hydrocarbons to fuel the future - petrotechpetrotech.in/uploadfiles/speakerprofiles/ivan marten...

Hydrocarbons to Fuel the FutureChoices and Challenges

Dr. Iván Martén

Vice Chairman Energy Practice

December 6, 2016

20161201_Petrotech_2016_HCs_to_Fuel_Future_Global_v1.pptx 1

Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

Two distinct worlds are starting to emerge

3,000

2,000

1,000

0

TPED (mtoe)

+1%

2040203520302025202020152000

Baseline

GDP growth

CAGR

2,000

1,500

1,000

500

0

TPED (mtoe)

-11%

2040203520302025202020152000

0

2,000

4,000

6,000

8,000

203520302025202020152000 2040

+53%TPED (mtoe)

2.2% 1.7% 5.1%

Source: IEA (New Policy scenario), BCG Energy Scenario Model

OECD Americas OECD Europe Non-OECD Asia


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

How can we deliver hydrocarbons to sustain growth?

How could oil demand evolve?

How will the interplay of gas and coal play out?

How can Governments collaborate in a world focused

on sustainability?

How can energy efficiency help meet the

growth challenge?

E&P cost

versus return

Oil substitutes

emerging

Gas & Coal usage

trade-off

Sustainability

requires

collaboration

Efficiency to be a

key focus area

5

The hydrocarbon industry faces 5 key choices & challenges

1

2

3

4


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

0

5

10

15

20

2000 2002 2004 2006 2008 2010 2012 2014

$/boe

"E&P cost versus return"

Producers continuously spending more for very little return

Exploration results not hitting the mark

despite high E&P spend......leading to increased Production cost

0

20

40

0

15

30

45

60

2015

2014

2013

Bn boe$Bn

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

TOTAL

Statoil

RD/Shell

Repsol

ExxonMobil

Eni

ConocoPhillips

Chevron

BP

LHS graph for all active companies (371 companies); RHS graph for Big Oil companies: Chevron, ExxonMobil, Shell, Total, BP, ConocoPhilips, Statoil, Eni, RepsolSource: LHS: IHS 2016; RHS: UBS Global Oil & Gas Analyser (Sep, 2015)

1

Liquid volumes

Gas volumesExploration

spend ($Bn)


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

"E&P cost versus return"

Cost of recent LNG projects also reflects this trend1

198019751970 2020200520001995 201519901985 2010

DarwinAtlantic 1

ADGAS

Pluto

$/tpa

Ichthvs

PNG

NLNG Exp

QC

LMLNG

Brunei

Gorgon

APLNG

GLNG

Donggi

Sabine Pass

MLNG T9

QG4NLNG Peru

ELNG 2

QG3

YemenNWS

QG2MLNG Exp

ELNG 1

Oman

Kenai

RG3

Atlantic 2&3

QG1

Snohvit

Angola

Start-up date

Greenfield

Brownfield Recent

"high-cost"

projects

Evolution of Liquefaction Development Costs

0

500

1.000

1.500

2.000

Skikida exp.

Recent LNG projects have dramatically changed

the LNG cost structure


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

Oil substitutes emerging

Today, Transport is about Oil & Oil is largely about Transport2

CoalOil ElectricityGasRenewables Nuclear

Biomass

Road Transport

Air TransportTransport

Transport

Transport

Maritime Transport

Non-OECD

OECD

Source: IEA, BCG Analysis

Other

Space Heating

Power Generation

Feedstock

Industry


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.


Tomorrow, Transport is poised for disruption2

Technology development...

...drive and is driven by

substitution dynamics

150

125

100

75

50400 300 200 100

Oil price ($/bbl)

Battery cost ($/kWh)

CNG

Gasoline

or diesel

Electricity1

US$ per kWh,

normalized

202520202015

2013

2012

Estimates from 2010 Realized

2010

Tesla

225

600500

1,105

0

300

600

900

1,200

2014

Forecast of Ion-Lithium battery costs

Source: BCG analysis, IEA, Advanced Automotive Batteries, Boston Consulting Group, Deutsche Bank, Electrification Coalition, National Research Council, and Pike Research, SolidEnergy, Scientific American, UBS Q-Series report: "Global Utilities, Ausos & Chemicals" – cost through Umicore, AABC Tesla & UBS estimates,


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.


Peak oil demand may be likely before 2030

3,500

0

4,000

4,500

5,000

20352025

mtoe

+0.3%/yr

2020

-5%

2015 20402030

Source: IEA, BCG Energy Scenario Model

2

Global Oil Consumption

-8%

-17%

Baseline (New Policies)

GDP @ 3.0%/yr

EV (high)

ICE Effiency (High)


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

Gas & Coal usage trade-off

Left to its own devices non-OECD Asia may gravitate to coal

Country Gas Coal Trend

China 13.9 5.9Cost advantage for Coal, new build focused on inland areas

India 7.3 5.9Coal to remain dominant

Indonesia 7.2 8.9Both coal and gas to gain share in power mix, Coal to remain dominant

Thailand 7.5 6.2Share of Coal in power mix to increase

Malaysia 4.4 6.9Gas price reforms and coal supply security to decide share in power

Vietnam 6.1 6.8Gas & Coal import prices to decide share in power, Coal likely to dominate

Philippines 8.4 8.4Share of Coal in power mix to increase

Note: Including capex & opex, US cents/kWhSource: Coal and gas competition in power generation in Asia, IEA Feb-15 ; Press search ; BCG analysis

Average power generation cost of coal/gas fired power plants

3

http://upload.wikimedia.org/wikipedia/commons/archive/f/fa/20091103090801!Flag_of_the_People's_Republic_of_China.svg

http://upload.wikimedia.org/wikipedia/commons/4/41/Flag_of_India.svg


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

20

5

15

20

40

0

20

40

60

80

100

Electricity

& heat generation

%

Agriculture, Forest

and Land Use

BuildingsTransportIndustry

Global GHG Emissions 2015

Source: BCG Energy & Emissions model; IPCC report; IEA; WRI


GHG emissions driven by 5 sectors3


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.


