OAPEC

3rd Small-Scale LNG Summit

Current and Future Prospects for Arab-Europe Strategic

Partnership in LNG Sector and Its Applications

Gas Industries Expert

OAPEC
Agenda

Setting the Scene: Recent Developments in the

Global LNG Market

Arab-Europe Strategic Partnership Along the LNG

Value Chain

LNG as an Effective Means of Energy Security

Future Prospects for Arab-Europe Cooperation in

LNG Bunkering

3rd Small Scale LNG Summit

2 11-12 February 2020, Milan-Italy
 The official ceremony for the delivery of the 1st commercial cargo of LNG from Algeria,
by Methane Princess, was held at Canvey Island in UK on 12 October 1964.

1971 ،‫ للغاز الطبيعي المسال في أرزيو بالجزائر‬Camel ‫الصورة لمجمع‬

Capacity Cost Cargo Capacity Gas Phase

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 Development of Global LNG Trade: Demand Side

Development of Global LNG Demand, MT*

(2009-2019)

GLOBAL DEMAND IN 2019

Demand went up > 35 MT, led by

demand growth In Europe

ANNUAL GROWTH RATE, YOY

Source: Combination of OAPEC, ICIS and GIIGNL data High demand growth YOY for the
*MT : million tons 6th consequent year
** Estimated based on 9 months of 2019

3rd Small Scale LNG Summit

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 Development of Global LNG Trade: Supply boom

Total LNG exports almost doubled between 2009 and Arab region, led by Qatar, is still by far the largest
2019, as a result of new projects came onstream in exporter, with a global market share of 31% or 110
Australia, USA, Russia and other new players mt in 2019
3rd Small Scale LNG Summit
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 LNG Trade Between Arab Region and Europe.. Current Figures!
THE ARAB LNG DESIGNATIONS IN EUROPE
IN 2018

ARAB REGION LNG EXPORTS TO EUROPE

Turkey

2017 62% 38%

Arab region is the largest single source of LNG
exports to Europe
2018 54% 46%
Arab Region Other Suppliers

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 Co-operation between NOCs and IOCs in LNG Projects

NOCs Shell Total BP Eni UFG Others

Qatargas
IV
70% 30%

Qatar
Italy Qatargas II 65% 17%

Spain Qatargas I 65% 10%

Turkey
Oman T-3 65.6% 11% 4%

Oman
Syria Iran
Iraq Oman T-
Jordan
1&2
51.0% 30% 6%
Algeria Egypt
Libya
Damietta 20% 80%

Egypt
UAE
Idku T-2 24% 38.0%

Idku T-1 24% 35.5% 5%

UAE& Yemen
UAE-
70% 5.0%10%
Adgas
Yemen
17% 39.6%
LNG

European IOCs are in strategic partnerships with

Arab NOCs in major LNG export projects in Qatar, Integrated business model is
Egypt, Oman, Yemen and UAE. the predominant structure

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 LNG Sale and Purchase Agreements Between Arab Exporters & European Utility Companies

Medium and long term SPAs of European electric and

gas utilities with Arab NOCs.
Major electric and gas utility companies in
Europe (Cepsa, Naturgy, DEPA, ..) have
signed LNG SPAs (Sale and purchase
0.74 agreements) with Arab LNG exporters
1.5

1.1
0.75 4.6 The TCQ (total contracted quantities) in
0.75
force on the medium and long term basis is
1.65
~ 24 MT ( million tonnes) which represent
0.72 0.9
0.77 1.1
50% of Europe’s LNG needs in 2018.

3.2 3

UP TO 10 YEARS MORE THAN 10 YEARS

Botas Cepsa Gas DEPA UFG Some agreements will expire in the years
Naturgy RWE Centrica uniper to come. Negotiations on renewing some
Endesa PGNiG Edison agreements are ongoing with more
Source: OAPEC, GIIGNL
flexibility expected in new contract T & C
-Quantities in million tonnes and the duration is the remaining contract length
considering 2018 is the base year.
-Arab NOCs include Qatar Gas, Ras Gas, SEGAS and Sonatrach
3rd Small Scale LNG Summit
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 LNG Exports from Arab Region are Based on Medium/Long Term Agreements

