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Gas: A Bridge or a Destination Fuel? Insights from Bosphorus Forum, November 2017

Unveil key gas industry trends from leading studies and experts. Explore global gas connectivity, emerging supply sources, and the competition with coal. Understand the potential of gas as a clean energy choice and the challenges of carbon capture and storage. Dive into the significance of gas in the transition to cleaner energy systems. Will gas be a bridge or the ultimate destination in the energy landscape?

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Gas: A Bridge or a Destination Fuel? Insights from Bosphorus Forum, November 2017

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  1. Gas: a bridge or a destination fuel? BOSPHORUS FORUM NOVEMBER 2017

  2. PRESENTATION CONTENTS • THREE VISIONS OF GAS 03 • GAS TRENDS 05 • GLOBAL GAS CONNECTIVITY 14 • THE COMPETITION 17 • CONCLUSIONS 24

  3. Three visions of gas

  4. THREE VISIONS OF GAS

  5. GAS TRENDS

  6. MAJOR GAS INDUSTRY TRENDS ¹ BP ²Earnst & Young Oil and Gas US Perceptions Study, 2017

  7. NATURAL GAS: “ABUNDANT, ACCEPTABLE, AFFORDABLE” • Overall gas demand to grow by 35% by 2035, from current 342.5 bcf/d • Recent uses: Hydrogen (made from natural gas) as an energy carrier & transport fuel • Asia to be biggest center of demand growth • Major demand centers are China, India and Pakistan • Japan and south Korea gas demand to be relatively modest • Taiwan plans to close its nuclear plant by 2025 – replaced by LNG and renewables • Middle East and US demand growth from increased supply 7 *Includes biofuels Source: BP; Qamar Energy

  8. NEW GLOBAL GAS RESOURCES NOT ONLY ABOUT SHALE Unconventional gas going global Shale / tight / coalbed gas New conventional gas 8

  9. GEOLOGICAL POTENTIAL UNQUESTIONED • Middle East holds the largest conventional gas reserves & technical recoverable reserves • Iran is the largest natural gas reserve holder, but limited gas exports • Middle East shale gas only assessed for Saudi, UAE, Oman, Jordan 9 Source: BP 2017; Lukoil; EIA (Middle East shale); Qamar Energy

  10. NEW SUPPLY SOURCES, LOWER COSTS Supply Lithuania Latvia Ireland Poland Germany Pakistan Morocco Jordan Egypt Bangladesh Philippines India UAE New and growing demand markets • 59% of gas trade to be met by LNG in 2040 compared to 39% now • Australia & US lead supply growth • LNG as a whole addresses security of supply problems of pipelines; FLNG solving infrastructural issues • Middle East losing cost advantage Source: Qamar Energy for KPMG; IEA figures for LNG

  11. GAS DEMAND IN INDUSTRY & TRANSPORT Increase in gas demand by sector between 2013 and 2030 in major emerging Asian markets Supply • Focus is on gas switching in power sector. Key catalyst is falling gas prices • Coal-to-gas switch in China, to combat air pollution • India’s fertilizer industry one of the highest gas consumption in industry • India gas demand largely met by LNG as pipeline projects risky • Japan nuclear likely replaced by gas and renewables until nuclear is gradually increased • Gas in transport set to grow in Asia with government preferential tax schemes • LNG started being used in medium- and heavy-duty vehicles and shipping • 2020 impact of MARPOL sulphur regulations for shipping Source: Oxford Institute of Energy Studies

  12. ACCEPTABLE: GAS THE CLEANEST FOSSIL FUEL • Pollution costs reflect damage to human health from sulphur oxides, nitrogen oxides and particulates Supply Sources: Qamar Energy Research; Cost of damage based on UK factors; CO2e emissions include infrastructure and methane emissions

  13. CARBON CAPTURE & STORAGE (CCS) • 22 large-scale carbon capture and storage projects are in operation around the world, capturing 40 million tonnes (0.04 Gt) of CO2 per year • Depending on costs, CCS can make gas climate-friendly • Current high costs • Costs of capture are $60-70/t of CO2 avoided for new coal plants • Costs for natural gas plants are higher ∼$125/t of CO2 avoided • Costs to remain uncertain until more industrial-scale projects under way • Carbon capture technologies for natural gas could be used to address industrial emissions Cumulative power: 6.9 Gt Cumulative industry: 3.8 Gt Cumulative others: 2.2 Gt Al Reyadah carbon-capture project, Abu Dhabi Assumes an emissions trajectory consistent with at least a 50% chance of limiting the average global temperature increase to 2°C Source: IEA Qamar Energy; RightGraphics: The National

  14. GLOBAL GAS CONNECTIVITY

  15. GLOBAL GAS CONNECTIVITY: SHIFTING FLOWS • CIS & Middle East are the two major exporting regions • However, total Middle East gas exports do not grow much • Russia to dominate supplies to Europe. Russian spare capacity estimated at 170 BCM/y • Big change is the emergence of North American gas exports • Asia is the major importing region 15 Source: BP 2017; Qamar Energy

  16. GLOBAL GAS CONNECTIVITY: NEW INFRASTRUCTURE East Mediterranean gas Blue stream Turkish stream Baku-Tiblisi-Ezurum TANAP KRG-Turkey TAPI PEACE MEIDP 16 Source: Qamar Energy; Reuters

  17. THE COMPETITION

  18. ONGOING COMPETITION WITH COAL Supply • We see Singapore LNG prices averaging a little over $6.5/MMBtu from 2017 to 2022 and to stabilize at $8.60/MMBtu in 2024 onwards • Supply growth in the medium term will keep prices subdued • Long-term oil linked contracts • New hubs? Source: SPLNG; EIA; Qamar Energy

  19. BREAKEVEN PRICES OF NEW LNG PROJECTS Supply Source: Rystad Energy Ucube

  20. COMPETITIVENESS OF FOSSIL FUELS VS OTHERS IN ELECTRICITY GENERATION Supply • Compared to fossil fuels, most renewable energy sources require large capital investments; thus sensitivity to interest rates • MENA solar operating costs high with dust accumulation • Alternative generation (solar, nuclear, coal CCS) is cheaper than LNG or oil Source: Qamar analysis; Maersk Oil; Vestas

  21. DRAMATIC FALLS IN SOLAR PV POWER BIDS Supply Dubai Dubai Abu Dhabi

  22. A WILDCARD – ADVANCED NUCLEAR Supply • TurkeyAkkuyu nuclear plant to start construction in 2018 (4 × 1200 MW) • Jordan plant under construction (2000 MW) • Egypt finalizes deal with Rosatom for nuclear plant (4800 MW) • Abu Dhabi Barakah nuclear plant construction of first unit complete expected by 2018 (4 × 1350 MW) Source: US EIA

  23. conclusions

  24. WHAT DOES GAS NEED FOR ITS GOLDEN AGE? Gas’s long-term future Cost competitiveness • To coal and renewables Continuing strong supply • New entrants to meet rising demand Completing the global market • Global interconnectivity Creating new markets • New demand centers • Gas in transport CCS • To reduce CO2 emissions 24

  25. CONTACT DETAILS ROBIN MILLS CEO Qamar Energy HDS Business Centre Cluster M, Jumeirah Lakes Towers Dubai Tel +971 4 364 1232 Fax +971 4 420 3391 www.qamarenergy.com info@qamarenergy.com

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