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Natural Gas Hydrate

Economics

Widodo W. Purwanto

Departemen Teknik Kimia


Universitas Indonesia

Natural Gas Economics 2012

Content

Gas hydrate reserves


Gas hydrate production technology
Ocean gas transportation (GTS)
Economic aspects

What is Natural Gas Hydrates?


Gas hydrates are crystalline
substances composed of water and gas
in which a solid water-lattice
accommodates gas molecules in a
cagelike structure (clathrate)

Type of gas hydrates


1. Unconventional gas reserves
2. Synthetic gas hydrate

Hydrate Structures

Type I

Type II

Type H

Concentrates gas with a ratio of ~ 1:160

Source: U.S. Geological Survey

Sources: U.S. Geological Survey and Texas A&M University

One cubic foot of gas hydrate


contains
160 cubic feet of gas at standard
temperature and pressure

Gas Hydrates Potential

where?
860 tcf?

The gas hydrate resouce


pyramid

Gas Hydrates Potential

Gas Hydrates Potential

Global estimates place the gas volume


(primarily methane) resident in oceanic natural
gas hydrate deposits in the range of 30,000 to
49,100,000 trillion cubic feet (Tcf), and in
continental natural gas hydrate deposits in the
range of 5,000 to 12,000,000 Tcf.
Comparatively, current worldwide natural gas
resources are about 13,000 Tcf and natural
gas reserves are about 5,000 Tcf.

Gas hydrate stability

Migration of gas along faults and


hydrate formation

Technology of NGH Recovery from


Seafloor Reserves
(a) presence of gases (e.g.,

methane, ethane,
propane) shifts the
boundary curve to the
right
(b) presence of chemical
inhibitors (e.g., methanol)
shifts the boundary curve
to the left.

Ruppel, 2011

P-T equilibrium curve for watermethane system

Makogon, 2010

Gas Hydrates Production Technology


thermal injection
(b) depressurization
(c) inhibitor injection.
(a)

Ruppel, 2011

Technology of NGH Recovery from


Seafloor Reserves
(a) Thermal injection:

The use of a heat source of energy to


raise the reservoir T, thus breaking the
hydrogen bonds in the hydrate to release
the gas
Hot water, steam and brine are commonly
used

Technology of NGH Recovery from


Seafloor Reserves
(b) Depressurization:

When the reservoirs P is reduced,


hydrate dissociates by absorbing energy
from the surrounding reservoirs T
decreases.

Hydrate will continue to dissociate until


sufficient gas evolves to achieve the
equilibrium P. at the lower T.

Technology of NGH Recovery from


Seafloor Reserves
(c) Inhibitor injection

By injecting chemicals to the sub-sea


hydrates, dissociation will occur.

The chemicals decrease the stability of the


hydrate by changing the equilibrium T or P.

Alcohols (methanol) and glycols are


commonly used.

Technology of NGH Recovery from


Seafloor Reserves
Disadvantages
Thermal stimulation
requires much materials
poses environmental effects
Depressurisation
forms ice and/or reforms gas hydrate due to the
endothermic gas hydrate dissociation
Inhibitor injection
poses environmental effects.
causes corrosion on pipelines if air dissolves in the
inhibitor

Effect of depressurization, temperature


stimulation and inhibitors on the hydrate
stability curve

CO2 injection

The figure illustrates the


molecular mining method by
means of CO2 injection in order
to extract CH4 from gas hydrate
reservoirs. The concept is
composed of three steps as
follows; 1) injection of hot sea
water into the hydrate layer to
dissociate the hydrates, 2)
produce gas from the hydrate, 3)
inject CO2 to form carbon dioxide
hydrate with residual water to
hold the sea bed stable

Why the interest in Gas Hydrates?


Safety:

Hydrates plug flowlines


Hydrates can be geohazards

Resource:

Methane Hydrates are a source of natural gas

Environmental:

Sensitive Communities use hydrates as food


Methane Hydrates can contribute to global warming

Potential Impact of Natural Gas Hydrates


in the Seafloor Sediments On Deepwater
Production Facilities

Hydrates Form On
Exterior of Subsea
Equipment

Heat From Buried


Pipelines Cause
Hydrate Dissociation

Hydrates Dissociation
Affects Foundation of
Surface Facilities?
Heat From Production
Wells Causes Hydrate
Dissociation

99-00075

Ocean NGH transportation concept

NGH and LNG Comparison


Natural Gas
Hydrate (NGH)

Liquefied Natural Gas


(LNG)

Solid

Liquid

Temperature to be
maintained

-200C

-1620C

Gravity

0.85 - 0.95

0.42 - 0.47

Contents in 1 m3

Natural Gas:
170Nm3
Water: 0.8 m3

Natural Gas: 600 Nm3

Modes of
Transport and
Storage
Physical Property Data for NGH and LNG

Properties of Gas Storage Media

much gas can be stored at milder conditions

Dissociation of the hydrates

Hydrate dissociates quickly under standard temperature and


pressure. The dissociation of the hydrates containing methane
molecules occurs satisfying the following reaction equation
(Sloan et al, 2003):
CH4.6H2O (solid) CH4 (gas) + 6 H2O (liquid)

The value of H dissociation is 10 20 kcal/mol of gas


dissociated. Thus, the dissociation requires an external energy
source to propagate along the right hand side. It is necessary
therefore to cool down its temperature to -80oC to stop its
dissociation completely.
It is confirmed, however, that under a certain condition the
hydrate does but very slowly dissociate even if it is kept under
the a standard condition (non-equilibrium area) which would,
otherwise, bring about a complete dissociation. This
phenomenon is called "self-preservation effect" -20oC

Effect of methane hydrate temperature of the rate of


weight reduction as the hydrates are exposed at
standard conditions (25oC, 1 atm)

Methane hydrate pellets under


condition of self-preservation

NGH pellet production

NGH carriers

Flow sheet NGH production

Javanmardi et al, 2005

Javanmardi et al, 2005

Cost Estimation

Capex Distance

CNG Marine Economics

Widodo W. Purwanto

Departemen Teknik Kimia


Universitas Indonesia
Natural Gas Economics 2012

Outline
Overview of CNG Marine
Technology
Simple Economic Analysis of
CNG Marine

CNG ships add value for producers

Overview of CNG Marine

CNG Process

CNG marine transport chain

CNG Specification
Component

Limit

Methane

min. 88%

Ethane

max. 6%

C3+

max. 3%

Oxygen

max. 1%

CO2+N2

range 1.5-4.5% (CO2 maks 3%)

Sulphur

max. 16 ppm (H2S mak 4 ppm)

Water

max. 65-112 mg/m3 (4-7 lb/MMscf)

Wobbe Index

46-52 MJ/m

Gas Capacity

CNG Logistic parameters

Logistic Equations
-Tug speed
: 12 knot
- GTM Volume : 134 MMscf
- Load Factor : 100 %

tloading (h)

