What can we expect from the energy markets in 2017? Luc De Leersnyder & Jens Lievens E&C Consultants 23/11/2016
What do we do? ENERGY PROCUREMENT CONSULTANCY Gas & electricity Focused on price, not on consumption reduction Consulting, not supplying, trading or brokering CONSULTANT SUPPLIER CLIENT 2
Integrated international approach Since its creation in 2005, E&C has grown organically, responding to the request of our clients. 12 offices serving 28 countries 3
E&C s global approach Europe & North- America: full service Rest of the world light approach: - epoint: follow-up of global consumption & cost - follow-up of deregulation process - Support of central buyers for tenders & price fixing in deregulated markets 4
Energy markets today
Oil market
World energy demand 7 25/11/2016
Oil price 1861 - today 8 25/11/2016
Oil price 2005 - today 9 155 145 135 125 115 105 95 85 75 65 55 45 35 25 15 1/01/15 1/06/15 1/11/15 1/04/16 1/09/16 1/01/05 1/06/05 1/11/05 1/04/06 1/09/06 1/02/07 1/07/07 1/12/07 1/05/08 1/10/08 1/03/09 1/08/09 1/01/10 1/06/10 1/11/10 1/04/11 1/09/11 1/02/12 1/07/12 1/12/12 1/05/13 1/10/13 1/03/14 1/08/14 Axis Title Brent M+1 M+1$ M+1
Oil price 2012 - today 10 120 100 80 60 40 20 01/01/2012 01/03/2012 01/05/2012 01/07/2012 01/09/2012 01/11/2012 01/01/2013 01/03/2013 01/05/2013 01/07/2013 01/09/2013 01/11/2013 01/01/2014 01/03/2014 01/05/2014 01/07/2014 01/09/2014 01/11/2014 01/01/2015 01/03/2015 01/05/2015 01/07/2015 01/09/2015 01/11/2015 01/01/2016 01/03/2016 01/05/2016 01/07/2016 01/09/2016 01/11/2016 Brent Futures M+1 Brent $ Brent
11 World oil production World oil production 100 000 90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Thousand barrels per day Total North America Total S. & Cent. America Total Europe & Eurasia Total Middle East Total Africa Total Asia Pacific
12 World oil consumption World oil consumption 100 000 90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Thousand barrels per day Total North America Total S. & Cent. America Total Europe & Eurasia Total Middle East Total Africa Total Asia Pacific
13 North American oil production 25000 20000 15000 10000 5000 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 TBD 2003 2005 2007 2009 2011 2013 2015 North American Oil Production US Canada Mexico
Merit order oil production 80 Estimation of the oil production merit order of 20 years ago Production costs in $/bbl 60 40 20 Giant oil fields Traditional offshore Production costs in $/bbl 140 120 100 80 60 Estimation of the current oil production merit order Gas & coal to fuel Deepwater offshore Biofuel Tar sands 40 20 Giant oil fields Traditional offshore 14
