UNECE: Forum on Fostering Investment in Cleaner Electricity Production from Fossil Fuels – Session I
Natural gas supplies to Europe – Expectations and challenges with regard to global competition for natural gas Dr. Dominik Halstrup Head of Strategic Analyses & Concepts Section Gas Supply & Spot Trading E.ON Ruhrgas AG UNECE Committee on Sustainable Energy Geneva, November 27th 2007
Gas in Europe – a story of growth and success Share of natural gas in total primary energy consumption
Consumption of natural gas in 2005/06 and by 2020 bcm
1,000
40% USA
35%
800 EU
30% 25% USA
600
25% 22%
20% 15%
400
14%
EU 10%
J, SK, T
Japan
200
5%
China India
0% 1960
1965
1970
1975
1980
1985
1990
1995
2000
0
2005 2005/06
Growth by 2020
y Rapid growth between 1965 and 1975 and continued increase of market share in Europe (EU27). y Largest growth by 2020 expected in the US followed by Europe and China. Quelle: E.ON Ruhrgas, Wood Mackenzie
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EU gas supply is currently well diversified, but import dependency grows – need for new projects depending on future demand bcm
550-585 495 9% 11% 24%
9% 10% 9% 25%
18% 6% 9%
16% 4% 8%
23%
590-635 11% 7% 11% 8% 26% 15%
615-670 21%
future projects
7% 10% 7%
advanced projects
26%
Russia
other non-EU imports *) Algeria
Norway 12%
19%
5% 16%
15%
2006
2010
2015
2020
10%
15%
17%
18%
Other internal EU trade Netherlands Indigenous production for domestic use LNG-share in supplies
provisional data for 2006; 1 m³ 0 11.5 kWh *) of which: Nigeria 3%, Egypt 2%, Qatar 1% (2006) Basis for EU imports: Contracted volumes, prospective contract prolongations and further volumes dedicated to EU markets
Remark: Malta and Cyprus are not supplied with natural gas
y Due to a decline in indigenous production and a projected market growth approximately 240 bcm of additional imports need to be realised until 2020. y LNG is projected to increase its share in supplies until 2020. Source : E.ON Ruhrgas
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Import needs are set to grow in all major gas-consuming regions and will fuel global competition for gas supplies bcm
600 500
Import needs in major gas-consuming regions
Europe
400 300
Japan, S. Korea, Taiwan
USA
200
200 201 5 2020 0
India
200 2015 2020 0
200 2015 2020 0 200 201 5 2020 0
0
China
200 2015 2020 0
100
y Due to growing demand and stagnating or declining indigenous production, the need for more imports into the main gas-consuming regions/countries is set to grow considerably. y The competition for natural gas supplies is becoming more global. Source: E.ON Ruhrgas, Wood Mackenzie, BP Statistical Review of World Energy 2006
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Gas potential for Europe abundant – powerful gas producers Major gas reserves for Europe in bcm (approx. 70% of world gas reserves)
Natural gas consumption EU27 in 2010: 550-585 bcm
Thereof: Norway 44% Netherlands 26% UK 10%
North Africa
bcm
Russia 150
Europe 5.500
“Big 6” produce approx. 66% of the gas supplies needed in the EU27 in 2010
Caspian Region 9.100
148
47.800 100 Iran
83
Qatar
8.000
61
50 Nigeria 5.200
26.700
37
25.800
34 24*
0 Production for EU (27) in 2010 (expected)
Thereof: Algeria Egypt Libya
58% 24% 18%
Source: BP, E.ON Ruhrgas
y y
„Top-Three“ are state-owned companies Additional state-owned producers „ante portas“: y National Iranian Oil Company y Nigerian National Petroleum Corporation
Source: Company Reports; estimated figures based on general business information -5-
Due to increasing gas import needs new infrastructure is essential to secure supplies for European market – LNG will be part of it Existing and future infrastructure (Pipes and LNG)
Shtokman
Yamal
gas fields existing pipelines under construction or planned
Norway
possible pipeline projects existing and future LNG routes
LNG to USA
Kazakhstan
Turkmenistan Azerbaijan
Algeria LNG from Nigeria
Egypt Libya
Iran Katar
LNG from Qatar/ Iran
Examples for infrastructure investments Russia until 2020 new Russian pipes: upgrade existing pipes: pipes to Europe:
~ $55 bn. ~ $67 bn. ~ $15 bn.