Vb arge ( MMscf )
Rate _ gasl ( MMscfd )

x 24h

Dis tan ce(km)


ttravel (h)
Tugspeed(km / h)
Number _ B arg e

t roundtrip (h)
tloading (h)

tloading (h) tunloading(h)


troundtrip (h) tloading 2 * ttravel tunloading

Number _ Tug

2 * ttravel (h)
Number _ B arg e
t roundtrip (h)

Hub-and-Spoke & Milk-Run

CNG Marine Technology


Provider
COSELLE
(USA)
TransCANADA (Canada )
VOTRANS
(USA)
TransOCEAN (Canada)
KNUTSEN
(Norwegia)

Coselle (USA)

Coselle (USA)

Coselle Stack design


stacking & support

Cosselle arrangement in barge

Cosselle arrangement in barge

Coselle CNG Tug & Barge


system

Votrans-Enersea (USA)

Votrans pressure vessel


specification

Votrans pressure vessel

Pressurized tube configurations


in Votrans CNG ship

Pressurized tube configurations


in Votrans CNG ship

TransCanada
Specification
Storage Capacity

Barge mounted 25+ mmscf ship up to 1 bcf

Storage System

Pressure vessel consists of a high strength steel


inner liner and heads and wrapped with
external glass fiber.
Weight is 60% of equivalent steel vessel

Storage vessel size

42 to 60 inch diameter, 20, 40, 80 ft long

Gas Pressure

Up to 3600 psi (1500 psi mid-scalemum)

Gas Temperature

Ambient

Vessel Size

Typical size 3200 dwt

Gas Transport Module (GTM)

Demonstration GTM

CNG Ship & Barge mounted


module

Large Articulated Tug Barge


(AT/B)

TransOcean (Canada)
Specification
Storage Capacity

150 mmcf to 1.2 bcf

Storage System

Pressure vessel consists of a high density polyethylene liner with


stainless steel end bosses and wrapped with external glass
and/or carbon fiber. Weight is one third of equivalent steel
vessel

Storage vessel size

42 to 60 inch diameter, 40 to 120 ft long

Gas Pressure

3600 psi

Gas Temperature

5 oC

Vessel Size

Panamax for 500 mmscf

TransOcean Module

Knutsen (Norway)

Knutsen Large Size

Knutsen Transportation
specification
Standard Size

Small Size

Large Size

2672

870

3900

20 MSm3

3.4 MSm3

30 MSm3

Length, o.a

276 m

182 m

325 m

Length, b.p

260 m

171.5 m

311 m

Beam (Bm)

54 m

29 m

59 m

Dm

29 m

16 m

29 m

13.5 m

8.5 m

15 m

Tballast abt.

11 m

7.3 m

11.6 m

DWT up to

20000 tons

3500 tons

30000 tons

Service Speed

15.5 knots

18 knots

18 knots

Specification
No. of gas Cylinders
Volume of Gas Carried

Tdesign

Pipe Data
42 in Dia.
19-38 m legth
Steel High Strength (X80)

CNG Licensors Comparison


Parameter

Licensors
Cossele

Vortrans

TransOcean

TransCanada

Knutsen

263

389

111

248

267

Material

Carbon
Steel

Carbon Steel

Fiber
Reinforced
Plastic

Composite
Pressure
Vessel

Carbon Steel

Maturity

Prototype
Testing

Prototype
Testing

Prototype
Testing

Prototype
Testing

Prototype
Testing

STL

STL

FPSO

FPSO

STL

10

-20

Ambient

Ambient

c. Pressure (psi)

3600

1885

3600

3600

3640

Safety

good

good

fair

fair

fair

Certification

ABS,
DNV

ABS, DNV

ABS

ABS

DNV

Ratio Capacity (cf/ft3)

Operability
a. Loading/Unloading
b. Temperature (oC)

Simple Economic Analysis


of CNG

Assumptions for Economic


Analysis

Capacities: 1, 0.6, and 0.4 MTPA


Rule of Thumb
Distance 2100 km ~ Donggi-West Java
Cost of capital 12%
Life service 20 years
Product cost CNG = Wellhead + (Capex + OM)
Full chain

Capex O&M cost of CNG


(high case)
Component

Capex
(US$)

Share(%)

O&M
(US$/year)

Share (%)

Tug

50,960,000

10.7%

12,700,000

58.9%

Barge

77,400,000

16.3%

2,000,000

9.3%

GTM

277,200,000

58.3%

1,300,000

6.0%

Transporter

405,560,000

85.3%

16,000,000

74.1%

Gas Treating

30,388,205

6.4%

3,765,654

17.4%

Loading

23,011,896

4.8%

702,285

3.3%

Unloading

16,325,829

3.4%

1,112,299

5.2%

475,285,930

100.0%

21,580,239

100.0%

Total

Source:TransCanada for 0.5 mtpa, 2130 km


US$ 950/tpa, and O&M cost 43 US$/ton (US$ 0.83/mmbtu).

Capital Cost Breakdown


CapEx Marine
6.4%

4.8%

3.4%

85.3%

Transporter

Gas Treating

Loading

Unloading

Capital Cost Breakdown

Economides, SPE 2008

Capex & O&M (low case)

Source: Hanranhan, 2006

250 mmscfd (1.92 mtpa)


and distance 750 nautical miles (~1400 km)
US$ 511-766/tpa, and O&M cost is 13 US$/ton (US$ 0.25/mmbtu).

Economides, SPE 2008

Economides, SPE 2008

Capex (high case)


Capital Cost (full chain of CNG)

= $ 475,360,000.00

Size

= 0.5 mtpa

Duration

= 20 years

Cost of Capital (i)

= 12 %

Cost Recovery Factor (CRF)

= 0.1339

Size of CNG (mtpa)

CNG (1)

CNG (2)

CNG (3)

0.6

0.4

Capex

772,224,598.26

540,069,319.88

406,617,087.56

Capex /mtpa

772,224,598.26

900,115,533.14

1,016,542,718.90

Capex/tpa

900.12

1,016.54

Annual Capex

72,315,281.93

54,446,028.02

Capex/mmbtu

2.58

772.22
103,400,873.71
2.21

2.91

Capex (low case)


Capital Cost (full chain of CNG)

= $ 1,115,000.00

Size of 1 train

= 1.93 mtpa

Duration

= 20 years

Cost of Capital (i)

= 12 %

Cost Recovery Factor (CRF)

= 0.1339

Size of CNG (mtpa)

CNG (1)

CNG (2)

CNG (3)

0.6

0.4

Capex

703,695,463.18

492,142,222.68

$ 370,532,874.00

Capex /mtpa

703,695,463.18

820,237,037.81

$ 926,332,185.00

Capex/tpa

703.70

Annual Capex

94,224,822.52

Capital Cost/mmbtu

1.81

820.24
65,897,843.62
2.11

926.33

$ 49,614,351.83
$

2.39

Product cost of CNG (high case)

Cost (US $/mmBtu)

7.00

O&M cost

6.00

Capex

5.00

Wellhead

4.00
3.00
2.00
1.00
0.00
1 mtpa

0.6 mtpa
CNG Plant Capacity

0.4 mtpa

Product cost of CNG (low case)

