# Presentation: 245961

## LNG Trade Prospectsin the Atlantic BasinUS EIANational Energy Modeling SystemAnnual Energy Outlook 2003 ConferenceWashington, DC, March 18, 2003 David NissenCenter for Energy PolicyColumbia Universitydn2022@columbia.edu&Poten & Partners, Inc.www.poten.com

## Punchlines

-  Atlantic LNG -- volume and  facilities
- Trade volume will triple by 2010
- Supply – flood of new projects
- Europe import capacity to triple
- Big question – No. American import capacity
-  Trading and commerce – new markets, new models
-  LNG significance – supply, liquidity, competition, arbitrage

## Volumes and facilities

## Atlantic LNG trade -- from 30 Mtpa (1.5 Tcf/y) today                                     to 100+ Mtpa (5+ Tcf/y) by 2010

**Atlantic LNG Imports Projected to 2010**

**0**

**20**

**40**

**60**

**80**

**100**

**1965 **

**1980 **

**1995 **

**2010 **

**Brazil**

**Mexico**

**Caribbean**

**USA**

**Turkey**

**Greece**

**Italy**

**Spain**

**Portugal**

**France**

**Belgium**

**New Markets**

**   ****Source:  Atlantic Basin LNG Outlook to 2010, Poten & Partners**

**UK**

-  Europe to 60 MMtpa
- Big growth in Iberia
- Coming growth in France and Italy
- Import facilities and supply     mostly committed
- North America – 40+ MMtpa
- US/Caribbean existing      terminals at 28MMtpa
- US, Canada, Mexico   terminals big uncertainty

**Atlantic LNG trade -- from 30 Mtpa (1.5 Tcf/y) today****                                     to 100+ Mtpa (5+ Tcf/y) by 2010**

## New supply

- Nigeria (NLNG)and Trinidad
- new grassroots in 1999
- expansions now
- more coming
- Committed
- Norway (Snohvit)
- Egypt (Dammieta and Idku)
- RasGas (to Italy), Qatargas (to UK)
- Developing
- Algeria
- Africa – Nigeria Brass, Angola LNG, Eq. Guinea
- Venezuela – Mariscal/Sucre
*Supply is not resource limited -- for inland market prices above*
*$3-$3.50/MMBtu, long-run supply curve is flat for a long way*

## Flood of new European import projects              and export projects

- Qatar

## Big question         -- No. American import terminals

- Big pause – departure of “energy merchants” – Enron, EL Paso, CMS, Dynegy
- Big help – Deepwater Act, FERC relax open access/open season

- US existing, 4 terminals at 26 MMtpa
- New Brunswick (Canada)  Chevron/Irving, 4 MMtpa
- Bahamas, 3 competing, Tractabel probably ahead, 6+ MMtpa
- Florida (BP) ?
- LA (Hackberry), Sempra, 10 MMtpa
- El Paso offshore “energy bridge”?
- Offshore Gulf gravity-based, ChevronTexaco 7-14 MMtpa
- Texas coast (Cheniere),3 sites each 4 – 14 MMtpa
- Altamira (Mexico) Shell, 4 MMtpa
*Could be 70 MMtpa (3.5 Tcf/y) or more by 2010*

## Trading and commerce

## Growing Short-term Supplies

- From 2 to 8 MMtpa in 4 years
- Asia/Pacific supply largely to Atlantic
- Growing Atlantic short-term supply, from new projects in Nigeria and Trinidad

## Growing short-term markets

- Growing US liquidity offers markets for global spare supply capacity
- Shift to Europe in 2002 reflects opportunistic exploitation of oil-based prices
- Asia import mostly Korea reflecting winter shortfall and stalled long-term contracting

## Aggressive expansion of the LNG Fleet...74,000m3 and above (end 2002)

***Of 58 orders (+ 22 options), at least 15 are not employed in LT trades***

## Significance

## Why now?

- LNG supply business changed
- Project costs down by 50% due to scale and design efficiency
- Since 1996, supply projects commit with part of capacity unsold
- Flood of shipping with – with some for trading
- Deepening Atlantic gas markets
- Transparent, liquid US market
- Europe -- deregulation/open access, demand-side dash to gas
- Broadened scope of LNG market
- Proliferations of supplies and uncommitted capacity
- Proliferation of import markets

## Implications

- LNG ***supply***, at 5+Tcf/y by 2010 becomes significant
- LNG ***competition*** will affect continental gas pricing
- In Europe where long-term contracts are now indexed to oil
- In USA, where adequate P/L supply is uncertain
- LNG ***arbitrage*** is the only physical mode for continental gas/electricity value – embedded “real option” value in trading chain
- LNG ***merchant traders ***emerge with supply, import capacity, and ***shipping*** for trading – Shell, BP, BG, and Tractabel
***Atlantic LNG – the emerging “nexus” energy market***