Transcript Slide 1

Globalization of Fuel
Markets
David G. Victor
Director
Program on Energy & Sustainable Development
Freeman Spogli Institute, Stanford University
Professor of Law
Stanford Law School
Adjunct Senior Fellow
Council on Foreign Relations
http://pesd.stanford.edu/
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PESD Overview
• Initiated in 2001
• Funded mainly by EPRI and BP
• Six principal research topics
1)
2)
3)
4)
5)
6)
Electricity Markets
Global Natural Gas Market
Energy Services in Low-Income Communities
National Oil Companies & The World Market
Climate Change Policy after Kyoto
Emerging Global Coal Market
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
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Brent Crude Oil Prices: 1999 - 2008
160
140
$
120
Price / BBL
100
80
60
€
40
20
0
6/16/2008
11/14/2007
4/18/2007
9/15/2006
2/15/2006
7/15/2005
12/8/2004
5/10/2004
10/3/2003
2/28/2003
7/29/2002
12/19/2001
5/21/2001
10/13/2000
3/10/2000
8/6/1999
1/4/1999
Data Source: Reuters. Prices shown are front month futures contract.
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
3
Growth In World Oil Demand
3.0
2.5
Rest of World
Middle East
Million Barrels / Day
2.0
United States
1.5
China
1.0
0.5
0.0
1981-19901991-1999
2000
2001
2002
2003
2004
2005
2006
2007
-0.5
Source: BP Statistical Review 2008
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
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The World’s Oil Reserves by Owner
International Oil
Companies
9%
Major International
Oil Companies
4%
National Oil Companies
87%
Booked Oil Reserves: 1.09 trillion barrels oil equivalent
Source: 2008 Energy Intelligence Report. Note: 2006 liquid reserves.
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
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Middle East OPEC
100
1979
80
Oil Price (2007 $)
2007
60
2006
1985
40
2003
20
1973
1950
0
0
5
10
15
20
25
Annual Oil Production Rate (million bbls / day)
Source: P. Nolan, OPEC Annual Statistics Bulletin 2007, BP Statistical Review. Note: Oil Prices 1950-1983 Arabian Light posted at Ras Tanura, 1984-2007 Brent dated.
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
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Projected U.S. Natural Gas Supply Sources
(Lower 48)
25
20
LNG
Imports from Canada
Natural Gas (tcf)
40
2020 Projection
(AEO tcf)
HH Gas
($/mmbtu)
35
Domestic
Production
15
30
25
20
10
15
10
$9.01
$6.18
$4.31 $4.05 $3.37 $5.49
5
5
$10.33
$7.11
$6.98
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Sources: EIA AEO 2000-2008 and EIA Nat Gas Price History for NYMEX HH (Henry Hub) front month gas. Note: HH
prices are annual averages, 2008 is YTD average.
2029
2027
2025
2023
2021
2019
2017
2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
0
Sources: EIA Natural Gas Gross Withdrawals and Production for history, EIA AEO (Annual Energy Outlook) 2008 for forecast. Note: AEO forecast is for Lower 48. Nat gas production history has
been adjusted to exclude Alaska from total production. Because the EIA had not yet released 2007 Alaskan production data, 2007 Alaskan "dry production" assumed to be the same as 2006 given
similarity in "marketed production" year on year. Imports from Mexico not included.
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
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Gas Resources and Potential Demand
White: where the lights are on, satellite imagery
Blue  Red : Gas resources, with increasing size (USGS)
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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“Spare” LNG Import Capacity
US serves as LNG market of last resort
16
14
bcf natural gas / day
12
10
EIA LNG Terminal Capacity Projections
8
6
4
LNG Terminal Capacity
EIA AEO LNG Import Forecast
2
LNG Imports
Oct-2010
Jul-2010
Apr-2010
Jan-2010
Oct-2009
Jul-2009
Apr-2009
Jan-2009
Oct-2008
Jul-2008
Apr-2008
Jan-2008
Oct-2007
Jul-2007
Apr-2007
Jan-2007
Oct-2006
Jul-2006
Apr-2006
Jan-2006
Oct-2005
Jul-2005
Apr-2005
Jan-2005
Oct-2004
Jul-2004
Apr-2004
Jan-2004
Oct-2003
Jul-2003
Apr-2003
Jan-2003
0
Sources: EIA Natural Gas Imports, EIA AEO 2008, Damien Gaul – EIA. Note: EIA AEO is the Energy Information Administration's Annual Energy Outlook. Large increase in
2008 due to splicing history and forecast.
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Figure 9
MARKET NETBACKS TO QATAR FROM VARIOUS MARKETS - JANUARY
06 WHEN ATLANTIC BASIN MARKETS WERE TIGHT AND JANUARY O8
WHEN ASIAN MARKETS WERE STRONGEST
Qatar Netback $/MMBtu
$10.00
$8.00
Tight Atlantic Basin Markets
Prempted Flexible LNG Trade
During the 05/06 Winter
Now Severe Asian Shortages
Have Made U.S. and U.K.
Non-Competitive in Spot Trade
$6.00
[1]
U.S. Gulf
Coast
U.K.
