The Road to Competitiveness for East Coast LNG: Are We There Yet? - - PowerPoint PPT Presentation

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The Road to Competitiveness for East Coast LNG: Are We There Yet? - - PowerPoint PPT Presentation

Mar 19, 2023 216 likes •482 views

The Road to Competitiveness for East Coast LNG: Are We There Yet? Canadian Energy Research Institute Overview Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in

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The Road to Competitiveness for East Coast LNG: Are We There Yet?

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Canadian Energy Research Institute

Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia and the public. CERI publications include:

  • Market specific studies
  • Geopolitical analyses
  • Quarterly commodity reports (crude oil, electricity and natural gas)

In addition, CERI hosts a series of study overview events and an annual Petrochemicals Conference.

Overview

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Core Funders: Donors: In-kind:

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Presentation Outline

Supply and Demand in the Atlantic basin East Coast LNG: Specifics and Competitiveness Sourcing and Transportation of Natural Gas

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Atlantic Basin

Consumers:

  • Europe
  • South America
  • Central America and Mexico
  • India

LNG EXPORTER PERSPECTIVE Suppliers:

  • US and Canada
  • Norway and Russia
  • Middle East
  • Africa
  • Central and South America
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Atlantic Basin

SECOND LARGEST GAS MARKET

0% 5% 10% 15% 20% 25% 30% 10 20 30 40 50 60 70 80 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Demand Growth 2000-2017, bcf/d

Europe Latin, Central America and Mexico India % of world

Last 17-y 5-y

+20 +4.3

Demand, bcf/d % of world demand

  • 4% -1%

Gas % in energy supply

23%

Sectors’ growth

Power, Buildings, Industry

Source: BP Statistical Review 2018, CERI

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Atlantic Basin

MARKET OPEN FOR IMPORT

82 bcf/d

+5% Demand Supply

47 bcf/d

  • 7%

Net Import

35 bcf/d

+10% Reserves life

25 years

0%

Domestic Balance: 2017 And Change for the Last 5 Years (%)

Source: BP Statistical Review 2018, CERI

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Atlantic Basin

TRADE FLOWS 2017 Europe Russia, CIS Africa USA Middle East Other

27.7 bcf/d 8.6 bcf/d

Pipeline LNG Central America and Mexico 1.9 South America India 17.4 0.5 0.7 0.2 0.4 53% 20% 14% 12% 1% Share

Source: BP Statistical Review 2018, CERI

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Atlantic Basin

DEMAND OUTLOOK 2040 Europe: 6.5 bcf/d India: 5.9 bcf/d Central, South America and Mexico: -2.6 bcf/d

+19 bcf/d

Demand growth

10 bcf/d

Supply Opportunity

75 mtpa

Source: IEA World Energy Outlook 2018, CERI

10 20 30 40 50 60 2017 2025 2030 2035 2040

Demand Outlook

Europe demand Central, South Amercia and Mexico India

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European Market In Focus

WELL SUITED FOR MORE LNG Total regasification

22 bcf/d

Planned regasification

+8 bcf/d

Lack of supply:

6.5 bcf/d ~50 mtpa

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European Market in Focus

COMPETITION AT THE MARKET

Imports bcf/d LNG 3-y growth bcf/d Russia 18.3 0% +4 Norway 11.0 4% +1 Netherlands 4.2 0%

  • 0.1

Africa 6.3 42% +1.8 Other Europe (inc. UK) 2.7 3%

  • Qatar

2.3 100%

  • Other (inc. Iran)

1.7 1% +0.3 South and Central America 1.0 100% +0.1 USA 0.3 100% +0.3

87% 41 bcf/d 13% 6.3 bcf/d

Source: BP Statistical Review 2018, CERI

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European Market In Focus

KEY DEVELOPMENTS SHAPING THE FUTURE

  • Energy transition to renewables

and lower carbon fuels

  • Geopolitical risks of increased

energy dependence from Russia

  • Declining supply from Europe

North

Policy and Issues Supply

  • Existing import: 47 bcf/d
  • Potential expansion: 6.5 bcf/d

Supplier’s plans in the near future:

  • Russia: + 7.8 bcf/d

(Nord Stream 2, Arctic LNG 2)

  • USA: + 5 bcf/d (LNG)
  • Africa: + 3 bcf/d (LNG)
  • Qatar: + 2 bcf/d (LNG)

Source: EIA, IGU, LNG Journal, CERI

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East Coast LNG Projects

Bear Head LNG Goldboro LNG Saguenay LNG 5-10 mtpa 0.7-1.3 bcf/d 8-12 mtpa 1.1-1.6 bcf/d 11 mtpa 1.5 bcf/d AC LNG 4.5-13.5 mtpa 0.6-1.8 bcf/d

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Key Differentiators

West

Abundant WCSB / Marcellus gas Conducive temperature regime Competitive

  • perating costs

Proximity to Markets Securing transportation High transportation costs Moderate capital costs Lack of domestic experience in LNG Plant delivery

