the creation of an asia- pacific natural gas trading market

The creation of an

Asia- Pacific Natural

Gas Trading Market

Presenter:

Andrew (Zhang Hanzhou)

Anny (Gong Huaping)

Taijie (Zhang Taijie)

Peter (Zhu Zheren)

Mark (Kong Zichao)

Date: 31 July 2015

1

1. Overview of the World Natural Gas Market

2. World Main Natural Gas Market Pricing Mechanism

3. Research regarding the Asia-Pacific NG Trading Market

4. Conclusions and Recommendations

2

1.1 World Natural Gas Reserves

1.2 Natural Gas Production and Consumption (Bcm)

1.3 World Natural Gas Market Trading Outline

Source: BP Statistical Review of World Energy 2015

3

1645 1642

2112 2133

2789 2775

3461

3393

4408 4400

5069 5059

0

1000

2000

3000

4000

5000

6000

1.2 Natural Gas Production and Consumption (Bcm)

North America S & C America Europe & Eurasia

Middle East Africa Asia Pacific

Total Natural Gas Production Total Natural Gas Consumption

1985 1995 2005 2014 2025 2035

4

Henry Hub

NBP

JCC

1.3 World Natural Gas Market Trading Outline

5

Number pricing methods Main factors of

influencing price

Main application

area proportion

1 Gas-on-oil S curve

pricing method Oil price Europe ,Asia 20%

2 Gas-on-gas Regional supply and

demand conditions

North America,

Britain, Australia

and Europe

40%

3 The regulated

pricing method Government Asia 35%

Sources:IEA,Shen Wan Research(SWR)

2.1 Three main natural gas pricing methods

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2.3 European market

2.4 Asia Pacific Market

2.2 North American market

Gas-on -oil Gas-on -gas

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The Asia-Pacific NG market relies heavily on the LNG trade

and lacks “Gas -on- gas" competition.

The imported LNG pricing mode in Asia is singular.

The Natural Gas market is controlled in most Asian countries .

2.5 Characteristics of the Asia-pacific Natural Gas market

8

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Prices $/Mmbtu

Japan LNG cif

UK NBP

US Henry Hub

Sources: BP Statistical Review of World Energy 2015

3.1 Competitive markets and price


World LNG Receiving Capacity

Sources: IGU(International Gas Union)-World LNG Report-2015 Edition

3.2 Natural Gas infrastructure


FID -Final Investment Decision

0

50

100

150

200

250

300

350

400

MTP

A

Existing FID Pre-FID

3.3 The number of market participants


Country Producers/Importers Local gas utilities

China CNPC,CNOOC and SINOPEC Around 1800 companies

Japan 7 power companies; 8 gas companies; and several industrial importers

Around 200 local gas utilities

Singapore 5 gas importers when SLNG comes into operation

-

South Korea

KOGAS 30 city gas companies； and 14 power companies

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Institutional/structural requirement Japan Korea China Singapore Australia

Hands-off government approach - - - +/- +/- Separation of transport and

commercial activities - - +/- + +

Wholesale price deregulation + - +/- + +/- Sufficient network capacity and non-

discriminatory access - - +/- + +

Competitive number of market

participants +/- - +/- +/- -

Facility and infrastructure + + + +/- + Involvement of financial institutions +/- - +/- + + Market potential for gas-to-gas

trade (HH) - - + - -

Geographic location - - + + -

3.4 Comparison of the selected countries


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Note:+ Positive; - Negative; +/- Neutral

Advantages

Can be a physical or virtual location

Provides on-going price reference

Enhances regional energy security

Concerns Location - Each country desires their own trading market Rules - Trading/financial regulations

Liquidity - Acceptable as price reference? Geopolitical issues

Reality and foresight Two regional markets in operation: the Singapore market opened in 2013,the Shanghai market formally opened early July 2015, plus existing JCC institution, chance or challenge? Long term LNG contracts will still dominate in the next decade, therefore a multiple price system will exist for a longer period of time

3.5 Discussion about Asia-Pacific Natural gas trading market


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3.6 China’s LNG terminals and Natural gas pipelines


14

Natural Gas

Supply

Market Revolution

Natural Gas

Demand

Policy: Environment/Water Nuclear Power Renewable Energy Coal Use

Asia Pacific Economic Growth

Unconventional Development:

Tight Gas, CBM, Hydrates New

Pipeline: China-Russia

ASEAN

Floating Technologies

New LNG Capacity: Australia,

Russia, USA,

Canada, Africa

Policy: Environmental Export Limits

3.7 NG Market Drivers, Relationships


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Asian economic growth is the key driver of global natural gas market development

Trading market is the trend for the Asia-pacific NG business development Several NG trading hubs are emerging in Asia-Pacific region

The roadmap for the Asia-pacific NG trade market development

3.8 The key findings


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Reform benchmark integration cooperation

The global natural gas market is growing and the prospect is promising

We can learn from the US and EU market development experience

The Asia-Pacific natural gas market is developing dramatically, but there is still a long way to go

Natural gas market issues should be put on the list of concerns for discussion by regional institutions

4. Conclusions and Recommendations

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the creation of an asia- pacific natural gas trading market

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