between

gas and renewables,

• CO2 emissions reduction

targets

• Capacity mechanisms

A global and supra

regional analyze of gas

demand drivers

Establishing regional

demand trends based

on local or regional

expert knowledge (IGU

regions + selection of

some countries)

ENERGY DEMAND

DRIVERS : Economic

growth, population

growth, energy

prices, energy mix

How will be

the supply

response

(tradtionnal

sources+new

sources) to

the gas

demand

trends?

ECONOMICS ENERGETIC DRIVERS REGULATION

DEFINITION OF GAS

DEMAND DRIVERS


THE GAS PLACE IN THE ENERGY MIX

ENERGY DEMAND DRIVERS

(global*+regional** analysis)

ECONOMIC GROWTH

POPULATION GROWTH

ENERGY PRICES

ENERGY MIX

PRODUCERS/CONSUMERS

*A global and supra regional analysis of gas demand drivers

**Establishing regional demand trends based on local or regional expert knowledge

(IGU regions + selection of some countries)

ENERGY

DEMAND

Regarding these drivers, globally and by

region :

• How do the gas compete with other

energy sources to satisfy the future

energy demand?

• Which sector will be the main driver in

shaping the demand of gas: power

generation, residential, industry?

• Conduct research : WOE 2015, US DOE,

consultants publications, …


ROLE OF GAS DEMAND FACING TRADTIONNEL AND NEW SOURCES OF SUPPLY

DRIVERS

TYPE

GAS DEMAND

DRIVERS

GLOBAL

ANALYSIS*

Per

region/countries

to select**

ECONOMICS Economic growth China, Ukraine, EU

Energy prices: gas,

coal, oil,

renewables

Asia , UE, US

Coal and gas fired

power plants

profitability

ENERGETIC Power demand

(weather)

POWER MIX

Other gas Uses :

heating, Transport

Geopolitics :

energy

independancy

(LNG, pipes,

storage capacity)

Iran, Russia, EU

Interconnexions

(gas pipelines,

reverse flows)

EU, NA, ME

REGULATION Energy transition:

complementarity

between gas and

renewables,

UK, UE (Germany,

France)

CO2 emissions

reduction targets

EU, NA

Capacity

mechanisms

EU

GAS

DEMAND

How will be the supply response

(tradtionnal sources+new sources) to

the gas demand trends? :

• Traditionnal sources : LNG + gas

pipelines

• New sources : LNG flows,

unconventionnal gas, new pipe

routes, small scale LNG

• OTHER SOURCES

*A global and supra regional analysis of gas demand drivers

**Establishing regional demand trends based on local or regional expert knowledge

(IGU regions + selection of some countries)

Regions definition (1/2)

Defintion of Regions according to IGU

The regions to cover could be the definition usually used within the IGU , There are 8 regions:

North America

Latin America

Africa

Europe

CIS

Middle East

Asia Asia Pacific

Select the countries we want to focus on, according to the last major events (Iran future gas sector developments,

Russia gas exports to EU (Nord stream, ..), Argentina future unconventional gas developments, Australia future

LNG exports, Turkey, …) WEO 2015 gas demand perspectives

Europe : Uk, Germany, Turkey, Central and Eastern European countries

North America : USA, Canada, Mexico

Asia : Japan, China, Australia

FSU : Russia, Azerbaijan, Tukmenistan

Middle East : Iran, Saudi Arabia, Oman

Regions definition (2/2)


GAS DEMAND TRENDS AND DRIVERS

• In 2014, top ten countries represent 60% of global gas consumption

• In 2040, which countries will represent 2/3 of global consumption?

0

500

1000

1500

2000

2500

2009 2010 2011 2012 2013 2014

EVOLUTION OF GAS CONSUPMTION IN THE TOP TEN CONSUMING COUNTRIES (CEDIGAZ 2015)

UK

MEXICO

GERMANY

CANADA

SAUDI ARABIA

JAPAN

IRAN

CHINA & HONK KONG

RUSSIA

USA

SUPPLY TRENDS TO 2040 : GAS PRODUCTION GROWING MORE SLOWLY


• CONVENTIONAL :83 IN 2014%~70% of global production in 2040

• Same majors actual producers (China, Russia, US, Australia,

Canada)

• IRAN

UNCONVENTIONAL: growing share from 17% in 2014 to ~30% in 2040

• US + Canada

• Development outside America :

• China, Australia

• ARGENTINA

• High Uncertainties in Europe

• LNG :

• Qatar

• US, AUSTRALIA

• EAST AFRICA

Source : MT Gas market report, IEA 2015

SUPPLY TRENDS


• LNG Market : From a tight market in 2011-2013 (Fukushima, EU demand drop,..) to an oversupplied

market 2014-2020 (softer demand in Asia, EU market of last resort, US less imports, new volumes from

Asutralia )

• China : increasing LNG and pipe imports 25% inter regional pipe trade and in top 3 in LNG in 2020

Breakdown of imports by region, 2014 and 2020 (MT GAS MARKET REPORT, IEA 2015)

MARKET REFORMS NEEDED IN EU


Less

carbon-intensive

energetic system

More integration

of renewables for

power generation

Natural gas

demand

TRADTIONAL SUPPLIES + NEW

SUPPLIES (Conventional, LNG, shale)

NEW MARKET DESIGN NEEDED TO BE IDENTIFIED DESPITE MARKET TURNMOIL :

FLEXIBLITY : MORE INVESTMENTS IN BACK UP AND INFRASTRUCTURES (650 B$ ESTIMATED BY IEA TO 2040)

CO2 PRICE : MSR (MARKET STABILITY RESERVE ( 2019)

NATURAL GAS SHOULD BE A GOOD FIT FOR A

GRADUALLY DECARBONIZING ENERGY

SYSTEM

GAS STILL GROWING


Power generation and industry will be the main sectors which will drive the global

demand and non-OCDE countries (mainly by China and Middle East)

SUMMARY

1.TEAM MEMBERS & OBJECTIVES

2.METHODOLOGY


WORK SHARE REGION COUNTRY PERSON(S) WHO WILL WORK ON

North America

USA, Canada, Mexico

Bard (Statoil)

Latin America

Bresil, Argentina? ?

Africa

EGYPT, Algeria? ?

Europe

Uk, Germany, Italy, Turkey, Spain+ Europe

Valery?

CIS Russia,, Turkmenistan, Uzbekistan, Kazakhstan

?

Middle East Iran, Saudi Arabia, Oman, UAE+ ME

ALI+DENIS

Asia China, India

NABILA+DANNI

Asia Pacific

Japan, Australia, Korea ?

WORLD GAS DEMAND WORLD DENIS? ALI?

PLACE OF GAS IN

ERNGY DEMAND

WORLD NABILA?

FUELING THE FUTURE WITH GAS

2015-2018 AGENDA


• Make a first planning

• proposition and validation of

methodology

• Start working

NOW - MARCH 2016 MARCH 2016 - JANUARY 2017

• Fix the title, the description and the

key words of the topic

• Fix and Describe the plan in detail

start intermediate deliverables • Select regions/countries

• share the work between study

group members

APRIL 2017 – APRIL 2018

• Select papers

• Start to write down the report

• IGU MAGAZINE

• PRESENTATIONS INSIDE/OUTSIDE

IGU

• …

MAY 2018- JUNE 2018

• Prepare presentations

• Final report

CONGRESS IN WASHINGTON ON

JUNE 2018

gas markets committee study group 1

Documents