The Global Natural Gas Industry

Orlando CABRALES SEGOVIA

Presidente de Naturgas, Colombia
Regional Coordinator
International Gas Union

August 28 2018
 IGU Members serve 97% of the Worlds Gas Market

91 Charter Members

72 Associate Members

Founded in 1931

16 IGU Presidency

2018-2021 Korea

IGU Secretariat

Barcelona, Spain

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 Global Gas Report 2018 – Special Edition WGC2018

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 Top 10 global gas developments in 2017

5 Russian production growth

4 European consumption growth

Flexible tech. (Malta and Turke

9
6 US production growth y—FSRU) 2 Chinese consumption growth

6 New production (Zohr) 9 Flexible tech. (China—SSLNG)

Global highlights 3 Asian spot LNG price increase

10 First FLNG (Malaysia)

1 Global consumption growth
8 Mozambique LNG FID
6 New production (Australia LNG)
7 Global LNG market liquidity

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 2017 developments in global gas

Trade—Region average
Region Consumption Gas price Production Imports Exports Infrastructure

• LNG liquefaction (Mozambique

Africa • 6.7% - • 8.6% • -5.0% • 8.9%
FID)

Regional LNG liquefaction and

• +$1.1/MMBtu
Asia • 5.3%
(Japan spot)
• 4.1% • 10.0% • 10.6% regas; Chinese pipeline
developments

CIS • 6.3% - • 6.8% • 6.9% • 7.8% • Russia LNG (Yamal)

• +$1.1/MMBtu
Europe • 6.1%
(NBP)
• 1.9% • 12.0% • 14.3% • Pipeline development (TANAP)

Latin America • 0.4% - • 0.1% • -7.7% • -7.7% • No key developments

Middle
• 4.8% - • 4.1% • -3.7% • -0.1% • No key developments
East

• +$0.5/MMBtu • US liquefaction and cross-border

North America • -0.8%
(Henry Hub)
• 0.5% • 8.0% • 16.5%
pipelines

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 Unconventionals have been the key source of global
gas production growth

Global gas production growth by type Unconventional gas production by country

Unconventional +10.8%
bcm Conventional -0.5% bcm
4,000 800
19 6 1
3,421 3,441 3,455 3,527 3,531 17
3,261 3,339 65
491 557 591 656 725 763
3,000 411 600
243

2,000 400
763

2,850 2,849 2,864 2,849 2,799 2,802 2,768 Δ between 2010-2016

1,000 200 411

0 0

2010

2016
countries
Argentina
Canada

China
US

Australia
2010 2011 2012 2013 2014 2015 2016

Other
Unconven-
13 15 16 17 19 21 22
tional (%)

Source: Rystad data (Gas production), BCG analysis

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 Strong global gas trade growth in 2017 led by US, Russia, and
Australia exports

Global gas trade by year 2017 annual change in exports

bcm
2016 total
4,000
US 22.8
382 Russia 20.0
328 349 10% Australia 15.4
317 315 321
295 324 Norway 11.2
3,000 822 22% Nigeria 4.2
725 691 714 758
710 706 Angola 4.1
693
Iran 3.2
Malaysia 2.9
+9%
2,000 Canada 1.3
Turkmenistan 1.3
67% Kazakhstan 1.0
UK 1.0
1,000 Inra-Europe (other) 25.2
Qatar -2.8
Netherlands -5.1
Other -8.2
0 2017 total

2010 2011 2012 2013 2014 2015 2016 2017 0 1,150 1,200 1,250

bcm
Intl’ LNG Intl’ Pipeline Domestic supply Pipeline LNG

Source: Cedigaz global trade data, BCG analysis

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 LNG capacities growing at 6% per year
4x global consumption growth

Global liquefaction capacity Global regasification capacity

bcm bcm
1,200 1,200

1,000 1,000 +5.8%

800 800

1,157
600 600

1,090
1,019
+6.5%

971
926
878
858
825
813
400 400

733
635
639
590
502
466
408

200 200
382
367
353
346
335
318
251
251
240
235

0 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Liquefaction Regasification
81 88 90 90 76 88 94 90 86 84 80 75 77 32 33 36 31 30 36 38 36 34 33 32 32 33
Utilization1 (%) Utilization2 (%)

Decline driven by cap. increase in Asia/Oceania3 Decline driven by Europe

and Africa4 and N. America

1. Liquefaction utilization = LNG Exports/Liquefaction capacity * 100 2. Regasification utilization = LNG Imports/Regasification capacity * 100
Source: CEDIGAZ data (Trade, Plants, Terminals), IGU, BCG analysis