Cost (US $/mmBtu)

5.00

O&M cost

4.00

Capex
Wellhead

3.00
2.00
1.00
0.00
1 mtpa

0.6 mtpa
CNG Plant Capacity

0.4 mtpa

CNG Product valuation


Product Cost per mmbtu
Natural Gas (wellhead)
Capex
O&M

$ 1.5 2.0
$ 1.81 2.21
$ 0.25 0.83

Cost of Product

$ 3.56 5.04

$ 1.5 2.0
$ 2.11 2.58
$ 0.25 0.83
$ 3.86 5.41

$ 1.5 2.0
$ 2.39 2.91
$ 0.25 0.83
$ 4.14 5.74

CNG

CNG

CNG

1 mtpa

0.6 mtpa

0.4 mtpa

Technical Aspect comparison

Economical Aspect

CNG :
simple and inexpensive onshore
facilities
80-90% of the investment is in ships
and pressure containers

Business opportunities
Wellhead gas
2 US$/mmbtu

Potential Gas Price


5 US$/mmbtu
(1/2 diesel price
~ 9 US$/mmbtu)

Business opportunities

Xiuli Wang, 2008

Xiuli Wang, 2008

Natural Gas Contracts


(supply, transport and sales)
Lecture-3

Widodo W. Purwanto, *Hanan Nugroho

Departemen Teknik Kimia


Universitas Indonesia
*Bappenas
Natural Gas Economic 2012

Outline
Types and key elements of
natural gas contract
LNG contracts

Types and key elements


of gas contract

Natural gas value chain and


gas contract agreement

GSA Between ?

Producers

Consumer

Trader

Natural gas EP Contract

Conssesion contract
Production Sharing Contract

Conssesion contract
Conssesion contracts: Tax/royalty conssesion
contract, conventional type North america,
Argentina, Australia, part Middle east

PSC
Production sharing contract (PSC), more
complex Asia, Africa, part of South america
and Middle East

Gas sales agreements


The gas sales agreement (GSA) is also known as a gas purchase
agreement (GPA) or a gas sales and purchase agreement (GSPA). These
agreements between a producing company or sales agent (seller) and a
consuming company (buyer)
Term. The term of a GSA can be as short as one day or as long as the
economic life of the field from which the gas is produced, the terms could
reach 20 or 30 years.
Quantity. Broadly speaking, there are two distinct types of volume
commitments contracts:
Depletion contracts and the more common supply contracts. Under depletion
contracts, also called output contracts, the producing company dedicates the
entire production from a particular field or reserve to a buyer.
In contrast, supply contracts commit the seller to supply a fixed volume of gas to
the buyer for fixed term, typically 20 to 25 years. The seller is responsible for
sourcing the gas, either from its own reserves or from third parties.

Two major types of


volume gas contracts
Depletion contract
Allocation of all the reserves economically recoverable
from a field or accumulation to the buyer
This type of contract is generally preferred by the
producer
Part of the risk is transferred to the buyer
The price will tend to be lower

Supply contract
The producer agree to supply an annual volume of gas
for a number of defined years
Gas supplies originates from several sources
This does not necessitate to show reserves to the buyer
This type of contract is generally preferred by the buyer

Gas sales aggrement (cont)


Price terms. Gas must be priced at a level competitive with alternate fuels in the
marketplace and provide an adequate return for all parties in the chain. Pricing may be
fixed, fixed with escalators, or floating.
Delivery obligation. The terms of delivery may be firm or flexible. Firm delivery
implies an obligation by the producing company or seller to deliver the specified
quantities over the term of the contract. If the delivery obligation is not fulfilled, the
seller may be obliged to pay damages or cover the costs of alternate fuels used by the
buyer. Flexible delivery obligates the producing company to make attempts to fulfill the
delivery obligation but does not require fulfillment of all the delivery obligations.
Take-or-pay (TOP) obligations. The basic premise of take-or-pay (TOP) is that the
buyer is obliged to pay for a percentage of the contracted quantity.
Delivery point. This is the physical location where gas is delivered to the buyer. It
could be at the gate of the power plant, the hub for a city grid, an interconnection of
two pipeline systems, the site of a compressor, international border, or the fence of an
LNG plant.
Gas quality. The GSA clearly states the quality of gas, including its maximum and
minimum heating values (in Btu/MMcf units); maximum level of impurities like oxygen,
CO2, SOx, and NOx; the delivery pressure; and water vapor content..

Key provisions of contracts

Contract Duration

Volume, capacity and tolerance


Volume. The first is the amount of gas, which can be sold and purchased,
the total amount of gas, which can be taken over the life of the contract.
Capacity, which is represented by the minimum rate at which the seller must
offer gas and the maximum rate at which the buyer may take gas. The
capacity is usually expressed as a daily quantity.

Tolerance clauses to allow to some extent for the unforeseen. Tolerances


affect the contract volumes only partially, but may affect any penalties due
for failure to live up to the contract.

Volume, capacity and tolerance


Annual Contract Quantity (ACQ). It represents the maximum annual
quantity the supplier is obligated deliver to the buyer
The ACQ may be stated as an independent figure in the contract or
alternatively it can be sometimes expressed as the multiple of a Daily
Contract Quantity (DCQ)

ACQ = 365*DCQ.
Daily Delivered Rate (DDR) expresses the rate at which the sellers
facilities must be capable of delivering gas. It is usually expressed as
a multiple of the DCQ. The DCQ is multiplied by the fraction 1/load
factor.

Volume, capacity and tolerance


Load factor is a very important component of the contract,
because it determines buyers flexibility. Lower load factor and
therefore higher daily volume flexibility offers to the buyer the
possibility to purchase more in the period, when he desires it.
Downward Quantity Tolerances states the amount by which a
buyer may fall short of its full Annual Contract Quantity (in a Take
or Pay gas sales contract) without incurring sanctions. If there is
no provision requiring the buyer to take supplementary volumes in
subsequent years to make good for the deficiency, the ACQ
becomes in effect the ACQ minus the DQT which we call Annual
Minimum Quantity (AMQ).

LNG Contracts

Types of LNG Sales Contracts


FOB (Free on Board)
- delivery point at connection between ship and loading facility

CIF (Cost, Insurance, Freight)


- delivery point at the buyers receiving terminal
- risk of loss passes to the buyers at loading point or an agreed point
on the trip

DES (Delivered Ex. Ship)


- delivery point at flange connecting ship to receiving
terminal
- the seller bears all costs and risks up to terminal

Shipping terms
Deliveries may be on Free-on-board (FOB) basis, where the buyer
takes ownership of LNG as it is loaded on ships at the export LNG
facility. The buyer is responsible for LNG delivery, either on its own
ships or ships chartered by the buyer. The contracted sales price
does not include transportation costs.
Cost-insurance-freight (CIF) basis, where the buyer takes legal
ownership of the LNG at some point during the voyage from the
loading port to the receiving port. The seller is responsible for the
LNG delivery, and the contracted sales price includes insurance and
transportation costs.
Delivered ex-ship (DES) basis, where the buyer takes ownership of
the LNG at the receiving port. The seller is responsible for LNG
delivery, and the contracted sales price includes insurance and
transportation costs.