US oil rigs evolution US rigs evolution 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 01/01/12 01/03/12 01/05/12 01/07/12 01/09/12 01/11/12 01/01/13 01/03/13 01/05/13 01/07/13 01/09/13 01/11/13 01/01/14 01/03/14 01/05/14 01/07/14 01/09/14 01/11/14 01/01/15 01/03/15 01/05/15 01/07/15 01/09/15 01/11/15 01/01/16 01/03/16 01/05/16 01/07/16 01/09/16 Axis Title Oil Gas 25/02/2015 E&C Market info slide 15
EUR/USD rate EUR/USD 1,50 1,40 1,30 1,20 1,10 1,00 1/01/09 1/04/09 1/07/09 1/10/09 1/01/10 1/04/10 1/07/10 1/10/10 1/01/11 1/04/11 1/07/11 1/10/11 1/01/12 1/04/12 1/07/12 1/10/12 1/01/13 1/04/13 1/07/13 1/10/13 1/01/14 1/04/14 1/07/14 1/10/14 1/01/15 1/04/15 1/07/15 1/10/15 1/01/16 1/04/16 1/07/16 1/10/16 EUR/USD % 18/11/2016 1,0629-0,82% 17/11/2016 1,0717 0,14% 16/11/2016 1,0702-0,59% 15/11/2016 1,0765-0,11% 14/11/2016 1,0777-1,16% 25/02/2015 16 E&C Market info slide 16
Conclusion: increased volatility due to Higher marginal costs of producing oil Improving technology efficiency 17 Fundamentally, supply and demand will determine prices. Supply : OPEC fears and belief Demand: Sustained economic recovery? Other: Stronger dollar evolution. Interest rate hike? Trump policy gives hope to US riggers
Gas market
19 EU forward gas prices 2007 - today 46 43 40 37 34 31 28 25 22 19 16 13 10 16/04/07 16/08/07 16/12/07 16/04/08 16/08/08 16/12/08 16/04/09 16/08/09 16/12/09 16/04/10 16/08/10 16/12/10 16/04/11 16/08/11 16/12/11 16/04/12 16/08/12 16/12/12 16/04/13 16/08/13 16/12/13 16/04/14 16/08/14 16/12/14 16/04/15 16/08/15 16/12/15 16/04/16 16/08/16 /MWh Natural gas l Cal contracts Y+1 UK: NBP BE: Zee DE: GPL NL: TTF IT: PSV
EU forward gas prices 2012 - today 20 28 26 24 22 20 18 16 14 12 01/01/2012 01/03/2012 01/05/2012 01/07/2012 01/09/2012 01/11/2012 01/01/2013 01/03/2013 01/05/2013 01/07/2013 01/09/2013 01/11/2013 01/01/2014 01/03/2014 01/05/2014 01/07/2014 01/09/2014 01/11/2014 01/01/2015 01/03/2015 01/05/2015 01/07/2015 01/09/2015 01/11/2015 01/01/2016 01/03/2016 01/05/2016 01/07/2016 01/09/2016 01/11/2016 /MWh European forward gas prices TTF Y+1 NCG Y+1 Zee Y+1 NBP Y+1 ( /MWh) PEG N Y+1
Natural gas l Pacific vs European vs North American prices 55 50 45 40 35 30 25 20 15 10 5 0 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 /MWh Japan NBP UK Henry Hub 25/02/2015 21 E&C Market info slide 21
Natural gas l global production World gas production 1 200 1 000 800 600 400 200 Billion Cubes Metres 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 0 Total North America Total S. & Cent. America Former Soviet Union Total Middle East Total Africa Total Asia Pacific 25/02/2015 22 E&C Market Rest info of Europe slide 22
Natural gas I global consumption World gas consumption 1 400 1 200 1 000 800 600 400 200 Billion Cubes Metres 0 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2013 2015 Total Africa Total Asia Pacific 25/02/2015 23 E&C Market info slide 23 25/11/2016 Total North America Total Europe & Eurasia Total S. & Cent. America Total Middle East
