IV International Conference "Eastern Siberia and Russian Far East Oil and Gas" 17-18 April 2014, Moscow Updating Russian Crude Status in Japan s Rising LNG Projects Targeting Asia Pacific Market Daiske HARADA, 原田大輔 Economist, Deputy Director Russia Project Team, E&P Ventures Energy Research Division, Research & Analysis Dept. Japan Oil, Gas and Metals National Corporation Increasing Flow from Russia to Asia Pacific 1 ESPO Crude: Keeping Steady Increase 2 ESPO Crude to Japan in detail 3 Composition of Russia Crude to Japan Other ESPO Buyers 100% kl Others 10 000 000 90% 80% Malaysia Peru 8 India 70% 16 18 26 29 ESPO：：68% 8 000 000 Indonesia 60% Singapore 50% 29 27 15 40% Philippine 11 Thailand 8 Taiwan 30% 13 10% 4 000 000 S-1：：18% China 20% 31 30 6 000 000 6 34 19 USA Korea 2 000 000 Japan 0% 2010 2011 2012 S-2：：14% 2013 0 306MBD→ 306MBD →304MBD 304MBD→ →326MBD 326MBD→ →420MBD 2005 2006 2007 S-2 Project Source: JOGMEC, METI-Japan 2008 2009 2010 S-1 Project 2011 2012 ESPO 2013 Changes of Exporting Countries to Japan Source: MOF-Japan 4 2012 2013 2012 2013 ESPO Crude: its advantage against Dubai 5 Shipping days: 3 to 5 days Cost: 0.7 USD/BBL No choke points No Destination Clause Shipping days: 20 days Cost: from 1.4 USD/BBL Choke points of Straits Destination Clause etc. Japanese JV in East Siberia In this September, and 6 successfully firmed in those projects In addition, we should remember.. Ural Blend： Blend：103 103USD USD 51USD 51 USD Export Duty： Duty： 52 52USD USD 79USD 79USD East Siberia： Siberia：24USD 7 Before Earthquake and Fukushima 8 Outlook of Primary Energy Supply in Japan published in 2010 MMklOE Renewable: 3% 3%8% Hydro: 3% 3%4% Nuclear: 12%21% Natural Gas: 15% 15% 14% Coal: 21% 21%18% LPG: 3% 3%3% Oil: 43% 43%33 33% % Source: METI, Japan Nuclear Circumstances in Japan 9 World Top Nuclear Countries At present, Exist 54 reactors 0 in operation 54 under inspection North American Plate Eurasian Plate Pacific Plate Philippine Sea Plate Source: METI, Japan Japan’s Electricity Supply by Source Options in Discussion 10 ‘Options for Energy & Environment’ June 2012 Economic Impact Public Trend & Opinion Lobbing by Business side Politics ‘Prototype Alternatives for Energy Mix toward 2030’ Nuclear Renewables Fossil Fuel Option A 0% 35% 50% Option B 15% 30% 40% Option C 20-25% 20-25% 35% Option D Cogeneration Energy Conservation CO2 Emissions -16% 15% -10 to -20% -20% -23% Achieving the most desirable generation mix for society by the choice of power consumers in the market after setting up a framework for sharing the social cost by utilities. Approved New ‘Basic Energy Plan’ 11 Japanese Government approved longlong-waited New ‘Basic Energy Plan’ on 11th April, 2014, took three years after the earthquake. Focal Points Nuclear as important base load power power,, which contributes to the stability for energy supply and demand structure. To promote resumption of nuclear power plants, plants, which are qualified and fitted with the strictest standards in the world stipulated by the Nuclear Regulation Authority. Dependence upon nuclear should be decreased by promoting renewable energy and efficiency of thermal power stations as much as possible. Trade Status of Crude Oil & LNG Highest Price Hike before Lehman Shock 12 Billion t Billion yen Earthquake Crude Oil Import by volume MMt Crude Oil Import by cost Billion yen LNG Import by volume Source: MOF, Japan LNG Import by cost Changes Electricity Mix by LNG Change of Electricity Supply by Source Constant Increase of LNG Import Drastic change after Earthquake MMt 2010FY 2012FY Source: MOF, Japan, and The Federation of Electric Power Companies of Japan 13 Price Divergence and its impact Gas Price Divergence started from 2008 Suffering Japanese Utility Companies 14 Nuclear Power Total 472.28MMkW 98% shut down Balance@2012FY Nuclear dependence suffer Total 1.5 trillion yen loss Russia as a Reasonable Supplier 1000yen/ton 2006 2007 2008 2009 2010 2011 15 2012 2013 Average USD/MMBTU USA 36.2 36.7 41.3 40.7 55.5 54.2 65.9 - 47.2 10.29 Oman 53.2 48.8 65.4 33.6 32.3 39.5 48.9 57.3 47.4 10.32 - - - 32.1 38.3 52.7 59.5 71.5 50.8 11.07 Australia 38.8 42.0 61.4 42.9 52.2 61.2 65.6 75.6 55.0 11.97 UAE 