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Laszlo Varro Head of Gas Coal and Power Markets International Energy Agency © OECD/IEA 2015 © OECD/IEA 2015 IEEJ : September 2015. All Rights Reserved.
Laszlo VarroHead of Gas Coal and Power Markets International Energy Agency
© OECD/IEA 2015© OECD/IEA 2015
IEEJ : September 2015. All Rights Reserved.
Global gas demand increases amid growing uncertaintiesgrowing uncertainties
Incremental gas demand by region, 2014 ‐ 2020
120140160
Major downward revisions 2015 v 2014
406080
100120
cm
Major downward revisions 2015 v 2014
02040
Bc
Gl b l d d ill l t f ll i k d l d i b th 2013 d 2014
© OECD/IEA 2015
o Global gas demand will re‐accelerate following a marked slowdown in both 2013 and 2014.o Global gas demand is projected to grow 2% on average by 2020.
IEEJ : September 2015. All Rights Reserved.
GDP used to have a large impact on electricity up until recentlyon electricity up until recently
1 6
1.8Income elasticity of power demand in the growth period leading to current consumption level
1.4
1.6
1.0
1.2
0.6
0.8
0.2
0.4
© OECD/IEA 2015
0.0USA: internet bubble to financial
crisis, 2001 -2007Germany, reunification to financial crisis 1993-2007
Japan, "Lost decade", 1989-2000
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It is not only the financial crisis and not explained by electricity pricesnot explained by electricity prices
1.08
1.1Germany power
Germany GDP
1.04
1.06
Germany GDP
USA power
USA GDP
1
1.02
0.96
0.98
0.92
0.94
© OECD/IEA 2015
0.92007 2008 2009 2010 2011 2012 2013 2014
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Coal mainly competes with long distance gas imports
Global coal‐fired power generation (TWh)
imports
7000
8000
6000
4000
5000Other
US3000
US
China
1000
2000
© OECD/IEA 2015
0countries with domestic gas countries with imported gas
IEEJ : September 2015. All Rights Reserved.
A young and efficient coal fleet in Asia takes d t f l l iadvantage of low coal prices
• 350 GW coal capacity350 GW coal capacity came online in 2010‐2014
• 80% of the global ultrasupercritical fleet i i A iis in Asia
• To cut the load factor of an USC plant one
Manjung, Malaysia
of an USC plant one needs 4$/mbtu LNG or 8$ LNG and a 50$/ton j g, ycarbon price
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IEEJ : September 2015. All Rights Reserved.
Who is cleaning the air in China?g
1400Expansion of energy sources with low particulate and SO2 emissions2014‐2020
1200
2014 2020
1000
600
800
TWh Solar
400
600
Wind
200OtherHydro
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0Retrofitted coal plants low carbon sources Gas
PowerNuclear
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Is LNG still competitive with wind and l ?solar?
Recent long-term remuneration contract prices (e.g. auctions or FITs)
Germany67-100 $/MWh
USChina
80 100 $/MWhTurkey
73 $/MWh
Ireland69 $/MWh
UK120 $/MWh
US~75 $/MWh
UK120 $/MWh
60 $/MWh
US48 $/MWh
80 - 100 $/MWh$
India88 $/MWh
~75 $/MWh
BrazilDubai
<60 $/MWh$Onshore wind
Brazil54 $/MWh
Australia
Chile89 $/MWh85 $/MWh
SA65 $/MWh
81 $/MWh
SA52 $/MWh
Australia65 $/MWhUtility PV
Combination of technology cost reduction, better resources,
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appropriate regulatory framework attracting financing Long‐term PPAs and price competition effective drivers
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Integration of renewables : gas in competition with Silicon Valleycompetition with Silicon Valley
Better forecasting algorithmsalgorithms
Close to real time tioperation
Improved grid monitoring and TSO collaboration
System friendly renewables
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Will solar + batteries make gas capacity redundant?capacity redundant?
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At 40 – 50 latitude (EU, Japan, New York) up to 85% of PV production is between 15th March and 15th October
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Alternative vehicles and lower oil pricesprices
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IEEJ : September 2015. All Rights Reserved.
LNG as a marine bunker fuel
SO2 regulations on bunker
Less constraining space and weight limits on gships
Major ports with Major ports with already existing LNG facilities nearby:facilities nearby: Yokohama, Singapore, Shanghai, Dubai,
© OECD/IEA 2015
Shanghai, Dubai, Rotterdam
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Global production growth shifts towards OECD countriestowards OECD countries
Incremental gas supply by region, 2014 ‐ 2020
120140
d d 201 201
406080
100 Major downward revisions 2015 v 2014
- 40- 20
020
Bcm
© OECD/IEA 2015
IEEJ : September 2015. All Rights Reserved.
Low oil prices fail to stop North American production expansionproduction expansion
MarcellusMarcellus Cost deflationTechnological progressAccess to capitalAccess to capital
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IEEJ : September 2015. All Rights Reserved.
Second wave of additional LNG supply is coming soonsupply is coming soon
Additional LNG export capacity by year, 2005 ‐20
60
70 United States
40
50
60
m
Russia
Southeast
20
30
40
Bcm Southeast
AsiaQatar
0
10
20
Other Middle East0
2005 2007 2009 2011 2013 2015 2017 2019
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IEEJ : September 2015. All Rights Reserved.
Low oil prices detrimental to new LNG i t tinvestments
Correlation between oil price and LNG activities in the US
120
140
LNG ContractsConstruction start
USD
/bbl
80
100 Brent
60
80
20
40
0
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IEEJ : September 2015. All Rights Reserved.
Global LNG trade flows will shift
Change in LNG net trade: 2014‐20 (bcm)
This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory city or area
© OECD/IEA 2015
frontiers and boundaries and to the name of any territory, city or area.
IEEJ : September 2015. All Rights Reserved.
China’s supplies become more diversifieddiversified
LNG38 bcm
Domestic production 38 bcm
47 bcm
Pipeline 51 bcm
© OECD/IEA 2015
51 bcm
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Russian gas: the East is the manifest destiny?destiny?
•Production constrained by EU and domestic demand
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y•Surging independent production backed by NGLs•Pipeline projects rely on Russian suppliers and rouble costs
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The age of capital disciplineg p p
Oil at 100$ Oil at 60$
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IEEJ : September 2015. All Rights Reserved.
Europe import dependency risesp p p y
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IEEJ : September 2015. All Rights Reserved.
Reducing EU dependency on gas imports: running faster to stand still
WEO NPS 2035 without increasing gas imports to the EU:
imports: running faster to stand still
120000 windmills to compensate for d li i l tideclining coal generation
PV on 52 million rooftops to compensate for decommissionedcompensate for decommissioned reactors
5 times the current EU biogas production to compensate for declining
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p p ggas upstream
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fThank you for your attention!
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IEEJ : September 2015. All Rights Reserved.
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