Dutch Oil&Gas Conference 2010 Jeroen van der Veer: ‘To achieve security of supply, you need alternatives‘ Noé van Hulst: ‘The Middle East is increasingly looking eastwards‘ Marcel Kramer: ‘Gas is certainly a good story‘ Jan Dirk Bokhoven ‘Europe has its own learning curve to get through‘ Paul van Gelder ‘Gas storage opens up interesting possibilities in the value chain‘ In this issue Introduction Fact Special is a theme-based issue of The gas business has changed drastically in the last two years. Global gas markets have evolved Fact, Deloitte's corporate magazine. from a sellers’ market, driven by tight supply and demand, to a buyers’ market, with demand easing as new supply comes on stream. Weak economic conditions have adversely affected Contact: gas demand, especially in Europe, which has witnessed lower consumption in the industry Deloitte and power generation sectors. In a market with increased flexibility and tradability, the market attn. Walter Wijnhoven players face a challenging time. With the US becoming self-sufficient and China and Europe P.O. Box 2031 looking to step up their unconventional gas exploration and production,, the supply of natural 3000 CA Rotterdam gas is growing faster than demand, leading to oversupply. The oversupply will keep natural gas The Netherlands prices low and hold up investments in new production facilities that may be critical later. These [email protected] developments leave long-term fixed-price contracts exposed to increasing price volatility. In Jeroen van der Veer Noé van Hulst Dick de Jong Jos de Groot addition, coal - because of its low costs – continues to be the commodity of choice for power It’s essential to Security of supply is Governments Our country 4 8 14 17 Editorial board: generation in the US, China and India, making it a competitor for natural gas. Likewise, we see stay a step ahead in the climbing the agenda are now clawing back is to be the centre of a Peter Bommel renewable and nuclear energy emerge as a long-term threat to demand for natural gas. On the technology race influence, in the gas northwest European Gas Marcus van den Hoek other hand we see significant demand potential in populous countries like India and China and market, too Hub Leonie van der Meer in the western world because of the clean-fuel status of natural gas. Copywriting and editing: The gas industry is of significant importance for the Netherlands. Its economic added value Carla Bakkum, Back2Back Language to the national income is twice that of the agriculture sector. At approximately € 10 billion Services per annum, gas revenues are also a significant source of income for the central government. Proven reserves of gas are worth another €140 billion. The Netherlands will be a gas producing Photography: and exporting country for years to come. It is no surprise, therefore, that gas is the country’s Maartje Geels predominant source of energy for power generation, for households and for industry. Design: Based on the gas infrastructure and the talent and capabilities in the gas business built up Studio MCBD Deloitte Rotterdam over the last decades, and based on the geographic position of the Netherlands, the Dutch have the ambition to become the Gas Hub for northwest Europe. It is therefore of essence for Printing: all involved to understand the developments in the global gas markets - and the northwest Thieme Media Services, Delft European market in particular – and to understand how this plays out for the Dutch Gas Hub initiative. © 2010 Deloitte No part of this publication may be This was the central theme of the Deloitte Dutch Oil & Gas Conference 2010 held in Rotterdam Marcel Kramer Jan Dirk Paul van Gelder Jan Treffers reproduced, stored in a retrieval on May 27th – the single must-attend event for all those who work in and for the oil & gas Gasunie is driving Bokhoven By around 2030, The Gas 18 22 24 28 system or transmitted, in any form industry in our country. For this special edition of Fact magazine, Deloitte conducted in-depth various initiatives to ‘green In my view the market will our country will be a net Roundabout is a way to or by any means, without the prior interviews with our impressive line of keynote speakers, as well as with the director of Energy the grid’ reach equilibrium around importer of gas remain a front runner written permission of the publisher. Markets of the Ministry of Economic Affairs Jos de Groot and with Jan Dirk Bokhoven, the 2015 CEO of Energie Beheer Nederland. We also give the reader an impression of the lively panel discussion at the conference, which, as in other years, was a resounding success. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member I hope you will find this magazine interesting reading. firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. Marcus van den Hoek Energy & Resources Leader Deloitte Netherlands and Conference chairman © 2010 Deloitte, Member of Deloitte Touche Tohmatsu 3 Famous last words: ‘no revolution’ Jeroen van der Veer may no longer be the CEO of oil & gas major Shell, but in the industry to which he devoted his entire career - and in the chambers of political power - his voice still carries great weight. Deloitte gauged his –strictly personal– views on a set of thought-provoking propositions. 4 5 The current oversupply in the global gas In the short term, the economic crisis has disrupted the On the infrastructure side, the spaghetti of pipelines market is just a blip on the radar demand-supply balance in the gas market. Demand has will continue to grow, bit by bit. It’s hard to rush that ‘These days, I agree. What I’ve learned during my career with Shell is to really plummeted, with significant effects on the spot ‘Governments, not energy development, as infrastructure has to be used to capacity producing look first at the very long term. Between now and 2050, market. But that shouldn’t blind us to the long-term the moment it goes live, otherwise you lose money on not only is the world population expected to rise from 6 uptrend. Meanwhile, even in an evolutionary industry companies, decide what energy it. Meanwhile, it’s obvious that more gas storage will be gas requires to 9 billion, but a far larger proportion of these people like gas, unexpected things sometimes happen. A case in needed beyond the current ones and Bergermeer, and will belong to the middle classes. That means demand point is the tight-gas boom in North America. This, in my mix is right for their country’ we have lots of depleted fields and caverns that could be different for energy is likely to double in this period, even taking view, is a discontinuity, and the jury is out as to how long cost-effectively converted for that purpose. But the timing skills, most account of significant advances in energy efficiency. the effect will last. is difficult. Being the first mover is an advantage, as it may Keeping up with that growth in demand will require The days of long-term supply contracts head off storage initiatives in surrounding countries, but of all shifts in the energy mix. These will vary from country to In the medium term, demand for energy will pick up as and the peg to crude are over not at any price. country, depending on the resources they have. Brazil, the economy moves out of recession. And the quickest I doubt it. It’s a lot more complex than it seems. People manufac- with its agricultural strength, will use more biofuel, while and cheapest way to meet that demand is building generally have an idea of the bandwidth of the oil price, As for the trading side, that doesn’t necessarily have turing France will expand its nuclear energy capacity and the gas-fired power plants. These plants require less than half and linking the gas price to that makes it easier for to happen where the physical assets are. Look at oil: Russians will step up their oil and gas exports. But I’d like the investment of a coal-fired plant, and they produce far companies to invest in costly infrastructure like pipelines the trading hubs are Houston and Singapore, but also know-how’ to emphasise that governments, not energy companies, lower carbon emissions per kWh. The cost comparison and LNG terminals. If they aren’t sure they’ll get a decent London. So having the gas in the Netherlands gives us decide what energy mix is right for their country and with nuclear and renewables is even more favourable. All return on their investment, they won’t build. If they don’t an edge, but it’s no guarantee that trade will take place use their powers to bring this about – for example by this makes gas a highly flexible instrument. So I expect build, supply declines and prices automatically go up. here. Our main competitor for gas trade, I believe, will be imposing extra taxes on fossil fuels, withholding permits medium-term demand for gas to be robust. Following that line of argument through, much capacity London. To keep the trade here, we need the help of the for nuclear power plants, or facilitating the construction doesn’t get built until the long-term contracts are in government to create the right climate in terms of tax, but of coal-fired power plants.