40.7 43.6 60.6 43.3 52.8 63.3 71.7 85.0 57.6 12.55 Brunei 35.2 38.4 69.3 50.3 52.7 63.1 72.9 84.0 58.2 12.69 Indonesia 48.7 51.4 62.2 36.3 42.7 62.2 75.1 87.8 58.3 12.70 Malaysia 39.1 47.2 68.2 46.0 53.7 64.1 73.6 86.6 59.8 13.03 Trinidad Tobago 69.2 63.8 86.6 46.5 45.6 42.7 52.6 80.3 60.9 13.27 - - - - 36.0 60.0 68.1 83.9 62.0 13.51 Qatar 45.8 49.5 71.7 53.0 56.4 64.6 71.8 84.6 62.2 13.54 Brazil - - - - - - 63.9 - 63.9 13.92 Nigeria 72.9 63.9 91.7 56.0 38.1 54.8 66.9 81.4 65.7 14.31 Algeria 60.8 61.6 94.8 - 34.3 58.5 70.6 79.9 65.8 14.33 Peru - - - - - 57.2 68.1 86.6 70.6 15.38 Equator Guinea - 58.9 87.9 56.9 58.4 71.2 75.4 87.7 70.9 15.45 67.4 66.3 87.3 87.6 60.1 65.0 72.8 83.2 73.7 16.06 Belgium - - - - - - 74.1 - 74.1 16.14 Norway - - 94.6 - - 54.1 64.8 87.8 75.3 16.41 Spain - - - - - - 69.2 83.7 76.5 16.65 France - - - - - - 71.7 86.1 78.9 17.18 Angola Source: MOF-Japan - - - - - - - 84.4 84.4 18.38 Russia Yemen Egypt *Conversion factor: 1USD=96.99yen, 1.09t=51.7MMBTU Russia as active player but in haste Projects Stakeholders Sakhalin-2, Sakhalin3rd Train Supply source Luni Pil’tun-Astokh Kirinsky (S (S--3) Vladivostok LNG Reserves 17.7TCF Start Present 9.6MMt +5MMt 2018 possibly 15MMt 5MMt 26.3TCF 42.4TCF (ABC1+C2) Sakhalin LNG Odoptu Chaivo Arkutun-Dagi 17.1TCF 2018 possibly Yamal LNG YuzhnoTambeyskoye 24.6TCF 2016～2018 Shtokmanovskoye 137.7TCF － Shtokman LNG (ABC1) Baltic LNG Pechora LNG Capacity 2009 2016 possibly Relatively faster and more viable (ABC1+C2) Chayandinskoye 16 West Siberia Yamal Peninsula Kumzhinskoye CH Invest JSC EuroNorthOil LLC －（5.5+5.5+5.5） 7.5MMt － 10MMt 2018 3MMt 3.4TCF (ABC1+C2) Korovinskoye *2019以降開発 16.5MMt 1.5TCF (ABC1+C2) Russian LNG Projects & NSR 17 LNG Projects on ‘Waiting list’ 18 Country Expected Timing Possible Volume Australia 2015 to 2017 32.9MMt Indonesia 2014 to 2015 2.0MMt Papua New Guinea 2014 to 2015 11.6MMt From 2015 72.0MMt 2014 to 2017 29.0MMt From 2018 29.0MMt USA Canada East Africa TOTAL 176.5MMt LNG Vectors at present 19 LNG Vectors in the future 20 Ukraine factor would enhance Eastern Vector World Demand Forecast for Natural Gas BCM BCM 21 Rushing PL Projects to West & East BCM 2008 EU Demand 2011 555 Nord 2012 +19 +27.5 2015 2017 2017-- 2020 2025 574 +34 608 636 +8 +23 +27.5 South +63 Nabucco ITGI +12 TAP +20 TANAP GALSI +8 Supply Capacity +55 +91 Excess Capacity Asian Demand SKV 2008 399 OR 2011 2012 +214 +6 Source: IEA Report, “Golden Age of Gas Scenario” 2011 +83 163 To East 2015 2017 2017-- 2020 613 +120 733 +24 2025 853 +17.2 (SKV+YKV=47.2) YKV: from 2016 YKV Altai +36 107 To West BCM ～60 +16 +30 Conclusions and Summary 22 After completion of ESPO ESPO--2 pipeline, Russia’s capacity to supply crude oil will double in three years, and it will gain possible 10% share in the Japanese market in the near future, which may result in positive effects on Japan’s energy security.. security Russia is the most appropriate additional crude oil supplier to Japan due to its proximity, safety and flexibility, and will help Japan gain a stronger position in relation to its traditional Middle Eastern and African oil suppliers, while Russia has reduced tax revenue instead. After the earthquake in March 2011, Japan shifted power generation from nuclear to LNG, which pushed LNG imports up 25% in two years. However, in 2014, China and Russia’s possible decision to start trading pipeline gas after Ukraine situation, and Japan’s decision to resume nuclear, leads to more limited demand capacity for LNG in this region. Who will take the rest LNG demand, depends upon the severe competition. Russian LNG projects may have possibility to provide new standards, especially in price, for AsianAsian-Pacific market. Thank you for your attention s Q&A E-mail: [email protected] harada TEL: TEL: URL: +81+81-3-67586758-8109 http://www.jogmec.go.jp http ://www.jogmec.go.jp Notice: This communication is private and confidential, for your information only. It has been prepared for this meeting, solely for informational informational purposes and is not an offer, recommendation or a solicitation to buy/sell any investment, nor is it an official information. 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