Main Terms of LNG Contracts


Duration
Quantities
Build up volume
Annual Contract Quantity (ACQ)
Downward Quantity Tolerance
Upward variation

Take-or-Pay clauses
Shipping Agreements
Price
Quality

Build up and Plateau Arrangements

Main Terms of LNG contracts (1)


Duration
Mostly long term contracts, 20 years
Trend toward medium and Short Term contracts,
SPOT with deregulation
Buyers and Sellers prefer Long Term, to secure
financing of infrastructure

Build up volume
Sellers prefer fast build up to recover investment
Buyers prefer slow build up to follow market
growth
Compromise to be found

Main Terms of LNG contracts (2)


Plateau Quantities
ACQ (Annual Contract Quantity), expressed in
energy (TBtu/year) or in number of cargoes per year
DQT (Downward Quantity Tolerance): volume
that the buyer can defer without going to Take or Pay
obligation. Generally 10% with a maximum on cumulated
volume. May be subject to Make Up arrangement.
Upward Variation: additional volumes required by
buyers, depending seller ability to supply.

Main Terms of LNG contracts (3)

Take or Pay clauses


Obligation for the buyer to pay a cargo, even if
he cannot take it for market or other reasons
Transfer the market risk to the buyer, and
secures cash flow for the seller
The Downward Quantity Tolerance is negotiated,
generally leading to a Take-or-Pay level of 90%
(DOT=10%)
Volume under Take-or-Pay called Minimum Bill

Main Terms of LNG contracts (4)

Prices
Base price
Escalation formula: crude oil linkage
Frequency of calculation: quarterly or
monthly
Procedures for renegotiation, either
regular (every 5 years) or according to
change in context.

LNG Project Structure (1)

LNG Project Structure (2)

LNG Project Structure (3)

LNG Project Structure (4)

LNG Project Structure (5)

LNG Project Structure (6)

Bontang LNG Project Organization

Badak Train F
Project Finance
PT Badak
Plant use &
operation
agreements

Pertamina

Gas Supply
agreements

E. Kalimantan
Gas Producers

Japanese
Buyer
Offshore
proceeds
account, NY

LNG Plant

Turn key
contractors

Processing
agreements

Trustee

Gov. of
Indonesia

Loan
agreements

PSC

Producers
agreements

Banks

Source: International Advisory & Finance

LNG Terminal - Tolling Model


Contractual Structure Diagram
LNG Producer

Gas Sales
Agreement

END USERS

Terminal Used Agreement


(TUA)

LNG Receiving Terminal


Operation & Maintenance
Agreement

Company

Time Charter
Party Agreement

LNG Vessel Owner

LNG Terminal - Merchant Model


Contractual Structure Diagram
LNG Producer

END USERS

LNG Sale and Purchase


Agreement

Time Charter
Party Agreement

Gas Sales
Agreements

LNG Receiving Terminal


Operation & Maintenance
Agreement
Company

LNG Vessel Owner

Time Charter
Party Agreement

Gas contract and price vision

Structure of Natural Gas


Industry/Market
- lecture 1

Widodo W. Purwanto
Departemen Teknik Kimia

Natural Gas Economic 2012

Outline
What is natural gas?
Structure of natural gas industry
What is natural gas market?
Gas trading & infrastructures

What is natural gas?

Natural gas components

Natural gas problem is volume


For the same energy content:

Characteristics and conversion factors


1 m3 of LNG = 630 m3 of gas
1 Ton of LNG = 2.22 m3 of LNG = 52 MMBtu
1,400 m3 of gas = 1.3 Ton of crude oil
49,500 Cft of gas = 9.0 bl of crude oil
1 Million Tons/year of LNG = 130 MMCFD of gas sales
= 142 MMCFD of gas at LNG plant inlet

A ship of 135,000 m3 = 60,000 Tons of LNG = 3 BCF of gas


1 TCF of natural gas eq. to 1 Million Tons of LNG for 20 years
Average Heating Values: Natural Gas: 1,000 Btu/Cft
Crude Oil: 5.8 MMBtu/Bl.

Oil and Gas Industry

The natural gas value chain

Upstream

Midstream

Downstream

Natural gas transportation


Pipeline
Liquefied natural gas (LNG)
Compressed natural gas (CNG)

SUPPLY

Gas to Solid (GTS)


Gas to Liquids (GTL)

MARKETS

Gas to Chemicals (GTC)


Gas to Wire (GTW)

Physical conversion
Chemical conversion

: pipeline, CNG, LNG, GTS


: GTL, GTC, GTW

Structure of Natural Gas Industry

Key Dates in the Deregulation of


the US Natural Gas Industry

Development of Competition in the British Gas Market

LNG market structure

Why Regulate?
Avoid monopoly
Regulation: exclusive teritories, setting
rate/tariff etc
Who ragulates: Regulatory Commission or
Gov.
Regulatory process: rolemaking, rate cases,
certificate cases, service standard, complaint
cases

Aim of Regulation

Approaches to Regulation

Policy instruments

Why Deregulation?
Competitive gas market
The market maturation cycle: regulation,
deregulation, commoditization, valueadded services
Market dynamics

Natural gas industry-Indonesia

Pertamina,
Total, Conoco,....

TGI, Nusantara Regas


Pertagas/Pertamina?

PGN
Small CNG companies

Natural gas industry (USA)

Natural gas industry (USA)

Natural gas industry (UK)

Natural gas industry (ARGENTINA)

Natural gas industry (Thailand)


UNOCAL

PTTEP

PTT Co Ltd/Plc
(Supply & Marketing)

TOTAL

Others

Supply & Marketing


Companies

100% shareholding

PTT Transmission
Company

Transmission
Companies

PTT Distribution
Pipeline Co.

Distribution
Companies

EGAT

Private Power Producers


IPP / SPP

End Users
Industrial Sector

What is

Market consist of
The physical (cash) market: business activity,
supply and demand fundamental,
transportation and physical transaction
Financial Market: Value, pricing and trading

IGU, 2006

Gas production/consumption by region

Gas consumption per capita

Chart of natural gas trade

Major gas trade movements

Gas domestic vs. export

KEN (2025)