Main figures 2011-2015 2011 2012 2013 2014 2015 Global natural gas consumption + 2.2% + 2.2% +1.4% +0.4% +1,7% growth: EU gas consumption: - 9.9% - 2.3% -1.1% -11.6% +4,6% Global natural gas production growth: + 3.1% + 1.9% +1.1% +1.6% +2,2% EU gas production decline: -11.4% - 5.5% -0.5% -9.8% -8% World proven gas reserves : 208.4 tcm 187.3 tcm 185.7 tcm 187 tcm 186.9 tcm Enough for: 63.6 years 55.7 years 55.4 years 54.1 years 52.8 years 24
Natural gas l Storage levels 01/08/2016 Capacity (mcm) Storage (mcm) % full 25 000 Austria 4 694 3 470 73,94% 20 000 Belgium 770 310 40,29% Bulgaria 550 343 62,44% 15 000 Croatia 532 252 47,35% Czech Republic 3 272 1 163 35,56% 10 000 Denmark 1 010 526 52,05% France 9 381 4 756 50,70% 5 000 Germany 21 754 12 606 57,95% Hungary 6 230 1 682 26,99% 4/03/12 4/07/12 4/11/12 4/03/13 4/07/13 4/11/13 4/03/14 4/07/14 Austria Bulgaria Denmark Germany 4/11/14 4/03/15 4/07/15 4/11/15 4/03/16 4/07/16 0 Belgium Czech Republic France Hungary Italy 16 623 13 299 80,01% Latvia 2 300 743 32,32% The Netherlands 10 218 7 742 75,77% Poland 2 796 1 656 59,24% Portugal 300 85 28,46% Slovakia 2 597 1 955 75,26% Spain 2 547 1 882 73,87% UK 4 248 2 150 50,60% Total hubs EU 89 822 54 621 60,07% 25 Source: GSE Aggregated Gas Storage Inventory
Natural gas Liquefaction plants 700.00 600.00 500.00 400.00 300.00 200.00 100.00-2008 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 cumulative capacity gas (million m³) on-stream recently on-stream under construction planned Source: IGU World LNG Report 2016, Global LNG Info (based on data of 2015 and data as of July 2016) 26
LNG is not arriving in a market that is short 27
Coal market
29 Coal markets 210 190 170 150 130 110 90 70 50 30 2/05/03 2/10/03 2/03/04 2/08/04 2/01/05 2/06/05 2/11/05 2/04/06 2/09/06 2/02/07 2/07/07 2/12/07 2/05/08 2/10/08 2/03/09 2/08/09 2/01/10 2/06/10 2/11/10 2/04/11 2/09/11 2/02/12 2/07/12 2/12/12 2/05/13 2/10/13 2/03/14 2/08/14 2/01/15 2/06/15 2/11/15 2/04/16 2/09/16 $/tonne Coal $/tonne Y+1 Y+1 21/11/16 63,75 18/11/16 65,70 17/11/16 66,48 16/11/16 70,08 15/11/16 71,25
30 Coal markets Cal 17 Cal 18 Cal 19 21/11/16 59,97 53,97 52,91 18/11/16 61,81 55,60 54,61 17/11/16 62,03 55,15 54,26 16/11/16 65,48 57,61 56,67 15/11/16 66,19 58,57 57,55 90 80 70 60 50 40 30 1/01/13 1/03/13 1/05/13 1/07/13 1/09/13 1/11/13 1/01/14 1/03/14 1/05/14 1/07/14 1/09/14 1/11/14 1/01/15 1/03/15 1/05/15 1/07/15 1/09/15 1/11/15 1/01/16 1/03/16 1/05/16 1/07/16 1/09/16 1/11/16 /tonne Coal /tonne Cal16 Cal17 Cal18 Cal19
