Análisis de Contingencia Tabla 17

LNG is natural gas which has been condensed into a liquid. Natural gas can be transformed into a liquid state by the application of pressure or extreme cooling or a combination of both. Due to the hazards associated with the application of extreme pressure, the LNG industry adopts a cooling process which operates at atmospheric pressure. LNG is predominantly methane, with small proportions of ethane, propane, butane and pentanes. The resulting liquid is chemically inert in respect of most substances and will not burn or explode. At ambient temperatures LNG boils away leaving no residue, and any LNG which transforms into gaseous state is about half the density of air and consequently rises and disperses. The transformation of methane gas into liquefied methane yields a volume reduction of approximately 600 to one. This super-cooled liquid can be stored cryogenically in insulated tanks constructed of special steel (as normal steel cannot withstand the low temperature of LNG) or aluminium, which can then be installed on ocean-going vessels for transportation.

3.1 The LNG industry

3.1 Gas reserves¹

As at the end of 2007, the world’s proved reserves of natural gas were estimated at 6,263.34 trillion cubic feet, with nearly one quarter of those reserves located in the Russian Federation (24.5%), and 41.3% located in the Middle East. Only 8.9% of the Erin Dyer

Daniel Reinbott Melanie Williams Ashurst LLP

1 Reserves statistics from BP, Statistical Review of World Energy, June 2008, p 22.

world’s gas reserves occur in OECD countries. The reserves-to-production ratios indicate that, at current levels of production, the Russian Federation’s reserves will last for the next 73.5 years, and that Iran and Qatar each have reserves for more than 100 years.

3.2 Global LNG trade

The world’s first regular LNG trade commenced with Algerian exports to the United Kingdom in the 1960s. In the 1970s, Indonesia commenced LNG exports to Japan and South Korea. Since then, the LNG trade has evolved from distinct regional markets in the Atlantic and Pacific basins towards a more global trade:

• On the supply side, there have been many new entrants – including Australia, Malaysia, Nigeria, Qatar and Trinidad & Tobago. In 2007, Qatar was the largest exporter of LNG, followed by Malaysia and Indonesia; and

• Currently, Japan and Korea predominate as importers of LNG, accounting for 39.3% and 15.2% respectively of total imports in 2007, with import volumes also going to the United States and Europe.²The increasing energy requirements of China and India will be of future significance to the global LNG trade.

3.3 Supply–demand equation

The International Energy Agency (IEA) estimates that from 2006 to 2011 global gas demand will increase to 113 trillion cubic feet. This is equivalent to growth of 2.4%

per year. The IEA also notes the plateauing of gas production in OECD countries, yet the increasing OECD import dependence on gas, particularly with strong OECD investment in gas-fired power stations.

The LNG supply–demand equation is somewhat unbalanced at present. There is strong demand for LNG, yet tight LNG supply due mainly to a bottleneck in the development of liquefaction capacity. The tight supply situation is unlikely to be significantly eased by the new liquefaction projects coming on stream in the near term as most of the volumes are already committed (see table below).

2 BP, Statistical Review of World Energy, June 2008, p 30.

3 Inclusive of this train, Qatar plans to increase its current output of approximately 31 million tonnes per annum (mtpa) to 77mtpa by 2012.

Anticipated Project Capacity Location

commercial (million tonnes

operation date per annum)

3Q 2008 Qatargas II (first train)³ 7.8mtpa Qatar 4Q 2008 North West Shelf Train 5 4.4mtpa Australia Early 2009 Sakhalin II (two trains) 9.6mtpa Russia Early 2009 Tangguh (two trains) 7.6mtpa Indonesia

Early 2009 Yemen LNG 6.7mtpa Yemen

1H 2010 Peru LNG 4.4mtpa Peru

Late 2010 Pluto LNG (first train) 4.8mtpa Australia

In addition, delays in final investment decisions (FID) (due largely to escalating construction costs and, in some cases, political uncertainty) mean further constraints on future LNG supplies.⁴ Industry analysts appear undecided as to whether the supply tightness (and consequent price pressure) may be eased by the proposed development of further LNG projects, including:

• in Angola, and the Olokoka LNG project (OK LNG) in Nigeria, estimated for start-up in 2012; and

• in Papua New Guinea, Russia, Brass LNG in Nigeria, Greater Sunrise in the Timor Sea and Browse, Gorgon, Wheatstone and Scarborough off north-west Australia, all estimated for start-up around 2014 to 2015.

3.4 Political risk

The geographical location of gas reserves leads to many LNG projects being situated in areas of high political risk. The development of LNG projects in areas such as Nigeria, Papua New Guinea, Russia and Yemen requires sponsors to manage significant risk on LNG projects. However, the capacity to do this is not without limits. Total and the Shell–Repsol–YPF joint venture announced suspensions of final investment decisions in respect of their respective LNG projects in Iran, citing high political risks and political pressure.

Another factor relevant to the high political risk of many LNG projects is increasing resource nationalism by host governments, particularly in the context of high commodity prices and pressure to achieve the best possible returns on the nation’s resources. There are numerous examples, including the recent further reopening of LNG prices under long-term contracts for LNG supply from the Indonesian Tangguh project, and the decision of foreign sponsors to proceed with the Sakhalin II LNG project in Russia, despite the dilution of their interests as a result of Gazprom becoming a majority participant.

Even in seemingly low political risk environments, such as the United States and Australia, LNG projects are affected by political considerations. The difficulty in obtaining local approvals for LNG import terminals in certain areas of the United States is well known and the development of further LNG projects in north-western Australia has been hampered by the difficulty in obtaining regulatory approval for sites for the onshore facilities.

As the natural gas market underlying LNG diversifies, so too do its interests align.

The Gas Exporting Countries Forum (GECF) is an informally structured group of the world’s largest natural gas exporters which, between them, are estimated to control up to 60% of global proved and provable gas reserves and approximately 50% of current global gas exports. Indications in early 2008 were that some natural gas exporters, notably Russia and Iran, had mooted further cooperation between the GECF members in the areas of gas pricing, infrastructure and consumer relations.

Such cooperation was regarded by some commentators as tantamount to the formation of a ‘gas OPEC’. Given the sensitivity surrounding LNG pricing and the increasing roles of national oil companies and host governments in some GECF

4 For example, no new liquefaction projects were sanctioned in 2008.

members, any suggestion of cartel activity is likely to cause concern amongst parties seeking to develop LNG projects or those relying on LNG imports.