2005
Produksi
Demand gas
Ekspor
Impor

8.13 bcf/d
3.38 bcf/d
4.75 bcf/d

~
9.15 bcfd

~
13.22 bcfd

1.02 bcfd

5.09 bcfd

Domestic gas market

Gas Pipeline Network


Medan Block

Block B-Duyong

West Natuna
- Singapore
Bunyu

Bontang

Duri-Grissik
Corridor-Singapore

Samarinda
So. Palembang Block

Pare-Pare

Jawa Barat
Jawa Timur

Existing
Planned
Future

Vogel Kop

Gas supply EU

Gas supply EU

JAPAN Gas Facilities

Japan gas pipeline supply option

TAGP

Australia gas network

US gas market

US gas network

North America gas supply

LNG Economics

Widodo W. Purwanto

Departemen Teknik Kimia


Universitas Indonesia

Natural Gas Economics 2012

LNG Technology Chain

LNG Trade History


1964 First plant in Algeria (Arzew), delivery to UK
1969 First LNG deliveries to Japan (from Alaska)
1970s Start up of Indonesia (Arun, Bontang), Abu Dhabi,
Libya, Brunei projects
1980s Start up of Malaysia, Australia projects
1990s Start up of Qatargas, Nigeria, Trinidad and RasGas
projects
2000 Start up of Oman LNG project
2006 Australia
2007 Norway
2009 Qatar II ( 7.8 Mtpa)
2009 Rusia
2010 Peru

LNG Plant

LNG Plant

LNG Plant

Number and LNG train capacity

Global LNG Capacity

LNG capacity and technology

LNG tech comparison

Floating LNG

World largest LNG exporter

LNG Supply: A plethora of new projects

LNG Terminal

Start-up LNG Terminal

LNG Terminal Capacity

LNG Terminal
Send-out capacity

LNG Fleet and Order

LNG carrier types

LNG ship capacity and age

LNG Chain Costs by Liquefaction,


Shipping & Regasification
Investment Costs: Site Preparation, Gas Treatment, Liquefaction,
Utilities & Ancillaries, LNG Storage & Loading, Other Infrastructure
Operating Costs: Personnel Expenses, Maintenance Cost,
Consumables, Overheads, Insurance and Taxes, Variable Costs
Investment Costs: Tanker Capacity
Operating Costs: Fixed Costs (crew), Maintenence Expenses,
Insurance, Overheads, Variable Costs (fuel, consumables, port charges,
taxes)
Investment Costs: LNG unloading facilities, LNG Storage, LNG
vaporization and sendout, Utilities, Infrastructure
Operating Costs: Fixed Costs, Maintenance Expenses, Insurance,
Overheads, Variable Costs (power, fuel, consumables)
PEUI -2007

Typical Costs for a project of 8 M


Tons/year

Cost Element

US$ (2003)

US$/MMBTU

(Billion)
Gas Production

1.0 - 2.0

0.5 - 1.0

Liquefaction

1.2 - 1.8

0.8 - 1.2

Shipping

1.0 - 2.0

0.5 - 1.0

Regasification

0.5 - 1.0

0.3 - 0.6

Total

3.7 - 6.8

2.1 - 3.8

PEUI -2007

Liquefaction cost

Capital Expenditure LNG plant

100,000 GPD = 160 TPD = 0.05 MTPA

Reducing LNG costs: a trend that is reversing?

Source: LNG Focus, 2006

Mid-Scale LNG costs

Source: Linde

Full chain base load LNG


capital cost breakdown

Source: Patel Foster Wheeler

Capex breakdown (Technip-Coplexip)


2 Train plant
Utilities
Offside
Common

45-65%
8-15%
20-40%
7-10%

Total LNG plant


Others

100%
15-30%

Total LNG project

115-130%

Train:

common/inlet facilities, impurities removal (acid gas, water,


mercury, sulfur), refrigeration/liquefaction, fractionation.
Utilities:
power generation, cooling water, other water, steam
fuel, air and nitrogen
Offside:
LPG storage & loading, condensate storage & loading,
loading jetty, flare and liquid blow-down, other fire protection,
drainage & waste treatment
Common: site infrastructure, control room, DCS,ESD, telecom, administration
& maintenance building
Others:
gas pipeline, site preparation, material offloading, residential area, spare
part, movable, training and start-up.

Liquefaction cost component


Plant capacity:
Total plant capital cost
Utilization rate
Annual cost of capital

5 mtpa
$ 1.2 billion
90%
$ 155 milion

Per Mcf cost of capital


Fuel
Taxes
Operating costs

$0.72/Mcf
$0.08/Mcf
$0.15/Mcf
$0.2/Mcf

Total cost of liquefaction $1.15/Mcf


Source: Bob Shively & John Ferrare, 2005

Liquefaction cost component

Source: Henry Lee, 2005

Liquefaction cost component


Kapasitas
Train
Capex
Capex total
Life time
Cost of Capital
CRF
Capex Annual
Capex Cost
O&M
O&M Cost
Biaya Bahan
Bakar

Fuel Cost
Liquefaction Cost

500
3,85
200.000.000
700
2.692.307.692
20
10,00%
0,1175
316.237.451
1,58
107.692.308
0,54
50
17.750.000
4
71.000.000
0,355
2,47

MMscfd
MTPA
MMBtu/Year
USD/TPA
USD
Year
%
USD/Year
USD/MMBtu
USD/Year (4% dari capex)
USD/MMBtu
MMscfd (10% feed)
MMBtu/Year
USD/MMBtu
USD/Year
USD/MMBtu
USD/MMBtu

Liquefaction Capital vs. Capacity

PEUI -2007

Capital investments
Small Scale LNG plant

Small scale LNG infrastructure

Shipping cost

Shipping Cost
Tanker cost
Mid Size (138,000 m3)
1993 ~ US$ 320 million/ship
2005 ~ US$ 170 million/ship
Large size (216,000 m3) ~ US$ 210 million
Daily carter rate
US$ 27,000/day US$ 150,000/day

PEUI -2007

LNG vessel cost

Fleet utilization and short term charter rates

Shipping cost
Kapasitas

500 MMscfd
200.000.000 MMBtu/Year
8.538.462 m3 LNG/year

Kapasitas
Tanker

Kapasitas Aktual
t loading
t unloading
Kecepatan
Jarak
day/year
Waktu
Perjalanan
Roundtrip (PP)
days in port
Waktu berlayar
/ Year
Kapasitas
angkut
Jumlah Kapal

O&M

USD/ Year
21.600.000 (4%Capex)

Portfees/station
port charges

80.000 USD
4.793.522 USD/ Year

150 m3 untuk LNG

labor

95%

Insurance

5.301.195 USD/Year
USD (15% OPEX
6.027.907 total)
USD (10% OPEX
4.018.605 total)

142,5 m3
64.772 Ton LNG
12 hour
12
18
33,34
3564

hour
knot
km/jam
km

350 hari

Misc
OPEX total
OPEX Cost
Boil off
Fuel Mix

LNG Price

107 Jam

41.741.229 USD/ Year


0,21 USD/MMBtu
(3% actual
0,03 capacity)
0,5
972 ton
50.523 MMBtu
USD/MMBtu
12 (ICP/8)

238 Jam
9,91 Hari
67,75 hari/Year

Fuel Oil Price

303.136 USD/Trip
MMBtu/liter
27 (Fuel Oil)
688.554 Litre (Fuel Oil)
1 USD/Liter

282,25 Hari
28,48 trip/Year

Total per Trip

688.554 USD/Trip
991.690 USD/Trip

Total per year


FUEL Cost

59.421.125 USD/ Year


0,3 USD/MMBtu

Shipping Cost

0,82 USD/MMBtu

4.058.882 m3 LNG/kapal/Year
3

Capex

180.000.000 USD/kapal

Durasi
CoCapital
CRF

540.000.000 USD
20 Year
10%
0,1175

Shipping cost

Source: Henry Lee, 2005

Shipping cost

Characteristics of trips

Typical Delivered cost of LNG

Shipping cost f (distance)