Spot, Medium and long term LNG shipments from

LNG Long Term Contracts: Good or Bad?
Arab region to the European markets
MT
Stable LNG Procurement for Buyers 35 100%
90%
30
80%
Security of Supply 25 70%
60%
Sellers provide some flexibility 20
on seasonality of demand 50%
15 40%

10 30%
Stability of Entire Market
20%
5
To launch new LNG projects 10%
0 0%
2013 2014 2015 2016 2017 2018
Take-or-Pay Penalty MT-LT Imports Spot Imports Share of MT-LT %
! Sellers could waive the penalty
Source: OAPEC, GIIGNL

(ex.PGNiG & QG deal)

! The overwhelming part of Arab LNG shipments to
Europe is based on MT/LT contracts (80-95% in
High Priced gas ..indexed to Oil total)
New contracts dropped close to 11%,
compared with 13-15% 10 years ago. Recently some agreements have been renewed to
prove the key role of Arab region as an established
LNG supplier to Europe

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 Europe Acts as the Balancing Mechanism between MT/LT & Spot LNG

Spot and MT/LT LNG Shipments from USA to the LNG supplies flood the market as results of US,
European Markets Russia and Australia new projects startup. As a
consequence, Spot LNG prices dipped leading to
MT Spot Imports MT-LT Imports Share of MT-LT % prices convergences across regions
3.0 100%
90%
2.5
80%
70%
2.0
60%
1.5 50%
40%
1.0
30%
20%
0.5
10%
0.0 0%
2016 2017 2018
Source: OAPEC, GIIGNL

Spot LNG market still has a small share and is

USA gains a higher market share via spot LNG shipments to more vulnerable to volatile spikes
the European markets which represent over 80% of US total
shipments
2018 32% 68%
Spot & Short term Volume MT/LT Volume
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 Gas Supply in Europe.. Higher Dependence on Extra-regional Imports

Development of Gas Balance in Europe Development of Europe’s Gas Imports

1990-2018 2014-2018
700 Production 56% 60%
Net Imports bcm
% Dependence Degree
300
600 50%
251
250
500
37% 40%
200 184
Net imports
400
150
bcm

30% 117
300
‫ؤخىسعةحفهخ‬ 100
64

200 Production ‫ى‬ 20%

50
48

10% 0
100
Extra-regional LNG imports Extra-regional pipelines Imports
2014 2015 2016 2017 2018 based on 1H 2019
0 0% Source: OAPEC, GIIGNL

Between 2014 and 2018, gas imports via pipelines

Source: OAPEC, GIIGNL
and LNG increased by 30% to meet the demand
rebound.
The degree of dependence on gas imports gas has
However, the early estimates for 2019 show that
increased due to continuing gas production
LNG imports will grow further (65% YOY), in an
depletion and demand rebound recently
oversupplied LNG market.

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 Future Gas Supply in Europe.. Role of LNG in diversifying Supply Sources

Prospects for European Gas Supply, bcm Share of Russian Gas in Imports per Each Country, 2018
2018-2040

600 80%
66% 70%
500
60%
56%
400
50%

300 40%

30%
200
20%
100
10%

0 0%
2018 2025 2030 2040
Gap Contracted Piped Gas (MCQ)
Production % dependance

The map is based on the share of Russian Gas in total gas imports per each country for
Source: interpretation based on CEDIGAZ outlook 2019
reference only..Author
Source: Some countries may be a net exporter of gas while import gas from Russia

Some European countries notified LNG is set to play a broader role in the European future gas
their intention not to renew some
supply which will help to achieve diversification and security
piped gas supply agreements from
Russia after their expiry date.
of supply

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 Outlook of Global LNG Supply/Demand Balance

Future Outlook of LNG Supply X Demand LNG Long Run Marginal Supply Cost (LRMC) to Europe
(2016-2040) $/MMBTU

640 Production Liquafaction Shipping Regasification

Additional FIDs are
560 needed to fill the gap 0 2 4 6 8 10

480
Mozambique LNG 2.1 4.7 1.7
400
Post-FID
MTPA

320 US LNG 3.5 2.9 0.7

240
Russia LNG 1 4 1.5
160

Operating Algeria LNG

80 3.4 1.9 0.4
Oversupplied Supply-tight
0
Qatar LNG 1.2 1.4 1
Operating (as of end-2018) Post-FID projects
upside from offline capacity Demand
Source: different sources
Source: interpretation of Cedigaz and Shell data

Post-FID as of August 2019, Qatar expansion is not included

Additional LNG projects with credible FID Qatar is at the head of the curve. There is no
potential could push the supply gap to late doubt that Qatar is the cheapest source of new
2020s. global LNG supply.

