Nexant Officials Discuss Global Gas Model

Two officials from Nexant (U.K.) held a briefing at the United States Energy Association (USEA) to discuss how their firm’s proprietary World Gas Model (“a scenario tool”) was used to assess “the impact on the world gas market of LNG exports from North America.”

Mike Fulwood and Brian Little (both principals with Nexant Global Gas) discussed how much gas will be exported from the United States, which markets it could go to, and the implications for gas pricing in various markets, especially Europe and Asia Pacific. The impact of differing levels of LNG exports on the North American natural gas market was also discussed. Fulwood and Little’s basic conclusions can be summarized as follows:

Demand. Through 2040, Europe shows weak gas demand (mostly a result of coal displacement of gas). Asia (China and India) drives global growth. By 2040, consumption of gas for power increases 44 percent worldwide, followed by industrial use, (energy + feedstock uses) growing at 23 percent.

Supply. North America is the primary supply “growth” region through 2040. Shale gas will also be produced “in significant” amounts after 2020 in China, Poland, Ukraine, Russia, Kazakhstan, and Turkmenistan. No growth in output from Qatar and Iran occurs, but other parts of the world do grow. Mozambique and Tanzania come in after 2020. Huge growth during next six years (doubling of LNG capacity).

North American LNG Exports. Their model assumes five LNG export terminals are built: Sabine, Cameron, Freeport, Lake Charles, and Cove Point (but not Alaska or Jordan Cove). Finds that bulk of exports from North America will go to Japan and Korea. Europe becomes the residual “sink,” presuming that Asian market becomes “saturated” by 2018. China and India markets remain dominated by Qatar and Australia (with little U.S. exports going to those markets).

Market “Tightness.” North American “tightness” rises circa 2020 “as LNG exports rise.” However, price increases are relatively modest (see below).

Impact on Prices. Projects about $1.00 increase in Henry Hub prices. Steady around $4 until 2020, then slight increase ($1-$2), but then remains relatively flat after 2020.

To download the Nexant PPT, including a couple of interesting slides showing the potential effects of a total disruption of Russian gas to Europe: Click Here.