Henry Lee:
US $/mmbtu = (distance + 1650)/16107
distance is round trip in nautical miles

US $/mmbtu = 7 x 10-5 distance + 0.102


distance is round trip in km

Regasification cost

CAPEX LNG Terminal


Hazira India 2.5 mtpa (330 mmscfd) - US$ 600 million
Sempra 7.5 mtpa (1bcfd) US$ 800 -1000 million
Exxon-Qatar Petroleum, 2 bcfd, (2009/2010), jetty, 5 x
150,000 m3 full containement, 1.3 billion US$
Ken UK, 1.7 bcfd, 3 x 190,000 m3 full containement, 1
billion US$
Fujian/CNOOC, 350 mmscfd, 2 x 160,000 full
containement, 250 mm US$ (2008)
Quentiro, Chile, 400 mmscfd, jetty, 2x 160,000 + 10,000
m3 full containement, 775 mm US$ (2010)
Ecolectrica, Puerto rico, jetty, 90 mmscfd, 160,000
double containement, 150 mm US$ (2000)

LNG Regas cost

Small LNG terminal (dedicated)


(165 m3 - for Power generation) 1000 MW needs 130 mmscfd of gas

Typical Cost Breakdown Regas

Regasification Cost
Plant capacity
Total plant capital cost
Utilization rate
Annual cost of capital

1 bcf/day
$500 million
75%
$65 million

Per Mcf cost of capital


Fuel
Operating cost

$0.23/Mcf
$0.09/Mcf
$0.08/Mcf

Total cost of regasification

$0.4/Mcf

Note: SCV technology

Source: Bob Shively & John Ferrare, 2005

Regasification cost
Kapasitas regas

400 MMscfd
0,01072 Bcmd
140.000.000 MMBtu/Year

Capex

110.000.000 USD/Bcmy
412.720.000 USD

Durasi

20

CoCapital

10,00%

CRF

0,1175

Capex Annual
Capex Cost
O&M
O&M Cost

48.477.936 USD/Year
0,34 USD/MMBtu
20.636.000 USD/Year (5% capex)
0,15 USD/MMBtu

boil off

0,15%

Konsumsi bahan bakar

1,50% % Kapasitas storage


6 MMscfd
2.100.000 MMBtu/year

Fuel Price

12 USD/MMBtu
25.200.000 USD/Year

Fuel Cost

0,18 USD/MMBtu

Regas Cost

0,67 USD/MMBtu

Natural Gas Pipeline Economics

Widodo W. Purwanto

Departemen Teknik Kimia


Universitas Indonesia

Natural Gas Economics 2012

Type of natural gas transportation


How to bring natural gas from the fields to potential gas markets?

Pipeline
Liquefied Natural Gas (LNG)

GAS
SUPPLY

Compressed Natural Gas (CNG)


Gas to hydrate (GTH)

GAS
MARKETS

Gas to Liquids (GTL)


Gas to Chemicals (GTC)
Gas to Wire (GTW)

Physical transportation
Chemical conversion

: pipeline, LNG, CNG, GTH


: GTL, GTC, GTW

Concept map natural gas transportation

Source: Hetland

The European Gas Pipeline

The most extensive gas pipeline networks

IGU, 2010

Warner ten Kate et al, IEA, 2013

The Sumatran Gas Hub

MALAYSIAKerteh
Kuala Lumpur

NATUNA SEA

SUMATRA
Duri

Singapore
Batam
600 Kms
South
Jambi
B PSC

1. Corridor Block to Duri

540 Km 1999

2. Corridor Block to Singapore

530 Km 2003

3. Corridor Block to PLN Jkt

606 Km 2006

-----------1676 Km
======

Corridor PSC

J A V A

S E A

Jakarta

JAVA

West Java Gas Market


ASAHIMAS CHEMICALS
CHANDRA ASRI
OTHER PETCHEM
KRAKATAU
STEEL*

TANJUNG
PRIOK

MUARA
KARANG

MUARA
TAWAR

PGN
JAKARTA
EXOR-I
LPG MUNDU

CIKARANG
LISTRINDO*
26-12km

24-74km

SEMEN
PALIMANAN

12

BITUNG
16

CILAMAYA

JAKARTA

14-59km

WALAHAR

18-59km

LEGEND

Gas Consumer

10-27km

SERPONG

18-45km

TEGAL
GEDE

CIMANGGIS

Gas Processing Facility


Comp. Station

10-12km

BOGOR

SUNYARAGI

24

8-25km

Power Plant

24-45km

24-27km

24-51km

SEMEN
CIBINONG

CIKAMPEK
LPG
SDK
PUPUK
KUJANG

City
Existing Pipeline
Current Users

WEST JAVA

Potential Users

* Not taking gas/taking minimal amounts currently

PGN CIREBON

CIREBON
CITEUREUP

PGN BOGOR
LPG SDK

Source: Baskoro, 2011

Source: Baskoro, 2011

Nautical mile =1.85 km

Transportation cost of natural gas


via pipeline and LNG

Schwimmbeck, 2008

Engineering Yardsticks
Gas velocity: 5 15 m/sec
Pressures at consumers: 20-30 bar
Transmission pipeline pressure: 60 bar-100 bar
Compressor: interval of 150-200 km
Onshore pipeline CAPEX: ~20,000 US$/in-km
Annual operating cost of pipeline 0.5 -1.5% of the
total investment cost
Annual operating cost of compressor 4-5% of
the total investment cost
Offshore gas velocity: up to 30 m/sec
Offshore pipeline pressure: 100-130 bar
Offshore pipeline CAPEX: ~40,000 US$/in-km

Pipeline cost formula


Cost (in millions US$/mile) = 563,000 +35,600 x D
D: pipeline diameter in inches
Cost (in millions US$/km) = 350,000 + 871,000 x d
d: pipeline diameter in meters

Source: Seddon, 2006

Pipeline Cost

Source: Mohitpour

Steel price

2006

$900

2005

$850

2004

$800

2003

$450
$0

$200

$400

$600

$800

$1.000

Steel Plate Price per Net Ton

Pipe material cost

Cost ratio

Compressor cost formula


Cost (in millions US$) = 2,970,000 +1,120 x P
P: compressor power in hp
Cost (in millions US) = 2,970,000 + 1,500 x p
p: compressor power in kW

Source: Seddon, 2006

Rule of thumb: Pressure drop, Power & Fuel


consumption
50 km pipeline, 24 in, 200 PJ/y (500
mmscfd) dP=10 bar ~1.8 MW
Fuel consumption on annual basis 31.5
GJ/kW ~ 22.3 mmbtu/hp
50-60 km, fuel consumption 3% of the gas
transmitted