Main figures 2012-2015 2012 2013 2014 2015 Global coal consumption growth: + 2,5% +3% +0,4% -1,8% Non-OECD consumption growth: + 5,4% +3,7% +1,1% -0,3% OECD consumption growth: -4,2% +1,4% -1,5% -6,1% Global coal production growth: +2% +0,8% -0,7% -4,0% Non-OECD production growth : + 3,9% +1,3% -1,4% -2,6% OECD production growth: -3,3% -0,7% +1,5% -8,1% World proved coal reserves at year end: 861 billion tonnes 891 billion tonnes 892 billion tonnes 892 billion tonnes Enough for: 109 years 101 years 110 years 114 years Source: BP Statistical Review 31
Power market
Power markets European forward electricity prices 75 65 55 45 35 25 /MWh 01/01/12 01/03/12 01/05/12 01/07/12 01/09/12 01/11/12 01/01/13 01/03/13 01/05/13 01/07/13 01/09/13 01/11/13 01/01/14 01/03/14 01/05/14 01/07/14 01/09/14 01/11/14 01/01/15 01/03/15 01/05/15 01/07/15 01/09/15 01/11/15 01/01/16 01/03/16 01/05/16 01/07/16 01/09/16 01/11/16 15 BE Y+1 NL Y+1 DE Y+1 FR Y+1 UK Y+1 ES Y+1 IT Y+1 PL Y+1 CZ Y+1 SK Y+1 HU Y+1 Nordpool SYS Y+1 Y+1 BE FR DE NL UK IT ES PT PL HU SK CZ 21/11/16 40,67 47,98 30,25 35,73 51,99 44,00 43,38 43,45 36,18 37,41 31,30 30,50 18/11/16 41,20 49,61 30,97 36,13 52,47 44,00 43,80 43,87 36,11 37,99 31,95 31,25 17/11/16 41,19 48,35 30,83 36,03 52,23 44,50 43,63 43,70 36,09 37,74 32,65 31,95 16/11/16 41,58 47,86 31,69 36,55 52,14 44,50 44,00 44,07 36,14 37,91 32,65 31,95 15/11/16 42,14 49,62 32,30 36,75 52,12 44,88 44,15 44,22 36,28 38,07 33,30 32,60 33
Main figures 2011-2014 2011 2012 2013 2014 Total EU installed generation* 896 GW 932 GW 996 GW NA capacity: Total EU electricity production**: 3303 TWh 3298 TWh 3264 TWh 3166 TWh Total EU installed capacity growth + 3,1% + 4% + 6,9% NA Total EU production growth: -2,0% -0,2% -1,0% -3,0% Share of renewables in EU electricity production***: 21,4% 24,2% 27,2% NA Share of renewables in EU capacity growth: 71,3% 70% NA NA Worldwide production growth*: + 3% + 2,1% +2,4% +1,5% 34
Electricity production 35 25/11/2016
Renewable energy evolution 36 25/11/2016
Marginal cost pricing /MWh Disposable for pay-back on fixed costs Marginal cost CO2 CO2 Marginal cost = variable cost to produce an extra MWh of electricity Renewable Nuclear Coal Gas 37
Electricity generation mix France FRANCE'S ELECTRICITY GENERATION MIX 2015 11% 4% 1%2% 6% 76% Nuclear Thermal Hydro Wind power Solar Bioenergy Source: French transmission grid operator RTE 38 25/11/2016
Electricity Analysis CURRENT OUTAGES 39 REACTOR NAME CAPACITY (MW) OUTAGE START EXPECTED RESTART REASON Belleville 1 1,300 Nov. 12 Nov. 21 ND Unplanned outage Cruas 3 900 Nov. 8 Nov. 27 Planned outage Tricastin 4 900 Oct. 22 Dec. 31 Statutory outage Cruas 2 900 Oct. 15 Nov. 21 Planned outage Cattenom 3 1,300 Sep. 24 Dec. 20 Statutory outage Dampierre 3 900 Sep. 24 Nov. 30 Planned outage Gravelines 2 900 Sep. 17 Dec. 31 Planned outage Civaux 2 1,500 Sep. 10 Nov. 30 Statutory outage St Laurent 2 900 Sep. 3 Nov. 27 Statutory outage