Spain LNG
Japan Total
LNG
Japan Spot
LNG [1]
[1] There Were
No Atlantic Basin
Spot Cargoes
Diverted to
Japan During the
Winter of 05/06
$4.00
$2.00
$0.00
January 06
Program on Energy and Sustainable Development
January 08
-
Jensen Associates
http://pesd.stanford.edu/
Crude, Gas, and Coal: MMBTU Comparison
25
Oil (Brent, ICE)
$ / mmbtu
20
15
Gas (HH,
NYM)
10
Coals (ICE,
NYM)
5
Jan-95
Jun-95
Nov-95
Apr-96
Sep-96
Feb-97
Jul-97
Dec-97
May-98
Oct-98
Mar-99
Aug-99
Jan-00
Jun-00
Nov-00
Apr-01
Sep-01
Feb-02
Jul-02
Dec-02
May-03
Oct-03
Mar-04
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
0
Source: Reuters. All prices are front month futures contracts. Green is NYMEX coal, black is Richard’s Bay South Africa, orange is the Northwest Europe ARA contract. NYM is New York
Mercantile Exchange (NYMEX). ICE is Intercontinental Exchange. HH is Henry Hub gas.
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Changing Projections for the Total Energy
Mix in 2020
700
600
Other
Nuclear
Quadrillion BTUs
500
Petroleum
Liquids
400
300
Natural
Gas
200
100
Coal
0
2004
2006
2008
Source: EIA IEO 2002, 2004, 2006.
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Coal Siting in the US: Many Challenges
Source: Sierra Club
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Growth in Global Hard Coal Trade Since
1975
Source: RWE Power, World Market for Hard Coal, 2005
Program on Energy and Sustainable Development
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http://pesd.stanford.edu/
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International Coal Pricing
250
NW Europe
200
150
100
US
(Appalachia)
50
US (Powder River Basin)
6/21/2008
4/21/2008
2/21/2008
12/21/2007
10/21/2007
8/21/2007
6/21/2007
4/21/2007
2/21/2007
12/21/2006
10/21/2006
8/21/2006
6/21/2006
4/21/2006
2/21/2006
12/21/2005
10/21/2005
8/21/2005
6/21/2005
4/21/2005
2/21/2005
12/21/2004
10/21/2004
8/21/2004
6/21/2004
4/21/2004
2/21/2004
12/21/2003
10/21/2003
0
8/21/2003
$ / metric ton
South
Africa
Sources: Reuters, McCloskey’s. Note: US coal prices adjusted from short tons to metric tons for comparison. BTU content of coal varies. API 2 and API 4 are McCloskey’s
Index prices. NYMEX is front month futures contract. PRB contract is a NYMEX front month swap.
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Growth in Coal Consumption to 2030 Will Be
Dominated by China and India
Source: IEA WEO 2007
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Fragmented Carbon Markets
50
EU ETS
50 million tons
45
40
10 million tons
Real USD per metric ton CO2
35
1 million tons
30
25
CDM
20
15
10
Australia NSW
UK ETS
CCX
5
0
0
Jan-02
12
24
Dec-03
36
48
60
72
Oct-05
84
Jun-08
96
Note: CDM before
May 2007 reflects
primary deal
prices, secondary
thereafter.
Sources: Danny Cullenward, Point Carbon, Reuters, Nordpool. Note: EU ETS is European Union Emissions Trading Scheme. CDM is the Clean Development Mechanism. UK
ETS is the United Kingdom Emissions Trading Scheme. NSW is New South Wales. CCX is Chicago Climate Exchange.
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Carbon Parity Price in Europe
(results highly sensitive to market particulars)
Carbon Price Required to Make Gas and Coal Generation Equally Profitable
80
German Baseload CAL09 Futures Market
70
60
€ / ton
50
Carbon Parity Price (CAL 09)
40
30
20
EU ETS (DEC 09 EUA)
7/20/2008
7/6/2008
6/22/2008
6/8/2008
5/25/2008
5/11/2008
4/27/2008
4/13/2008
3/30/2008
3/16/2008
3/2/2008
2/17/2008
2/3/2008
1/20/2008
1/6/2008
12/23/2007
12/9/2007
11/25/2007
11/11/2007
10/28/2007
10/14/2007
9/30/2007
9/16/2007
9/2/2007
8/19/2007
8/5/2007
7/22/2007
7/8/2007
6/24/2007
0
6/10/2007
10
Source: Reuters. Note: Carbon intensity of gas generation assumed .411 mtCO2e / MWh, .91 mtCO2e / MWh for coal generation. CO2 prices are EUAs (Nordpool).
Note: EU ETS is the European Union Emissions Trading Scheme. EUA is European Union Allowance. CAL09 is the 2009 calendar year futures contract.
Program on Energy and Sustainable Development
-
http://pesd.stanford.edu/
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Carbon Storage Project “Pipeline”
Quantified projects only
Speculative
Possible
Operating
Data: PESD Carbon Storage Project Database
Program on Energy and Sustainable Development
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http://pesd.stanford.edu/
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Thank You
Program on Energy and Sustainable Development - http://pesd.stanford.edu/
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