Source: Seddon, 2006

Principal working assumptions for


pipeline and LNG cost study

PT Perusahaan Gas Negara


for the South Sumatra to West Java Phase II Gas Pipeline Project

Tipikal Cost breakdown


pipa gas PGN

Levelized cost
mmscfd (kap.
700 Troughput)
Million Metric Ton Per
5 Annum (MTPA)
245.000.000 MMBTU/Year
258,475 PJ/Year
70 Bar
10 m3/s
15 m/s
0,92 m
36,27 inch
1000 km
70.000 USD/in km
2.538.553.781 USD
20
10,00%
0,1175
298.177.575 USD/Year
1,22 USD/MMBTU

Kapasitas

Tekanan gas
Flowrate gas pipa
Kec gas
Diameter
Distance
Capex
Durasi
CoCapital
CRF
Capex Annual
Capex pipeline
Distance Between
Compresion
Number stasion

50 km
20
MW (Gas Usage &
6,14 Value Sheddon hal. 90)
2.979.210 USD
59.584.200 USD
6.998.738 USD/Year

Power Required/stasion
Compresor Price
Compression Capex
Compressor Cost

0,03

O&M

129.906.899

Unit Cost O&M

0,53

USD/MMBTU

1,78

USD/MMBTU

Transportation Cost

USD/MMBTU
USD/Year (5% Capex)

BPH, 2011

BPH, 2011

BPH, 2011

Transmission tariff (toll fee)


1000 km, 200 PJ/y
Estimating pipeline tariff =
Cost of the pipeline/(Total volume of gas carried
over the lines lifetime in Mscf) x 3.35

Source: Seddon, 2006

financing

No.

Name of Project

pipeline project
Loan Condition

W. Java Transmission System

Gas Distribution (Jakarta, Bogor, Medan)

I = 12 %, grace period = 5 years, loan period = 15 years

Gas Distribution (Surabaya)

i = 13 %, grace period = 5 years, loan period = 15 years

Grissik - Duri

i = 15 %, grace period = 4 years, loan period = 20 years

Grissik Batam - Singapore

i = 15 %, grace period = 4 years, loan period = 20 years

S.Sumatra - W.Java

i = 0.95 % and 0.75%, grace period = 10 years, loan period = 40 years

W. Java Trans & Distribution Expansion

i = %, grace period = years, loan period = years

Cirebon - Semarang

Semarang - Gresik

10

E. Kalimantan Central Java

Financing the project: from public to private

No.Name of Project
1 W. Java Transmission System
2 Gas Distribution (Jakarta, Bogor, Medan)
3 Gas Distribution (Surabaya)
4 Grissik - Duri
5 Grissik Batam - Singapore
6 S.Sumatra - W.Java
7 W. Java Trans & Distribution Expansion
8 Cirebon - Semarang
9 Semarang - Gresik
10 E. Kalimantan Central Java
Source: Bappenas

Year L (km) D (inch)$ (MM)

Funding

Owner

1978 200+ 28
120
Pertamina Pertamina
1986
34
IBRD
PGN
1990
86
IBRD
PGN
1995 544 28
310
ADB, EIB
PGN
2001 478 28
415
ADB, EIB
PGN
2004 520 28, 32
440
JBIC, PGN
PGN
2005
120
PGN, IBRD
PGN
230
Private
Private
250
Private
Private
1,219
1,600 (est.) Private
Private

Natural Gas Price & Tariff


Lecture-2

Widodo W. Purwanto

Departemen Teknik Kimia


Universitas Indonesia

Natural Gas Economics 2012

Outline
Type of natural gas price
Natural gas pricing mechanism
LNG Price
Tariff

There is no World Prices for gas yet


Oil and gas are different commodities
Market maturity

Mature

In development

International

Regional

Different outlets

Captive markets

No captive market

Risks

Exploration risks

Market risk

Regional differences

Oil is an internationally traded commodity.. But the isolated regional nature of


gas markets, coupled with heavy government intervention in gas pricing, has
led to wide variations in pricing practices. There is no world gas price.
Jensen, 2011

World Natural gas and LNG Prices

Asian LNG Import Prices

Source: IGU, 2011

Harga gas bumi dalam rantai nilainya

Source: Weijermars, 2011

Pembentukan harga gas wholesale


(border/hub)

Source: IGU, 2011

Mekanisme Pricing
Gas on gas competition
Oil price escalation
Bilateral monopoly
Netback from final product
Regulation on a cost of service basis
Regulation on a social and political basis
Regulation below cost
No pricing

Source: IGU, 2011

World gas price formation, 2007

Source: IGU, 2011

Source: IGU, 2011

Gas-on-gas competition is the dominant pricing


mechanisms in the US and the UK. It means that the gas
price is determined by the interplay of gas supply and
demand over a variety of different periods (daily, weekly,
monthly, quarterly, seasonally, annually or longer). Trading
takes place at physical hubs, e.g. Henry Hub, or notional
hubs such as the NBP in the UK. Trading is likely to be
supported by developed futures markets (NYMEX or ICE)
and online commodity exchanges (ICE or OCM).
The demand curve is inelastic at high prices and low
prices, where there is little scope for fuel-switching,
and elastic in the middle range where demand for gas
can change readily depending on relative fuel prices;
The supply curve is identical to the long run marginal
cost curve; and
The average cost curve cuts the long run marginal
cost curve at its low point, and then the demand curve
at a lower price than the competitive market price.

Oil price escalation is the dominant pricing mechanism in


Continental Europe and Asia. It means that the gas price is
contractually linked, usually through a base price and an
escalation clause, to the prices of one or more competing
fuels, in Europe typically gas oil and/or fuel oil, in Asia typically
crude oil. Occasionally, coal prices are part of the escalation
clause, as are electricity prices. The escalation clause ensures
that when an escalator value changes, the gas price is
adjusted by a fraction of the escalator value change depending
on the so-called pass-through factor.
The gas price under oil price escalation will likely be above the
market-clearing price if oil prices are very high, and below if oil
prices are very low. Thus by summer 2008, when oil prices
were in the $120-130/bbl range, gas prices may have been
close to P2, while at low oil prices they could be around P3. If
oil prices are in the fuel-switching range, the oil indexed gas
prices will presumably be close to P1.

Bilateral monopoly negotiations were the dominant pricing


mechanism in interstate gas dealings in the former East
Bloc including the Former Soviet Union (FSU) and Central
and Eastern Europe. The gas price was determined for a
period of time typically one year through bilateral
negotiations at government level. There were often elements
of barter with the buyers paying for portions of their gas
supply in transit services or by participating in field
development and pipeline building projects.
The underlying valuation of the gas, the capital goods and
the services that changed hands in the intra-East Bloc gas
trade was opaque, with politics playing a major role
alongside economics.
Examples of gas pricing based on bilateral negotiations
may still be found in countries where one dominant
supplier, e.g., the national oil company, faces one or a
couple of dominant buyers, say, the state owned power
company and maybe 1-2 large industrial companies. A
number of immature developing country gas markets have
this structure.
Many Non-OECD countries still practice below cost
regulation, meaning that the gas price is knowingly set
below the sum of production and transportation costs as a
form of state subsidy to the population. Again the gas
company would be state-owned.
In some countries where a substantial proportion of
indigenous gas supply comes from oil fields with gas caps
or gas-condensate fields, the marginal cost of producing
this gas may be close to zero and as such it could be sold
at a very low wholesale price and still be profitable.
However, to the extent it is sold below the average cost of
production and transportation it would still be included in
the regulation below cost category.

