Basis for pricing of Gas From the seller s perspective Laurent Viguier, Market Analysis Classification: Open 10 April 2018 Statoil ASA
Basis for pricing of Gas From the seller s perspective Whatever the product considered, LPG or Natural Gas, the aim is simple : Maximise the value of equity production and third-party volumes Under the constraints of the Market: Prices, Infrastructures or physical frame, Supply & Demand drivers Hence the basis for pricing LPG or Natural Gas in Norway is determined by the alternative markets either regionally or globally. LPG and Natural Gas pricing correspond then to the netback value, value achieved once adjusted primarily for transportation cost. 2 Classification: Open 10 April 2018 Statoil ASA
Knowing the markets Global LPG Markets European Gas Markets Liquidity High Low ARA MB SP CP FEI NBP ZEE TTF GP NCG PEG CEGH US HH PVB PSV ASIA JKM LPG (Propane & Butane) A Global Market with regional arbitrage opportunities Enhanced liquidity but still strong relationship to Crude and Naphtha From USDc/Gal in the US (Mont Belvieu) to USD/mt in NWE (ARA) to Asia (Far East Index) Natural Gas Regional Markets tending to a Global one through LNG From long term oil indexed contracts to short term gas indexed ones From p/therm in UK to EUR/MWh on the continent In USD/MMBtu for US (Henry Hub) & Asia (Japan Korean Marker) 3 Classification: Open 10 April 2018 Statoil ASA
Knowing the markets prices LPG highly linked to Crude & Products Butane through Gasoline blending and as alternative feedstock to Petrochemical Propane as alternative feedstock vs Naphtha and in competition for heating Source: GDM, Argus, ICIS Heren, Platts Far East Index is the premium market NWE has to compete with Asia to attract the necessary volumes to cover its deficit US Mont Belvieu is now the reference for sourcing Flexible Demand from Petrochemical Propane, Butane and Naphtha as substitutes Switching often in relation to Propane Naphtha spread (ProNap) and Butane Naphtha ratio 4 Classification: Open 10 April 2018 Statoil ASA
Knowing the markets prices Source: GDM, Argus, ICIS Heren, Platts 5 Classification: Open 10 April 2018 Statoil ASA
Knowing the physical frame Rather similar supply constraints from fields down to Gas processing facilities At delivery gate, competition on the Residential & Commercial, Industry and Heating sectors From processing plants to delivery gate: Pipeline versus Shipping 6 Classification: Open 10 April 2018 Statoil ASA
Knowing the physical frame Pipeline: Entry/Exit Capacity costs Shipping: TC & Terminal costs* Booking of entry/exit capacities done at upstream and downstream levels Booking short, medium and long-term allowing to increase flexibility Firm and Interruptible Developing and increasing Capacity market with auctions, secondary trading * Simplified illustration of arbitrage Source: GDM, Argus, Baltic Exchange, ENTSOG 7 Classification: Open 10 April 2018 Statoil ASA
Knowing the Supply & Demand drivers Gas Supply Gas Demand 8 Classification: Open 10 April 2018 Statoil ASA
Basis for pricing of Gas From the seller s perspective Laurent Viguier Market Analyst www.statoil.com Statoil ASA This presentation, including the contents and arrangement of the contents of each individual page or the collection of the pages, are owned by Statoil. Copyright to all material including, but not limited to, written material, photographs, drawings, images, tables and data remains the property of Statoil. All rights reserved. Any other kind of use, reproduction, translation, adaption, arrangement, any other alteration, distribution or storage of this presentation, in whole or in part, without the prior written permission of Statoil is prohibited. The information contained in this presentation may not be accurate, up to date or applicable to the circumstances of any particular case, despite our efforts. Statoil cannot accept any liability for any inaccuracies or omissions.