LNG market Outlook (Cederic Cremers)

Thank you for the invitation to speak here today about the shale energy outlook of 2019. Hopefully some interesting trends to share that will be a good platform for a fruitful discussion afterwards. My lawyers asked me to show this slide; I would summarize it by saying that despite talking about the future, I don't have a crystal ball, so please don't rely on it for your personal investment strategies. Last year when we published the 2018 LNG outlook, we talked about how the external environment was creating more opportunities for gas, and how the LNG demand growth in Asia in 2017 was considered unsustainable by markets. The context a year ago included the medium-term need for more energy supply investment. Now let's see how that worked out in 2018. First, remind ourselves of the global energy challenge: a growing population and economic growth driving energy demand, with urbanization and climate change. The World Bank projects close to 10 billion people by 2050, a 50% increase in energy demand. Cities will hold two-thirds of the population. CO2 emissions have risen after a plateau; the Paris agreement implies emissions must drop by 2040. Air quality affects millions; 7 million premature deaths annually from outdoor and indoor pollution. Indoor pollution from solid fuels like wood and dung affects billions without clean energy. To meet rising demand while cutting emissions, a transformation is needed. Natural gas is critical, with gas and renewables providing 70% of growth over 20 years. Gas has the largest share in absolute terms, but its global share is only 23%. China and India have ambitions to increase gas to 10% and 15% respectively. Government policies from Korea to Europe favor gas over coal. Non-power sectors like industry and transport drove recent demand growth. LNG demand grows 4% compounded annually, with South Asia expected to triple. New LNG importers include Bangladesh, Panama, and Antigua. Transportation uses a third of energy, with LNG penetrating road and marine sectors. China has 340,000 LNG vehicles; Europe aims for 250,000 trucks. Marine LNG demand could reach 35 million tonnes by 2035 due to IMO sulfur caps. Supply from post-Fukushima projects added 27 million tonnes net in 2018; total trade doubled to 300 million tonnes. In 2019, 35 million tonnes of new supply is expected, with 70% going to Europe. European gas demand is flat due to balancing factors, but domestic production declines require more imports. Infrastructure in Asia is underutilized, but new LNG project sanctions are insufficient: only 21 million tonnes in 2018, less than annual demand growth. To meet demand, the world needs over 20 million tonnes of new LNG projects every year. Russia, as the largest gas exporter, is underrepresented in LNG with only 5% of supply. The world needs Russian gas; Russia should aim for higher market share. Sakhalin Energy celebrated its 25th anniversary as the first Russian LNG project, increasing capacity by 20% without new trains, and cumulatively supplying 100 million tonnes to Asia. Thank you for listening. These views are up for debate.