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Latin America and Caribbean LNG market fundamentals:


Overview
LNG Service (Q4 2017) and Global Gas Service (H2 2017)

Trusted commercial intelligence woodmac.com


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Agenda

Snapshot for Gas and LNG in Mexico

LNG Demand in the Caribbean and Central America

LNG fundamentals in the Southern Cone and risked volumes


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LNG imports to Mexico are expected to decline near zero by the end
of this decade
Given the expansion of the pipeline networks in both central Mexico and crossing the US
border, which will allow access to lower-cost US piped gas
Regas terminals Infrastructure in Mexico Mexico’s LNG Imports vs Gas Balance

Altamira
9.0
Owner 8.0

Gas Balance (bcfd)
7.0
Capacity 500 mmcfd
6.0
Startup 2006 5.0
Storage 4.0
300,000 m3
capacity 3.0
2.0
1.0
0.0
Costa Azul Jan‐18 Jan‐20 Jan‐22 Jan‐24
Power Industrial RCA Other Domestic Production
Owner

Capacity 1,000 mmcfd 8.0


7.0
Startup 2008 Net Imports (bcfd)
Manzanillo 6.0
Storage
320,000 m3 5.0
capacity
Owner
4.0
Capacity 500 mmcfd 3.0

Startup 2012 2.0

Storage 1.0
300,000 m3
capacity 0.0
Jan‐18 Jan‐20 Jan‐22 Jan‐24
Source: Wood MacKenzie
Pipe LNG
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The Caribbean is the only region of Latin America where oil is still
used extensively for power generation
This presents opportunities, but to exploit the market’s potential, in many cases new
projects need to offer creative solutions to accommodate low-volume needs
Note: click on the terminal’s name to GNL del Este
open the relevant LNG asset report
Montecristi DOMINICAN
Bogue REPUBLIC

PUERTO
The Salvadoran RICO Aguirre
Assembly is
JAMAICA
considering a new Andres Penuelas
law to grant port Old Habour In July, Excelerate
concession for the cancelled its
planned regas facility agreement to provide
after the EL SALVADOR an FSRU for Aguirre.
Constitutional Court CURAÇAO Fundamentals for the
ruled that such conversion remain in
EDP RdK
concession had to be Costa Norte SPEC place, but Puerto
granted via a law Rico’s dire financial
Baru
Investment situation complicates
setting firm plans.

Total regas
Icon Status
capacity (mmcfd) PANAMA
FSRU/FSU operational 630

Conventional operational 747

FSRU/FSU under construction 460 COLOMBIA


Conventional under construction 250

FSRU/FSU proposed or wtih 1,720 Buenaventura


configuration pending
Source: Wood Mackenzie
*Estimate
See also: Global LNG - emerging markets overview 2017
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LNG is expected to continue acting as baseload fuel for the majority


of importers in the Caribbean basin
However countries with high hydro penetration like Colombia, and to a lesser extent
Panama, are likely to use LNG as a contingency fuel for dry years
Historical and Forecast annual LNG imports
Historical monthly LNG imports by country
by country
300,000
14
250,000
12

Million tonnes
200,000 10
Tonnes

150,000 8
6
100,000
4
50,000
2
- 0
Jan-14
Apr-14

Oct-14
Jan-15
Apr-15

Oct-15
Jan-16
Apr-16

Oct-16
Jan-17
Apr-17

Oct-17
Jul-14

Jul-15

Jul-16

Jul-17
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Puerto Rico Dominican Republic Jamaica
Panama El Salvador Colombia
Dominican Republic Puerto Rico Jamaica Colombia Curaçao

• The hurricane season of 2017 significantly affected Puerto • Further conversions and new gas-fired power plants drive
Rico’s power system. Both Irma and Maria caused damage growth in LNG imports in the medium and long-term.
and LNG imports for the second semester of 2017 are • However, such growth is dependent on:
expected to be around half of usual. No major damage was • A widening in the price gap between LNG and
reported in the Dominican Republic. alternative fuels,
• The Puerto Rico power utility announced that it expects to • Utility-scale batteries to remain an expensive option to
restore 95% of power by mid-December. provide firm capacity, and/or
• Colombia had a very strong hydro year so its LNG needs were • Further improvements in small scale LNG logistics
minimal.
Sources: Wood Mackenzie
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Gas, and particularly LNG, has been the balancing fuel of choice for
Brazil’s power sector
However, going forward gas may gain a baseload role as the construction of large hydro
becomes environmentally unfeasible
Regas Infrastructure LNG imports vs. reservoir levels
100%
Demand 2025 ≈ 1 mmtpa

National average reservoir


80% 20-year average
Pecem onshore
60%
(proposed) Pecem

levels
40%
Pernambuco LNG
(mothballed) 20% National average
reservoir level
Sergipe LNG
0%
(under construction)
TRBA 120
100

