Vladimír Dlouhý, International Advisor, Goldman Sachs
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Transcript of Vladimír Dlouhý, International Advisor, Goldman Sachs
Long-term Trends in Natural Gas Supply and Demand
Vladimír Dlouhý, International Advisor, Goldman Sachs
presentation for
EGS24 Summit, Prague, May 24, 2012
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A View on the Path to 80% Carbon Reduction in 2050 (1/4)The Road to Sustainable Energy Has to be Based on a Large Role for Natural Gas
Today to 2030
Gas’s high efficiency and low emissions of CO2 in heating and power generation can make a direct and immediate contribution to the reduction of GHG emission in the EU
Additionally, its flexibility can be well combined with the development of renewable sources
The share of natural gas in primary energy consumption is predicted to increase from 26% in 2010 to 30% in 2030 as the EU moves towards a low-carbon economy
The market share of gas in the residential and services sector is expected to decrease, but in the transport and power generation sectors, to increase
Source: Eurogas (Eurogas Roadmap 2050)
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A View on the Path to 80% Carbon Reduction in 2050 (2/4)The Road to Sustainable Energy Has to be Based on a Large Role for Natural Gas
Source: Eurogas (Eurogas Roadmap 2050)1 Including district heating, raw material and energy branch.
Natural Gas Market Development
63
162203 191
140
210 15286
120
106 114
112
1 28
33
34
4247
40
357
521544
462
1990 2010 2030 2050
BCM
Power Generation Residential & Services Industry Transport Other¹
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A View on the Path to 80% Carbon Reduction in 2050 (3/4)The Road to Sustainable Energy Has to be Based on a Large Role for Natural Gas
2030 to 2050
After 2030, the need for the development of natural gas power plants and industrial plants equipped with carbon capture and storage (CCS) technology will become apparent
The need for flexible gas-fired plants to support the necessary large-scale development of variable zero-carbon renewables will remain
Hence, the gas volumes in the power generation and industry sectors will be sustained. Moreover, the natural gas market share in the transport sector is expected to increase even further
In the residential and services sector, gas usage could decline further due to increased efficiency and behavioral changes
Source: Eurogas (Eurogas Roadmap 2050)
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A View on the Path to 80% Carbon Reduction in 2050 (4/4)The Road to Sustainable Energy Has to be Based on a Large Role for Natural Gas
Source: Eurogas (Eurogas Roadmap 2050)1 The study addressed energy related CO2 emissions by sector. Industrial processes and agriculture have not been considered.
GHG Emission Reduction of 82% (1990 – 2050)1
4132
143
1816
11
5
19
13
10
3
22
28
19
7
80
57
1990 2010 2030 2050
Power Generation Residential & Services Industry Transport Baseline
10089
54
18
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Market Dynamics (1/4)
Energy Demand
Factors determining future energy demand in Europe include
— Continued economic growth of 2% p.a. after the economic crisis has been overcome
— Near stable population
— Increased environmental awareness among politicians and consumers
— Growing trend to save energy and to improve energy efficiency
— Deliberations at the national level to use nuclear energy and expand the use of renewables
Energy consumption is expected to only increase by a minimal rate of 0.1% p.a.
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007 – 2030)
Demand is Expected to Rise
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Market Dynamics (2/4)
Improvements in Energy Efficiency
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007 – 2030)1 2007 – 2030.