COP 21 may prioritize Gas over Coal

1997 Kyoto Protocol

Reduce carbon by 30% below 1990 level

by 2020

Fight global climate change

Quantitative reduction targets agreed to in a

wide range of countries

Carbon market as the most fitting mechanism

for controlling emissions

Possibility of generating profits through

emissions reduction projects (CDM)

Climate change strategies based on mitigation

Signatories representing 15% of emissions

2015 Paris Protocol objective

Firm emissions reduction target by 2050 to

avoid "2 degrees" scenario

Fight global and local climate change

National contributions defined per country in

light of its national circumstances

Different mechanisms being developed

(taxes as the most used mechanism)

No outside support for emissions reduction

projects

Climate change strategies based on both

mitigation and adaptation

Signatories representing 97.1% of emissions

Vs.

Vs.

Vs.

Vs.

Vs.

Vs.

3

Vs.


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

Sustainability requires collaboration

Fast, global & radical action needed to offset global warming

World TPED

(mtoe)

fossil

non-fo

ssil

2050-2DS

15,318

36%

64%

2000

10,084

80%

20%

1971

5,546

85%

15%

Fossil demand

(mtoe)

OE

CD

Non-O

EC

D

2040 New

Policies

14,415

26%

74%

Non-OECD

Increase

4,290

OECD

Reduction

-570

2013

10,696

40%

60%

Non-

OECD

115% of

demand

increase

Note: asset lifetimes are subject to substantial longevity differences depending on region, specs, and economics. Lifetimes can be prolonged or shortened depending on commodity economicsSource: Velocity suite, British Hydro, Shell, Rystad, Lazard, BCG nuclear database, Morgan Stanley, Wind Energy Update, US government, press search, IEA WEO, BCG

0

20

40

60

80

100

20602050204020302020201020001990

CO2 Emission

(GtCO2)

Current

trajectory

2°C

Curve needs to

break

Natural death of

2015 coal plant

4

FastNeed results by 2030

GlobalOECD to support non-OECD

RadicalFossil needs to decline


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.


Countries showing good intentions

Renewables: Positive announcements

Green Climate Fund

International Solar Energy Alliance

Aggressive renewable strategy

co-exists with increasing CO2

175

186

246

430

200

400

600

Gas

Coal

Other

FY 2022

533

FY 2016

303

Installed Capacity (GW)

Renewables

10

100

Allocated (as

of Oct 2016)

Pledged (as

of Sep 2016)

10

Announced (per

annum amount)

100

$ billion

To mobilize USD 1 trillion by 2030 for

deployment of affordable solar energyMotive

Source: BCG Research; Installed Capacity graph: CEA; Note: Other = Hydro, Nuclear & Diesel

4

2022 generation mix will

increase CO2 by ~30% in India

http://upload.wikimedia.org/wikipedia/commons/4/41/Flag_of_India.svg


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.


OGCI – a leading example of collaboration4


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.


Producing "more energy, for more people, with fewer GHGs"4

O&G companies

Service companies

Institutions &

Associations

1. Clean cooking solutions including LPG

2. Mini-grids solutions

3. Utilization of gas flaring for energy access

4. Distribution of off grid electricity products

5. Gas to Power for communities, especially

local communities

6. Ecosystem and markets

Working together... ...to find practical solutions


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

Efficiency to be a key focus area

Efficiency will play a major role in meeting growth challenge

Residential lighting (2012) Large home appliances (2012)

0.04

0.03

0.02

0.01

0.00

GJ/m2

-57%

2.5

2.0

1.5

1.0

0.5

0.0

-61%

GJ/unit

Source: IEA BCG analysis

What if the US was as energy efficient as Germany?

230+ TWh saved (>40 coal power plants)

5


Copyr

ight

© 2

016 b

y T

he B

osto

n C

onsultin

g G

roup,

Inc.

All r

ights

reserv

ed.

Opportunity to move to a new operating model based on lean

operations, portfolio focus, supplier collaboration & a culture based on

cost consciousness & continuous improvement

Opportune time for oil & gas players to re-think their strategy and

response to a potential disruption in the transportation sector

Balanced intervention required to facilitate a shift towards natural

gas in the growing non-OECD Asian markets

Opportunity for governments and companies to come together

in an over-supplied hydrocarbon market to explore how to achieve

sustainability objectives

Focus on energy efficiency necessary for prudent management

of demand to sustainable levels

E&P cost

versus return

Oil substitutes

emerging

Coal & Gas usage

trade-off

Sustainability

requires

collaboration

Efficiency to be a

key focus area

5

Summary

Some actions and opportunities emerging for the industry

1

2

3

4

Hydrocarbons to Fuel the FutureChoices and Challenges

Dr. Iván Martén

December 6, 2016

hydrocarbons to fuel the future - petrotechpetrotech.in/uploadfiles/speakerprofiles/ivan marten...

Documents