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 In 2017 gas prices rose in Europe and Asia vs. other fuels

Oil, Gas and Coal prices in major reference markets 2011-2017

North America Europe Asia
$/MMBtu $/MMBtu $/MMBtu
24 24 24

18 18 18

12 12 12

6 6 6

0 0 0
2010 2012 2014 2016 2018 2010 2012 2014 2016 2018 2010 2012 2014 2016 2018

WTI HH US Coal1 Brent NBP Eur. Coal Dubai NEA Spot Asia Coal

1. US coal price is Central Appalachia price 2. Rotterdam index 3. Australia coal

Source: World Bank, Bloomberg, EIA, BCG analysis

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 Rapid gas growth expected to continue

Gas is projected to be the ... based on key growth regions and se ... enabled by key market
fastest growing fossil fuel ... ctors ... Developments…
Share of growth by 2040
Economic
development/growth
1.6% 38% Non-OECD Asia
Annual gas
growth to 2040

Increasing global gas

20% Middle East supply

10% Africa
#2 9% Industry
Source of
7% Transport Supportive government polici
global energy (Bunkers and N. Am.)
by 2040
es
16% Other

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 Requirements and measures to achieve global gas growth

1. Cost competitiveness 2. Security of supply 3. Sustainability

1A. Reducing LNG 2A. Expanding gas 3A. Adoption of local

costs through the pipeline and storage air pollution policies
supply chain infrastructure

3B. Development of low carbo

1B.Pricing 2B. More flexible n technologies for gas
environmental LNG contracting
externalities
3C. Addressing the
2C. Development of methane emissions
1C. Development new access-enabling challenge
of local gas technologies
production

Industry action required Gov. action required

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 China: Multiple policy measures driving rapid growth
of gas across all sectors

Policies supporting gas consumption Gas consumption growth across sectors

Coal boiler conversation to gas Gas consumption by sector (%)

• Target conversation of 200k coal boiler units to natural gas to meet local pol
100
lution targets 13% +4bcm 9%
7% +11bcm 10%
New residential connections 75 20% 18%
+11bcm
• Target to increase penetration from 35% to 85%, adding >120m new conne
ctions 12% +12bcm 13%
50
+17bcm 25%
Incentives for CNG/LNG for transport 27%
• Discounts provided on prices in gas price formula 25
• Gas consumption of cars targeted to more than double from 2014 to 2020 21% +21bcm 24%
0
New 5 year plan prioritizing gas power
2010 2015
• Targeting 44GW of new gas-fired capacity …
• … though also targeting 200GW of new coal capacity
Other Power Production Comm & Res
Transport Energy use Industry

Source: CEDIGAZ data (Terminals and Plants), IEA data (Natural gas balance), analyst reports, BCG analysis

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 UK: Share of gas in power is growing following the increase in
carbon price floor

UK power generation capacity UK power production by source

Gas-fired generation increased
by 40% in 2016, replacing coal s
UK power generation capacity (GW) UK power production (TWh) hut downs
150 Announcement of carbon price floor in 2011, set at 0.4
£18/T from 2016

0.3
100 42 46
9 31
11 0.2
9 9 8
36
50 36 38 43 Complete coal p
hase out expecte 0.1
33 19 11 2 d around 2025
1
1 12 1 18
0 4 1 9 0.0
2010 2011 2012 2013 2014 2015 2016 2017
2010 2015 2020 2025

Hydro Nuclear Oil

All renewables Gas Oil
Wind & Solar Gas Other
Nuclear Coal Other
Other Renewable Coal

Source: IEA, Ofgem, BCG analysis

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 Opportunities and requirements for gas in cities

Gas provides specific advantages for cities ... ... but requires multiple enablers

Air pollution: nearly zero sulphur dioxide, nitrogen oxide

1 Infrastructure investment of $34-55B/
, and no particulate matter emissions
yr in gas midstream
GHG emissions: 40% less than
2 Scaling up consumption over time, starting with large scale anc
coal and 20% less than oil
hor customers in industry and power generation

Technological innovation to expand

Heat intensity: Most heat intensive (and thus highest eff
3 gas applications and enable
iciency)
sustainability goals
fuel source
Government policies enabling consumption, particularly for
Scalability: Ease of adding
4 reducing air pollution
customers to existing networks
once infrastructure is developed

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 Thank you

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