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 LNG Could Achieve Energy Security for Both Partners

Ongoing LNG Projects in the Arab Countries Outlook of Total LNG Capacity (MTPA)
over 2019-2027 in the Arab Countries

New un-utilized Existing

210

180
55
39
150

193 MTPA
120 33

MTPA

138 MTPA
90
138 138
60
105
30

0
2018 2024 2027

* MTPA: million tonnes per annum

Qatar will boost its LNG export capacity to 110 LNG capacity in the Arab region will be boosted
MTPA by 2024 and eventually to 126 MTPA by by around 60% in total by 2027 to increase LNG
2027. FID to be taken in early 2020. supplies to different European markets.

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 Future Prospects for Arab -Europe co-operation in LNG Bunkering

In terms of demand, MT
30
The global Sulphur cap of 0.5% could
drive the global uptake on LNG as 22.5

bunker fuel.
Annual rate
Global marine fuel demand is mainly met by 61%
Demand Fuel Oil (86%) followed by diesel (14%)
0.5
Either using H.S.F.O with scrubbers or using
Options low sulfur fuels including distillates 2017 2025 2030
Data Source: Shell, QP, TMR

New transition is significant since it In terms of investment, million $

Transition Volume represents 75% of global marine fuel
demand compared to ECA. 24,685

LNG is on top of the agenda as an alternative

LNG marine fuel to meet IMO new regulations

Annual rate
62.5%

1,350

2018 2024

Data Source: AMEC

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 Future Prospects for Arab -Europe co-operation in LNG Bunkering

LNG bunkering locations per region, as of April 2018

60 Global leader in LNG bunkering
Europe is the global leader in LNG
50
bunkering business with the
highest number of bunkering
40 locations worldwide.

12
30

20
6
26
10
6
13
2
5 4 4 At very early stage
0
Europe Asia Americas Asia Pacific Middle East LNG bunkering is at very early
Source: DNV in operation planned (decsion taken)
stage a in the region, however
it has a set of factors that
enables it to be a regional hub.
-Over 50 LNG bunkering locations are distributed worldwide
-Further 26 projects are planned to enter operation in the years ahead

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 Future Prospects for Arab -Europe co-operation in LNG Bunkering

Oman LNG bunkering project, pioneer in the

region

Partnership
Oman Total E& P signed an agreement with
Oman Oil Company in 2018

Scope of work
Develop a bunkering terminal at Sohar
port, with 1 MTPA capacity

Oman Current Project phase

Bunkering
FEED competition awarded in July 2019
hub to a trio of Mcdermontt, Technip & JGC.

FEED completion
? submittion of FEED designs till March
2020. EPC costing details are expected by

? April 2020.

Expected Project Time Frame

bunkering hub expected to be operational
tentatively during the 2024-25 timeframe.

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 Future Prospects for Arab -Europe co-operation in LNG Bunkering

Egypt and Italy commenced discussions

in late 2019, on installing LNG bunkering
service at Damietta port located on the
Mediterranean coast

LNG plant Damietta has one LNG plant with a

total capacity of 5.5 MTPA, a JV of UFG
(80%) and EGAS/EGPC (20%)

UAE’s Adnoc signed MOU with Japan’s Inpex in

late 2018 to construct LNG bunkering facilities

Adnoc has one LNG plant offshore Abu Dhabi

with a total capacity of 5.8 MTPA

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 LNG contributed to the formation of long-
established economic ties between Arab
region and Europe, that achieve “energy
security” for both partners.

Further opportunities for co-operation between

European and Arab countries in LNG business can be
materialized in the years to come

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 Thank You

Eng/Wael A.Moati
Gas Industries Expert,
OAPEC
Whamed_eng@oapecorg.org

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20 11-12 February 2020, Milan-Italy