Demand is Expected to Rise
0%
20%
40%
60%
80%
100%
120%
140%
160%
2006 2009 2012 2015 2018 2021 2024 2027 2030
GDP (+48%¹)
PEC (+2.6%¹)
PEC/GDP - Energy Intensity (-31%¹)
Investments in new energy efficiency efforts and climate change commitments will result in significant improvement in energy efficiency: +31%
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Market Dynamics (3/4)
Growing Market Share for Natural Gas
Natural gas consumption in EU member states is expected to rise from 437 mtoe in 2007 to a range between 500 to 535 mtoe in 2030, corresponding to an increase of between 14% and 23%
At the same time, the share of natural gas in European primary energy demand could rise from 24% in 2007 to 27%-30% in 2030 (18% in 1990), with most of the growth expected from power generation
Due to its “green properties” and the existing highly efficient application technologies, natural gas will remain the fuel of choice and will continue to make a growing contribution to energy supply in the EU and Europe as a whole
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007 – 2030)
Demand is Expected to Rise
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Market Dynamics (4/4)
Rising Share of Natural Gas in Primary Energy Consumption
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007 – 2030)
Demand is Expected to Rise
24.0%
25.7%26.4% 26.9% 26.7%
2007 2015 2020 2025 2030
Base Case Environmental Scenario
27.8%28.4% 28.7%
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Demand DevelopmentsSector Trends
Residential and Commericial Sector Natural gas has a 35% market share and is the leader in this sector Further market penetration in this sector will slow down considerably
— Already reached high market penetration in major gas consuming countries and upcoming saturation in the sector in others
— Low population density which limits greater market penetration— Improving energy efficiency of buildings and moderately growing European population
Gas currently accounts for 31% of industrial final energy consumption (excluding industrial power stations)
The price of energy plays an important role in the sector and gas will only be able to gain market share at the expense of oil and coal, if it can be supplied at competitive prices
Depending on the economic developments and gas price competitiveness, gas sales to the industrial sector could increase slightly to 123-129 mtoe in 2030
Industrial Sector
Power Generation The role of natural gas in the power generation segment has increased considerably since 1990 and
now gas-fired power stations produce 20% of the electricity in the EU (7.5% in 1990) The exact development of the demand for gas in this segment cannot be ascertained However, given the resource’s considerable potential for reducing CO2 emissions in power generation
at low cost, it is expected that power generation would increase its share from 30% (in 2007) to 36-38% of total gas demand by 2030
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Natural Gas Demand Outlook by Sector
161 167 164 170 163 170 160 168
117 113 116 120 119 123 123 129
131 154 169 184 179 197 182 2022729 30 30 31 31 31
311 2 3 3 4 4 4
5
406
2007
2009
2015
2020
Ba
se C
ase
2020
En
viro
nmen
tal
Scen
ario
2025
Ba
se C
ase
2025
En
viro
nmen
tal
Scen
ario
2030
Ba
se C
ase
2030
En
viro
nmen
tal
Scen
ario
MTO
E
437 465 482 507 496 525 500 535
Residential & Commercial Industry Power Generation Others (Heat Plants & Others) NGV
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Supply and Dependency on Imports (1/4)
Key Developments Indigenous gas production in Europe is going to further decline
Given the increasing gas demand and the gradually declining indigenous production, the currently contracted gas supply cannot meet gas demand in the longer term, so new imports will be necessary from 2015 onwards
European gas production (including Norway) in 2010 accounted for 55% of supplies to the European gas market; by 2030, the EU gas market will need around 70% from regions outside Europe
Natural gas reserves are abundant worldwide, however, with the global proved reserves accounting for 185 trillion m3
Although Russia will remain the key gas supplier for Europe, African countries and the Middle East will provide Europe with increasing quantities of gas as well
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007-2030), British Petroleum 2010)
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Supply and Dependency on Imports (2/4)
EU27 Supply Outlook
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007-2030), British Petroleum 2010)
177 140 102 76 57
7185
9793 88
189 240 270274
260
13 54 9538 83 130
0
100
200
300
400
500
600
2007 2015 2020 2025 2030
MTO
E
EU27 Indigenous productionAvailable volumes from NorwayContracted imports and possible prolongations from outside EuropeAdditional supplies to be defined - Base CaseAdditional supplies to be defined - Environmental Scenario
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Supply and Dependency on Imports (3/4)
Future Security of Supply Potential shale gas reserves in Europe could strengthen the continent’s position
