Professional Documents
Culture Documents
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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