Bugey 4 900 Aug. 27 Dec. 31 Statutory outage Gravelines 1 900 Aug. 20 Nov. 24 Statutory outage Tricastin 1 900 Aug. 13 Dec. 31 Statutory outage Fessenheim 2 900 June 13 Mar. 31, 2017 Statutory outage Tricastin 3 900 May 7 Dec. 31 Statutory outage Paluel 1 + 1,300 Apr. 9 Nov. 19 ND Statutory outage Gravelines 5 900 Apr. 9 June 30, 2017 Statutory outage Bugey 5 900 Aug. 27, 2015 May. 31, 2017 Statutory outage Paluel 2 1,300 May 16, 2015 Nov. 30, 2017 Statutory outage TOTAL OUTAGES 18,400
Electricity Analysis PLANNED OUTAGES IN FUTURE Fessenheim 1 900 Dec. 10 Jan. 3, 2017 Planned outage Gravelines 4 900 Dec. 17 Jan. 10, 2017 Planned outage Civaux 1 1,500 Dec. 23 Jan. 15, 2017 Planned outage Tricastin 2 900 Dec. 23 Jan. 15, 2017 Planned outage Gravelines 6 900 Feb. 4, 2017 Apr. 7, 2017 Statutory outage Paluel 3 1,300 Feb. 11, 2017 Aug. 18, 2017 Statutory outage St Alban 1 1,300 Feb. 17, 2017 Aug. 5, 2017 Statutory outage Blayais 2 900 Feb. 18, 2017 Apr. 21, 2017 Statutory outage Cattenom 2 1,300 Feb. 18, 2017 May 27, 2017 Statutory outage Chooz 1 1,500 Feb. 25, 2017 May 14, 2017 Statutory outage Nogent 2 1,300 Mar. 4, 2017 Apr. 10, 2017 Planned outage Golfech 2 1,300 Mar. 11, 2017 Apr. 16, 2017 Planned outage 40
Electricity Analysis RECENT RESTARTS REACTOR NAME CAPACITY (MW) OUTAGE START RESTART DATE REASON Penly 2 1,300 Aug. 27 Nov. 14 Statutory outage Flamanville 1 1,300 Nov. 11 Nov. 14 Planned outage Chinon 3 900 Oct. 8 Nov. 14 Planned outage St Laurent 1 900 Nov. 8 Nov. 9 Unplanned outage Cruas 3 900 July 30 Nov. 6 Statutory outage Chooz 1 1,500 Oct. 29 Nov. 1 Planned outage Cattenom 1 1,300 May 28 Oct. 25 Statutory outage Chooz 1 1,500 Oct. 22 Oct. 24 Planned outage Blayais 3 900 Oct. 19 Oct. 21 Unplanned outage Flamanville 1 1,300 Sep. 17 Oct. 20 Planned outage 41
42 Electricity l France l EEX Cal l Base French EEX Cal's Baseload 54 49 44 39 34 29 24 1/01/14 1/03/14 1/05/14 1/07/14 1/09/14 1/11/14 1/01/15 1/03/15 1/05/15 1/07/15 1/09/15 1/11/15 1/01/16 1/03/16 1/05/16 1/07/16 1/09/16 1/11/16 /MWh Cal17 Cal18 Cal19 French EEX Cal 17 Base Cal 18 Base Cal 19 Base 21/11/2016 47,98 36,78 37,38 18/11/2016 49,61 36,88 37,13 17/11/2016 48,35 36,65 36,30 16/11/2016 47,86 37,20 37,70
43 France spot prices 73,82 47,60 47,60 47,02 48,86 43,02 42,93 43,25 34,81 38,14 34,13 140 120 100 80 60 40 20 0 1/01/07 1/05/07 1/09/07 1/01/08 1/05/08 1/09/08 1/01/09 1/05/09 1/09/09 1/01/10 1/05/10 1/09/10 1/01/11 1/05/11 1/09/11 1/01/12 1/05/12 1/09/12 1/01/13 1/05/13 1/09/13 1/01/14 1/05/14 1/09/14 1/01/15 1/05/15 1/09/15 1/01/16 1/05/16 1/09/16 /MWh French EPEX D+1 Spot Yearly Average