as well
— There have been increasing exploration efforts in Poland and Romania with largely positive results
To ensure the future security of supply
— Gas production and recovery must be maximized from indigenous sources
— New technologies for exploration and exploitation must be supported
— Stable and competitive fiscal and regulatory regimes must be created
— Infrastructure must be improved: new supply routes to Europe and LNG terminals
— Planning and permitting processes for major projects must be facilitated
— Research and development into biogas production, distribution and final use should be encouraged
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Supply and Dependency on Imports (4/4)
EU27 Import Dependency from Outside Europe
Source: Eurogas (Long term outlook for Gas Demand and Supply 2007-2030), British Petroleum 2010)
43%51%
59%66%
71%
61%68%
73%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2015 2020 2025 2030
Import dependency - Base Case Import dependency - Environmental Scenario
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Supply Potential for Europe (1/2)
Overview Supply Potential Netherlands and UK production is
declining with some increase in Norwegian production
Pipeline infrastructure being established (Nord Stream, South Stream, Nabucco) which would add around 150 bcm to existing capacity
LNG regasification growing rapidly, supplied in the near term by LNG from Egypt, Trinidad and Qatar
Shale gas with strong growth in the US leading to LNG cargo diversion, and potential in Europe
Source: ENTSOGI, British Petroleum 2010
Supply is Set to See Substantial Change Towards Imported Gas
0
1
2
3
4
5
6
7
8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(G
Wh/
y in
mill
ions
)
Indigenous Production RussianNorwegian LNGAlgerian LibyanAzeri
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Supply Potential for Europe (2/2)
Gas Reserves Around Europe (tr m3)
Source: ENTSOGI, British Petroleum 2010
Russia44.38
Other LNG40.96
Qatar25.37
Turkme-nistan8.10
Nigeria5.25
Algeria4.50 Libya
1.54Iraq3.17
Azerbaijan1.31
Norway
2.05
Indigenous Gas Production (MTOE)
Import Dependency from Outside Europe (in % of Demand)
177
140
10276
57
2007 2015 2020 2025 2030
43%
71%
2007 2030
Supply is Set to See Substantial Change Towards Imported Gas
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Development of Supply Situation
Section Title
Total import capacity in Europe is set to increase from 466bcm in 2010 to 639bcm in 2020 and 715bcm in 2030. Whilst this significantly exceeds the demand projections of the EU27, several projects might still get delayed or cancelled
Overview of Key Supply Regions
2010 94 bcm2020 115 bcm2030 120 bcm
NorwayYr Capacity
2010 6 bcm2020 6 bcm2030 6 bcm
T&T, VenezuelaYr Capacity
2010 21 bcm2020 38 bcm2030 45 bcm
West AfricaYr Capacity
2010 166 bcm2020 196 bcm2030 207 bcm
RussiaYr Capacity
2010 NA bcm2020 13 bcm2030 13 bcm
Turk. & Azerb.Yr Capacity
2010 44 bcm2020 68 bcm2030 88 bcm
Qatar/UAE/Oman/YemenYr Capacity
2010 81 bcm2020 110 bcm2030 115 bcm
AlgeriaYr Capacity
2010 12 bcm2020 25 bcm2030 38 bcm
LibyaYr Capacity
2010 23 bcm2020 28 bcm2030 28 bcm
EgyptYr Capacity
2010 NA bcm2020 5 bcm2030 20 bcm
IraqYr Capacity
2010 NA bcm2020 35 bcm2030 35 bcm
IranYr Capacity
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Pan-European Gas Pipeline Projects
Nord Stream Established in 2005 for the construction of two
1,224km natural gas pipelines through the Baltic sea, delivering Russian gas to Germany and West Europe, the project is near its completion with Line 1 completed in Nov 2011 and Line 2 expected to be operational by Q4 2012
When operational, the two pipelines will have capacity to transport combined total of 55bcm of gas a year
Pipelines are designed to operate for 50 years
South Stream
The South Stream project is another step towards strengthening European energy security and it executes Gazprom’s strategy of diversifying the Russian natural gas supply routes
When operational the pipeline’s capacity is planned to be 63bcm per year
The final investment decision on the construction of the planned pipeline will be taken in Nov 2012
Map of Planned Major Pipeline Projects
Source: Project websites, Press release
Nabucco - ???
Nord StreamSouth StreamNabucco
Germany
Romania
Turkey
Serbia
HungaryAustria
Russia
Slovenia
Bulgaria
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Natural Gas in the Czech Republic
Demand will follow the expected European trends above strategic decision: gas vs. nuclear
Supply Diversification of supply routes
Almost 100% import dependence 50 % supply from FR, rest from Norway (RF:N approx. 3:1) and spot market
Impact of Nord Stream Strategic position vis-a-vis gas deliveries to western Europe Gazelle, more interconnectors in the future, potential link to South Stream
Flexibility as to market volatility and emergency situation Underground natural gas storages
40% annual consumption, potential of 60 mil. m3 per day, for 30 days max. Open market, competition
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Thank you