Supply (Mcmd)
80

GNA Infra LNG (proposed) 60


Baia de Guanabara (without FSRU) 40
Verde Atlântico Energias (proposed) 20

Terminal Gas Sul (proposed) 0


Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016 Jan-2017
Imported - LNG Imported - piped Domestic
Rio Grande (proposed) 120
LNG in Brazil s expected to remain low in the short-term
Demand (Mcmd)

100
due to: 80
Belo-Monte’s online schedule for turbines. 60
40
Renewables expansion in the Northeast. 20
0
Increase of Pre-salt’s associated gas production. Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016 Jan-2017
ResComm
Source: ONS, MME (Boletim de Gás) Others Power + Cogen Industrial
Source: Wood Mackenzie.
Note: for more information see “Global gas markets long-term outlook H1 2017: Southern Cone”.
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In our base case, we expect LNG imports to Chile to be 70% higher


in year 2030 than the current level
Neverthless, 1.8 mmtpa could be risked due to flows from Argentina, mostly in the
summer
Regas terminals Infrastructure in Chile and
Argentina Chile’s LNG Demand
mmtpa
6 Risked LNG demand
due to Argentina’s gas
Mejillones
exports* to Chile
5

Andes
4
Quintero

3
GNL Penco Escobar

2
Bahia
Talcahuano La Plata
Blanca
1

0
2016 2020 2025 2030

Risked LNG Demand LNG Demand

Source: Wood Mackenzie

Note: Gas exports to Chile are a result of applying the “High Performance” Scenario of Wood Mackenzie’s “Vaca Muerta development study”
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Argentina LNG demand in winter is well positioned for cheaper spot


cargoes due to counter-cyclicality with the northern hemisphere
Nevertheless even LNG peak demand can be risked due to a high-performance in Vaca
Muerta
LNG spot cargoes vs LNG imports Monthly LNG demand projected
Argentina’s
Winter
25 25%
Mcmd
20 20%
Risked LNG per year in
US$/mmbtu

0.9 2,2 3,1 4,9 5,2 4,9

% Brent
15 15% 70 mmtpa:
10 10% 60
5 5% 50
0 0% 40
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Japan Spot DES Europe Spot DES 30
Japan % Brent Europe % Brent
20
800,000
700,000 10
600,000
-
500,000
tonnes

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24

Jan-25
Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24

Jul-25
400,000
300,000
200,000
100,000
Risked LNG volumes LNG Demand
0
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
GNL Escobar Bahia Blanca GasPort Source: Wood Mackenzie's Global Gas Model H2 2017
Source: Wood Mackenzie, Argus, NYMEX
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Conclusions
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Growth will continue: +13 mmtpa by 2025 5.5 mmtpa risked LNG volumes in the
Our forecast indicates that LNG consumption in Latin Southern Cone in 2025
American and the Caribbean will grow from 13 These volumes might be risked due to a Vaca Muerta’s
mmtpa in 2017 to 26 mmtpa in 2025. The Caribbean “High Performance Scenario”. More LNG volumes might
and Central America explain most of the growth, but be risked considering the potential of Brazil’s Pre-salt
Mexico is expected to hit nearly zero LNG imports by associated gas.
2023.

Demand seasonality is positive


Peak demand months for air-conditioning in the
Caribbean and for heating in Argentina and Chile
matches LNG low-prices season, which is the
summer in the Northern Hemisphere
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Contacts
Senior Analyst – Latin America Gas & LNG Senior Analyst – Latin America Power
Mauro Chavez (Rio de Janeiro) Ricardo Gonzalez (Houston)
T +55 21 3550 7718 T +1 713 470 1851
E mauro.chavez@woodmac.com E ricardo.gonzalez@woodmac.com

Principal Analyst – US Gas & LNG Senior Analyst – Mexico Gas Analyst
Alex Munton (Houston) Rodrigo Rosas (Mexico City)
T +1 713 470 1901 T +52 55 73162158
E alex.munton@woodmac.com E rodrigo.rosas@woodmac.com

Director Americas – Commodity Analytics Wood Mackenzie Client Helpdesk


Brett Blankenship (Houston) E support@woodmac.com
T +1 713 470 1655
E brett.blankenship@woodmac.com Americas +1 713 470 1700
Asia Pacific + 65 6518 0888
Europe +44 131 243 4477
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Disclaimer
Strictly Private & Confidential

 This report has been prepared by Wood Mackenzie Limited. The report is intended
solely for the benefit of its subscribers and its contents and conclusions are confidential
and may not be disclosed to any other persons or companies without Wood Mackenzie’s
prior written permission.

 The information upon which this report is based has either been supplied to us by public
and private sources or comes from our own experience, knowledge and databases. The
opinions expressed in this report are those of Wood Mackenzie. They have been arrived
at following careful consideration and enquiry but we do not guarantee their fairness,
completeness or accuracy. The opinions, as of this date, are subject to change. We do
not accept any liability for your reliance upon them.
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