Netback from final product means that the price received


by the gas supplier reflects the price received by the buyer
for his final product. For instance, the price received by the
gas supplier from the power sector may be set in relation
to, and allowed to fluctuate with, the price of electricity.
Netback based pricing is also common where the gas is
used as a feedstock for chemical production, such as
ammonia or methanol, and represents the major variable
cost in producing the product.

Under cost of service based regulation the price is


determined, or approved, by a regulatory authority, or
possibly a Ministry, so as to cover the cost of service,
including the recovery of investment and a reasonable
rate of return, in the same way as pipeline service tariffs
are regulated in the US. Normally, cost of service based
prices are published by the regulatory authority.
Pakistan provides an example of cost of service based
prices, with the wellhead price being the target.

Prices may also be regulated on an irregular social and


political basis reflecting the regulators perceptions of
social needs and/or gas supply cost developments, or
possibly as a revenue raising exercise for the
government. In all probability the gas company would
be state-owned.

Under bilateral monopoly or netback pricing situations


the price could, in theory, be higher or lower than the
market-clearing price P1. In practice, as will be shown
later, prices under these mechanisms in 2005 were
probably close to the P5 level, i.e. just above or below
average cost.
With below cost regulation the gas price could be at P4,
that is, materially below the average cost. Under cost of
service regulation the price would most likely be slightly
above the average cost at P5.
Regulation on social and political grounds would likely
lead to a price somewhere in the range between P4
and P5. In all cases, the price is likely to be below the
market-clearing price P1.

Harga gas wellhead, wholesale, retail di AS

Source: Weijermars, 2011

Perbandingan nilai gas bumi


30

US $ / MMBtu

25
20
Distribution

15

Processing
Netback

10
5
0
LNG - Badak Pipeline - Java

Methanol

GTL (FT
Diesel)

DME

Cost component of pipeline gas

Kondisi Industri Gas Bumi Saat Ini


Sebagai negara produsen gas - dapat memenuhi gas untuk
kepentingan dalam negeri sekaligus untuk penerimaan negara
dari ekspor gas
Harga gas domestik harga subsidi/regulated price
menyebabkan keengganan pemasok gas memenuhi kebutuhan
dalam negeri, yang berakibat kekurangan gas bagi konsumen
domestik dan investasi infratsruktur gas tersendat
Renegosiasi fixed gas contract untuk beberapa koridor (Jambi
Merang, ONWJ, Conoco Natuna B., Pagar Dewa..)
Mekanisme pasar gas masih belum jelas
Walupun potensi permintaan gas domestik tinggi, namun harga
gas domestik belum memberikan sinyal yang benar bagi
konsumen dan produsen.
Belum adanya transparansi cost breakdown dari sisi produsen
dan konsumen

Harga gas domestik vs. Harga LNG

Source: PGE, 2012

Oil/Gas Price ratio

Rasio harga minyak bumi terhadap


harga gas bumi
20
NG US

18

NG Uni Eropa
LNG Jepang

16

NG PGN

14
12
10
8
6
4
2
0
1989

1991

1993

1995

1997

1999

2001

2003

2005

Rata-rata rasio harga minyak bumi terhadap gas di:


- US sebesar 8,7
- Uni Eropa sebesar 7,6
- Jepang sebesar 6,2
- PGN berkisar 8-18

2007

2009

Pusat permintaan gas domestik Jawa dan Sumatra

Source: PGE, 2012

Source: PGE, 2012

Usulan Pengembangan Pasar dan


Harga Gas Domestik
Dengan adanya Regas LNG dan pipa transmisi
diperlukan pengembangan wholesale
border/hub (Jawa, Sumatra)
Mengembangkan formula harga gas hub oil
price escalation,..
Transparansi cost breakdown dari sisi produsen
dan konsumen termasuk transporter
Harga gas end-user, wholesale + toll fee, margin
downstream + tax

Usulan Pengembangan Pasar dan


Harga Gas Domestik (lanj.)
Perlu inovasi strategi mitigasi kedala-kendala
yang ada dalam pengembangan pasar gas
domestik termasuk pengembangan
infrastruktur gas (institusi, regulasi,
ekonomi,dll)
Mengembangkan hybrid market (central
planed dan Market oriented), Thurber, PES,
2011 sebagai langkah awal pengembangan
pasar gas domestik ke depan.

Instrumen Kebijakan dalam


Rantai Nilai Gas Bumi

Source: Thurber and Chang, 2011

Gas Hub?

Source: PGN and PGE

LNG trade

LNG Pricing Formulae in Asia (1)


1988 2004
Prices linked 85% to crude oil
10-15% premium over crude at around $18/bbl
Lower premium declines at higher oil prices and no
premium above $28-$30/bbl
S shaped curve in some contracts

2004+
New indices and price mechanisms to reflect
changing markets?

LNG Pricing Formulae in Asia (2)


Reference Oil Price: JCC Japanese Custom Cleared average
price1988 2004
Price applies over an agreed range ($11 to $30/bbl), outside
that range there is an agreement to meet and discuss
Such a pricing basis initially developed with Japanese buyers
but has been adopted by S. Korea and Taiwan
In Japan the basic formula has been modified by adopting an
S shaped curve
No S curves in S. Korea and Taiwan contracts

LNG Pricing Formulae in Asia (3)


Most contracts for LNG sold on an ex-ship basis use the
following pricing formula:

P(LNG) = A x P (Crude Oil) + B


where
P(LNG) = price of LNG in cents$/MMBtu
P (Crude Oil) =price of crude oil in $/bbl
B = a constant in cents/MMBtu

In many contracts:
A = 14.85
B = 70 to 90 cents

Basic LNG Pricing Formulae in Asia

Asian S Curve Price Formula

LNG Pricing Formulae in Asia


Linkage to crude oil is about 85%
In most contracts the average of Japanese Custom Cleared
(JCC) crude prices are used, but Indonesia uses the average
price of Indonesian crude exports
Inclusion of constant results in premium over crude oil parity
of about 10-15% at $18/bbl
Premium erodes as oil price increase and disappears at
around $28-30/bbl
Most price negotiations focus on the constant
The 14.85 factor is used in many contract is not exclusive
(especially in FOB contracts)

Tipikal formula harga LNG

Different Tariffication Methods for Gas


Transportation
Tariffication according to the distance: booking
capacity along each section of the tariff route
Tariffication according to pondered distance
(average distance)
Tariffication Entry-Exit: booking capacity at entry
and exit, without taking into account physical flows
between these two points
Tariffication post-stamp: a unique tariff applied for
injection and withdrawal on the overall territory