Event agenda of the French nuclear crisis 55 Cal 17 Base /MWh 8 th Nov : Grid operator announced France could face winter power cuts 50 20th July: Reduction of EDF s nuclear 2016 output target 2 nd -3 rd Nov: Restart of 5 reactors delayed until the end of the year 3 rd revision of 2016 output target 45 40 35 23th June: Investigation of 18 reactors required due to potential anomalies on steam generator 18 th Oct: 5 reactors to be stopped to be checked before mid January 30 25 21st Sept: 2 nd Reduction of EDF s nuclear 2016 output target 20 44
45 Electricity l Belgium l Endex Year Ahead Endex BE Y+1 95 85 75 65 55 45 35 25 06/09/04 06/01/05 06/05/05 06/09/05 06/01/06 06/05/06 06/09/06 06/01/07 06/05/07 06/09/07 06/01/08 06/05/08 06/09/08 06/01/09 06/05/09 06/09/09 06/01/10 06/05/10 06/09/10 06/01/11 06/05/11 06/09/11 06/01/12 06/05/12 06/09/12 06/01/13 06/05/13 06/09/13 06/01/14 06/05/14 06/09/14 06/01/15 06/05/15 06/09/15 06/01/16 06/05/16 06/09/16 /MWh Endex BE Y+1 EndexBE Y+1 14/10/16 38,45 13/10/16 38,14 12/10/16 37,85 11/10/16 37,87 10/10/16 38,24
46 Electricity l Belgium l Endex Cal 46 41 36 31 26 1/09/16 1/01/14 1/03/14 1/05/14 1/07/14 1/09/14 1/11/14 1/01/15 1/03/15 1/05/15 1/07/15 1/09/15 1/11/15 1/01/16 1/03/16 1/05/16 1/07/16 /MWh Endex BE Cal contracts Cal 17 Cal 18 Cal 19 Endex BE Cal17 Cal18 Cal19 14/10/2016 38,45 34,53 33,88 13/10/2016 38,14 34,02 33,63 12/10/2016 37,85 33,80 33,20 11/10/2016 37,87 33,67 33,48 10/10/2016 38,24 33,70 33,50
Electricity generation Belgium BELGIUM'S ELECTRICITY GENERATION MIX 2015 9% 2% 5% 8% 38% 0% 38% Fossil fuel Nuclear Hydro Wind Solar Biomass Biogass and Waste Pumped Hydro Source: FEBEG 47
Electricity generation Germany 2015 48 25/11/2016
Germany s nuclear exit plan 49 25/11/2016
50 Electricity l Germany l EEX Cal Base EEX Cal contracts Base 58 53 48 43 38 33 28 23 18 1/01/12 1/03/12 1/05/12 1/07/12 1/09/12 1/11/12 1/01/13 1/03/13 1/05/13 1/07/13 1/09/13 1/11/13 1/01/14 1/03/14 1/05/14 1/07/14 1/09/14 1/11/14 1/01/15 1/03/15 1/05/15 1/07/15 1/09/15 1/11/15 1/01/16 1/03/16 1/05/16 1/07/16 1/09/16 1/11/16 /MWh Cal17 Cal18 Cal19 Cal20 EEX Cal 17 Cal 18 Cal 19 Base Base Base 21/11/2016 30,25 26,97 25,97 18/11/2016 30,97 27,27 26,10 17/11/2016 30,83 26,97 25,90 16/11/2016 31,69 27,29 25,89 15/11/2016 32,30 27,53 26,60
51 Renewables versus coal/gas and uncertainty of nuclear capacity in Belgium and France
Conclusion Decline in demand Excess coal supplies Shale / oil gas revolution Green energy revolution Supply > demand More costly marginal production Lower prices Increased volatility 4 revolutions 52 25/11/2016
What to do with increasing volatility? What is the impact of the energy cost on your business P&L? Determine a strategy: budget, market or survival risk. 53
More information? Luc De Leersnyder Director d: +32 56 24 56 54 m: +32 495 510 481 54
More information? Jens Lievens Business Developer d: +32 56 24 56 58 m: +32 479 56 07 71 55
Questions?