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Supply Cost

THREE MAJOR COMPONENTS

  • Transport
  • Feed gas
  • Capital costs

Source: CERI

USD CAD

Supply cost

11.01 $ 13.77 $

Captial cost

2.65 $ 3.31 $

Feed Gas cost

3.67 $ 4.59 $

Transportation cost

3.33 $ 4.16 $

Operating cost

0.69 $ 0.86 $

Corporate taxes

0.50 $ 0.62 $

Carbon tax

0.18 $ 0.23 $

Total taxes

0.68 $ 0.85 $

Sensitivity analysis:

Key metrics (billion USD, nominal):

CAPEX 7.7 $ CAPEX/tpa ($) 962 $ OPEX 8.3 $ Corporate taxes 9.2 $ Natural Gas and Transportation 85.7 $ Carbon and LNG Incom 1.9 $ Supply Cost, Eastern Canada LNG, 8 mtpa, Greenfield, Merchant, AECO-C natural gas

24% 33% 30% 6% 5% 2%

Captial cost Feed Gas cost Transportation cost Operating cost Corporate taxes Carbon tax $11.2

8.0 9.0 10.0 11.0 12.0 13.0 14.0

  • 75%
  • 50%
  • 25%
  • 10%

0% 10% 25% 50% 75%

OPEX CAPEX TRANSPORT GAS PRICE

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Jurisdictional comparison with the US GoM

TAX DIFFERECES

  • 6% in total supply cost
  • Approximately twice as

in GoM

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

East Coast LNG Lousiana LNG Texas LNG

Taxes, $/mmbtu

Corporate tax Carbon Tax

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Transportation options and costs

Transport route and cost Total cost,

$/mmbtu

1 2 3

NIT to Dawn Dawn to NS New 1,600 km, $5.5 bln CAPEX pipeline

$1 $2.3

Source WCSB Marcellus Horton Bluff, NS

PA to Dawn

$0.8 $0.42

New 340 km $1 bln CAPEX pipeline

$3.3 $0.42 $3.1

4

WCSB

Mainline -> TQMS -> PNGTS (Dracut) -> M&NP

$2.4 $1 $3.4

Key issue

Building interprovincial pipeline Fracking ban / proving resource Available capacity / Expansion cost

Source: CERI

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Natural Gas Cost

COMPETITIVE CANADIAN GAS

  • Canadian gas edges

US Henry Hub gas prices

  • EIA Outlook 2019

suggests a steeper Henry Hub growth: to $10 dollars nominal by 2050

Source: CERI

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Capital Costs

  • 1,000

2,000 3,000

Qatar Nigeria LNG Angola LNG Africa, Golar FLNG AU Prelude FLNG AU QCLNG AU North West Shelf AU Gorgon West Canada East Canada US GoM Greenfield US GoM Brownfield Yamal, Russia

Capital costs, $ per tpa (with pipeline costs except for Qatar and Nigeria) AT THE HIGHER END OF NEW PROJECTS

Pipeline costs (gray)

Source: CERI

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1 2 3 4 5 6 7 8 9 10 11 12 13 14

US, brownfield, LA US, greenfield, TX Eastern Canada, Marcellus, NS Eastern Canada, AECO, NS Eastern Canada, Horton Bluff Shale, NS Qatar Russian pipeline gas

Landed LNG cost at UK, $ per mmbtu

CAPEX Feed gas Transport OPEX Corporate taxes Carbon Tax Shipping

$60 $70 $50 HH*115% + 3.5 + 0.75 = $9.44 HH*115% + 2.5 + 0.75 = $8.44 $80 $90 $100 Oil- linked contract

Competitiveness

Source: CERI, Rystad Energy, LNG Journal

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Path to Competitiveness

$70 $50 $80 $60

Oil- linked contract

$90 $100

Taxes: Fiscal incentives Gas cost: Integrated gas Transport cost: Shared pipeline cost Reaching toll reductions Capital cost: Plant expansion Efficient technology

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Are We There Yet?

  • 1. European market and India present supply opportunities for East

Coast LNG

  • 2. Competition is strong and comes from Russia, Africa, Qatar, and

the US, and Australia

  • 3. Quebec, New Brunswick and Nova Scotia have attractive large

shale gas resources, but they are inaccessible for current proponents aiming at LNG delivery by 2025

  • 4. Costs can be cut to be competitive in the European there but not

without a coordinated effort, specifically on the midstream side

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Thank You for Your Time

WWW.CERI.CA

CANADIAN ENERGY RESEARCH INSITUTE @CERI_CANADA

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Additional slides

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Atlantic Basin

TRADE FLOWS CHANGE - LAST 3 YEARS Europe Russia, CIS USA Africa Other Middle East

+7.6 bcf/d +1.8 bcf/d

Pipeline LNG Central America and Mexico +0.2 0 South America India +0.5 +0.2

  • 0.5
  • 0.1

+0.4 +4.3 +2.9 +2.4 +0.3

  • 0.6

Bcf/d