Shtokman Offshore Field (Russia) approx. $14 bn. (approx. 70-90 bn. m³/a possible) Nord Stream (Russia) > € 5 bn (approx. 55 bn. m3/a) Ormen Lange + Langeled Pipeline (Norwegian Sea) approx. $7 bn. + $ 3 bn. (approx. 20 bn. m³/a) Nabucco Pipeline (Iran via Turkey and Central Europe to Austria) approx. $5,5 bn. (approx. 25 bn. m³/a) Qatargas II LNG integrated project (Upstream, Liquefaction and Regasification) approx. $13 bn. (approx. 20 bn. m³/a)
Quelle: Wood Mackenzie 2005 et.al. -6-
Various liquefaction and regas projects underway – France, UK and Spain with strong regas position in Europe Liquefaction terminals and projects in major LNG supply regions
Regas terminals and projects in Europe Regas terminals and projects in Europe Regas – existing Regas – under construction Regas – planned GATE Shannon Terminal Anglesey Canvey Wilhelmshaven South Hook Liongas Dragon Zeebrugge Isle of Grain
Oxelösund
Gdansk
Le Havre Montoir El Ferrol Sines
El Musel Bilbao
Black Se Trieste Bordeaux Rovigo Monfalcone La Spezia Krk
Constanta Mar Ere
Fos Cavaou
Rosignano Livorno Brindisi Sagunto Taranto Taranto Cartagena Gioia San Ferdinando Tauro Priolo Porto Barcelona
Huelva Quelle: Poten & Partners
Izmir Revytho
Source: E.ON Ruhrgas, CERA
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The US, Europe and SE Asia could already be competing for LNG volumes by 2015 Pacific Basin LNG 2006: 135 bcm 2015: 200 bcm
Atlantic Basin LNG 2006: 76 bcm 2015: 200 bcm
140 120
bcm
Mrd. m
3
100 80
60 40
India
China
Taiwan
Soth Korea
Japan
Russia
Australia
Brunei
Indonesia
Malaysia
Yemen
Qatar
Oman
U.A.E
Egypt
Eq. Guinea
Libya
Algeria
Nigeria
Norway
Peru
Angola
Alaska
Trinidad&Tobago
Greece
Turkey
Italy
Belgium
France
UK
Iberian Peninsula
Mexico
Puerto Rico
Chile
USA
0
Dom. Rep.
20
Source: Wood Mackenzie, E.ON Ruhrgas
y Middle East with position to supply LNG markets all over the world. y In 2015 LNG demand will probably exceed LNG supply.
2006 2015 Importing countries Exporting countries -8-
LNG business is influenced by heterogeneous price-levels and price-setting mechanisms
USA y Gas indexation at Henry Hub
South East Asia y Crude oil (JCC) Continental Europe y Oil products (Pipeline) y Crude oil (LNG) UK y Gas indexation at NBP
y Future LNG Supply Business in Europe must take into account, that interaction of oil-indexed LTC’s and short-term gas trading will further persist (“Cohabitation des régimes”). -9-
Thank you for listening.
Disclaimer This document may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Annual Report on Form 20-F, in particular to the discussion included in the sections entitled "Item 3. Key Information: Risk Factors", "Item 5. Operating and Financial Review and Prospects", "Item 11. Quantitative and Qualitative Disclosures about Market Risk"). The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.
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UNECE: Forum on Fostering Investment in Cleaner Electricity Production from Fossil Fuels – Session I
Natural gas supplies to Europe – Expectations and challenges with regard to global competition for natural gas Dr. Dominik Halstrup Head of Strategic Analyses & Concepts Section Gas Supply & Spot Trading E.ON Ruhrgas AG UNECE Committee on Sustainable Energy Geneva, November 27th 2007