Robert Oushoorn
George Sarraf
Thomas Schlaak
An Unprecedented Market
How the Recession
Is Changing the
Global Gas Market
Contact Information
Abu Dhabi
Raed Kombargi Düsseldorf
Partner Thomas Schlaak
+971-2-699-2400 Principal
raed.kombargi@booz.com +49-211-3890-245
thomas.schlaak@booz.com
Amsterdam Houston
Otto Waterlander Andrew Steinhubl
Partner Partner
+31-20-504-1950 +1-713-650-4183
otto.waterlander@booz.com andrew.steinhubl@booz.com
Robert Oushoorn London
Principal Jake Melville
+31-20-504-1981 Partner
robert.oushoorn@booz.com +44-20-7393-3425
jake.melville@booz.com
Arlington, VA
Dan Gabaldon McLean, VA
Principal Eric Spiegel
+1-703-902-5890 Partner
dan.gabaldon@booz.com +1-703-902-3813
eric.spiegel@booz.com
Beirut
Ibrahim El-Husseini Munich
Partner Walter Wintersteller
+961-1-985-655 Partner
ibrahim.el-husseini@booz.com +49-89-54525-540
walter.wintersteller@booz.com
George Sarraf
Principal Shanghai
+961-1-985-655 Nick Pennell
george.sarraf@booz.com Partner
+86-21-2327-9800
Dallas nick.pennell@booz.com
Christopher Click
Principal
+1-214-746-6543
chris.click@booz.com
Exhibit 1
Gas Demand Destruction under “The Agencies’ Consensus” Scenario
2% 2% 2% 2%
0% 0%
-2% -2%
-3%
-4%
-5% OVERALL
IMPACT
-8%
Power Generation
Industrial
Residential
Weighted Average
Exhibit 2
Gas Demand Destruction under “Industrial Production” Scenario
0% 0% 0%
-3%
-4% -4%
-8%
-10%
OVERALL
-13% -13% IMPACT
-17% -17%
Power Generation
Industrial
Residential
Weighted Average
Exhibit 3
World Gas Demand 2006–2020 Under Different Scenarios
bcm
3,400 Prerecession
Outlook Agencies’
3,300 Consensus
Scenario
3,200
3,100
3,000
Industrial
2,900 Production
Scenario
2,800
2,700
2,600
9 years
2,500
2,400
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Exhibit 4
Global Supply Demand Overview 2008–2015
3,200
Gas sources
3,000
5%–15% surplus Production from current fields and infrastructure
Conventional pipeline
2,800
LNG
Unconventional
2,600 Demand in Agencies’ Consensus Scenario
200
0
2008 2009 2010 2011 2012 2013 2014 2015
Maximum Surplus
269 444 410 423 407 383 338
(bcm)
Source: IEA, Navigant Consulting, Oil & Gas Journal, Booz & Company global gas model, Booz & Company analysis
Exhibit 5
Implications and Potential Considerations for Sellers
- Production and export volumes are lower than planned with corresponding - Assess potential for and impact of lower production, both
lower revenue economic impact and competitive position versus established and
- Project profitability is at risk effect on emerging exporters
- New NOCs are still entering the playing field - Assess company-specific demand scenario and revisit project portfolio
- Prerecession price levels come under pressure; oil indexation at risk to bring it in line with this new outlook, for both pre- and post-FID projects
- Importers/buyers will seek opportunities to renegotiate contractual terms - Aggressively take advantage of reverse capital expenditures inflation:
NOC
- IOCs face similar implications as NOCs as part of joint ventures - Position for and respond to likely NOCs-induced supply reductions,
- High-tech projects with high development and marginal costs could including reducing costs to improve local competitive position
become uneconomic - Accelerate building of cross-market capabilities to optimize sources
IOC
- Highly leveraged IOCs become more exposed and possibly vulnerable and netbacks and increase relevance
to takeover - Assess which assets/operations might become most distressed and
- Geopolitical issues may restrict playing field pursue acquisition possibilities
Exhibit 6
Implications and Potential Considerations for Buyers
- The changed market offers opportunities to diversify imports and/or - Assess potential to reduce offtake from suppliers under long-term
access gas as we move away from a supplier’s market contracts, while ensuring not to jeopardize long-term security of supply
Importers/Utilities
- Demand destruction results in less revenue, especially in OECD - Take advantage of opportunities to rebuild the gas portfolio by
countries and the industrial segment identifying and pursuing long-term portfolio changes now:
- Importers faced with TOP obligations have less room to maneuver within - Reconsider gas suppliers
the context of their long-term contractual obligations - Assess vertical integration, including upstream
- Noncaptive customers—e.g., large industrials and power generators—will - Expand market presence to create arbitrage potential
try to benefit by seeking lower-priced gas - Consider changes to partner with other importers to enlarge oppor-
tunities and ability to consume risk, and to increase bargaining power
- Value in LNG supply chain may be shifting from “volume” plays - Actively broker “buyers” and “sellers” to secure pre-FID investments by
Infrastructure Companies
seeking baseload positions to “access” plays seeking multiple positions segmenting and reevaluating each group
- The changing market dynamics may result in inertia with customers before - Assess the upside potential of alternative business models for gas
they decide on future course of actions infrastructure in the future:
- Reduced access to project financing, higher financing costs, and less - Will the throughput model continue to dominate?
clarity on project timing puts projects at risk - Is an access model based on optionality feasible?
- Aggressively take advantage to reverse capital expenditures inflation:
leverage the inevitable oversupply in contractors and materials
- Reposition projects to better align with marketplaces and trading
hubs
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